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**UNITED STATESSECURITIES AND EXCHANGE COMMISSION****WASHINGTON, DC  20549**

**FORM 10-Q**
| **ý** | **QUARTERLY REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
|------------|----------------------------------------------------------------------------------------------|

** **

**For the quarterly period ended June 30, 2001**

OR
| **o** | **TRANSITION REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
|-------|-----------------------------------------------------------------------------------------------|

 

**For the transition period from                 to               .**

**Commissionfile number   0-19368**  

| **COMMUNITY  FIRST BANKSHARES, INC.******               |                                                       |
|---------------------------------------------------------|------------------------------------------------------------|
| (Exact  name of registrant as specified in its charter) |                                                       |
|                                                    |                                                       |   |
| **Delaware**                                            | **46-0391436**                                             |   |
| ****                                                    | ****                                                       |   |
| (State  or other jurisdiction of                        | (I.R.S.  Employer Identification No.)                      |   |
| incorporation  or organization)                         |                                                       |   |
|                                                    |                                                       |   |
| **520 Main Avenue**                                     |                                                       |   |
| **Fargo, ND**                                           | **58124**                                                  |   |
| ****                                                    | ****                                                       |   |
| (Address  of principal executive offices)               | (Zip  Code)                                                |   |
|                                                    |                                                       |   |
|                                                    | **(701) 298-5600**                                         |
|                                                    | ****                                                       |
|                                                    | (Registrant’s  telephone number, including area code) |
|                                                         |                                                            |  |  |

 

Indicatedby check mark whether the registrant (1) has filed all reports required to befiled by Section 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for the past 90 days: YES  ý  NO   o

AtAugust 8, 2001, 40,675,609 shares of Common Stock were outstanding.

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COMMUNITY FIRSTBANKSHARES, INC.

FORM 10-Q

QUARTER ENDED JUNE 30,2001

INDEX

|                            |     |                                                                                        |
|---------------------------------|----------|---------------------------------------------------------------------------------------------|
| PART I - FINANCIAL INFORMATION: |     |
|                            |     |                                                                                        |
|                            | Item 1.  | Condensed Consolidated Financial  Statements and Notes                                      |   |
|                            |     |                                                                                        |
|                            | Item  2. | Management’s  Discussion and Analysis of Financial Condition and Results of Operations |   |
|                            |     |                                                                                        |
|                            | Item  3. | Quantitative  and Qualitative Disclosure About Market Risk                                  |   |
|                            |     |                                                                                        |
|                            |     |                                                                                        |
| PART II - OTHER  INFORMATION:   |     |
|                            |     |                                                                                        |
|                            | Item 1.  | Legal Proceedings                                                                           |   |
|                            |     |                                                                                        |
|                            | Item 2.  | Changes in Securities                                                                       |   |
|                            |     |                                                                                        |
|                            | Item 3.  | Defaults  Upon Senior Securities                                                            |   |
|                            |     |                                                                                        |
|                            | Item  4. | Submission  of Matters to a Vote of Security Holders                                        |   |
|                            |     |                                                                                        |
|                            | Item 5.  | Other Information                                                                           |   |
|                            |     |                                                                                        |
|                            | Item 6.  | Exhibits  and Reports on Form 8-K                                                           |   |
|                            |     |                                                                                        |
| SIGNATURES                      |     |
|                                 |          |                                                                                             |  |  |

COMMUNITYFIRST BANKSHARES, INC.CONDENSED CONSOLIDATEDSTATEMENTS OF FINANCIAL CONDITION

| (Dollars in thousands, except per share  data)                                           | June  30,                                                                                                                  |      | December  31, |      |
|------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------|-----------|---------------|-----------|
| (Unaudited)                                                                              | 2001                                                                                                                       |      | 2000          |      |
|                                                                                          |                                                                                                                       |
| ASSETS                                                                                   |                                                                                                                       |      |          |      |
| Cash and due from banks                                                                  | $                                                                                                                          | 226,050   |          | $         | 256,136 |   |
| Federal funds sold and securities  purchased under agreements to resell                  | -                                                                                                                          |      | -             |      |
| Interest-bearing deposits                                                                | 10,716                                                                                                                     |      | 1,110         |      |
| Available-for-sale securities                                                            | 1,468,166                                                                                                                  |      | 1,714,510     |      |
| Held-to-maturity securities (fair  value: 6/30/01 - $74,962, 12/31/00 - $73,222)         | 74,962                                                                                                                     |      | 73,222        |      |
| Loans                                                                                    | 3,808,419                                                                                                                  |      | 3,738,202     |      |
|                                                                                     | Less: Allowance for loan losses                                                                                            | (52,891   | )             | (52,168   | ) |
|                                                                                          |                                                                                                                       |
| Net loans                                                                                | 3,755,528                                                                                                                  |      | 3,686,034     |      |
| Bank premises and equipment, net                                                         | 125,694                                                                                                                    |      | 121,675       |      |
| Accrued interest receivable                                                              | 45,595                                                                                                                     |      | 52,494        |      |
| Intangible assets                                                                        | 102,339                                                                                                                    |      | 114,971       |      |
| Other assets                                                                             | 86,527                                                                                                                     |      | 69,577        |      |
|                                                                                          |                                                                                                                       |
| Total assets                                                                             | $                                                                                                                          | 5,895,577 |          | $         | 6,089,729 |   |
|                                                                                          |                                                                                                                       |
| LIABILITIES AND SHAREHOLDERS’ EQUITY                                                |                                                                                                                       |      |          |      |
| Deposits:                                                                                |                                                                                                                       |      |          |      |
|                                                                                     | Noninterest-bearing                                                                                                        | $         | 519,590       |      | $ | 500,834 |   |
|                                                                                     | Interest-bearing:                                                                                                          |      |          |      |   |
|                                                                                     | Savings and NOW accounts                                                                                                   | 2,177,151 |          | 2,349,606 |   |
|                                                                                     | Time accounts over $100,000                                                                                                | 717,882   |          | 672,968   |   |
|                                                                                     | Other  time accounts                                                                                                       | 1,306,453 |          | 1,496,483 |   |
|                                                                                          |                                                                                                                       |
| Total deposits                                                                           | 4,721,076                                                                                                                  |      | 5,019,891     |      |
| Federal funds purchased and securities  sold under agreements to repurchase              | 363,638                                                                                                                    |      | 205,758       |      |
| Other short-term borrowings                                                              | 133,218                                                                                                                    |      | 203,952       |      |
| Long-term debt                                                                           | 137,132                                                                                                                    |      | 123,957       |      |
| Accrued interest payable                                                                 | 38,023                                                                                                                     |      | 45,489        |      |
| Other liabilities                                                                        | 30,488                                                                                                                     |      | 25,251        |      |
|                                                                                          |                                                                                                                       |
| Total liabilities                                                                        | 5,423,575                                                                                                                  |      | 5,624,298     |      |
| Company-obligated mandatorily  redeemable preferred securities of CFB Capital I & II | 120,000                                                                                                                    |      | 120,000       |      |
| Shareholders’ equity:                                                               |                                                                                                                       |      |          |      |
|                                                                                     | Common stock, par value $.01 per share:                                                                                    |      |          |      |   |
|                                                                                     | Authorized Shares – 80,000,000                                                                                        |      |          |      |   |
|                                                                                     | Issued Shares – 51,021,896                                                                                            | 510       |          | 510       |   |
|                                                                                     | Capital surplus                                                                                                            | 192,450   |          | 192,368   |   |
|                                                                                     | Retained earnings                                                                                                          | 326,064   |          | 315,091   |   |
|                                                                                     | Unrealized gain (loss) on  available-for-sale securities, net of tax                                                       | 3,613     |          | (9,486    | ) |
|                                                                                     | Less  cost of common stock in treasury - June 30, 2001 – 10,036,055 shares December  31, 2000 – 9,155,144 shares | (170,635  | )             | (153,052  | ) |
|                                                                                          |                                                                                                                       |
| Total shareholders’ equity                                                          | 352,002                                                                                                                    |      | 345,431       |      |
|                                                                                          |                                                                                                                       |
| Total liabilities and shareholders’  equity                                         | $                                                                                                                          | 5,895,577 |          | $         | 6,089,729 |   |
|                                                                                          |                                                                                                                       |
|                                                                                          |                                                                                                                            |           |               |           |  |  |  |  |

See accompanying notes.

COMMUNITYFIRST BANKSHARES, INC.CONDENSED CONSOLIDATED STATEMENTS OF INCOME

|                                                 |                                                                                 |                                   |    |                                 |    |    |    |    |    |
|------------------------------------------------------|--------------------------------------------------------------------------------------|----------------------------------------|---------|--------------------------------------|---------|---------|---------|---------|---------|
| (Dollars in thousands, except per share  data)       |                                                                                 | For  the Three Months Ended   June 30, |    | For  the Six Months Ended   June 30, |    |
| (Unaudited)                                          |                                                                                 | 2001                                   |    | 2000                                 |    | 2001    |    | 2000    |    |
|                                                      |                                                                                 |
| Interest income:                                     |                                                                                 |                                   |    |                                 |    |    |    |    |    |
|                                                 | Loans                                                                                |                                   | $       | 86,529                               |    | $       | 88,287  |    | $       | 174,050 |   | $ | 173,272 |   |
|                                                 | Investment securities                                                                |                                   | 25,251  |                                 | 31,825  |    | 52,807  |    | 64,051  |   |
|                                                 | Interest-bearing deposits                                                            |                                   | 77      |                                 | 52      |    | 139     |    | 120     |   |
|                                                 | Federal funds sold and resale  agreements                                            |                                   | 18      |                                 | 28      |    | 54      |    | 179     |   |
|                                                      |                                                                                 |
|                                                 | Total interest income                                                                |                                   | 111,875 |                                 | 120,192 |    | 227,050 |    | 237,622 |   |
| Interest expense:                                    |                                                                                 |                                   |    |                                 |    |    |    |    |    |
|                                                 | Deposits                                                                             |                                   | 37,076  |                                 | 40,862  |    | 79,407  |    | 78,742  |   |
|                                                 | Short-term and other borrowings                                                      |                                   | 4,420   |                                 | 10,508  |    | 9,984   |    | 20,196  |   |
|                                                 | Long-term debt                                                                       |                                   | 2,089   |                                 | 1,501   |    | 4,282   |    | 2,868   |   |
|                                                      |                                                                                 |
|                                                 | Total interest expense                                                               |                                   | 43,585  |                                 | 52,871  |    | 93,673  |    | 101,806 |   |
|                                                      |                                                                                 |
| Net interest income                                  |                                                                                 | 68,290                                 |    | 67,321                               |    | 133,377 |    | 135,816 |    |
| Provision for loan losses                            |                                                                                 | 3,303                                  |    | 3,811                                |    | 8,920   |    | 8,801   |    |
|                                                      |                                                                                 |
| Net interest income after provision for  loan losses |                                                                                 | 64,987                                 |    | 63,510                               |    | 124,457 |    | 127,015 |    |
|                                                      |                                                                                 |
| Noninterest income:                                  |                                                                                 |                                   |    |                                 |    |    |    |    |    |
|                                                 | Service charges on deposit accounts                                                  |                                   | 10,138  |                                 | 10,009  |    | 19,591  |    | 19,672  |   |
|                                                 | Insurance commissions                                                                |                                   | 2,928   |                                 | 2,528   |    | 5,978   |    | 4,937   |   |
|                                                 | Fees from fiduciary activities                                                       |                                   | 1,419   |                                 | 1,472   |    | 2,925   |    | 2,969   |   |
|                                                 | Security sales commissions                                                           |                                   | 2,085   |                                 | 2,321   |    | 3,161   |    | 4,282   |   |
|                                                 | Net gain on sales of available-for-sale  securities                                  |                                   | (252    | )                                    | 144     |    | 232     |    | 148     |   |
|                                                 | Other                                                                                |                                   | 2,479   |                                 | 2,496   |    | 6,202   |    | 5,447   |   |
|                                                      |                                                                                 |
|                                                 | Total noninterest income                                                             |                                   | 18,797  |                                 | 18,970  |    | 38,089  |    | 37,455  |   |
|                                                      |                                                                                 |
| Noninterest expense:                                 |                                                                                 |                                   |    |                                 |    |    |    |    |    |
|                                                 | Salaries and employee benefits                                                       |                                   | 29,620  |                                 | 27,788  |    | 57,627  |    | 54,974  |   |
|                                                 | Net occupancy                                                                        |                                   | 7,562   |                                 | 8,005   |    | 15,749  |    | 16,155  |   |
|                                                 | FDIC insurance                                                                       |                                   | 234     |                                 | 271     |    | 476     |    | 545     |   |
|                                                 | Legal and accounting                                                                 |                                   | 1,085   |                                 | 987     |    | 1,920   |    | 1,788   |   |
|                                                 | Other professional service                                                           |                                   | 1,099   |                                 | 1,086   |    | 2,413   |    | 2,123   |   |
|                                                 | Restructuring charge                                                                 |                                   | -       |                                 | -       |    | 7,656   |    | -       |   |
|                                                 | Data processing                                                                      |                                   | 1,062   |                                 | 1,239   |    | 1,952   |    | 2,375   |   |
|                                                 | Company-obligated mandatorily  redeemable preferred securities of CFB Cap I & II |                                   | 2,590   |                                 | 2,562   |    | 5,151   |    | 5,123   |   |
|                                                 | Amortization of intangibles                                                          |                                   | 2,518   |                                 | 2,614   |    | 5,119   |    | 5,237   |   |
|                                                 | Other                                                                                |                                   | 11,242  |                                 | 10,517  |    | 21,964  |    | 20,896  |   |
|                                                      |                                                                                 |
|                                                 | Total noninterest expense                                                            |                                   | 57,012  |                                 | 55,069  |    | 120,027 |    | 109,216 |   |
|                                                      |                                                                                 |                                        |    |                                      |    |         |    |         |    |
|                                                 |                                                                                 |                                   |    |                                 |    |    |    |    |    |
| Income before income taxes                           |                                                                                 | 26,772                                 |    | 27,411                               |    | 42,519  |    | 55,254  |    |
| Provision for income taxes                           |                                                                                 | 9,039                                  |    | 9,150                                |    | 14,558  |    | 18,330  |    |
|                                                      |                                                                                 |
| Net income                                           |                                                                                 | $                                      | 17,733  |                                 | $       | 18,261  |    | $       | 27,961  |   | $ | 36,924 |   |
|                                                      |                                                                                 |
|                                                      |                                                                                      |                                        |         |                                      |         |         |         |         |         |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

|                                                       |                                                                         | For  the Three Months Ended  June 30, |       | For  the Six Months Ended  June 30, |       |
|------------------------------------------------------------|------------------------------------------------------------------------------|---------------------------------------|------------|-------------------------------------|------------|
| (Dollars in thousands, except per share  data)             |                                                                         |                                  |       |                                |       |   |   |   |   |
| (Unaudited)                                                |                                                                         | 2001                                  |       | 2000                                |       | 2001 |   | 2000 |   |
|                                                            |                                                                         |
| Earnings per common and common  equivalent share:          |                                                                         |                                  |       |                                |       |   |   |   |   |   |   |   |   |
| Basic net income                                           |                                                                         | $                                     | 0.43       |                                | $          | 0.38 |   | $ | 0.68 |   | $ | 0.75 |   |
|                                                            |                                                                         |
| Diluted  net income                                        |                                                                         | $                                     | 0.43       |                                | $          | 0.38 |   | $ | 0.67 |   | $ | 0.75 |   |
|                                                            |                                                                         |
| Average commone and common equivalent  shares outstanding: |                                                                         |                                  |       |                                |       |   |   |   |   |
|                                                       | Basic                                                                        |                                  | 41,126,894 |                                | 48,060,322 |   | 41,357,510 |   | 49,186,594 |   |
|                                                       | Diluted                                                                      |                                  | 41,633,795 |                                | 48,437,386 |   | 41,814,307 |   | 49,525,365 |   |
|                                                            |                                                                         |
| Dividends paid                                             |                                                                         | $                                     | 0.16       |                                | $          | 0.15 |   | $ | 0.32 |   | $ | 0.30 |   |
|                                                            |                                                                         |
|                                                       |                                                                         |
|                                                       |                                                                         |
| STATEMENTS  OF COMPREHENSIVE INCOME                        |                                                                         |
|                                                       |                                                                         |
|                                                       |                                                                         |
|                                                       |                                                                         |
|                                                       |                                                                         | For  the Three Months Ended  June 30, |       | For  the Six Months Ended  June 30, |       |
| (Dollars in thousands, except per share  data)             |                                                                         |                                  |       |                                |       |   |   |   |   |
| (Unaudited)                                                |                                                                         | 2001                                  |       | 2000                                |       | 2001 |   | 2000 |   |
|                                                            |                                                                         |
| Net income                                                 |                                                                         | $                                     | 17,733     |                                | $          | 18,261 |   | $ | 27,961 |   | $ | 36,924  |   |
| Other comprehensive income, net of tax:                    |                                                                         |                                  |       |                                |       |   |   |   |   |
|                                                       | Unrealized  gains (losses) on securities:                                    |                                  |       |                                |       |   |   |   |   |   |
|                                                       | Unrealized holding gains (losses)  arising during period                     |                                  | 1,656      |                                | 4,317      |   | 13,238 |   | (2,856) |   |
|                                                       | Less: Reclassification adjustment for  (losses) gains included in net income |                                  | 151        |                                | (86        | ) | (139 | ) | (89) |   |
|                                                            |                                                                         |
| Other comprehensive income                                 |                                                                         | 1,807                                 |       | 4,231                               |       | 13,099 |   | (2,945) |   |
|                                                            |                                                                         |
| Comprehensive income                                       |                                                                         | $                                     | 19,540     |                                | $          | 22,492 |   | $ | 41,060 |   | $ | 33,979  |   |
|                                                            |                                                                         |
|                                                            |                                                                              |                                       |            |                                     |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

COMMUNITYFIRST BANKSHARES, INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

|                                                                               | For  the Six Months Ended  June 30,                        |     |
|------------------------------------------------------------------------------------|------------------------------------------------------------|----------|
| (In  thousands)                                                                    |                                                       |     |   |   |
| (Unaudited)                                                                        | 2001                                                       |     | 2000 |   |
|                                                                                    |                                                       |
| **Cash flows from operating activities:**                                          |                                                       |     |   |   |
| Net income                                                                         | $                                                          | 27,961   |   | $ | 36,924 |   |
| Adjustments to reconcile net income to  net cash provided by operating activities: |                                                       |     |   |   |
|                                                                               | Provision for loan losses                                  | 8,920    |   | 8,801 |   |
|                                                                               | Depreciation                                               | 6,665    |   | 7,299 |   |
|                                                                               | Amortization of intangibles                                | 5,119    |   | 5,237 |   |
|                                                                               | Net of amortization of (discounts)  premiums on securities | (365     | ) | 216 |   |
|                                                                               | Decrease (increase) in interest  receivable                | 6,899    |   | (1,262 | ) |
|                                                                               | (Decrease) increase in interest payable                    | (7,466   | ) | 1,522 |   |
|                                                                               | Other - net                                                | (12,794  | ) | (14,380 | ) |
|                                                                                    |                                                       |
| Net cash provided by operating  activities                                         | 34,939                                                     |     | 44,357 |   |
|                                                                               |                                                       |     |   |   |
| **Cash flows from investing activities:**                                          |                                                       |     |   |   |
|                                                                               | Net (increase) decrease in  interest-bearing deposits      | (9,606   | ) | 2,467 |   |
|                                                                               | Purchases of available-for-sale  securities                | (228,265 | ) | (73,391 | ) |
|                                                                               | Maturities of available-for-sale  securities               | 470,305  |   | 116,936 |   |
|                                                                               | Sales of available-for-sale securities,  net of gains      | 26,362   |   | 13,373 |   |
|                                                                               | Purchases of held-to-maturity  securities                  | (1,740   | ) | (1,749 | ) |
|                                                                               | Maturities of held-to-maturity  securities                 | -        |   | 4,458 |   |
|                                                                               | Net increase in loans                                      | (78,414  | ) | (45,268 | ) |
|                                                                               | Net increase in bank premises and  equipment               | (10,684  | ) | (3,384 | ) |
|                                                                                    |                                                       |
| Net cash provided by investing  activities                                         | 167,958                                                    |     | 13,442 |   |
|                                                                               |                                                       |     |   |   |
| **Cash flows from financing activities:**                                          |                                                       |     |   |   |
| Net decrease in demand deposits, NOW  accounts and savings accounts                | (153,699                                                   | )        | (45,849 | ) |
| Net (decrease) increase in time  accounts                                          | (145,116                                                   | )        | 117,140 |   |
| Net increase (decrease) in short-term  & other borrowings                      | 87,146                                                     |     | (51,690 | ) |
| Net increase in long-term debt                                                     | 13,175                                                     |     | 24,273 |   |
| Purchase of common stock held in  treasury                                         | (23,317                                                    | )        | (81,177 | ) |
| Sale of common stock held in treasury                                              | 2,047                                                      |     | 3,610 |   |
| Common stock dividends paid                                                        | (13,219                                                    | )        | (14,665 | ) |
|                                                                                    |                                                       |
| Net cash used in financing activities                                              | (232,983                                                   | )        | (48,358 | ) |
|                                                                                    |                                                       |
| Net (decrease) increase in cash and  cash equivalents                              | (30,086                                                    | )        | 9,441 |   |
| Cash and cash equivalents at beginning  of period                                  | 256,136                                                    |     | 251,826 |   |
|                                                                                    |                                                       |
| Cash and cash equivalents at end of  period                                        | $                                                          | 226,050  |   | $ | 261,267 |   |
|                                                                                    |                                                       |

COMMUNITYFIRST BANKSHARES, INC.

NOTESTO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE30, 2001

**Note A- BASIS OF PRESENTATION**

Theaccompanying unaudited condensed consolidated financial statements, whichinclude the accounts of Community First Bankshares, Inc. (the ‘Company’), itswholly-owned data processing, credit origination, insurance agency andproperties subsidiaries, and its wholly-owned subsidiary bank, have beenprepared in accordance with accounting principles generally accepted in theUnited States for interim financial information.  Accordingly, they do not include all of the information andfootnotes required by accounting principles generally accepted in the UnitedStates for complete financial statements. In the opinion of management, all adjustments considered necessary forfair presentation have been included.

**      Earnings Per Common Share**

Basicearnings per common share is calculated by dividing net income by the weightedaverage number of shares of common stock outstanding.

Diluted earnings per common share iscalculated by dividing net income by the weighted average number of shares ofcommon stock outstanding.  The weightedaverage number of shares of common stock outstanding is increased by the numberof shares of common stock that would be issued assuming the exercise of stockoptions and warrants during each period. Such adjustments to the weighted average number of shares of commonstock outstanding are made only when such adjustments dilute earnings per share.

**Note B – RESTRUCTURING CHARGE**

OnMarch 22, 2001, the Company announced a restructuring charge related to aseries of strategic initiatives designed in part to improve customer serviceand strengthen the Company’s position as a provider of diversified financialservices. The Company has designated each of its offices as either a RegionalFinancial Center or a Community Financial Center.  Regional Financial Centers are those locations exhibiting strongcommercial banking potential, while, Community Financial Centers offer greaterretail opportunities.  As a consequenceof the new delivery structure, the Company entered into sales agreements tosell 12 offices and close an additional nine offices, resulting in a one-timeafter-tax charge against earnings of $5.1 million, or approximately $0.12 pershare, on a diluted basis.   Therestructuring charge included approximately $3.1 million related to assetwrite-down, data processing, and legal and accounting fees.  Additionally the Company recorded anafter-tax expense of approximately $2.0 million to provide for severancerelated costs associated with the early-out and reduction-in-force programs.

During the first quarter of 2001, theCompany completed the consolidation of all banking offices into one nationallychartered institution and announced the implementation of a centralizedconsumer credit process.

**Note C – BUSINESS DIVESTITURES**

OnMarch 22, 2001, the Company announced an agreement to sell its Hankinson, NorthDakota branch to Lincoln State Bank, Hankinson, North Dakota.  The branch has assets of approximately $5million.  The transaction is subject toregulatory approval and is expected to close in the third quarter of 2001.

OnJune 22, 2001, the Company completed the sale of eight Arizona branches to TheStockmen’s Bank, Kingman, Arizona.  Thebranches, located in Ajo, Bagdad, Duncan, Gila Bend, Morenci, Patagonia,Sacaton and Yarnell, Arizona, had assets of approximately $98 million.

**Note D – SUBSEQUENT EVENTS**

OnJuly 20, 2001, the Company completed the sale of three Nebraska branches toSecurity First Bank, Sidney, Nebraska. The branches, located in Cody, Merrimanand Thedford, Nebraska, had assets of approximately $19 million.

On July 20, 2001, the Company completedthe closure of six offices, including two offices in Colorado, two offices inWyoming and one each in Minnesota and North Dakota.  Two of the offices closed are in communities where the Companymaintains other offices, thus continuing to serve those communities.  The closures are part of the Company’sstrategic initiative announced during the first quarter of 2001.

OnAugust 7, 2001, the Company announced its intention to repurchase up to 3million shares of the Company’s common stock. This share repurchase represents approximately 7% percent of the sharesof common stock outstanding at the date of the announcement.  Shares will be purchased primarily on theopen market, with the timing dependent on market conditions and any pendingacquisitions.

**Note E – ACCOUNTING CHANGES**

EffectiveJanuary 1, 2001, the Company adopted SFAS 133, “Accounting for DerivativeInstruments and Hedging Activities,” which establishes accounting and reportingstandards for derivative instruments, including certain derivative instrumentsembedded in other contracts, and for hedging activities.  It requires that an entity recognize allderivatives as either assets or liabilities in the statement of financialposition and measure those instruments at fair value.  In certain defined conditions, a derivative may be specificallydesignated as a hedge for a particular exposure.  The accounting for changes in fair value of the derivativedepends on the intended use of the derivative and the resulting designation.  As of June 30, 2001 and December 31, 2000,the Company had no derivative instruments outstanding.

InJune 2001, the Financial Accounting Standards Board issued Statements ofFinancial Accounting Standards No. 141, *Business Combinations*, and No. 142, *Goodwill andOther Intangible Assets*, effective for fiscal years beginning afterDecember 15, 2001.  Under the new rules,goodwill will no longer be amortized but will be subject to annual impairmenttests in accordance with the Statements. Other intangible assets will continue to be amortized over their usefullives.  The Company will apply the newrules on accounting for goodwill and other intangible assets beginning in thefirst quarter of 2002.  Application ofthe nonamortization provisions of the Statement is expected to result in anincrease in net income of $5.0 million ($0.12 per share) per year.  During 2002, the Company will perform thefirst of the required impairment tests of goodwill and indefinite livedintangible assets as of January 1, 2002 and has not yet determined what theeffect of these will be on the earnings and financial position of the Company.

**Note F – INVESTMENTS**

Thefollowing is a summary of available-for-sale and held-to-maturity securities atJune 30, 2001 (in thousands):

|                                | Available-for-Sale  Securities |      |
|-------------------------------------|--------------------------------|-----------|
|                                     |                           |
|                                |                           |      | Gross |   | Gross |   | Estimated |   |
|                                | Amortized                      |      | Unrealized |   | Unrealized |   | Fair |   |
|                                | Cost                           |      | Gains |   | Losses |   | Value |   |
|                                     |                           |
| United States Treasury              | $                              | 75,951    |   | $ | 1,907 |   | $ | - |   | $ | 77,858 |   |
| United States Government agencies   | 284,513                        |      | 3,449 |   | 191 |   | 287,771 |   |
| Mortgage-backed securities          | 899,178                        |      | 9,813 |   | 2,128 |   | 906,863 |   |
| Collateralized mortgage obligations | 4,507                          |      | 53 |   | 1 |   | 4,559 |   |
| State and political securities      | 104,914                        |      | 1,299 |   | 809 |   | 105,404 |   |
| Other securities                    | 93,122                         |      | 1,236 |   | 8,647 |   | 85,711 |   |
|                                     |                           |
|                                | $                              | 1,462,185 |   | $ | 17,757 |   | $ | 11,776 |   | $ | 1,468,166 |   |
|                                |                                |      |

 

|              | Held-to-Maturity  Securities |   |
|-------------------|------------------------------|--------|
|                   |                         |
|              |                         |   | Gross |   | Gross |   | Estimated |   |
|              | Amortized                    |   | Unrealized |   | Unrealized |   | Fair |   |
|              | Cost                         |   | Gains |   | Losses |   | Value |   |
|                   |                         |
| Other  securities | $74,962                      |   | $- |   | $- |   | $74,962 |   |
|                   |                         |
|              | $74,962                      |   | $- |   | $- |   | $74,962 |   |
|              |                              |   |

Proceedsfrom the sale of available-for-sale securities during the six months ended June30, 2001 and 2000 were $26,594,000 and $13,521,000, respectively.  Gross gains of $516,000 and $149,000 wererealized on sales during 2001 and 2000, respectively.  Gross losses of $284,000 and $1,000 were realized on sales during2001 and 2000, respectively.  Gains andlosses on disposition of these securities were computed using the specificidentification method.

**Note G- LOANS**

The composition of the loan portfolio atJune 30, 2001 was as follows (in thousands):

| Real estate                    | $         | 1,488,708 |      |
|--------------------------------|-----------|-----------|-----------|
| Real estate  construction      | 519,570   |      |
| Commercial                     | 853,531   |      |
| Consumer and other             | 688,187   |      |
| Agriculture                    | 258,423   |      |
|                           |           |      |
|                           | 3,808,419 |      |
| Less allowance for loan losses | (52,891   | )         |
|                           |           |      |
|                           | Net loans | $         | 3,755,528 |   |
|                           |           |      |
|                                |           |           |           |  |

**Note H- FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK**

Inthe normal course of business, the Company is party to financial instrumentswith off-balance sheet risk to meet the financing needs of its customers and tomanage its interest rate risk.  Thesefinancial instruments include commitments to extend credit and letters ofcredit.  The contract or notionalamounts of these financial instruments at June 30, 2001 were as follows (inthousands):

| Commitments to extend credit | $      | 709,742 |   |
|------------------------------|--------|---------|--------|
| Letters of credit            | 27,334 |    |

 

**Note I- SUBORDINATED NOTES**

Long-term debt at June 30, 2001 included$60 million of 7.30% Subordinated Notes issued in June 1997.  These notes are due June 30, 2004, withinterest payable semi-annually.  At June30, 2001, $24 million qualified as Tier 2 capital. At June 30, 2001, thesubsidiary bank had a $25 million unsecured subordinated term note payable,maturing on December 22, 2007.  Thesubsidiary bank note bears an interest rate of LIBOR, plus 140 basis points.

**Note J- INCOME TAXES**

Thereconciliation between the provision for income taxes and the amount computedby applying the statutory federal income tax rate was as follows (inthousands):

|                                          | **For the six months ended,  June 30, 2001** |   |
|-----------------------------------------------|----------------------------------------------|--------|
|                                          | ****                                         |   |
| 35% of pretax income                          | $                                            | 14,882 |   |
| State income tax, net of federal tax  benefit | 826                                          |   |
| Tax-exempt interest                           | (2,650                                       | )      |
| Amortization of goodwill                      | 459                                          |   |
| Other                                         | 1,041                                        |   |
|                                          |                                              |   |
| Provision for income taxes                    | $                                            | 14,558 |   |
|                                          |                                              |   |

**Note K- SUPPLEMENTAL DISCLOSURES TO CONSOLIDATED STATEMENTS OF CASH FLOWS**

| Six months ended June 30 (in thousands)           | 2001    |   | 2000   |   |
|---------------------------------------------------|---------|--------|--------|--------|
|                                                   |    |
| Unrealized gain on available-for-sale  securities | $21,692 |   | $4,860 |   |

**Item 2.  Management’s Discussion and Analysis ofFinancial Condition and Results of Operations**

**Basis of Presentation**

Thefollowing is a discussion of the Company’s financial condition as of June 30,2001 and December 31, 2000, and its results of operations for the three monthperiods ended June 30, 2001 and 2000.

**StrategicInitiatives**

OnMarch 22, 2001 the Company announced a series of strategic initiatives designedto improve customer service and strengthen its position as a provider ofdiversified financial services.  Initiatives included a redefinition of the Company’s delivery model andthe sale or closure of banking offices.

Inan effort to properly align resources with market opportunities and provide thedelivery support structure to optimize individual market potential each of theCompany’s offices was redefined as either a Regional Financial Center or aCommunity Financial Center.  RegionalFinancial Centers are those locations that exhibit strong commercial bankingpotential, and require a broader based support structure.  Community Financial Centers, which are lessgeographically concentrated, typically offer greater retail opportunities,including emphasis on insurance and investment product sales.

Inconjunction with the restructuring of the banking network, the Companyannounced agreements to sell 12 offices and close nine additional offices.  Offices to be sold included eight Arizonaoffices, three Nebraska offices and one North Dakota office.  The sale of the Arizona offices wascompleted on June 22, 2001 and the sale of the three Nebraska offices wascompleted on July 20, 2001.  Six of thenine offices slated for closure were closed on July 20, 2001.  Four of the nine offices slated for closureare located in communities in which the Company maintains additional offices,thus continuing to serve those customers from existing locations.

Inpreparation for the sale of the eight Arizona offices, the Company charged offits largest non-performing asset, a credit facility that was in the Arizonabank at the time the Arizona bank was acquired by the Company.  To maintain the current loan loss reservelevel, the Company recorded a special loan loss provision equal to the amountof the charge-off.  The specialprovision of $2.4 million, or approximately $0.04 per share after tax wasrecorded during the first quarter.

Theannounced initiatives resulted in changes in staffing needs within theCompany.  To accommodate these, theCompany made available an early-out program that was accepted by 21 eligiblemanagement personnel.

Asa result of these initiatives, the Company recorded a one-time after-taxrestructuring charge totaling $5.1 million. The charge was recorded during the first quarter and representsapproximately $0.12 per share.

Underthe redesigned delivery structure, the Company will implement a centralizedconsumer credit process. Once fully operational, the central structure willoffer a complete range of decision, origination, documentation and collectionservices to all Company offices through a Fargo, North Dakota location.

Duringthe first quarter, the Company completed the consolidation of its South Dakotastate chartered bank into its national chartered bank.  As a result of the consolidation, allbanking operations are conducted under a single national charter.

**Overview**

For the three months ended June 30, 2001,net income was $17.7 million, a decrease of $528,000 or 2.9% from the $18.3million during the 2000 period.  Basicearnings per common share for the three months ended June 30, 2001 were $0.43,compared to $0.38 in the same period in 2000. Diluted earnings per share for the three months ended June 30, 2001 were$0.43.

Returnon average assets and return on common equity for the three months ended June30, 2001 were 1.20% and 20.87%, respectively, as compared to the 2000 ratios of1.18% and 19.46%.  The increase inreturn on assets and return on equity is principally due to a reduction inaverage assets and average common equity as a result of the Company’s effortsto restructure its balance sheet, reduced reliance on wholesale funding and therepurchase of its common shares.

For the six months ended June 30, 2001,net income was $28.0 million, a decrease of $8.9 million or 24.1% from the$36.9 million during the 2000 period. Basic earnings per common share for the six months ended June 30, 2001were $0.68, compared to $0.75 in the same period in 2000.  Diluted earnings per share for the six monthsended June 30, 2001 were $0.67.  Thedecrease is principally due to a one-time after-tax charge of $5.1 million, or12 cents per share, to account for the financial impact of a restructuringcharge recorded in the first quarter of 2001 and, the write-off of theCompany’s largest non-performing loan and recognize a special loan lossprovision equal to the amount of the write-off of $1.5 million after-tax, or 4cents per share.  Excluding the one-timecharge and the special loan loss provision, diluted earnings per share wouldhave been $0.83 cents per share for the six months ended June 30, 2001.

Returnon average assets and return on common equity for the six months ended June 30,2001 were 0.95% and 16.37%, respectively, as compared to the 2000 ratios of 1.19%and 18.98%.  The decrease in return onassets and return on equity is principally due to a reduction in net income,resulting from the restructuring charge and special loan loss provision.  However, the reduction in average commonshares outstanding, as a result of the Company’s stock repurchase initiative,has had an offsetting, positive impact on return on equity.   Return on average assets and return onaverage common equity, exclusive of the one-time charge and the special loanloss provision recorded in the first quarter of 2001, would have been 1.17% and20.22%, respectively for the six months ended June 30, 2001.

 

**Resultsof Operations**

**        Net Interest Income**

Net interest income for the three monthsended June 30, 2001 was $70.3 million, on a tax-equivalent basis, an increaseof $1.0 million, or 1.4%, from the net interest income of $69.3 million earnedduring the 2000 period. The increase was principally due to the combination ofa $8.2 million reduction in interest income and a $9.2 million reduction ininterest expense resulting from a $332 million reduction in average assets,coupled with a 32 basis point increase in net interest margin.  The net interest margin of 5.22% for theperiod ended June 30, 2001 was up from 4.90% for the 2000 period.  The improvement in net interest is theresult of the Company’s balance sheet restructuring and reduction in wholesalefunding.

Net interest income for the six monthsended June 30, 2001 was $137.5 million, on a tax-equivalent basis, a decreaseof $2.6 million, or 1.9%, from the net interest income of $140.1 million earnedduring the 2000 period. The decrease was principally due to the combination ofa $10.7 million reduction in interest income and a $8.1 million increase ininterest expense resulting from a $288 million reduction in average assets,coupled with an 14 basis point increase in net interest margin.  The net interest margin of 5.09% for theperiod ended June 30, 2001 was up from 4.95% for the 2000 period.

**        Provision for Loan Losses**

Theprovision for loan losses for the three months ended June 30, 2001 was $3.3million, a decrease of $508,000, or 13.3%, from the $3.8 million provisionduring the 2000 period. The decrease is principally due to the Company’sobjective of maintaining adequate reserve levels, which appropriately reflectsthe asset quality of the portfolio.

Theprovision for loan losses for the six months ended June 30, 2001 was $8.9million, an increase of $119,000, or 1.4%, from the $8.8 million provisionduring the 2000 period.  During thefirst quarter of 2001 the Company recorded a $2.4 million special loan lossprovision to reflect the charge-off of the Company’s largest non-performingasset, an Arizona based credit facility that was in place when the Companyacquired its initial Arizona operation in 1997.

**             Noninterest Income**

Noninterest income for the three monthsended June 30, 2001 was $18.8 million, a decrease of $173,000, or 0.9%, fromthe 2000 level of $19.0 million. The decrease was principally due to a decreaseof $236,000, or 10.2% from the prior period, due principally to the downturn instock markets and a $252,000 loss on the sale of investment securities.  These decreases were offset by a $400,000,or 15.8% increase in insurance commissions.

Noninterest income for the six monthsended June 30, 2001 was $38.1 million, an increase of $634,000, or 1.7%, fromthe 2000 level of $37.5 million. The increase was principally due to a$1,041,000 or 21.1% increase in insurance commissions which was offset by an$84,000 decrease in gains from the sale of investment securities.  Investment sales commissions for the 2001period were $3.2 million, a decrease of $1,121,000, or 26.2% from the priorperiod, due principally to the downturn in stock markets.

**             NoninterestExpense**

Noninterestexpense for the three months ended June 30, 2001 was $57.0 million, an increaseof $1.9 million, or 3.5%, from the level of $55.1 million during the 2000period. The increase was principally due to a $1.8 million increase inpersonnel expenses, including costs associated with healthcare.

Noninterestexpense for the six months ended June 30, 2001 was $120.0 million, an increaseof $10.8 million, or 9.9%, from the level of $109.2 million during the 2000period. The increase was principally due to the $7.7 million one-timerestructuring charge recorded in the first quarter of 2001.  During the first quarter of 2001, theCompany also recorded a $462,000 early payment penalty, when it elected to payoff various Federal Home Loan Bank borrowings, which carried higher than marketinterest rates.

**             Provisionfor Income Taxes**

Theprovision for income taxes for the three months ended June 30, 2001 was $9.0million, a decrease of $111,000, or 1.2%, from the 2000 level of $9.2 million,due primarily to the decrease in pre-tax net income.

Theprovision for income taxes for the six months ended June 30, 2001 was $14.6million, a decrease of $3.7 million, or 20.2%, from the 2000 level of $18.3million.  The decrease was due primarilyto the decrease in pre-tax net income as a result of the one-time restructuringcharge, which included the write-off of various non-deductible intangibleassets and the special loan loss provision recorded in the first quarter of2001.

**FinancialCondition**

**        Loans**

Totalloans were $3.8 billion at June 30, 2001 and $3.7 billion at December 31,2000.  The following table presents theCompany’s balance of each major category of loans (dollars in thousands):

|                           | **June 30, 2001**        |       | **December 31, 2000**        |   |
|--------------------------------|--------------------------|------------|------------------------------|--------|
| ****                           |                     |
|                           | **Amount**               |       | **Percent of   Total Loans** |   | **Amount** |   | **Percent of   Total Loans** |   |
|                           | ****                     |       | ****                         |   | **** |   | **** |   |
| Loan category:                 |                     |       |                         |   |   |   |   |   |
|                           | Real estate              | $1,488,708 |                         | 39.09  | % | $1,458,494 |   | 39.02 | % |
|                           | Real estate construction | 5194,570   |                         | 13.64  | % | 466,616 |   | 12.48 | % |
|                           | Commercial               | 853,531    |                         | 22.41  | % | 872,824 |   | 23.35 | % |
|                           | Consumer and other       | 688,187    |                         | 18.07  | % | 686,064 |   | 18.35 | % |
|                           | Agricultural             | 258,423    |                         | 6.79   | % | 254,204 |   | 6.80 | % |
|                                |                     |
|                           | Total loans              | 3,808,419  |                         | 100.00 | % | 3,738,202 |   | 100.00 | % |
|                           |                     |       |                              |   |   |  |
| Less allowance for loan losses | (52,891                  | )          |                         |   | (52,168 | ) |   |   |
|                           |                          |       |                         |   |  |   |   |   |
| Total                          | $3,755,528               |       |                         |   | $3,686,034 |   |   |   |
|                           |                          |       |                         |   |  |   |   |   |

**             NonperformingAssets**

At June 30, 2001, nonperforming assetswere $24.2 million, a decrease of $1.9 million or 7.3% from the $26.1 millionlevel at December 31, 2000. The decrease was principally due to the charge offa $2.4 million non-performing asset which had been in the Company’s loanportfolio since December 1997, when the bank that originated the asset wasacquired.  At June 30, 2001,nonperforming loans as a percent of total loans were .56%, down from the December31, 2000 level of .63%.  OREO was $2.8million at June 30, 2001, an increase of $349,000 from $2.4 million at December31, 2000.

        Nonperforming assets of the Company aresummarized in the following table (dollars in thousands):

| Loans                                                   | **June 30, 2001**   |      | **December 31, 2000** |      |
|---------------------------------------------------------|---------------------|-----------|-----------------------|-----------|
|                                                    | Nonaccrual loans    | $         | 21,088                |      | $ | 23,426 |   |
|                                                    | Restructured  loans | 287       |                  | 224       |   |
|                                                         |                |
|                                                    | Nonperforming loans | 21,375    |                  | 23,650    |   |
| Other  real estate owned                                | 2,786               |      | 2,437                 |      |
|                                                         |                |
| Nonperforming assets                                    | $                   | 24,161    |                  | $         | 26,087 |   |
|                                                         |                |
| Loans 90 days or more past due but  still accruing      | $                   | 5,249     |                  | $         | 2,482 |   |
|                                                         |                |
| Nonperforming loans as a percentage of  total loans     | .56                 | %         | .63                   | %         |
| Nonperforming assets as a percentage of  total assets   | .41                 | %         | .43                   | %         |
| Nonperforming assets as a percentage of  loans and OREO | .63                 | %         | .70                   | %         |
|                                                    |                |      |                  |      |
|                                                    | Total Loans         | $         | 3,808,419             |      | $ | 3,738,202 |   |
|                                                    | Total Assets        | 5,895,577 |                  | 6,089,729 |   |

**             Allowancefor Loan Losses**

AtJune 30, 2001 the allowance for loan losses was $52.9 million, an increase of$1.3 million from the June 30, 2000 balance of $51.6 million.  Net charge-offs during the six months endedJune 30, 2001 were $2.1 million more than those incurred during the six monthsended June 30, 2000, principally as a result of the charge-off of the Company’ssingle largest non-performing asset, a $2.4 million credit facility at one ofits Arizona offices, a credit facility which was outstanding at the time thebank was acquired by the Company in December 1997.

AtJune 30, 2001, the allowance for loan losses as a percentage of total loans was1.39%, an increase from the June 30, 2000 level of 1.38% and a decrease fromthe December 31, 2000 level of 1.40%.

Thefollowing table sets forth the Company’s allowance for loan losses (dollars inthousands):

|                                                     | **For the Six Months ended June  30,** |      |
|----------------------------------------------------------|----------------------------------------|-----------|
|                                                     | **2001**                               |      | **2000** |   |
| ****                                                     |                                   |
| Balance at beginning of period                           | $                                      | 52,168    |   | $ | 48,878 |   |
| Charge-offs:                                             |                                   |      |   |   |
|                                                     | Real estate                            | 503       |   | 610 |   |
|                                                     | Real estate construction               | 2,480     |   | 17 |   |
|                                                     | Commercial                             | 2,782     |   | 3,645 |   |
|                                                     | Consumer and other                     | 4,519     |   | 3,625 |   |
|                                                     | Agricultural                           | 173       |   | 386 |   |
|                                                          |                                   |
|                                                     | Total  charge-offs                     | 10,457    |   | 8,283 |   |
|                                                          |                                   |
| Recoveries:                                              |                                   |      |   |   |
|                                                     | Real estate                            | 94        |   | 72 |   |
|                                                     | Real estate construction               | 3         |   | 2 |   |
|                                                     | Commercial                             | 407       |   | 576 |   |
|                                                     | Consumer and other                     | 1,604     |   | 1,377 |   |
|                                                     | Agricultural                           | 152       |   | 132 |   |
|                                                          |                                   |
|                                                     | Total recoveries                       | 2,260     |   | 2,159 |   |
| Net charge-offs                                          | 8,197                                  |      | 6,124 |   |
| Provision  charged to operations                         | 8,920                                  |      | 8,801 |   |
|                                                          |                                   |
| Balance  at end of period                                | $                                      | 52,891    |   | $ | 51,555 |   |
|                                                          |                                   |
| Allowance as a percentage of total  loans                | 1.39                                   | %         | 1.38 | % |
| Annualized net charge-offs to average  loans outstanding | 0.44                                   | %         | 0.33 | % |
|                                                     |                                   |      |   |   |
| Total Loans                                              | $                                      | 3,808,419 |   | $ | 3,729,497 |   |
| Average Loans                                            | 3,761,312                              |      | 3,693,498 |   |
|                                                          |                                        |           |  |  |  |  |  |  |  |

**        Investments**

Theinvestment portfolio, including available-for-sale securities andheld-to-maturity securities, was $1.5 billion at June 30, 2001, a decrease of$244.6 million, or 13.7% from $1.8 billion at December 31, 2000.  At June 30, 2001, the investment portfoliorepresented 26.2% of total assets, compared with 29.4% at December 31,2000.  The reduction in the level of theinvestment portfolio is the result of the Company’s balance sheet restructuringinitiative which seeks to reduce the level of lower yielding assets and highercost wholesale funding.  In addition toinvestment securities, the Company had investments in interest-bearing depositsof $10.7 million at June 30, 2001, an increase of $9.6 million from the $1.1million at December 31, 2000.

**        Deposits**

Totaldeposits were $4.7 billion at June 30, 2001, a decrease of $298.8 million, or6.0%, from $5.0 billion at December 31, 2000. Noninterest-bearing deposits at June 30, 2001 were $520 million, anincrease of $19 million, or 3.7%, from $501 million at December 31, 2000.  The Company’s core deposits as a percent oftotal deposits were 84.7% and 84.0% as of June 30, 2001 and December 31, 2000,respectively.  Interest-bearing depositswere $4.2 billion at June 30, 2001, a decrease of $318 million, or 7.0% fromDecember 31, 2000.

**        Borrowings**

Short-termborrowings of the Company were $133 million as of June 30, 2001, a decrease of$71 million, or 34.7%, from $204 million as of December 31, 2000.  The reduction in short-term borrowing is theresult of the Company’s balance sheet restructuring initiative which seeks toreduce the level of wholesale borrowings.

Long-termdebt of the Company was $137 million as of June 30, 2001, a decrease of $13million, or 10.6%, from the $124 million as of December 31, 2000.

**        Capital Management**

Shareholders’equity increased $7 million to $352 million at June 30, 2001 from $345 millionat December 31, 2000.  At June 30, 2001,the Company’s Tier 1 capital, total risk-based capital and leverage ratios were8.30%, 10.73%, and 6.20%, respectively, compared to minimum required levels of4%, 8% and 3%, respectively (subject to change and the discretion of regulatoryauthorities to impose higher standards in individual cases).  At June 30, 2001, the Company had risk-weightedassets of $4.4 billion.

**        StockRepurchases**

OnApril 10, 2000, the Company announced its intention to repurchase up to 5million shares of the Company’s common stock. On August 9, 2000, the Company announced its intention to repurchase upto an additional 5 million shares of the Company’s common stock.  As of August 8, 2001, the Company hasrepurchased 10,300,000 shares of common stock, includes shares from a priorauthorization and the two 5 million share authorizations in 2000, at pricesranging from $15.25 to $25.00.  OnAugust 7, 2001, the Company announced its intention to repurchase up to anadditional 3 million shares of the Company’s common stock.

**Item 3.  Quantitative and Qualitative DisclosureAbout Market Risk**

Therehave been no material changes in market risk exposures that affect thequantitative and qualitative disclosures presented as of December 31, 2000 inthe Company’s Form 10-K and Annual Report.

**PART II - OTHER INFORMATION**

Item 1.            Legal Proceedings:

                        None.

Item 2.            Changes in Securities:

                        None.

Item 3.            Defaults upon Senior Securities:

                        None.

| Item  4. | Submission  of Matters to a Vote of Security Holders:                                                                       |                                                                                                                                                                                                                                                                                                                                       |
|----------|-----------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|     |                                                                                                                        |                                                                                                                                                                                                                                                                                                                                       |
|     | The  Company held its Annual Meeting of Shareholders on April 24, 2001.  The shareholders took the following  actions: |                                                                                                                                                                                                                                                                                                                                       |
|     |                                                                                                                        |                                                                                                                                                                                                                                                                                                                                       |
|     | (i)                                                                                                                         | The  shareholders elected eleven directors to hold office until the next Annual  Meeting of Shareholders or until their successors are elected.  The shareholders present in person or by  proxy cast the following numbers of votes in connection with the election of  directors, resulting in the election of all of the nominees. |   |
|     |                                                                                                                        |                                                                                                                                                                                                                                                                                                                                       |   |   | Votes  For |   | Votes  Withheld |   |
|     |                                                                                                                        |                                                                                                                                                                                                                                                                                                                                       |   |   |  |   |  |   |
|     |                                                                                                                        |                                                                                                                                                                                                                                                                                                                                       | Mark A. Anderson |   | 32,550,601 |   | 325,480 |   |
|     |                                                                                                                        |                                                                                                                                                                                                                                                                                                                                       | Patrick Delaney |   | 32,232,474 |   | 643,607 |   |
|     |                                                                                                                        |                                                                                                                                                                                                                                                                                                                                       | John H. Flittie |   | 32,711,978 |   | 164,103 |   |
|     |                                                                                                                        |                                                                                                                                                                                                                                                                                                                                       | Thomas Gallagher |   | 32,713,845 |   | 162,236 |   |
|     |                                                                                                                        |                                                                                                                                                                                                                                                                                                                                       | Darrell G. Knudson |   | 32,699,862 |   | 176,219 |   |
|     |                                                                                                                        |                                                                                                                                                                                                                                                                                                                                       | Dennis M. Mathisen |   | 32,312,667 |   | 563,414 |   |
|     |                                                                                                                        |                                                                                                                                                                                                                                                                                                                                       | Donald R. Mengedoth |   | 27,817,587 |   | 5,058,494 |   |
|     |                                                                                                                        |                                                                                                                                                                                                                                                                                                                                       | Rahn Porter |   | 32,713,697 |   | 162,384 |   |
|     |                                                                                                                        |                                                                                                                                                                                                                                                                                                                                       | Annette Quintana |   | 32,705,430 |   | 170,651 |   |
|     |                                                                                                                        |                                                                                                                                                                                                                                                                                                                                       | Marilyn Seymann |   | 32,200,355 |   | 675,726 |   |
|     |                                                                                                                        |                                                                                                                                                                                                                                                                                                                                       | Harvey L. Wollman |   | 32,706,897 |   | 169,184 |   |
|     |                                                                                                                        |                                                                                                                                                                                                                                                                                                                                       |   |   |   |   |   |   |
|     |                                                                                                                        | (ii)                                                                                                                                                                                                                                                                                                                                       | The shareholders ratified and approved  the election of Ernst & Young LLP as the independent public accountants  for the Company for the current fiscal year.   32,795,258 votes were cast for the resolution; 80,823 votes were cast  against the resolution. |
|          |                                                                                                                             |                                                                                                                                                                                                                                                                                                                                            |  |  |  |  |  |  |  |

 

Item 5.            Other Information:

                        None.

Item 6.            Exhibits and Reports on Form 8-K:

                        (a)       Exhibits:

                        (b)       Reports on Form 8-K:

 

**SIGNATURES**

Pursuantto the requirements of the Securities Exchange Act of 1934, the Registrant hasduly caused this report to be signed on its behalf by the undersigned thereuntoduly authorized.

 

|                        | **COMMUNITY FIRST BANKSHARES, INC.**  |
|-----------------------------|---------------------------------------|
|                        |                                  |
|                        |                                  |
|                        |                                  |
|                        |                                  |
| Date:   August 8, 2001 | /s/ Mark Anderson                     |
|                        |                                       |
|                        | Mark A. Anderson                      |
|                        | President and Chief Executive Officer |
|                        |                                  |
|                        |                                  |
|                        |                                  |
|                        |                                  |
|                        |                                  |
| Date:   August 8, 2001 | /s/ Craig A. Weiss                    |
|                        |                                       |
|                        | Craig A. Weiss                        |
|                        | Chief Financial Officer               |