Despite having won a partial reversal of a CRA downgrade, an Illinois bank may have trouble opening a branch it is building in the suburbs.

Regulators had downgraded Marquette National Bank two notches to "substantial noncompliance" with the Community Reinvestment Act after the Association of Community Organizations for Reform Now, or Acorn, complained.

But on Jan. 26, after an appeal, the new rating was raised a notch to "needs improvement." That is still below the "satisfactory" Marquette received in its preceding CRA exam, three years earlier.

The downgrade means the Office of the Comptroller of the Currency could make Marquette's opening the suburban office contingent on its building one in Chicago, said Paul M. McCarthy, the bank's chairman and chief executive officer.

Patrick Woodall, a Washington-based policy analyst for Acorn, criticized Marquette's lending.

"This is a bank with real problems," Mr. Woodall said. "We have had members who have been turned down or yanked around by this bank."

The report filed by the Comptroller's Office echoed many concerns voiced by the community group. The agency's examiners said the $1.1 billion-asset bank's lending patterns "indicate conspicuous gaps in lending to low- and moderate-income geographies in the south side of Chicago."

Marquette operates seven branches in Chicago and nine in the suburbs.

In 1997, regulators-trying to ease the merger-approval pro-cess-began encouraging community groups to weigh in on banks' reinvestment records during CRA exams.

This is the second time Acorn has successfully intervened in a bank's CRA exam. Last May the group accused Mercantile Bank in St. Louis of favoring wealthy white mortgage borrowers. The Comptroller's Office downgraded Mercantile to "satisfactory" from the "outstanding" that Mercantile had scored on two previous exams.

Marquette had complained in its appeal that the Comptroller's Office was expecting too much of the bank's relatively new inner city branches.

In October 1995 and June 1996 the bank opened two branches in Chicago, adding 123 census tracts to its market area. Time was too short before the CRA exam to build a customer base in those markets, Marquette said.

"Overlooking the time required to build consumer awareness and cultivate lending opportunities, the OCC has attempted to create issues where none are warranted," the bank wrote. More recent statistics would show "the bank's earnest commitment to penetrate" its expanded assessment area, Marquette said.

Mr. McCarthy said Marquette has not decided whether to request another CRA exam when the OCC comes for its regular safety and soundness check this year.

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