Community First Bankshares of Fargo, N.D., said it has a definitive agreement to buy Mountain Parks Financial Corp., Denver.
The $123 million stock deal, announced this week, is the biggest yet for $2.3 billion-asset Community First. Buying $500 million-asset Mountain Parks would more than double its Colorado assets.
It would also bring several new businesses, including subprime mortgage and automobile financing.
"It's the first time that Community First has paid 2.2 times book for anything," said Mark Alpert, an analyst with Alex. Brown & Sons in New York, "but it was a unique opportunity for them. It looks like it's a good fit, and I trust it isn't a permanent deviation from their pricing discipline."
The companies' chief executives, Community First's Donald R. Mengedoth and Mountain Parks' Dennis M. Mathisen had discussed merging previously.
"I've long been acquainted with Dennis Mathisen and know his philosophy," said Mr. Mengedoth, whose company has been one of the most acquisitive banks in Colorado in recent years.
"There's a strong consistency in terms of our strategy," he said.
"It is a very good fit all the way across the board," agreed Mr. Mathisen, who would become Community First's largest single shareholder, take a seat on the board, and act as a consultant for a year. "It just seemed like the right time to do it."
The deal, which is subject to due diligence and regulatory and shareholder approvals, is expected to close late this year or in early 1997. Management said no layoffs are expected.
Community First, with bank offices in 63 communities in seven midwestern states, would get Mountain Parks' four Colorado banks and its two finance subsidiaries: Minneapolis-based Equity Lending Inc., which originates subprime mortgages, and Mountain Parks Financial Services Inc., a new subprime automobile finance firm in Denver.
Analyst Ben Crabtree of Dain Bosworth Inc., Minneapolis, said Community First should handle the new niches well.
"Community First management is very capable and very conservative," he said. "I have a very high degree of comfort with their ability to understand and control their businesses."
Slow growth in some of Community First's banking markets makes the fast growth of subprime lending and of Colorado's markets particularly attractive, Mr. Mengedoth said.
"As we continue to acquire smaller ... rural community banks, we generally find that their economies don't generally provide all the lending opportunities that we would like," he said.
After the acquisition, about 30% of Community First's assets would be in Colorado, more than in any of the other six states in its network. The company owns banks in Minnesota, North Dakota, Nebraska, South Dakota, Iowa, and Wisconsin.
Community First was formed in 1987 when investors led by Mr. Mengedoth purchased 21 small-town bank offices from Minneapolis-based First Bank System. Community First bought its first Colorado bank in 1993.
The new market breakdown could make Community First a more attractive takeover candidate, said Mr. Crabtree. He predicted it will get an offer in the next three to five years.
Mr. Mengedoth said he foresees Community First remaining independent in the near term.