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Release Date: June 16, 1997


For immediate release

The Federal Reserve Board today announced its approval of the application filed by AMCORE Financial, Inc., Rockford, Illinois, to acquire all of the voting shares of Country Bancshares Corporation, Mount Horeb, and Belleville Bancshares Corporation, Belleville, and thereby indirectly acquire their subsidiary banks: State Bank of Mount Hore, Mount Horeb; Montello State Bank, Montello; State Bank of Argyle, Argyle; Citizens State Bank, Clinton; and Belleville State Bank, Belleville, all in Wisconsin.

Attached is the Board's Order relating to this action.


AMCORE Financial, Inc.
Rockford, Illinois

Order Approving the Acquisition of
Bank Holding Companies

AMCORE Financial, Inc., Rockford, Illinois ("AMCORE"), a bank holding company within the meaning of the Bank Holding Company Act ("BHC Act"), has requested the Board's approval under section 3 of the BHC Act (12 U.S.C. 1842) to acquire all the voting shares of Country Bancshares Corporation, Mount Horeb, and its wholly owned subsidiary, Belleville Bancshares Corporation, Belleville (collectively "Country"), and thereby acquire their subsidiary banks: State Bank of Mount Horeb, Mount Horeb; Montello State Bank, Montello; State Bank of Argyle, Argyle; Citizens State Bank, Clinton; and Belleville State Bank, Belleville, all in Wisconsin.

Notice of the proposal, affording interested persons an opportunity to submit comments, has been published (62 Federal Register 14,910 (1997)). The time for filing comments has expired, and the Board has considered the proposal and all comments received in light of the factors set forth in section 3 of the BHC Act.

AMCORE is the tenth largest commercial banking organization in Illinois, controlling deposits of $1.9 billion, representing approximately 1.2 percent of total deposits in commercial banking organizations in the state, and is the 25th largest commercial banking organization in Wisconsin, controlling approximately $192.6 million in deposits, representing less than 1 percent of total deposits in commercial banking organizations in the state.1 Country is the 18th largest commercial banking organization in Wisconsin, controlling approximately $233.5 million in deposits, representing less than 1 percent of total deposits in commercial banking organizations in the state. On consummation of this proposal, AMCORE would become the tenth largest commercial banking organization in Wisconsin, controlling approximately $425.1 million in deposits, representing less than 1 percent of total deposits in commercial banking organizations in Wisconsin.

Interstate Analysis
Section 3(d) of the BHC Act, as amended by section 101 of the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994, allows the Board to approve an application by a bank holding company to acquire control of a bank located in a state other than the home state of such bank holding company, if certain conditions are met.2 For purposes of the BHC Act, AMCORE's home state is Illinois, and AMCORE would acquire a bank in Wisconsin. The conditions for an interstate acquisition under section 3(d) are met in this case,3 and the Board is permitted to approve the proposal under section 3(d) of the BHC Act.

Competitive Considerations
AMCORE and Country compete directly in the Madison, Wisconsin, banking market.4 AMCORE operates the 18th largest banking or thrift organization ("depository institution") in the Madison banking market, controlling deposits of approximately $48.8 million, representing approximately 1.1 percent of total deposits in depository institutions in the market ("market deposits").5 Country operates the ninth largest depository institution in the market, controlling deposits of approximately $118.9 million, representing approximately 2.6 percent of market deposits. On consummation of the proposal, AMCORE would become the sixth largest depository institution in the Madison banking market, controlling deposits of $167.7 million, representing approximately 3.7 percent of market deposits. The market would remain moderately concentrated, as measured by the Herfindahl-Hirschman Index ("HHI"), and the HHI would increase 6 points to 1247 as a result of the acquisition.6 Numerous competitors also would remain in the banking market. Based on all the facts of record, the Board concludes that consummation of this proposal would not result in any significantly adverse effects on competition or on the concentration of banking resources in the Madison banking market or any other relevant banking market.

Other Factors Under the BHC Act
The BHC Act also requires the Board, in acting on an application, to consider the financial and managerial resources of the companies and banks involved, the convenience and needs of the communities to be served, and certain other supervisory factors.

A. Financial, Managerial, and other Supervisory Factors
The Board has carefully considered the financial and managerial resources and future prospects of AMCORE, Country, and their respective subsidiary banks, and other supervisory factors in light of all the facts of record. The facts include supervisory reports of examination assessing the financial and managerial resources of the organizations and confidential financial information provided by AMCORE. Based on these and all other facts of record, the Board concludes that all the supervisory factors under the BHC Act, including financial and managerial resources, are consistent with approval of the proposal.

B. Convenience and Needs Factor
The Board has carefully considered the effect of the proposal on the convenience and needs of the communities to be served in light of all the facts of record. In reviewing the convenience and needs considerations in the proposal, the Board notes that AMCORE provides a full range of financial services through its banking subsidiaries, including a broad range of mortgage, consumer, agricultural, and small business loan products. AMCORE has stated that after consummation of the proposal, it would offer these services, some of which are not available through Country, in communities currently served by Country. AMCORE also has stated that it would review Country's credit products and retain the products that are unique to the local market, including the development and expansion of programs that serve rural and farm areas.

The Board has long held that consideration of the convenience and needs factor includes a review of the records of the relevant depository institutions under the Community Reinvestment Act ("CRA"). The CRA performance records of the institutions involved are reviewed below in light of all the facts of record, including comments received on the proposal.

CRA Performance Examinations. As provided in the CRA, the Board evaluates the convenience and needs factor in light of examinations of the CRA performance records of the relevant institutions by their primary federal supervisor. An institution's most recent CRA performance evaluation is a particularly important consideration in the applications process because it represents a detailed, on-site evaluation of an institution's overall record of performance under the CRA by its primary federal supervisor.7

All AMCORE subsidiary banks received "outstanding" or "satisfactory" ratings for CRA performance in the most recent evaluations by their primary federal supervisor. AMCORE's lead subsidiary bank, AMCORE Bank, N.A., Rockford, Rockford, Illinois, which controls a majority of the deposits in the AMCORE subsidiary banks, received an "outstanding" rating in its most recent CRA performance examination from the Office of the Comptroller of the Currency ("OCC"), as of August 1995 (the "Rockford Examination"). The six remaining AMCORE subsidiary banks received "satisfactory" ratings for CRA performance in their most recent evaluations. In addition, all of the subsidiary banks of Country received either "outstanding" or "satisfactory" ratings for CRA performance in their most recent evaluations by their primary federal supervisor.

The Rockford Examination concluded that the bank's lending activities and loan originations reflected excellent responsiveness to meeting community credit needs and that the bank was a leader in a number of federal loan programs. Examiners also concluded that the bank's distribution of credit products was reasonable and significantly penetrated all segments of the delineated community, including low- and moderate-income ("LMI") neighborhoods. The Rockford Examination also noted that the bank was active in community development activities, including providing assistance to several community development organizations located in LMI areas.

Comments on the Proposal. Commenter contends that AMCORE will close branches in Wisconsin, specifically in the Belleville community, as a result of this proposal and requests the Board to prohibit any branch closings in Wisconsin as a condition of approving the proposed acquisition.8

Federal banking law addresses branch closing by specifically requiring an insured depository institution to provide notice to the appropriate regulatory agency prior to closing a branch.9 The statute, however, does not authorize the federal regulators to prevent the closing of any branch, and the BHC Act does not make approval of a proposal contingent on an applicant maintaining all branch offices of an acquired institution open. The most recent CRA performance examinations of AMCORE's subsidiary banks, moreover, found that AMCORE has a branch closing policy that satisfactorily addresses the steps to be followed in case of a branch closing, and that the policy considers the impact a branch closing would have on a delineated community.

Conclusion Regarding Convenience and Needs Factor. The Board has carefully considered the entire record in its review of the convenience and needs factor under the BHC Act, including all the information provided by the Commenters. Based on all the facts of record, and for the reasons discussed above and in the Board's previous orders involving AMCORE and Country, the Board concludes that considerations relating to the convenience and needs factor, including the CRA performance records of the institutions involved, are consistent with approval of the application.10

Conclusion
Based on all the facts of record, the Board has determined that this application should be, and hereby is, approved. The Board's approval is specifically conditioned on compliance by AMCORE with all the commitments made in connection with this application. The commitments and conditions relied on by the Board in reaching its decision are deemed to be conditions imposed in writing by the Board in connection with its findings and decision and, as such, may be enforced in proceedings under applicable law.

The proposed acquisitions shall not be consummated before the fifteenth calendar day following the effective date of this order, or later than three months after the effective date of this order, unless such period is extended .by the Board or by the Federal Reserve Bank of Chicago, acting pursuant to delegated authority.

By order of the Board of Governors,11 effective June 16, 1997.

(signed) Jennifer J. Johnson

Jennifer J. Johnson

Deputy Secretary of the Board


Footnotes

1 State deposit data are as of December 31, 1996, and reflect AMCORE's acquisition of First National Bancorp, Monroe, Wisconsin, which was consummated on April 18, 1997. Market deposit data are as of June 30, 1996.

2 Pub. L. No. 103-328, 108 Stat. 2338 (1994). A bank holding company's home state is the state in which the operations of the bank holding company's banking subsidiaries were principally conducted on July 1, 1966, or the date on which the company became a bank holding company, whichever is later.

3 See 12 U.S.C. 1842(d)(1)(A) and (B) and 1842(d)(2)(A) and (B). AMCORE is adequately capitalized and adequately managed. On consummation of the proposal, AMCORE and its affiliates would control less than 10 percent of the total amount of deposits of insured depository institutions in the United States and less than 30 percent of the total amount of deposits of insured depository institutions in Wisconsin. The subsidiary banks of Country have been in existence and continuously operated for at least the minimum period required under Wisconsin law. In addition, all other requirements of section 3(d) of the BHC Act would be met on consummation of the proposal.

4 The Madison, Wisconsin, banking market ("Madison banking market") is approximated by Dane County except for the townships of York, Medina, Deerfield, Christiana, and Albion; and Dekorra, Lowville, Otsego, Fountain, Prairie, Columbus, Hampden, Leeds, Arlington, Lodi, and West Point townships in Columbia County, all in Wisconsin.

The Wisconsin Rural Development Center, Inc. ("Commenter") maintains that the proposal would increase market concentration and adversely affect competition for loans in a four county area in southwestern Wisconsin. Commenter presents no facts to support lending as the relevant product market or the four county area in southwestern Wisconsin as the relevant geographic market. The appropriate product market for evaluating the competitive effects of acquisitions of depository institutions is the cluster of products and services offered by such institutions. See Chemical Banking Corporation, 82 Federal Reserve Bulletin 239 (1997). The Board and the courts also have concluded that the relevant banking market for analyzing the competitive effects of a proposal must reflect commercial and banking realities and should consist of the local area where the banks involved offer their services and where local customers can practicably turn for alternatives. Id. The Board has considered Commenter's contentions in light of all the facts of record, and concludes that the appropriate geographic market is the Madison banking market as defined above. The Board bases this conclusion on an analysis of employment, commuting data, shopping patterns, newspaper circulation, advertising by financial institutions, loan and deposit data, traffic patterns, and other facts of record.

5 Market data are as of June 30, 1995. Market share data are based on calculations in which the deposits of thrift institutions are included at 50 percent. The Board previously has indicated that thrift institutions have become, or have the potential to become, significant competitors of commercial banks. See Midwest Financial Group, 75 Federal Reserve Bulletin 386 (1989); National City Corporation, 70 Federal Reserve Bulletin 743 (1984). Thus, the Board has regularly included thrift deposits in the calculation of market share on a 50-percent weighted basis. See, e.g., First Hawaiian, Inc., 77 Federal Reserve Bulletin 52 (1991).

6 Under the revised Department of Justice Merger Guidelines, 49 Federal Register 26,823 (June 29, 1984), a market in which the post-merger HHI is between 1000 and 1800 is considered moderately concentrated. The Justice Department has informed the Board that a bank merger or acquisition generally will not be challenged (in the absence of other factors indicating anticompetitive effects) unless the post-merger HHI is at least 1800 and the merger increases the HHI by more than 200 points. The Justice Department has stated that the higher than normal threshold for an increase in the HHI when screening bank mergers and acquisitions for anticompetitive effects implicitly recognizes the competitive effects of limited-purpose lenders and other non-depository financial entities.

7 The Statement of the Federal Financial Supervisory Agencies Regarding the Community Reinvestment Act ("Agency CRA Statement") (54 Federal Register 13,742, 13,745 (1989)) provides that a CRA examination is an important and often controlling factor in consideration of an institution's CRA record and that reports of these examinations will be given great weight in the applications process.

8 Commenter also contends that efforts by AMCORE and Country to assess and to serve the banking needs of LMI borrowers and communities in rural and farming areas in Wisconsin are inadequate. The Board recently has considered almost identical contentions by Commenter in connection with AMCORE's application to acquire First National Bancorp, Inc., Monroe, Wisconsin, and Country's application to acquire Belleville Bancshares Corporation, Belleville, Wisconsin, and concluded that the CRA performance records of AMCORE and Country were consistent with approval of those applications under the convenience and needs factor. See Amcore Financial, Inc., 83 Federal Reserve Bulletin 429 (1997), and Country Bank Shares Corporation, 83 Federal Reserve Bulletin 112 (1997) ("Country/Belleville Order"). Commenter reiterates contentions that unfair and discriminatory lending practices occur at Country's lead subsidiary bank, State Bank of Mount Horeb, Mount Horeb, Wisconsin ("Mt. Horeb Bank"). After sampling accepted and rejected loan applications in connection with Mt. Horeb Bank's most recent examination for CRA performance, examiners concluded that loan denials appeared to be reasonable and supported. The examination found no violations of substantive provisions of anti-discrimination laws and regulations. The Country/Belleville Order also noted that the bank's primary supervisor, the Federal Deposit Insurance Corporation ("FDIC"), was considering Commenter's allegations of unfair practices, particularly in connection with agricultural lending. The FDIC concluded that the bank did not engage in improper practices.

9 Section 42 of the Federal Deposit Insurance Act (12 U.S.C. 1831r-1) ("section 42"), as implemented by the Joint Policy Statement Regarding Branch Closing (58 Federal Register 49,083 (1993)) ("Joint Policy Statement"), requires that a bank provide the public with at least 30 days notice and the primary federal supervisor with at least 90 days notice before the date of the proposed branch closing. The bank also is required to provide reasons and other supporting data for the closure, consistent with the institution's written policy for branch closing.

10 Commenter has requested that the Board postpone action on this proposal until Commenter has had the opportunity to arrange a meeting between Commenter and AMCORE. The Board has indicated in previous orders and in the Agency CRA Statement that communication by depository institutions with community groups provides a valuable method of assessing and determining how best to address the credit needs of the community. Neither the CRA nor the Agency CRA Statement, however, require an insured depository institution to meet with community representatives. In reviewing an application under the BHC Act, the CRA and the Agency CRA Statement instead require the Board to focus on the established record of performance of the institutions involved and the programs and policies that the institutions have in place to assist in meeting the credit needs of their entire communities. In this case, the facts discussed above and the other facts of record indicate that the relevant institutions have programs to help serve the credit needs of their communities, and that denial or delay of the application is not warranted.

11 Voting for this action: Chairman Greenspan, Vice Chair Rivlin, and Governors Phillips and Meyer. Absent and not voting: Governor Kelley.

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