Community First of N. Dakota Taking $3.1M Charge

Community First Bankshares of Fargo, N.D., said it would take a $3.1 million charge against second-quarter earnings related to the planned sale of its subprime automobile and home equity lending operations.

FirstPlus Financial Group, Dallas, plans to buy most of Community First's home equity lending business.

Cygnet Financial Services Inc., a unit of Phoenix-based Ugly Duckling Corp., intends to buy most of its subprime auto business.

Terms of the deals were not disclosed.

The $5.7 billion-asset Community First, which announced in January that it intended to dispose of the businesses, also will record a second-quarter operating loss of $700,000 related to the loans.

The one-time charge and the loss would result in an estimated nine-cent reduction in earnings per share.

Earnings are scheduled to be announced Thursday.

The charge represents a loss on disposition of $1.7 million and expenses related to the sale of $1.4 million.

Community First would retain about $100 million in loans and servicing rights on another $100 million.

Community First acquired the businesses in its December 1996 purchase of Mountain Parks Financial Services Inc. of Denver.

Analysts generally viewed the intended sales as positive.

"They thought the business would be a nice contributor to their bottom line, but it just didn't work out," said Daniel Cardenas, an analyst with Howe Barnes Investments, Chicago.

"They've taken their medicine, gotten rid of this thing, and now they can move on."

Another analyst said Community First could have avoided a loss had it decided to sell the assets sooner.

"It was never a good strategic fit," said Ben Crabtree of Dain Rauscher Inc., Minneapolis. "It's a good thing that it's gone.

"It has been treated as a discontinued operation. The bad news is between the time they decided to sell it and when they sold it, the world's appetite for subprime business disappeared," Mr. Crabtree said.

Donald R. Mengedoth, president and chief executive officer of Community First, said, "Our principal mission is community banking, and these subsidiaries have not been a good strategic fit."