Acquisitive Community First May Be Rebuilding War Chest

One of the Midwest's most acquisitive community banks appears to be gearing up for a shopping spree.

Community First Bankshares, Fargo, N.D., on Jan. 17 filed a registration statement with the Securities and Exchange Commission for a proposed offering of $60 million of cumulative capital securities by its Delaware business trust subsidiary.

Although proceeds related to the offering will go into everything from funding subsidiaries to retiring debt, the company plans to use at least some of it to expand its presence in the Midwest and Mountain states, company officials said.

"I wouldn't be surprised if they're raising additional capital to go out and make acquisitions," said Daniel Cardenas, an analyst for Howe Barnes Investments Inc., Chicago. "I imagine they'll try to increase their presence in the Midwest."

Acquisition has been the key to Community First's growth since its founding 10 years ago by an investor group that purchased 21 banks in Minnesota, North Dakota, and South Dakota from First Bank System Inc., Minneapolis.

The $3.1 billion-asset Community First has acquired 21 banks in the past six years, along with some insurance agencies. Community First has found a profitable niche - its third-quarter return on assets and equity were 1.35% and 19.3%, respectively - by serving 79 small to medium markets in Colorado, Iowa, Minnesota, Nebraska, North Dakota, South Dakota, and Wisconsin.

The bank's last acquisition was Mountain Parks Financial Corp., a $443 million-asset bank headquartered in Denver. The deal closed Dec. 18.

Community First chief executive Donald R. Mengedoth has made clear his desire to expand into territory bordering the bank's existing franchise. The states on his agenda include Idaho, Illinois, Kansas, Missouri, Montana, New Mexico, Oklahoma, and Wyoming.

"We're actively looking to expand our franchise by serving small communities," he said. "As consolidation of the industry continues, we think there's an opportunity in small communities."

Community First has gone to the markets to fund expansion before; the most recent instance was in April 1995, when the bank made a $23 million preferred stock offering.

The Community First trust subsidiary will use the capital to buy subordinated debentures of the holding company, which will in turn use the proceeds for general corporate purposes.

This would be the first time the institution has used the trust subsidiary to raise capital.

"It's a very attractive security from the perspective that the Fed will count it as Tier 1 capital, and it's a tax-deductible coupon," Mr. Mengedoth said.

The offering will be made through Piper Jaffray Inc. and Dain Bosworth Inc.

Community First should learn next week when the registration statement will become effective, Mr. Mengedoth said.

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