WASHINGTON -- The Federal Reserve Board for the third time has denied a merger-acquisition request because the buyer has failed to comply with the Community Reinvestment Act.

The decision involves two small Illinois banks. Gore-Bronson Bancorp. is seeking to acquire the Water Tower Trust and Savings Bank, Chicago. Each has less than $200 million in assets.

The Fed reminded the applicants that a bank's CRA performance is "an important and often controlling factor" in gaining approval.

Gore-Bronson's largest banking subsidiary, Irving Bank, has received two consecutive "needs to improve" CRA ratings from the Federal Deposit Insurance Corp. B-G Bank, another Gore-Bronson subsidiary, got the same rating, the second-lowest possible, in a recent exam, as did Water Tower Bank, target of the acquisition.

Gore-Bronson argued that it is acting to fix the problems, but the Fed said changes should be "in place and working well" before an acquisition application is submitted.

Even if all three banks had had strong CRA programs, the merger might have been squashed because the Fed also noted that the acquisition would "significantly" reduce Gore-Bronson's capital ratios.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.