Commercial Federal Corp., a thrift based in Omaha, moved Monday to become a significant player in the fast-growing Colorado market, agreeing to acquire First Colorado Bancorp for $525 million in stock.

The acquisition of Lakewood, Colo.-based First Colorado, which operates as First Federal Bank of Colorado, would double Commercial Federal's deposits in the state to $2.4 billion.

The merger would give Commercial Federal the fifth-largest deposit base in Colorado, with 6% of the market, just behind FirstBank Holding Co., a privately held institution also based in Lakewood that holds 6.8% of the state's deposits. Norwest Corp. has the biggest market share, 18.2% of deposits, followed by U.S. Bancorp with 12.6%, and Golden West Financial Corp. with 8.5%.

The growth comes at a relatively steep price, analysts said.

Commercial Federal, which has $8.5 billion of assets, is paying 2.3 times First Colorado's book value and 23 times its estimated 1998 earnings, a high price for a traditional thrift.

Commercial Federal officials defended the price, saying it was justified by Colorado's high economic growth rate and the scarcity of large financial institutions for sale.

"The primary rationale is this gives us more presence in what we consider a very attractive Colorado market," said Gary Matter, Commerical Federal's senior vice president and controller. "We took a giant step forward in increasing our franchise value."

Commercial Federal's business is concentrated in slower-growth midwestern states, including Iowa, Kansas, and Nebraska. It has small operations in Arizona and Oklahoma.

The company has two acquisitions pending in Iowa-one for $402 million- asset Perpetual Midwest Financial Inc. of Cedar Rapids, and last month's announced deal to buy $1.5 billion-asset Amerus Bank of Des Moines. It has closed on three other acquisitions this year.

When the Iowa deals and Monday's announced merger with First Colorado are completed, Commercial Federal would have $11.8 billion of assets, nearly doubling its size in just two years.

Chad Yonker, an analyst at Fox-Pitt Kelton, said Commercial Federal has done a good job of integrating acquisitions and quickly becoming a significant player in its target states. Two years ago, for example, Commercial Federal had only a couple of branches in Iowa, but it will be the fourth-biggest bank in the state once it completes its two pending acquisitions.

Mr. Matter said the company is "not just in an acquisition mode," and that it is being opportunistic about building mass in its markets. Buying First Colorado gives Commercial Federal opportunities to increase revenues by selling more consumer banking products. First Colorado is primarily a traditional mortgage lender, and its deposits are heavily concentrated in certificates of deposit.

It also appears that Commercial Federal is "trying to be a survivor by building mass," said Joseph Roberto, an analyst with Keefe, Bruyette & Woods Inc.

Other analysts agreed, but added that Commerical Federal is becoming more attractive as a takeover with each acquisition.

"This further adds to the attractiveness to the Commercial Federal franchise," said Joseph Morford, an analyst with BT Alex. Brown.

Commercial Federal said the acquisition would be neutral to its 1998 earnings and would add to its 1999 earnings. The company said it would take a charge against earnings of up to $25 million when the deal closes in September.

Commercial Federal says it expects to cut $9.2 million, or 36%, of First Colorado's cost base. Part of the cost savings would come from closing five of First Colorado's 27 branches in the Denver area.

Commercial Federal entered Colorado in 1987 with the acquisition of Empire Savings Building and Loan of Denver.

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