CHICAGO - Hoping to reverse a recent rejection by the Federal Reserve Board, First Colonial Bankshares Corp. has amended its agreement to acquire two banks north of Chicago.

The amendment extends until March 31, 1994, the deadline for completing the acquisitions of Hi-Bancorp and GNP Bancorp.

Time to Improve a CRA Grade

The extension gives First Colonial time to improve compliance with the Community Reinvestment Act at Avenue Bank of Oak Park, one of the company's 16 subsidiaries. That deficiency stood in the way of Fed approval.

First Colonial's initial bid to buy the two banking companies was protested by a local activist group that complained of a poor mortgage-lending record at Avenue Bank.

As is standard on CRA-related protests, the application was referred by the Federal Reserve Bank of Chicago to the Fed's Board of Governors in Washington, which in May cited Avenue Bank's "needs to improve" CRA rating as the reason for denying the mergers.

C. Paul Johnson, the First Colonial chairman and chief executive officer who previously expressed bitterness about the Fed's action, said, "We are delighted to have reached agreement with the management and ownership of Hi-Bancorp and GNP Bancorp."

He added, "We are also confident that the Federal Reserve Board will approve the transaction [as] we have made significant progress on the CRA performance at Avenue Bank." The prospective acquisitions would add a combined $157 million of assets to Chicago-based First Colonial's $1.5 billion.

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