CHICAGO -- The Federal Reserve has crimped the expansion plans of First Colonial Bankshares by barring two acquisitions on community reinvestment grounds.
In blocking the acquisitions of Hi-Bancorp and GNP Bancorp, the Fed cited a weak community lending record at one of First Colonial's 16 subsidiary banks.
The unit, Avenue Bank, has received two consecutive "needs to improve" ratings under the Community Reinvestment Act.
C. Paul Johnson, First Colonial's chief executive, said he was "astounded" at the Fed's ruling.
Since receiving the latest CRA rating in January, Avenue has pledged to beef up its lending activities in low and moderate income communities within its service area, Mr. Johnson said.
Will Reapply to Fed
"Our plan is to do an even better job to improve our CRA rating," said Mr. Johnson. "We'll reapply with the Fed just as soon as we can."
The ruling represented only the fourth time the Fed has rejected merger plans on CRA grounds.
Hi-Bancorp and GNP, both based in suburban Chicago, would add $146 million of assets to First Colonial, which has assets of $1.6 billion.
Community Group's Petition
The Fed was responding to a petition filed by Calvin Bradford of Community Reinvestment Associates and a couple contending that First Colonial's Avenue Bank of Oak Park rejected their mortgage application on racial grounds.
First Colonial settled the suit out of court, and regulators founds no evidence of racial bias at the bank.