Midwest supercommunity banks on acquisition spree.

Several midwestern supercommunity banks are making names for themselves as some of the region's most aggressive acquirers.

The list includes Amcore Financial, Inc., Rockford, Ill., Community First Bankshares, Fargo, N.D.; Heritage Financial Services Inc., Tinley Park, Ill.; and Mid Am Inc., Bowling Green, Ohio.

Last year and in the first half of 1994, the companies have have acquired about $1 billion of assets. In addition, acquisitions totaling about $620 million are pending.

And these companies aren't about to stop the dealmaking.

"We feel treading water is not really an option," said. David R. Francisco, president and chief operating officer of MidAm, which has grown to nearly quadrupled in size in the last eight years. "If we don't have a plan, we'll be part of somebody else's plan."

But, Matthew Finn, an analyst with Burns, Pauli & Co. in St. Louis, said many of these fast-growing banks and the small companies they are buying are setting themselves up to be acquired in the future.

"Everybody is positioning themselves and lining up for the 'A-list' banks," he said.

Nonetheless, community banks have been extremely active in recent years. Some institutions, including Amcore and Community First, even have hired full,time acquisitions specialists.

Community First has set a goal of acquiring about $300 million of assets each year, said president and chief executive Donald R. Mengedoth. The company currently operates in 39 communities in five states.

The $1.4 billion-asset company buys banks that range from $20 million to $150 million of assets in small, rural communities. In 1993, Community First snapped up four institutions totaling $128 million of assets. lt's already ahead of its pace in 1994 acquiring three banks with $121 million of assets.

Last week it announced its biggest deal yet signing a definitive agreement to acquire $229 million-asset Minowa Bancshares in a stock deal valued between $33 million and $37 million.

Meantime, Amcore isn't sitting still. The 1.8-billion-asset company recently announced its third and largest acquisition agreement this year, by signing a letter of intent to acquire $170 million-asset NBM Bancorp., Mendota, Ill.

Amcore purchased Dixon Bancorp., Dixon, Ill., at the end of 1992. So far this year, Amcore has acquired $165 million-asset First State Bancorp, Princeton, Ill., and has another pending acquisition of $95 million.

Mid Am is also bulking up, acquiring $373 million of assets in 1993. This year, it has acquired a small savings bank and announced a deal for a $125 million-asset acquisition.

"We won't do dilutive deals," Mr. Francisco said.

He believes acquisitions should not exceed 25% to 30% of the company's size in any calendar year.

Nonetheless, acquisition efforts such as these carry challenges, analysts and bankers say.

For instance, out of town acquirers often stress that decisions will be made locally. But some think that kind of strategy could be risky.

"The risk is that the autonomy that you give these managers means you don't have some of the controls and don't get the productivity that you want," said John Snow, an analyst with Hamilton Investments in Chicago.

And some companies ultimately might have to move some decision making out-of-town anyway what community bankers often accuse the regionals of doing, Mr. Finn said.

In contrast, $969 million Heritage Financial Services, Tinley Park, Ill., acquires in Chicago's southwest suburbs and merges acquisitions into its existing bank.

"The biggest challenge, if you're not accustomed to it, is to ... merge the new culture into the existing culture," said Richard T. Wojcik, chairman and chief executive.

Heritage most recently acquired $108 million-asset Midlothian State Bank and has made several acquisitions in recent years.

Community First has operated many of its banks under separate charters. This has posed a problem for some customers who wanted to bank at other banks owned by Community First, but couldn't because they didn't have an account opened.

"As we've made additional acquisitions and grown, it's caused people to say, 'Why can't we bank at this new location?'" Mr. Mengedoth said.

In response, the company recently announced plans to merge its nine Minnesota banks

into three, five North Dakota banks into two, and six South Dakota banks into two.

While Mr. Mengedoth. said the move itself won't achieve significant cost savings, the company will be able to repurchase some minority-interest shares and perhaps help lower its efficiency ratio back to about 63% from the 66%.

Other pitfalls of aggressive expansion could include rapidly expanding companies that may outgrow management's capabilities; Mr. Finn said.

Also, if future acquirers of supercommunity banks don't like the markets they've. acquired in, they might not pay as high book value, Mr. Snow said.

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