For immediate release

The Federal Reserve Board today announced its approval of the applications filed by Susquehanna Bancshares, Inc., Lititz, Pennsylvania, to acquire Atcorp, Inc., Marlton, and its subsidiary bank, Equity National Bank, Atco; and Farmers Banc Corp. and its subsidiary bank, Farmers National Bank, both of Mullica Hill, all in New Jersey. Attached is the Board's Order relating to this action.

Susquehanna Bancshares, Inc. Lititz, Pennsylvania Order Approving the Acquisition of Bank Holding Companies

Susquehanna Bancshares, Inc., Lititz, Pennsylvania ("Susquehanna"), 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 Atcorp, Inc., Marlton, New Jersey ("AI"), and its subsidiary bank, Equity National Bank, Atco, New Jersey ("Equity Bank"); and Farmers Banc Corp. ("FBC") and its subsidiary bank, Farmers National Bank ("Farmers Bank"), both of Mullica Hill, New Jersey.1 Notice of the proposal, affording interested persons an opportunity to submit comments, has been published (61 Federal Register 60,706 (1996)). 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. Susquehanna, with total consolidated assets of approximately $3 billion, operates five banks and three savings associations in Pennsylvania and Maryland and engages in certain permissible nonbanking activities.2 Susquehanna is the 12th largest commercial banking organization in Pennsylvania, controlling approximately $1.3 billion in deposits, representing less than 1 percent of total deposits in commercial banks in the state.3 AI and FBC are, respectively, the 44th and 64th largest commercial banking organizations in New Jersey, controlling approximately $124 million and $72 million in deposits. The combined deposits of AI and FBC represent less than 1 percent of total deposits in commercial banking organizations in the state. 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.4 For purposes of the BHC Act, Susquehanna's home state is Pennsylvania, and Susquehanna would acquire banks in New Jersey. The conditions for an interstate acquisition under section 3(d) are met in this case. 5 In view of all the facts of record, the Board is permitted to approve the proposal under section 3(d) of the BHC Act. Competitive Considerations The BHC Act prohibits the Board from approving an application if the proposal would result in a monopoly, or would substantially lessen competition in any relevant banking market, unless the Board finds that the anticompetitive effects of the proposal are clearly outweighed in the public interest by the probable effect of the proposal in meeting the convenience and needs of the community.6 AI and FBC compete directly in the Philadelphia, Pennsylvania, banking market.7 On consummation of the proposal, Susquehanna would become the 23d largest commercial banking institution in the market, controlling deposits of approximately $195 million, representing less than 1 percent of total deposits in commercial banks or thrift institutions in the market.8 Based on all the facts of record, including the small increase in market concentration as measured by the Herfindahl-Hirschman Index ("HHI")9 and the number of competitors that would remain in the market, the Board concludes that the proposal would not have a significantly adverse effect on competition or the concentration of banking resources in the Philadelphia banking market or any other relevant banking market.

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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. Supervisory Factors The Board has carefully considered the financial and managerial resources and future prospects of Susquehanna, AI, FBC, 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 Susquehanna. 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, weigh in favor of approval of the proposal. B. Convenience and Needs Factor The Board also 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. As part of that review, the Board considered comments from New Jersey Citizen Action ("Protestant") alleging that Susquehanna has not taken adequate steps to assess the demographic characteristics and banking needs of neighborhoods with predominately low- and moderate-income ("LMI") and minority residents ("LMI and minority neighborhoods") served by AI and FBC and has not developed an adequate plan to serve those areas. Protestant also alleges, based on data filed under the Home Mortgage Disclosure Act (12 U.S.C. § 2801 et seq.) ("HMDA"), that Equity Bank, Farmers Bank, and Susquehanna's lead subsidiary bank, Farmers First Bank, Lititz, Pennsylvania ("Susquehanna Bank"), have inadequate records of lending to LMI and minority neighborhoods. To help to address the credit needs of LMI and minority neighborhoods in the communities to be served in New Jersey, Susquehanna has developed preliminary plans for a three-year lending program at Equity Bank and Farmers Bank, including lending goals for affordable home mortgage loans to first-time LMI homebuyers, home improvement loans, and community development loans. Those goals would supplement the current lending and community development programs of Equity Bank and Farmers Bank. In addition, the record indicates that Susquehanna provides a full range of retail credit and deposit products and services, including home mortgage loans, consumer installment loans, small business loans, and lifeline checking accounts. Susquehanna has stated that these products and services, some of which are not currently offered by Equity Bank and Farmers Bank, would be offered in the markets the banks serve. The Board also notes that Susquehanna has policies and programs in place to assist in ascertaining and meeting the credit needs of the communities served by its subsidiary banks. The Susquehanna CRA Officers Committee ("Committee") was formed in 1990 to provide oversight for the activities of Susquehanna's subsidiary banks under the Community Reinvestment Act (12 U.S.C. § 2901 et seq.) ("CRA").10 The Committee performs a variety of functions designed to exchange information and ideas involving CRA-related activities. In addition, the Committee provides services to support subsidiary banks in ascertaining and assisting to meet the credit needs of their communities, including compiling and analyzing data on CRA-related activities, reviewing community demographics and marketing techniques by using Susquehanna's Marketing Central Information File software, discussing unique aspects of and approaches to individual markets and communities, and discussing methods to assess and meet the credit needs of all members of the communities served by the bank.11

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Performance Examinations 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 CRA. As provided in the CRA, the Board evaluates this factor in light of examinations by the primary federal supervisor of the CRA performance records of the relevant institutions. 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.12 All of Susquehanna's subsidiary banks received "outstanding" or "satisfactory" ratings for CRA performance in their most recent evaluations by their primary federal supervisor. Susquehanna Bank received an "outstanding" rating in its most recent examination as of September 1994 by the Federal Deposit Insurance Corporation ("1994 Examination"). Three of Susquehanna's four remaining subsidiary banks also received "outstanding" ratings for CRA performance in their most recent evaluations. Equity Bank received a "satisfactory" rating for CRA performance from the Office of the Comptroller of the Currency ("OCC") as of March 1996, and Farmers Bank received a "satisfactory" rating for CRA performance from the OCC as of December 1993. The 1994 Examination concluded that Susquehanna Bank's lending activities reflected an overall responsiveness to meeting identified community credit needs. FDIC examiners commended the bank's strong efforts in ascertaining and meeting the credit needs of LMI loan applicants in the Lancaster, Pennsylvania, Metropolitan Statistical Area, noting that the bank had received applications for and originated a substantially higher percentage of housing-related loans than other area lenders in the aggregate. In addition, the 1994 Examination concluded that Susquehanna Bank had achieved a reasonable penetration of all segments of its delineated community, including LMI neighborhoods. Examiners also noted that the bank primarily promoted its credit products and services through newspaper, radio, and television advertising, including a Spanish language newspaper and a Spanish language radio station. The bank also employs bilingual personnel to facilitate communication with Hispanic customers.13 To respond to housing-related credit needs identified by the participation of its officers in community organizations, Susquehanna Bank established an adjustable rate home mortgage loan program to lend up to 95 percent of the property's value and initiated its participation in the Federal National Mortgage Association (Fannie Mae) Community Home Buyer's Plan, which permits the bank to employ more flexible underwriting criteria in low-income areas.14 The 1994 Examination also found that the bank was an active lender to and investor in organizations engaged in community development activities. For example, the bank invested as a limited partner in a nonprofit housing developer that created The Umbrella Works, which rehabilitated a building in a low-income neighborhood of Lancaster to provide 82 apartments for LMI households, and Oak Bottom, which produced 54 housing units for low-income households in Quarryville, Pennsylvania.15 Susquehanna Bank also renovated an abandoned paper mill in Lititz, Pennsylvania, to use as administrative offices and to provide additional office space for lease. In addition, the bank has extended more than $4 million in loans to local churches and participated in a $360,000 revolving loan to the Spanish American Civic Association to rehabilitate homes for LMI Hispanic residents in the City of Lancaster.16 HMDA Data and Record of Lending The Board has carefully reviewed the 1994 and 1995 HMDA data reported by Susquehanna Bank, Equity Bank, and Farmers Bank in light of the Protestant's contentions about the institutions' lending records. These data generally indicate that Susquehanna Bank's origination rates for loans to applicants from LMI census tracts and minority applicants were significantly higher than the origination rates for loans to those applicants for lenders in the market in the aggregate. For example, in 1994, Susquehanna Bank originated loans to 84 percent of its LMI applicants, compared to an origination rate of 70 percent for lenders in the market in the aggregate, and during 1995 originated loans to 81 percent of its LMI applicants, compared to an origination rate of 61 percent for other area lenders. Also in 1994, Susquehanna Bank originated loans to 93 percent of its Hispanic applicants and 83 percent of its African-American applicants, compared to origination rates of 70 percent and 62 percent, respectively, for lenders in the market in the aggregate.17 The Board also has carefully reviewed other information, particularly the 1994 Examination and examination reports for Equity Bank and Farmers Bank, which provide an on-site evaluation of compliance with the fair lending laws. Examiners found no evidence of prohibited discrimination or other illegal credit practices at the banks, and concluded that they were in satisfactory compliance with the substantive provisions of the fair lending laws. Examiners also found no evidence of any practices by the banks that were intended to discourage applications for the types of credit listed in the institutions' CRA statements. Conclusion on the 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 Protestant. Based on all the facts of record, and for the reasons discussed above, the Board concludes that considerations relating to the convenience and needs factor, including the CRA performance records of the relevant institutions, are consistent with approval of the approval.18 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 Susquehanna 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, and not 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 Philadelphia, acting pursuant to delegated authority.

By order of the Board of Governors,19 effective February 3, 1997. (signed) Jennifer J. Johnson Jennifer J. Johnson Deputy Secretary of the Board

Footnotes 1 Susquehanna would acquire AI and FBC separately by merging each company with a shell subsidiary corporation of Susquehanna. AI and FBC would be the surviving corporations of these mergers and would become separate subsidiary bank holding companies of Susquehanna. 2 Asset data are as of September 30, 1996. 3 Deposit data are as of June 30, 1995. 4 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. 5 See 12 U.S.C. § 1842(d)(1)(A) and (B) and 1842(d)(2)(A) and (B). Susquehanna is adequately capitalized and adequately managed. Equity Bank and Farmers Bank have been in existence and continuously operated for more than five years. In addition, on consummation of the proposal, Susquehanna 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 New Jersey. 6 12 U.S.C. § 1842(c). 7 The Philadelphia banking market consists of Bucks, Chester, Delaware, Montgomery, and Philadelphia Counties in Pennsylvania; and Burlington, Camden, and Salem Counties, the City of Trenton, and the Mercer County townships of Ewing, Hamilton, and Lawrence in New Jersey. 8 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 WM Bancorp, 76 Federal Reserve Bulletin 788 (1990); 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). 9 The HHI would remain unchanged at 1390 points after consummation of the proposal. 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 to be 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 HHI thresholds for screening bank mergers for anticompetitive effects implicitly recognizes the competitive effect of limited-purpose lenders and other non-depository financial entities. 10 The Committee is chaired by a Susquehanna corporate officer and has as its voting members the CRA officers of each affiliate. Nonvoting members of the Committee include Susquehanna's corporate directors of marketing and compliance, the manager of its CRA/HMDA support unit, and affiliate representatives involved in marketing, lending, and compliance. The Committee meets at least quarterly, and more frequently if necessary. 11 The Committee has implemented a number of programs that support the CRA-related activities of Susquehanna subsidiary banks, including uniform formats for CRA self-assessment, CRA programs, office closing and relocation policies, and fair lending policies. The Committee also has initiated a comprehensive CRA data compilation and analytical software system and has created a CRA review task force to assist subsidiary banks in analyzing their CRA-related activities and preparing for CRA performance examinations. 12 The Statement of the Federal Financial Supervisory Agencies Regarding the Community Reinvestment Act (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. 13 Susquehanna states that Spanish language mortgage loan documents also are available. 14 During 1996, the bank made 33 loans for $1.8 million in the aggregate under this program. 15 Since the 1994 Examination, Farmers First also has invested in a limited partnership that developed The Wagon Werks, a renovated building in Columbia, Pennsylvania, that provides housing for low-income senior citizens. As of December 31, 1996, the bank had approximately $500,000 invested in its housing-related limited partnerships. 16 Susquehanna Bank also offers two basic checking account plans that require no minimum balance and charge low fees. At the time of the 1994 Examination, Susquehanna Bank had 2,649 such accounts, which were generally held by low-income and retired customers. As of December 31, 1996, the bank had 2,983 such accounts with an average balance of $575 per account. 17 HMDA data for Equity Bank and Farmers Bank indicate that those banks also have higher origination rates for applicants in LMI census tracts and minority applicants than those of other lenders in the market in the aggregate. 18 Protestant requests that the Board withhold approval of the proposal until Susquehanna develops a more appropriate plan for the New Jersey communities to be served. The Board is required under applicable law and its regulations to act on applications under the BHC Act within specified time periods. The Board notes, moreover, that Protestant's comments on Susquehanna's anticipated CRA-related activities after consummation of the proposal have been carefully considered in light of all the facts of record, including Susquehanna's preliminary plans for the institutions to be acquired, its CRA-related policies and programs, and its record of ascertaining and meeting the credit needs of its service communities. Based on this review, and for the reasons discussed above, the Board concludes that the record is sufficient for the Board to act on the proposal at this time, and that delay or denial of the proposal is not warranted. 19 Voting for this action: Chairman Greenspan, Vice Chair Rivlin, and Governors Kelley, Phillips, and Meyer. Absent and not voting: Governors Lindsey and Yellen.

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1997 Orders on banking applications