Sounds like you got it right. That's the way I read it and I've read it over and over because this is so stunning it's hard to believe the Agencies proposed it.
The concept of evaluating lending outside the traditional branch-based assessment area contradicts the statute and 45 years of regulatory enforcement. It will distract from what should be a bank's real focus - the communities where it maintains its branches and where its employees, officers, and directors live. I would think community advocates would be opposed to this.
From Pages 236-237 of the NPR:
Banks that engage in retail lending outside of their assessment areas do not all have the same regional distributions of lending across the country. As such, the lending opportunities in the communities served by different banks in outside retail lending areas are not the same. The agencies propose to tailor performance expectations for outside retail lending areas to match the opportunities in the regions in which the bank lends.
The agencies propose to tailor performance expectations by setting performance ranges relative to bank-specific tailored benchmarks. These tailored benchmarks are calculated as the average of local market and community benchmarks across the country, weighted by the retail lending the bank does in each region. Specifically:
• For each major product line, the agencies would calculate market benchmarks and community benchmarks for the geographic and borrower distribution tests for every MSA, and the non-MSA portion of every state, in the country. Calculations of these benchmarks would follow the method described in Section IX.E.2.
• Each MSA and the non-MSA portion of each state is assigned a weight, calculated as the percentage, by dollar volume, of the bank’s outside retail lending that was in that MSA or non-MSA portion of a state.
• Tailored community benchmarks and tailored market benchmarks are then calculated as the weighted average of the community benchmarks and market benchmarks in every MSA and the non-MSA portion of every state, weighted by the percentage of the bank’s outside retail lending in that region.
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