August 5, 2022
The Honorable Jerome Powell
Board of Governors of the Federal Reserve System

Attention: Ann E. Misback, Secretary
20th Street and Constitution Avenue, NW
Washington, DC 20551
RE: OCC Docket ID OCC–2022–0002

The Honorable Martin Gruenberg
Acting Chair
Deposit Insurance Corporation

Attention: James P. Sheesley, Assistant Executive Secretary
550 17th Street, NW
Washington, DC 20429

Attention: Comments RIN 3064–AF81
The Honorable Michael Hsu
Office of the Comptroller of the Currency
Chief Counsel’s Office

Attention: Comment Processing
400 7th Street, SW
Suite 3E-218
Washington, DC 20219

E: Community Reinvestment Act, Notice of Proposed Rulemaking, Docket Number R-1769, RIN 7100-AG29
Submitted via the Federal eRulemaking Portal

Re: Joint Notice of Proposed Rulemaking Regarding the Community Reinvestment Act Regulations, Docket No. R-1764 and RIN 7100—AG29

Dear Chairman Powell, Acting Chair Gruenberg and Comptroller Hsu:

At Communities Unlimited, Inc., we appreciate the changes made in the last round of rulemaking but continue to be deeply concerned about proposed changes to the Community Reinvestment Act (CRA) that effectively exacerbate the trend of America’s rural divestment, eliminating the only remaining, non-predatory sources of capital available to hard working rural entrepreneurs, homeowners, and communities.

Communities Unlimited, Inc. is a Community Development Financial Institution (CDFI) serving Texas, Oklahoma, Arkansas, Louisiana, Tennessee, Mississippi, and Alabama which include 45% of the persistent poverty counties in America. Given the needs in our footprint, the focus of our lending is to provide emergency financing to rural water and wastewater systems, a backbone infrastructure that is rapidly deteriorating and in need of replacement or repair. We also provide working capital and start-up loans to rural entrepreneurs that have no other access to non-predatory capital. In our footprint, we continue to see a consolidation of banks, inevitably leading to the closure of more rural branches. Since the previous comment period in 2020, one of our most important banking partners was purchased by an intermediate-size bank not known for their community development investments. In our footprint, we need broader CRA regulations that require banks to make investments in persistent poverty counties regardless of their narrow, mostly urban markets. The work of our CDFI is dependent on the CRA investment capital from banks.

In 2019, the Amarillo Area Foundation and key locally owned mid-size banks, motivated by CRA, created a unique partnership to help Communities Unlimited expand into Amarillo and the Panhandle which did not have access to a single CDFI. Motivated by CRA, the banks made sizable investments both in the form of loans and grants to allow us to hire staff in a region. We are now making working capital / start-up loans to entrepreneurs that are the economic lifeblood for many rural communities in the Panhandle. Their investment paid off when Communities Unlimited became a Payroll Protection Program lender and was able to serve these banks’ smaller customers that required technical assistance to apply. Communities Unlimited made $4.1 million in PPP loans within a 12-week window, reaching mostly rural small businesses and entrepreneurs of color. The CRA regulations as currently proposed will reclassify our banking partners as small banks and not require them to make community development investments while still receiving a passing CRA score.

As the example above illustrates, the newest round of rulemaking merits concern. Communities Unlimited respectfully requests reconsideration of the following four recommendations:

Reclassification of Small Banks
The proposed rule would increase the small bank threshold from $330 million to $600 million in assets, increasing the number of banks considered small by 779 banks nationally. This coupled with the rule that small banks are not required to make community development investment is determinantal to rural areas, especially areas of persistent poverty, where only small and intermediary sized banks have any presence at all. This rule change exacerbates the disparities in investment between rural communities and businesses and their urban counterparts.

Addition of Critical Impact Factors
To incentivize increased investment in persistently poor rural areas, Communities Unlimited recommends consideration of the following impact factors that are decoupled from a bank’s assessment area. In other words, banks would be able to make community development investments outside of their assessment area and receive CRA recognition.

1. Deep Impact Lending Criteria
Deep Impact Lending is a distinction already utilized by the U.S. Department of Treasury to recognize CDFIs that engage in the most impactful lending to the most underserved communities. Deep Impact Lending constitutes a subset of the “qualified lending” criteria for lending in low-income, rural areas and lending to targeted populations, including communities of color. This criterion was most recently used to prioritize the CDFI Fund’s $9 billion emergency Capital Investment Program’s deployment. We recommend that the Community Reinvestment Act adopt this criterion to incentivize investments in CDFIs that have a
demonstrated history in serving particularly difficult markets to reach, especially in persistently poor areas.

The Deep Impact Lending criteria should be considered as an impact factor for any bank choosing to make such an investment regardless of their assessment area. This is the only path to creating equitable distribution of CRA investments across urban and rural areas of persistent poverty.

2. Rural Criteria
As banks continue to consolidate and close branches in rural communities, Rural America is increasingly falling outside of CRA assessment areas. Explicitly qualifying activities in rural areas as an Impact Factor would be a first step in addressing this disparity. Attracting investment in community development activities in rural communities can be especially challenging due to limited public and private sector resources and the lack of density that affects perceived return on investment. We strongly recommend that community development activities in rural communities be included as an additional community development impact factor, to incentivize and recognize banks for their rural community development lending, investment, and services. Investments in CDFIs primarily serving rural populations will open the capital flow to rural projects, communities and small businesses needed to revitalize much of Rural America.

Strengthening the Role of the Community Development Test
We understand that the retail test is at the core of the CRA regulation to ensure fairness in bank lending practices. However, most loan deals in persistent poverty areas do not meet bank lending regulations and require the engagement of a CDFI or community loan fund. To meet the capital needs in rural and persistently poor communities, we strongly recommend that the Community Development Test be weighted at 60% over the overall CRA score to incentivize investments in those entities that can actually reach people, businesses and communities experiencing persistent poverty.
The current notice of proposed rulemaking gives the retail test a disproportionate weight in a bank’s overall rating (60 percent). In fact, banks could achieve a Satisfactory overall rating despite failing the combined community development and services tests (40 percent of overall rating). This has negative unintended consequence of reducing community development activities, providing an incentive for many large banks to cease to aspire to an Outstanding rating that requires real effort on community development activities and instead settle for achieving a Satisfactory rating on the retail lending test. This disproportionately impacts Rural America.

We further recommend that the Community Development Test be weighted at 60% of the test for all banks, including small banks. This is particularly critical in light of the proposed rule that will increase the threshold for the small bank definition to $600 million in assets. Please see the first recommendation on this matter.

Since 1975, Communities Unlimited has been working to ensure rural communities in persistently poor areas can become places of economic opportunity and became a CDFI in 1992. The CRA should be a helpful tool in building community wealth through homeownership and small business ownership, in communities historically overlooked by banking practices. At Communities Unlimited, we deeply appreciate our relationship with each of our bank investors. Their investments are key to our ability to make the needed, viable loans to rural borrowers and entrepreneurs of color that banks are not able to make due to safety and soundness
regulations. We also understand that these investments in CDFIs require regulatory incentives and cannot just rely solely on charity of banking partners.


Ines Polonius
Ines Polonius
Chief Executive Officer
Communities Unlimited, Inc.
3 East Colt Square Drive
Fayetteville, AR 72704
Phone: 479-443-2700