Even by banker standards, Martie North is a numbers person. She’s a senior vice president at Simmons Bank, where she keeps close tabs on the bank’s lending to low-income communities and community development projects across the bank’s 35 markets.

As a regional bank based in Pine Bluff, Arkansas, with $17.8 billion in assets and around 200 branches across eight states, every market is a little bit different, and some markets are new to Simmons Bank — it’s acquired 11 other banks since 2013, quadrupling in size. It just acquired another bank last year, in St. Louis.

Each market has annual targets for loans to low-income communities and community development. North sets the targets, and the bank’s executive team and board approve them. She checks in with each market lead at least once a month.

“As you can imagine, the economic conditions, demographics, all types of factors are different for each market,” North says. “I can’t say we 100 percent hit the mark every time, that would not be honest. But [market leads] get performance benchmarks and they know where they’re supposed to fall. When they are underperforming, I try to assist them in finding [loan] products for their market, or it may be creating a new product, or connecting them to opportunities for them to address that underperformance.”

North’s job isn’t just for show. It’s about complying with the law, specifically the Community Reinvestment Act (CRA). It applies to all 5,200 banks in the United States, requiring them to meet the credit needs of every community where they take deposits, including low-income communities. If a bank falls short of its obligations, regulators can deny applications to acquire or merge with another bank, or deny an application to open a new branch.

Not every bank where she’s worked operates its CRA department the same way, but North has held a CRA-related position in banking for nearly all of the past 20 years, with five banking institutions. And now the three federal agencies who are in charge of enforcing the CRA want to update how they enforce it, and they’ve unveiled a pair of competing proposals that are sharply at odds with each other. The end result could dramatically affect the flow of hundreds of billions of dollars in loans and investments a year.

“I don’t think that’s an easy task, but CRA desperately needs to be modernized. I’ve been saying that for the last 14 years,” North says. “But we have to make sure that it is appropriate and in a way that actually honors and respects the original intent and purpose.”

On one side are the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC). Bank watchdog groups believe the OCC/FDIC joint proposal will severely undermine enforcement of the CRA. The agencies are accepting public comments on their joint proposal until March. (See our previous coverage of community advocates’ responses to the joint proposal.)

North says she’s read through the 240-page OCC/FDIC joint proposal three times since it was released on December 12. She says it would dramatically change her job in a number of ways, some of which still aren’t fully clear to her.

“This document has given me heart palpitations,” North says. “It would radically add not only to our reporting, it would definitely be a much more expensive proposition. And it has a lot of systems implications that I’m not really sure they had thought through.”

North is feeling much better about the Federal Reserve’s proposal to update CRA enforcement rules, unveiled last week by Federal Reserve Board Governor Lael Brainard at the Urban Institute in Washington D.C. “I think that the Fed is starting from a position that builds off of what was working and trying to address the areas that need to be updated, while the other one feels like is an attempt to rewrite CRA,” North says.

As written in the original CRA legislation, Congress stipulated that banks are “required by law to demonstrate that their deposit facilities serve the convenience and needs of the communities in which they are chartered to do business,” and that those needs include access to credit, “consistent with the safe and sound operation” of banks.

Under the current system to enforce the CRA, each bank has a self-selected number of assessment areas — metropolitan areas, cities, counties or states where they have branches. Before looking at borrower demographics, regulators first check to see if a bank is primarily making loans inside its assessment areas. CRA bank officers like North call it the “in and out” ratio, and in her experience a bank should be doing at least 85 percent of its lending inside its assessment areas.

Under the OCC/FDIC joint proposal, banks could get a failing grade in up to 50 percent of their assessment areas and still pass their overall CRA exam. The joint proposal justifies the change as a response to the modern banking system being less dependent on physical presence of branches and more flexible geographically, with customers doing most of their banking digitally. Banks would instead receive credit for CRA-eligible activities outside of their assessment areas — such as financing projects subsidized under the new Opportunity Zones tax break, including sports stadiums that may have marginal, if any, benefits for low-income communities.

That doesn’t fly with local bank watchdog groups.

“The whole heart of the CRA came from the idea banks were taking deposits in places but not lending those areas, which meant that those areas were providing the capital for the development of other places,” says Glenn Burleigh, community engagement specialist at the Metropolitan St. Louis Equal Housing & Opportunity Council (EHOC). “That is why the CRA exists, that is what it is supposed to mitigate. If we’re not doing that, we’re not doing the CRA.”

North would rather strengthen the existing “in and out” ratio enforcement. If a bank is making a ton of loans outside of its assessment area, that should be a flag to regulators that the bank warrants closer examination. Maybe the bank’s assessment areas need to be updated, or maybe the definition of assessment area could be expanded to include zip codes where the bank has a lot of depositors but few or no branches. Or maybe the bank is just violating the law.

“If they tweaked in and out ratio that could better address this desire of tying deposits to areas,” North says.

The OCC/FDIC joint proposal does introduce the concept of “deposit-based” assessment areas, as opposed to the existing branch-based assessment areas. The OCC/FDIC propose that if 50 percent of a bank’s deposits come from outside of its branch-based assessment areas — for example, if it’s an internet bank with only one branch in Delaware or Utah — then it would have to declare “deposit-based” assessment areas for metropolitan areas or states that account for at least 5 percent of its deposit base.

North still finds this part of the proposal to be deeply flawed, because of its focus on dollar amounts as opposed to the number of depositors in a given geography. Deposits are fluid, and can turnover on a seasonal basis in large volumes, she says. It could be a nightmare trying to keep track of whether any given area outside a bank’s branch-based assessment areas needs to be included as a deposit-based assessment area for the purposes of determining CRA obligations. North says software doesn’t currently exist to be able to do that on an ongoing monthly basis.

“The level of detailed tracking of deposits is something that has never happened under CRA before,” North says. “There’s a lot of things in [the OCC/FDIC proposal] that an infrastructure does not readily exist in the banking world to accommodate.”

The Federal Reserve proposal, which has not yet been fully fleshed out, doesn’t yet propose an answer to the question of evolving or expanding the definition of an assessment area beyond bank branch locations.

The OCC/FDIC also propose to create a new all-encompassing single metric capturing a dollar value for all of a bank’s activities that count for credit under the CRA and measuring that as a percentage of the bank’s total deposits. Banks would get one ratio for each of their assessment areas, and those would roll up into an overall ratio for each bank. Banks would get a presumed passing grade as long as their overall ratio — the percentage of CRA activity — is at least 6 percent of total deposits — including CRA-eligible activities outside their assessment areas. The stated goal of the one metric is to bring clarity to CRA performance evaluation.

North agrees that there’s not enough clarity around the existing measures, especially the thresholds for what barely passes versus what gets the highest grade — “outstanding,” as compared to just “satisfactory,” “needs to improve,” or “substantial non-compliance.” (The latter two are considered failing grades.)

“If you use our current framework, there’s a lot of vagueness, and vagueness is normally the problem that frustrates everybody,” North says. “But if we had more concrete benchmarks for each one of these areas, that would be in a chart or a table that goes with it, that would go so far.”

But bank watchdog groups, fair housing organizations and other community advocates have slammed the “one metric” idea, as they believe it will dramatically reduce incentives for banks to make more nuanced, often smaller investments that are more likely to be tailored to community needs and possibly have higher impact.

“The OCC/FDIC one ratio proposal is one of the most concerning things, especially for community groups, because it eludes a lot of the response to community needs,” says Elisabeth Risch, assistant director at EHOC and co-founder of the St. Louis Equal Housing and Community Reinvestment Alliance.

The OCC received around 1,500 comments on updating the CRA since unveiling the single metric idea in 2018. In the proposal released with FDIC, it acknowledges that (at least) a majority of commenters opposed the single metric idea, including banks as well as community groups.

“One thing everyone was consistent on was this dollar volume metric was a bad idea,” says Jesse Van Tol, CEO of the National Community Reinvestment Coalition. “Nonetheless the OCC has pressed forward with something that adds some bells and whistles to the one metric, but ends up as still fundamentally the driving force behind the grading scheme.”

North doesn’t like the one metric idea, either. “I just don’t see the real benefit in the one ratio,” she says. “If a bank goes out and they invest more in tax credits or something like that and they accomplish the ratio, and now they back off of lending but that ratio works out. Has that really improved anything? If you’re wanting to get banks to invest more, I think keeping the metrics separate is the way to get there.”

North very much favors the Federal Reserve’s approach, which instead proposes an array of clear benchmarks for each of the buckets of various CRA-eligible activities, and would tailor benchmarks to each assessment area. Performance thresholds would be based on a percentage of each bank’s deposits in that assessment area. So for example, given all the deposits a bank has in an assessment area, what do home mortgages to low and moderate income household borrowers represent as a percentage of those deposits. Each bank would get a dashboard to compare its performance on each CRA-eligible bucket to benchmarks for that assessment area.

While there are still more details still left open for discussion, that kind of framework fits in better with North’s existing workflow.

“I am a fan of metrics,” North says. “I utilize a lot of metrics in our CRA space internally here in the bank. It’s about developing the right metrics that are true to not only the original intent of CRA but also take in the changing financial landscape that we’re in, because my goodness has the landscape changed a lot since [the law was passed in] 1977.”