## 

Exhibit
13.1

FINANCIAL HIGHLIGHTS

|                                                                                                                |  | Years ended December 31 |          
|--------------------------------------------------------------------------------------------------------------- |  | ----------------------- | ---------
|
|
|
|Earnings                                                                                                        |  |                         |          
|Total interest income                                                                                           |  | $                       | 465,206  
|Total interest expense                                                                                          |  |                         | 185,818  
|Net interest income                                                                                             |  |                         | 279,388  
|Net income                                                                                                      |  |                         | 74,913   
|Per common and common equivalent share                                                                          |  |                         |          
|Basic earnings per share                                                                                        |  | $                       | 1.50     
|Diluted earnings per share                                                                                      |  |                         | 1.48     
|Net book value                                                                                                  |  |                         | 8.12     
|Dividends paid                                                                                                  |  |                         | 0.56     
|At year-end                                                                                                     |  |                         |          
|Total assets                                                                                                    |  | $                       | 6,302,235
|Total loans                                                                                                     |  |                         | 3,690,353
|Allowance for loan losses                                                                                       |  |                         | 48,878   
|Total deposits                                                                                                  |  |                         | 4,909,863
|Common equity                                                                                                   |  |                         | 407,269  
|Key performance ratios                                                                                          |  |                         |          
|Return on average common equity                                                                                 |  |                         | 18.07    
|Return on average assets                                                                                        |  |                         | 1.20     
|Net interest margin                                                                                             |  |                         | 5.06     
|Dividend payout ratio                                                                                           |  |                         | 37.90    
|Average common equity to average assets                                                                         |  |                         | 6.64     
|Nonperforming assets to period-end loans and OREO                                                               |  |                         | 0.88     
|Allowance for loan losses to period-end loans                                                                   |  |                         | 1.32     
|Allowance for loan losses to nonperforming loans                                                                |  |                         | 187.65   
|Net charge-offs to average loans                                                                                |  |                         | 0.66     
|Tier I capital                                                                                                  |  |                         | 10.01    
|Total risk-based capital                                                                                        |  |                         | 12.45    
|Leverage ratio                                                                                                  |  |                         | 7.16     
|Efficiency ratio                                                                                                |  |                         | 59.87    
|Earnings per share and ratios excluding goodwill and other intangible assets amortization and balances ("Cash") |  |                         |          
|Diluted earnings per share                                                                                      |  | $                       | 1.62     
|Return on assets                                                                                                |  |                         | 1.35     
|Return on average common equity                                                                                 |  |                         | 19.84    
|Efficiency ratio                                                                                                |  |                         | 56.95    



## 

CONTENTS

|Introduction           |  | 1 
|---------------------- |  | --
|Letter to Stakeholders |  | 3 
|Financial Review       |  | 10
|CFB Locations          |  | 43
|Board of Directors     |  | 44
|Senior Officers        |  | 44
|Corporate Information  |  | 46

Rapid motion. Rapid action. Rapid operation.They represent velocity. In a wordspeed. Past images of
bankingwhether green eyeshades or bankers' hoursno longer apply. The world is changing. So are we. Customers want things more quickly. They want services and products that
fit their lifestylesat the time of day that suits their schedules. Technology allows us to provide it.

In this fast-paced environment,Community First still offers the best of both worlds. Technology may change the tools we use. It makes
us more efficient. But our commitment to community banking principles means relationships count. That won't change. Relationships with our investors, customers, employees and communities, coupled with
strategic initiatives, will bring dividends to our stakeholders as we move forward.

ABOUT THE COMPANY

|Name          |  | Community First Bankshares, Inc.                                                                                          
|------------- |  | --------------------------------------------------------------------------------------------------------------------------
|Headquarters  |  | Fargo, ND                                                                                                                 
|Business      |  | Multi-bank holding company with banking, investment, insurance and trust services                                         
|Markets       |  | 156 communities                                                                                                           
|States Served |  | Arizona, California, Colorado, Iowa, Minnesota, Nebraska, New Mexico, North Dakota, South Dakota, Utah, Wisconsin, Wyoming
|Stock Symbol  |  | Nasdaq: CFBX                                                                                                              

VISION

The vision for the Community First Organization is to earn the reputation of being the best financial service organization in our markets by all our
stakeholders: our customers, employees, communities, shareholders, competitors and regulators ... recognizing that "best" will be defined differently by the various types of stakeholders.

To
achieve this vision, we must operate in a highly ethical manner in all that we do, with a sincere respect for all stakeholders and their unquestionable right to expect superior
performance from our organization. We must be flexible and willing to adapt to the expectations of all our stakeholders.

We
will evaluate achieving this vision by the growth that occurs: growth in the number of markets and customers and in the services we provide to meet their needs; growth of our
employees in a personal, career and financial sense; growth of our communities' economic quality of life; growth in our shareholders' capital value; growth of our competitors' service quality as they
strive to meet our standards; and growth of confidence and acceptability by regulators.

2



EFFICIENCY

[PAGE WITH 6 GRAPHS]

3



## 

FINANCIAL REVIEW

CONTENTS

|Management's Discussion and Analysis            |  | 5 
|----------------------------------------------- |  | --
|Consolidated Statements of Financial Condition  |  | 6 
|Consolidated Statements of Income               |  | 7 
|Consolidated Statements of Comprehensive Income |  | 9 
|Consolidated Statements of Shareholders' Equity |  | 30
|Consolidated Statements of Cash Flows           |  | 31
|Notes to Consolidated Financial Statements      |  | 32
|Independent Auditor's Letter                    |  | 58
|Five-Year Summary                               |  | 59
|Quarterly Results of Operations                 |  | 61

4



## 

MANAGEMENT'S DISCUSSION AND ANALYSIS

BASIS OF PRESENTATION

The following represents management's discussion and analysis of Community First Bankshares, Inc.'s (the "Company") financial condition as of
December 31, 1999 and 1998, and its results of operations for the years ended December 31, 1999, 1998, and 1997. This discussion should be read in conjunction with the consolidated
financial statements and related footnotes and the five year summary of selected financial data. The information has been restated to reflect significant mergers accounted for as a pooling of
interests as if they had occurred at the beginning of the first period presented. Purchases have been reflected in the Company's results of operations for all periods following the acquisition and are
reflected in the Company's financial condition at all dates subsequent to the acquisition.

MERGER AND ACQUISITION ACTIVITY

The Company has made a number of acquisitions during these periods. Each of these acquisitions has had an effect upon the Company's results of operations and
financial condition.

Pooling of Interests Transactions.In the following transactions during the periods presented, the Company accounted
for the acquisition using the pooling of interests method.

POOLING OF INTERESTS TRANSACTIONS

|Acquisition Month and Year |  | Location of
Bank or Name
of Acquired Entity |  | Number of
Locations at
Date of Acquisition |  | Total Assets at
Date of Acquisition
(in millions)
|-------------------------- |  | ------------------------------------------- |  | ------------------------------------------ |  | -------------------------------------------------
|December 1999              |  | Ramsey, Minnesota                           |  | 1                                          |  | $                                                
|October 1999               |  | El Cajon, California                        |  | 6                                          |  |                                                  
|August 1998                |  | Salt Lake City, Utah                        |  | 2                                          |  |                                                  
|July 1998                  |  | Las Cruces, New Mexico                      |  | 3                                          |  |                                                  
|May 1998                   |  | FNB, Inc., Colorado                         |  | 2                                          |  |                                                  
|April 1998                 |  | Longmont, Colorado                          |  | 4                                          |  |                                                  
|April 1998                 |  | Thornton, Colorado                          |  | 4                                          |  |                                                  
|December 1997              |  | Gunnison, Colorado                          |  | 4                                          |  |                                                  
|November 1997              |  | Phoenix, Arizona                            |  | 1                                          |  |                                                  

On
December 21, 1999, the Company issued approximately 317,000 shares of common stock to acquire River Bancorp, Inc. ("River Bancorp"), a one-bank holding
company headquartered in Ramsey, Minnesota. At acquisition, Ramsey had approximately $35 million in assets at one office in Ramsey, Minnesota. Because this acquisition was not material to the
Company's financial condition or operating results, the Company's financial information has not been restated to reflect this merger.

With
respect to certain other acquisitions listed above, including Valley National, the Company's results of operations and financial condition have been restated for all historical
periods.



5





The
1997 acquisitions of Phoenix and Gunnison listed in the table were accounted for as a pooling of interests; however, because the acquisitions were not material, individually or in
the aggregate, to the Company's financial condition or operating results, the Company's financial information has not been restated to reflect these mergers.

Purchase Transactions.The following transactions during the periods presented were accounted for as purchases:

PURCHASE TRANSACTIONS

|Acquisition Month and Year |  | Location of
Bank or Name
of Acquired Entity |  | Number of
Locations at
Date of Acquisition |  | Total Assets at
Date of Acquisition
(in millions)
|-------------------------- |  | ------------------------------------------- |  | ------------------------------------------ |  | -------------------------------------------------
|January 1998               |  | Banc One, Phoenix, Arizona(1)               |  | 37                                         |  | $                                                
|July 1997                  |  | Cheyenne, Wyoming                           |  | 24                                         |  |                                                  

---

On
January 23, 1998, the Company completed the purchase and assumption of approximately $730 million in assets and liabilities of 37 offices of Banc One Corporation
located in Arizona, Colorado and Utah. The transaction was accounted for as a purchase of certain assets and assumption of certain liabilities and resulted in the recognition of approximately
$44 million of deposit premium. The purchase was funded through a combination of net proceeds from the issuance of 2,000,000 shares of common stock in December 1997 and the proceeds of
the issuance of $60 million 8.20% Cumulative Capital Securities by a business trust subsidiary in December 1997.

On
July 14, 1997, the Company completed the purchase of KeyBank N.A. (Wyoming), ("KeyBank") from KeyCorp of Cleveland, Ohio. At the time of acquisition, KeyBank had total
assets of $1.1 billion in banking offices in 24 Wyoming communities. The purchase price of the transaction, which was accounted for as a purchase, was $135 million and resulted in the
recognition of goodwill of approximately $60 million. The purchase price was funded through a combination of proceeds from the issuance of $60 million 8.875% Cumulative Capital
Securities by a business subsidiary of the Company in February 1997, partial proceeds from the Company's issuance of $60 million 7.30% Subordinated Notes and retained earnings of the
Company.

6



OVERVIEW

General

For the year ended December 31, 1999, the Company reported net income of $74.9 million, an increase of $29.4 million, or 64.6% from the
$45.5 million earned during 1998. Diluted earnings per share were $1.48, compared to $0.89 in 1998. Return on average assets was 1.20% for 1999, compared with 0.75% for 1998. Return on average
common shareholders' equity for 1999 and 1998 was 18.07% and 11.03%, respectively.

For
the year ended December 31, 1998, the Company reported net income of $45.5 million, a decrease of $15.4 million, or 25.3%, from the $60.9 million
earned during 1997. Diluted earnings per share were $0.89, compared to $1.27 in 1997. Return on average assets was 0.75% for 1998, compared with 1.42% for 1997. Return on average common shareholders'
equity for 1998 and 1997 was 11.03% and 19.04%, respectively.

Total
assets were $6.3 billion and $6.2 billion at December 31, 1999 and 1998, respectively. The increase of $62.5 million, or 1.0%, during 1999 was
principally due to loan growth in the Company's subsidiary banks.

Sale of Sub-Prime Lending Business

During 1997, the Company made the determination to dispose of its sub-prime lending affiliates, Mountain Parks Financial Services, Inc.
("MPFS") and Equity Lending, Inc. ("ELI"). Both MPFS, which purchased auto contracts, and ELI, which originated residential, non-conforming mortgages, were acquired by the Company
in December 1996 through the merger with Mountain Parks Financial Corporation. The Company accounted for these entities as discontinued operations during all of 1997 and the first two quarters
of 1998. As of June 30, 1998, the Company changed the status of MPFS and ELI from discontinued operations and reflected the related assets retained as loans. In July 1998, the Company
sold the operating assets, excluding loans retained at MPFS and ELI, in cash transactions. The Company recognized income relating to MPFS and ELI of $967,000 net of tax in 1997 and a loss of
$3.9 million in 1998, including a $1.7 million charge associated with the disposition. The Company also realized a $2.2 million operating loss in 1998, consisting of $707,000 from
the operation of the entities and $1.4 million associated with one-time operating expenses related to preparing the subsidiaries for sale. The Company recorded another charge of
$10 million in the fourth quarter of 1998 in connection with further expected losses upon liquidation of the remaining assets. At December 31, 1999, the Company had approximately
$10 million in sub-prime mortgages and $237,000 in sub-prime automobile contracts remaining. The Company does not anticipate pursuing further sub-prime
lending activity.

Restructuring Charges

During the fourth quarter of 1998, the Company recorded a $5.5 million non-recurring charge as a result of the Company's initiative to
improve future core profitability principally through a reduction in work force. As part of the plan, approximately 200 positions were eliminated throughout the organization. The charge included
severance and other personnel related costs, as well as the disposal of redundant computer equipment acquired in conjunction with recent acquisitions. These actions respond to recent changes in the
financial markets, which have placed additional pressure on margin, slowed the pace of acquisitions and slowed the growth of sales of financial service products.

As
of December 31, 1998, all expected expenditures associated with the restructuring had been recognized and recorded, including the identification of specific personnel
affected by the reduction in work force. All costs, including severance payments, had been incurred as of December 31, 1999.

7



RESULTS OF OPERATIONS

Net Interest Income

The principal source of the Company's earnings is net interest income, the difference between total interest income on earning assets such as loans and
investments and interest paid on deposits and other
interest-bearing liabilities. The net interest margin is net interest income, on a tax-equivalent basis, expressed as a percentage of average earning assets. The margin is affected by
volume and mix of earning assets and interest-bearing liabilities, the level of interest free funding sources, interest rate environment and income tax rates. As discussed later, management actively
monitors its interest rate sensitivity and seeks to balance assets and liabilities to minimize the impact of changes in the interest rate environment.

The
following table presents the Company's average balance sheets, interest earned or paid and the related yields and rates on major categories of the Company's earning assets and
interest-bearing liabilities on a tax-equivalent basis for the periods indicated:

|                                           |  | Years Ended December 31 |          
|------------------------------------------ |  | ----------------------- | ---------
|
|
|
|Assets                                     |  |                         |          
|Loans(1)(2)                                |  | $                       | 3,573,060
|Investment securities(2)                   |  |                         | 2,104,661
|Other earning assets                       |  |                         | 24,886   
|                                           |  |                         |          
|Total earning assets                       |  |                         | 5,702,607
|Noninterest-earning assets                 |  |                         | 542,687  
|                                           |  |                         |          
|Total assets                               |  | $                       | 6,245,294
|                                           |  |                         |          
|Liabilities and Shareholders' Equity       |  |                         |          
|Interest-bearing checking                  |  |                         | 920,521  
|Savings deposits                           |  |                         | 1,091,228
|Time deposits                              |  |                         | 2,099,426
|Short-term borrowings                      |  |                         | 557,920  
|Long-term borrowings                       |  |                         | 97,732   
|                                           |  |                         |          
|Total interest-bearing liabilities         |  |                         | 4,766,827
|Demand deposits                            |  |                         | 880,484  
|Noninterest-bearing liabilities            |  |                         | 63,339   
|Trust owned preferred securities           |  |                         | 120,000  
|Preferred shareholders' equity             |  |                         |         
|Common shareholders' equity                |  |                         | 414,644  
|                                           |  |                         |          
|                                           |  |                         | 1,478,467
|                                           |  |                         |          
|Total liabilities and shareholders' equity |  | $                       | 6,245,294
|                                           |  |                         |          
|Net interest income                        |  |                         |          
|                                           |  |                         |          
|Net interest spread                        |  |                         |          
|                                           |  |                         |          
|Net interest margin                        |  |                         |          
|                                           |  |                         |          

---

8





The following table presents the components of changes in net interest income by volume and rate on a tax-equivalent basis. The net
change attributable to the combined impact of volume and rate has been allocated solely to the change in volume:

|                                               |  | 1999 compared to 1998 |        | 1998 compared to 1997
|---------------------------------------------- |  | --------------------- | ------ | ---------------------
|
|
|Interest income:                               |  |                       |        |                      
|Loans(1)                                       |  | $                     | 19,034 |                      
|Investment securities(1)                       |  |                       | 6,597  |                      
|Other earning assets                           |  |                       | (3,838 | )                    
|                                               |  |                       |        |                      
|Total interest income                          |  | $                     | 21,793 |                      
|Interest expense:                              |  |                       |        |                      
|Savings deposits and interest-bearing checking |  |                       | 412    |                      
|Time deposits                                  |  |                       | (3,720 | )                    
|Short-term borrowings                          |  |                       | 12,076 |                      
|Long-term borrowings                           |  |                       | (1,665 | )                    
|                                               |  |                       |        |                      
|Total interest expense                         |  |                       | 7,103  |                      
|                                               |  |                       |        |                      
|Increase (decrease) in net interest income     |  | $                     | 14,690 |                      
|                                               |  |                       |        |                      

---

9





## 

MANAGEMENT'S DISCUSSION AND ANALYSIS   COMUNITY FIRST BANKSHARES, INC.

Net interest income on a tax-equivalent basis in 1999 was $288.5 million, a $7.8 million increase from 1998. The increase was
primarily due to a 4.0% increase in earning assets partially offset by a 6 basis point reduction in the net interest margin. The increase in earning assets was due to loan growth in existing markets.
Net interest income on a tax-equivalent basis in 1998 was $280.7 million, a $72.3 million increase from 1997. The increase was primarily due to a 40.7% increase in earning
assets partially offset by a 23 basis point reduction in the net interest margin. The increase in earning assets was due to three bank acquisitions completed by the Company during 1998 and 1997, the
purchase of assets and assumption of liabilities of Banc One Corporation offices in Arizona, Colorado and Utah, and loan growth in existing markets.

The
net interest margin was 5.06%, 5.12% and 5.35% in 1999, 1998 and 1997, respectively. This decrease in margin was due to a 2 basis point decrease in the yield spread between 1998
and 1999, and a change in the mix of earning assets to lower-yielding assets. Average loans to average earning assets was 62.7% in 1999 compared to 61.7% in 1998 and 70.5% in 1997.

Provision for Loan Losses

Annual fluctuations in the provision for loan losses result from management's regular assessment of the adequacy of the allowance for loan losses. The
provision for loan losses for 1999 was $20.2 million, a decrease of $2.9 million or 12.6%, from the $23.1 million provision during 1998. The decrease in the loan loss provision
was principally due to the Company's credit experience in the operation and disposal of its sub-prime lending affiliates during 1998. The amount of the loan loss provision to be recorded
in future periods will depend on management's assessment of the adequacy of the allowance for loan losses in relation to the entire loan portfolio. The provision for loan losses for 1998 was
$23.1 million, an increase of $16.5 million, or 250% from the 1997 provision of $6.6 million. The increase was primarily due to the operation and disposal of the
sub-prime lending affiliates.

Noninterest Income

The Company continues to expand noninterest income associated with the Company's community banking operations. The primary sources of noninterest income
consist of service charges on deposit accounts, service fees on checking accounts, insurance commission, fees from the sale of investment products and fees for trust services. Management is working to
increase the contribution of noninterest income to operating results by increasing the delivery of financial products and services, including trust services, insurance policy sales and security sales
through a third party provider of standardized securities products.

Noninterest
income for 1999 was $72.5 million, an increase of $9.2 million, or 14.5%, from the $63.3 million earned in 1998. The increase was principally due to
an increase in service charges on deposit accounts in 1999 from $31.9 million earned during 1998 to $37.0 million earned in 1999, an increase of $5.1 million, or 16.0%.

Noninterest
income for 1998 was $63.3 million, an increase of $13.4 million, or 26.9%, from the $49.9 million earned in 1997. The increase was principally due to
an increase in service charges on deposit accounts in 1998 to $31.9 million from the $22.7 million in 1997, an increase of $9.2 million, or 40.5%.

Noninterest Expense

Noninterest expenses consist of salaries and benefits, occupancy, equipment and other expenses such as legal and postage necessary for the operation of the
Company. Management is committed to improving

10



the
quality of service while controlling such costs through improved efficiency and consolidation of certain activities to achieve economies of scale.

The
following table presents the components of noninterest expense for the periods indicated:

|                                                                                    |  | Years Ended December 31
|----------------------------------------------------------------------------------- |  | -----------------------
|
|
|Salaries and employee benefits                                                      |  | $                      
|Net occupancy                                                                       |  |                        
|FDIC insurance                                                                      |  |                        
|Legal and accounting                                                                |  |                        
|Other professional services                                                         |  |                        
|Acquisition, integration and conforming                                             |  |                        
|Data processing and loan servicing fees                                             |  |                        
|Company-obligated mandatorily redeemable preferred securities of CFB Capital I & II |  |                        
|Amortization of intangibles                                                         |  |                        
|Other                                                                               |  |                        
|                                                                                    |  |                        
|Total noninterest expense                                                           |  | $                      
|                                                                                    |  |                        

Noninterest
expense decreased $22.4 million to $218.2 million in 1999. The decrease was principally due to a decrease in salaries and employee benefits, net occupancy
expense and acquisition and related expenses, including legal and accounting and other professional services. The $12.8 million decrease in salaries and employee benefits and the
$1.2 million decrease in net occupancy expense are due principally to certain expense control and operating efficiency initiatives announced by the Company during the fourth quarter of 1998 and
implemented during 1999. The $586,000 decrease in legal and accounting, the decrease of $846,000 in other professional services, and the decrease of $668,000 in acquisition, integration and conforming
expenses are principally due to a reduction in the volume of acquisition activity during 1999. The Company incurred acquisition expenses of $3.1 million during 1999 in connection with the 1999
acquisitions.

Noninterest
expense increased $81.0 million to $240.6 million in 1998. The increase was principally due to an increase in salaries and employee benefits, net occupancy
expense, and acquisition and related expenses. The $35.9 million increase in salaries and employee benefits includes $18.7 million in additional expenses related to acquisitions
completed by the Company in 1998 and 1997. The $8.9 million increase in net occupancy is also due primarily to acquisitions completed by the Company. Legal and accounting fees increased
$1.8 million, or 75.0%, from $2.4 million to $4.2 million during 1998. The Company incurred acquisition expenses of $3.7 million in 1998 in connection with the 1998
acquisitions. Company-obligated mandatorily redeemable preferred stock expense increased by $5.1 million, or 100%, to $10.2 million in 1998 compared to $5.1 million in 1997, which
reflects the increase in the average underlying securities from $58 million in 1997 to $120 million in 1998. Amortization of intangibles expense increased $4.8 million, or 86.8%,
due to intangible assets, such as goodwill, noncompete agreements and insurance agency customer policy expirations recorded in connection with the Company's acquisitions. Other noninterest expense was
$46.9 million, an increase of $15.1 million, or 47.5%, from $31.8 million in 1997.

Provision for Income Taxes

The Company records a provision for income taxes currently payable and for taxes payable in the future because of differences in the timing of recognition of
certain items for financial statement and income tax purposes. The effective income tax rate differs from the statutory rate primarily due to tax-exempt income from loans and investments
and state income taxes. As a result of effective tax

11



strategies,
the Company's effective tax rates were lower than historical effective rates during 1998 and 1997. The 1999 effective tax rate is similar to the Company's anticipated effective tax rates
in future periods. The effective tax rate was 34.0%, 31.4% and 30.1% for 1999, 1998 and 1997, respectively.

Year 2000 Issue

The Company has experienced no adverse operating results related to the "Year 2000" issue. The issue addressed the potential inability of certain information
systems to properly recognize and process dates containing the year 2000 and beyond. During 1999, the Company completed an expansive review and analysis of its data processing systems and business
operations to ensure the Company would not be adversely impacted by the Year 2000 issue. The Company organized a Year 2000 Team, which adopted a Year 2000 Assessment and Testing Plan. The Plan
addressed all aspects of the Year 2000 issue, including: i) testing of all Company computer software and hardware; ii) working with deposit and loan customers to ensure they understood
the challenges of the issue; iii) communicating with third party vendors to ensure their software and hardware products were compliant; and iv) preparing contingency and disaster
recovery plans should they have been necessary.

The
Company incurred approximately $1.7 million in costs associated with the Year 2000 issue. These costs included approximately $400,000 in labor costs during both 1998 and
1999 and capital expenditures of $900,000 in 1999, principally for the upgrade of data processing equipment. The 1999 expenditures represented approximately 5% of the Company's information technology
operating budget and 30% of the Company's information technology capital expenditure budget for 1999. All Year 2000 issue costs were funded through operating income. The Company did not delay any
information technology projects as a result of the Year 2000 compliance effort.

FINANCIAL CONDITION

INVESTMENT OF FUNDS

Loans

At December 31, 1999, total loans were $3.7 billion, an increase of $153 million, or 4.4%, from the December 31, 1998, level of
$3.5 billion. A significant portion of this increase is attributable to in-market loan growth in the Company's existing markets.

The
Company has continued to purchase commercial loan assets to enhance earning asset yield performance. Many of such loan assets have been originated by selected Midwestern regional
banks and national leasing and finance companies with whom the Company has ongoing relationships. The Company's portfolio of purchased loan assets was $347 million at December 31, 1999,
compared to $322 million at December 31, 1998. These assets are subject to the Company's standard credit guidelines, as well as specific requirements for such assets, and bear the credit
risks attendant to commercial loans. It is anticipated that the purchased loan asset volume will decrease during 2000, in that the Company has elected to discontinue active solicitation of purchased
loans.

12



The
following table presents the Company's balance of each major category of loans at the dates indicated:

|                               |  | 1999 |           | 1998 |        | 1997 |   | 1996      |   | 1995   |  
|------------------------------ |  | ---- | --------- | ---- | ------ | ---- | - | --------- | - | ------ | -
|
|
|Loan category:                 |  |      |           |      |        |      |   |           |   |        |  
|Real estate                    |  | $    | 1,319,678 |      | 35.76  | %    | $ | 1,291,287 |   | 36.51  | %
|Real estate construction       |  |      | 434,924   |      | 11.79  | %    |   | 366,277   |   | 10.35  | %
|Commercial                     |  |      | 994,624   |      | 26.95  | %    |   | 966,404   |   | 27.32  | %
|Consumer and other             |  |      | 681,423   |      | 18.46  | %    |   | 618,530   |   | 17.48  | %
|Agricultural                   |  |      | 259,704   |      | 7.04   | %    |   | 295,039   |   | 8.34   | %
|                               |  |      |           |      |        |      |   |           |   |        |  
|Total loans                    |  | $    | 3,690,353 |      | 100.00 | %    | $ | 3,537,537 |   | 100.00 | %
|                               |  |      |           |      |        |      |   |           |   |        |  
|Less allowance for loan losses |  |      | (48,878   | )    |        |      |   | (51,860   | ) |        |  
|                               |  |      |           |      |        |      |   |           |   |        |  
|Total                          |  | $    | 3,641,475 |      |        |      | $ | 3,485,677 |   |        |  
|                               |  |      |           |      |        |      |   |           |   |        |  

General.The Company's loan mix remained relatively constant from 1998 to 1999.
Real estate loans continued to be the largest category of loans, representing 47.6% of the total loan portfolio.

Real Estate Loans.A significant portion of the Company's real estate loan portfolio consists
of residential real estate first mortgages that have been underwritten and documented to meet secondary mortgage requirements. Substantially all of the Company's real estate loans are based in the
Company's primary market area. As of December 31, 1999, $649 million, or 37.0%, of the Company's real estate loan portfolio consisted of residential real estate loans,
$149 million, or 8.5%, were secured by farmland, $522 million, or 29.7%, represented commercial and other real estate loans and $435 million, or 24.8%, represented construction
loans.

Commercial Loans.Loans in this category include loans to retail, wholesale, manufacturing and
service businesses, including agricultural service businesses and the Company's purchased loan asset portfolio. Commercial loans are underwritten based on the financial strength and repayment ability
of the borrower, as well as the collateral securing the loans.

Consumer and Other Loans.Loans classified as consumer and other loans include automobile,
personal loans, consumer lines of credit and overdrafts. The consumer loan portfolio also includes dealer-generated installment contracts for consumer goods, including automobiles and major home
appliances. The majority of these indirect loans are installment loans with fixed interest rates.

Agricultural Loans.Agricultural loans are made principally to farmers and ranchers. The
Company provides short-term credit for operating loans and intermediate-term loans for machinery purchases and other improvements.

Investments

Management augments the quality of the loan portfolio by maintaining a high quality investment portfolio oriented toward U.S. Treasury, U.S. Government agency
and government guaranteed mortgage-backed securities. The investment portfolio also provides the opportunity to structure maturities and repricing timetables in a flexible manner and to meet
applicable requirements for pledging securities, which are principally adjustable rate, and collateralized mortgage obligations, which are primarily floating rate securities, as tools in managing its
interest rate exposure and enhancing its net interest margin.

13



The
following table sets forth the composition of the Company's held-to-maturity securities portfolio at amortized cost as of the dates indicated:

|                                    |  | Book Value at December 31,
|----------------------------------- |  | --------------------------
|
|
|U.S. Treasury                       |  | $                         
|U.S. Government agencies            |  |                           
|Mortgage-backed securities          |  |                           
|Collateralized mortgage obligations |  |                           
|State and political securities      |  |                           
|Other                               |  |                           
|                                    |  |                           
|Total                               |  | $                         
|                                    |  |                           

The
following table sets forth the composition of the Company's available-for-sale securities portfolio at estimated fair value as of the dates indicated:

|                                    |  | Book Value at December 31,
|----------------------------------- |  | --------------------------
|
|
|U.S. Treasury                       |  | $                         
|U.S. Government agencies            |  |                           
|Mortgage-backed securities          |  |                           
|Collateralized mortgage obligations |  |                           
|State and political securities      |  |                           
|Other                               |  |                           
|                                    |  |                           
|Total                               |  | $                         
|                                    |  |                           

Held-to-Maturity Securities

|      |  | At December 31, 1999, Maturing in | 
|----- |  | --------------------------------- | 
|
|
|
|Other |  |                                  | 
|      |  |                                   | 
|Total |  |                                  | 
|      |  |                                   | 

---

14





Available-for-Sale Securities

|                                    |  | At December 31, 1999, Maturing in |       
|----------------------------------- |  | --------------------------------- | ------
|
|
|
|U.S. Treasury                       |  | $                                 | 31,544
|U.S. Government agencies            |  |                                   | 19,010
|Mortgage-backed securities          |  |                                   | 1,089 
|Collateralized mortgage obligations |  |                                   |      
|Municipal bonds                     |  |                                   | 9,187 
|Other                               |  |                                   | 766   
|                                    |  |                                   |       
|Total                               |  | $                                 | 61,596
|                                    |  |                                   |       

---

The Company's investments, including available-for-sale and held-to-maturity securities,
decreased $85 million, or 4.1%, to $2,012 million at December 31, 1999, from $2,097 million at December 31, 1998. This decrease reflects $76 million of
securities held at December 31, 1998, in response to the asset purchase and liability assumption of Banc One Corporation offices in Arizona, Colorado and Utah in January 1998. At
December 31, 1999, the Company's investments represented 31.9% of total assets, compared to 33.6% at December 31, 1998.

Credit Policy

The Company's lending activities are guided by the general loan policy established by the Board of Directors. The Senior Credit Committee of the Company has
established loan approval limits for each region of the Company and each subsidiary bank. The limits established for each bank range from $50,000 to $500,000 per borrower (except for the Fargo bank,
which has a $750,000 limit per borrower). However, renewals of any criticized or classified loans have a limit of $25,000. Amounts in excess of the individual bank lending authority are presented to
the regional credit officers. The regional credit officers for Arizona, California, Colorado, Iowa, Minnesota, Nebraska, New Mexico, Utah, Wisconsin, Wyoming and the Dakotas have lending authority up
to $750,000 per nonclassified borrower at which time a second regional credit officer or the respective regional managing officer must concur. Loans
above $1,500,000 per pass rated borrower, $1,000,000 per watch rated borrower and $250,000 per classified borrower are presented to the Senior Credit Committee for approval.

Although
the Company has a diversified loan portfolio, the economic health of significant portions of the Company's primary trade area and the ability of many of the bank's borrowers
to repay their loans (including real estate and commercial loans, as well as agricultural loans) is dependent to a large extent on the health of their local sector of the economy. The Company has
identified and implemented strategies to deal with these factors, including an emphasis on quality local loan growth and the diversification and performance of its earning asset portfolios.

Nonperforming Assets

The Company follows regulatory guidelines with respect to classifying loans on a nonaccrual basis. Loans are placed on nonaccrual when they become past due
over 90 days or when the collection of interest or principal is considered unlikely. The Company does not return a loan to accrual status until it is brought current with respect to both
principal and interest and future principal payments are no longer in doubt.

15



When
a loan is placed on nonaccrual status, any previously accrued and uncollected interest is reversed. Interest income of $5,534,000 on nonaccrual loans would have been recorded during 1999 if the
loans had been current in accordance with their original terms. During 1999, the Company recorded interest income of $1,067,000 related to loans that were on nonaccrual status as of
December 31, 1999.

The
Company considers nonperforming assets to include all nonaccrual loans, restructured loans defined as troubled debt restructurings under SFAS No. 15 and other real estate
owned ("OREO").

Nonperforming
assets of the Company are summarized in the following table:

|                                                             |  | December 31 |          
|------------------------------------------------------------ |  | ----------- | ---------
|
|
|Loans:                                                       |  |             |          
|Nonaccrual loans                                             |  | $           | 25,764   
|Restructured loans                                           |  |             | 284      
|Nonperforming loans                                          |  |             | 26,048   
|OREO                                                         |  |             | 6,525    
|                                                             |  |             |          
|Nonperforming assets                                         |  | $           | 32,573   
|                                                             |  |             |          
|Loans 90 days or more past due but still accruing            |  | $           | 1,949    
|                                                             |  |             |          
|Nonperforming loans as a percentage of total loans           |  |             | 0.71     
|Nonperforming assets as a percentage of total assets         |  |             | 0.52     
|Nonperforming assets as a percentage of total loans and OREO |  |             | 0.88     
|Total loans                                                  |  | $           | 3,690,353
|Total assets                                                 |  | $           | 6,302,235

Nonperforming
assets were $32.6 million at December 31, 1999, an increase of $5.1 million, or 18.5% from $27.5 million at December 31, 1998.
Nonperforming loans increased by $3.3 million due principally to an increase in nonaccrual loans in the remaining specialty lending area. OREO increased $1.8 million, or 37.0%, from
$4.8 million at December 31, 1998 to $6.5 million at December 31, 1999. The increase in OREO is attributed principally to assets in the Company's remaining specialty
lending portfolio. The ratio of nonperforming assets to total assets at December 31, 1999 was .52%, compared to .44% at December 31, 1998.

Nonperforming
assets were $27.5 million at December 31, 1998, an increase of $6.8 million, or 32.9%, from $20.7 million at December 31, 1997.
Nonperforming loans increased by $7.5 million. OREO decreased $670,000, or 12.3%, from $5.4 million at December 31, 1997 to $4.8 million at December 31, 1998. The
ratio of nonperforming assets to total assets at December 31, 1998, was .44%, compared to .37% at December 31, 1997.

Allowance for Loan Losses

The current level of the allowance for loan losses is a result of management's assessment of the risks within the portfolio based on the information revealed
in credit reporting processes. The Company utilizes a risk-rating system on all loans, including purchased loans, and a monthly credit review and reporting process that results in the
calculation of the guidelines reserves based on the risk within the portfolio. This assessment of risk takes into account the composition of the loan portfolio, previous loan experience, current
economic conditions and other factors that, in managements' judgment, deserve recognition.

16



The
allowance is allocated to individual loan categories based on the relative risk characteristics of the loan portfolios. Commercial and agricultural allocations are based on a
quarterly review of the individual loans outstanding, including outstanding commitments to lend. Real estate and consumer allocations are based on a quarterly analysis of the performance of the
respective portfolios, including historical and expected delinquency and charge-off statistics. The allowance allocated to real estate loans, including real estate construction, increased
$513,000 from $10.0 million at December 31, 1998 to $10.5 million at December 31, 1999. The allowance allocated to the consumer loan portfolio decreased
$3.7 million, from $8.4 million to $4.7 million at December 31, 1998 and 1999, respectively. This decrease was due principally to the volume of loans retained in 1998 at
MPFS, the Company's sub-prime consumer lending subsidiary.

The
Company also routinely maintains an unallocated allowance to recognize its exposure to unanticipated losses within the loan portfolio. This exposure is caused by inherent delays
in obtaining information regarding an individual borrower's financial condition or change in their specific business condition; the judgmental nature of individual loan evaluations, collateral
assessments and the interpretation of economic trends; the volatility of general economic or specific customer conditions affecting the identification and quantification of losses for large individual
credits; and the sensitivity of assumptions used in establishing allocated allowances for general categories of loans. The unallocated allowance also addresses risk in concentration of credit to
specific borrowers, products or industries. The unallocated portion of the allowance decreased from $22.6 million at December 31, 1998 to $22.4 million at December 31,
1999. The allocated allowance as a percentage of loans outstanding decreased from .83% at December 31, 1998 to .72% at December 31, 1999, and the unallocated portion decreased from .64%
to .60% at December 31, 1998 and 1999, respectively. The accompanying table shows the allocated and unallocated portions of the allowance for the various loan classifications.

The
Company's experience in the consumer loan and real estate loan portfolios of its sub-prime lending subsidiaries during 1998 and 1997 resulted in negative variances
from the allowance levels in these loan classifications. In other periods, the Company has experienced a positive variance, and management believes the Company's estimates have been conservative but
consistent with actual experience. Management has reviewed the allocations in the various classifications of loans and believes the allowance was adequate at all times during the five-year
period ended December 31, 1999. The analysis methodology has been consistently applied during this five-year period.

17



The
following table sets forth the Company's allowance for loan losses as of the dates indicated:

|                                             |  | December 31 |          
|-------------------------------------------- |  | ----------- | ---------
|
|
|Balance at beginning of year                 |  | $           | 51,860   
|Allowance of acquired companies and other    |  |             | 270      
|Charge-offs:                                 |  |             |          
|Real estate                                  |  |             | 2,181    
|Real estate construction                     |  |             | 2,965    
|Commercial                                   |  |             | 8,349    
|Consumer and other                           |  |             | 13,802   
|Agricultural                                 |  |             | 553      
|Total charge-offs                            |  |             | 27,850   
|Recoveries:                                  |  |             |          
|Real estate                                  |  |             | 928      
|Real estate construction                     |  |             |         
|Commercial                                   |  |             | 468      
|Consumer and other                           |  |             | 2,537    
|Agricultural                                 |  |             | 481      
|Total recoveries                             |  |             | 4,414    
|Net charge-offs                              |  |             | 23,436   
|Provision charged to operations              |  |             | 20,184   
|                                             |  |             |          
|Balance at end of year                       |  | $           | 48,878   
|                                             |  |             |          
|Allowance as a percentage of total loans     |  |             | 1.32     
|Net charge-offs to average loans outstanding |  |             | 0.66     
|Total loans                                  |  | $           | 3,690,353
|Average loans                                |  | $           | 3,573,060

At
December 31, 1999, the allowance for loan losses was $48.9 million, a decrease of $3.0 million from the December 31, 1998, level of
$51.9 million. This decrease was the result of an increase in 1999 net charge-offs and the Company's analysis of the loan portfolio credit quality at the Company's bank
subsidiaries. At December 31, 1999, the allowance for loan losses as a percentage of total loans was 1.32%, as compared to 1.47% at December 31, 1998.

At
December 31, 1998, the allowance for loan losses was $51.9 million, an increase of $10.7 million from the December 31, 1997, level of
$41.2 million. At December 31, 1998, the allowance for loan losses as a percentage of total loans was 1.47%, as compared to 1.31% at December 31, 1997. This increase was
attributed to the Company's analysis of the loan portfolio credit quality at the Company's bank subsidiaries, specifically its sub-prime lending operations.

During
1999, net charge-offs were $23.4 million, an increase of $8.8 million from the net charge-offs of $14.6 million in 1998. The
principal causes for the increase were the increase in real estate construction loan net charge-offs of $2.9 million; the increase in commercial loan net charge-offs of
$6.1 million; and an increase in consumer loan and other loan net charge-offs of $1.6 million. These increases are substantially the result of isolated credit determination
and not a systematic deterioration in a broader component of the loan portfolio. The Company's provision for loan loss was $20.2 million in 1999 and $23.1 million in 1998.

18



During
1998, net charge-offs were $18.3 million, an increase of $8.9 million from the $9.4 million during 1997. The increase is principally attributed
to losses recorded in the Company's sub-prime specialty lending operation. The Company's provision for loan loss increased from $6.6 million in 1997 to $23.1 million in 1998.

The
following table sets forth the allocation of the allowance for loan losses to various loan categories, as well as the allocation as a percentage of loans outstanding in each
category, as of the dates indicated:

|                            |  | Allowance for Loan Losses at December 31, |        | Allowance as a Percent of Loans Outstanding
by Category at December 31, |  
|--------------------------- |  | ----------------------------------------- | ------ | ----------------------------------------------------------------------- | -
|
|
|Real estate                 |  | $                                         | 10,329 |                                                                         | $
|Real estate construction    |  |                                           | 218    |                                                                         |  
|Commercial                  |  |                                           | 8,673  |                                                                         |  
|Consumer and other          |  |                                           | 4,657  |                                                                         |  
|Agricultural                |  |                                           | 2,643  |                                                                         |  
|Total allocated allowance   |  |                                           | 26,520 |                                                                         |  
|Total unallocated allowance |  |                                           | 22,358 |                                                                         |  
|                            |  |                                           |        |                                                                         |  
|Total allowance             |  | $                                         | 48,878 |                                                                         | $
|                            |  |                                           |        |                                                                         |  

SOURCE OF FUNDS

Deposits

The Company's major source of funds is provided by core deposits from individuals, businesses and local government units. Core deposits consist of all
noninterest-bearing deposits, interest-bearing savings and checking accounts and time deposits of less than $100,000.

The
following table sets forth a summary of the deposits of the Company at the dates indicated:

|                                    |  | December 31
|----------------------------------- |  | -----------
|
|
|Noninterest-bearing                 |  | $          
|Interest-bearing:                   |  |            
|Savings and checking accounts       |  |            
|Time accounts less than $100,000    |  |            
|Time accounts greater than $100,000 |  |            
|                                    |  |            
|Total deposits                      |  | $          
|                                    |  |            

Total
deposits at December 31, 1999, were $4.9 billion, a decrease of $191 million, or 3.7%, from $5.1 billion at December 31, 1998. The Company's
core deposits as a percentage of total deposits were 88.2% and 87.8% as of December 31, 1999 and December 31, 1998, respectively.

At
December 31, 1999, $580 million, or 11.8% of total deposits were in time accounts greater than $100,000, a decrease of $43 million, or 6.9%, from
$623 million at December 31, 1998. Management believes virtually all the deposits in excess of $100,000 are with persons or entities that hold other deposit

19



relationships
with the banks. Maturities of deposits in excess of $100,000 at December 31, 1999 were (in thousands):

|Maturing in less than three months   |  | $ | 237,461
|------------------------------------ |  | - | -------
|Maturing in three to six months      |  |   | 123,447
|Maturing in six to twelve months     |  |   | 158,475
|Maturing in over twelve months       |  |   | 60,131 
|                                     |  |  
|Total deposits in excess of $100,000 |  | $ | 579,514
|                                     |  |  

At
December 31, 1999, the Company had $71.4 million in deposits obtained through a brokered deposit relationship. In addition to the availability of core deposits,
management has determined it may continue to employ a brokered deposit program in an effort to attract lower cost sources of funds. The Company intends to continue to expand its core deposit base
through acquisitions.

Short-Term Borrowings

Short-term borrowings include securities sold under agreements to repurchase, commercial paper, Federal Home Loan Bank advances and federal funds
purchased. These funds are used to fund the growth in loans and securities and manage the Company's rate sensitivity risk. They are subject to short-term price swings as the Company's
needs change or the overall market rates for short-term investment funds change.

The
Company's subsidiary banks have arrangements with the Federal Home Loan Bank that provide for borrowing up to $529.4 million. As of December 31, 1999,
$383.5 million advances were outstanding. The Company also had a $19.4 million balance outstanding on its $35 million short-term commercial paper arrangement at
December 31, 1999. The $289 million increase in short-term borrowings from December 31, 1998 is due to strong loan demand at the Company's bank subsidiaries and a
reduction in total deposits.

20



The
following table sets forth a summary of the short-term borrowings of the Company during 1999, 1998 and 1997, and as of the end of each such period:

|                                                                           |  | Outstanding
at Year-End |         | Average
Daily
Amount
Outstanding |   | Maximum
Outstanding
at any
Month-End |  | Weighted
Average
Interest
Rate |         | Average
Interest
Rate at
Year-End |     
|-------------------------------------------------------------------------- |  | ----------------------- | ------- | -------------------------------- | - | ------------------------------------ |  | ------------------------------ | ------- | --------------------------------- | ----
|
|1999                                                                       |  |                         |         |                                  |   |                                      |  |                                |         |                                   |     
|Federal funds purchased and securities sold under agreements to repurchase |  | $                       | 252,760 |                                  | $ | 186,267                              |  | $                              | 261,191 |                                   | 4.48
|Commercial paper                                                           |  |                         | 19,412  |                                  |   | 18,403                               |  |                                | 22,546  |                                   | 5.60
|FHLB advances                                                              |  |                         | 383,500 |                                  |   | 289,859                              |  |                                | 383,500 |                                   | 5.29
|Other                                                                      |  |                         | 68,753  |                                  |   | 63,391                               |  |                                | 119,806 |                                   | 5.30
|                                                                           |  |                         |         |                                  |   |                                      |  |                                |         |                                   |     
|Total                                                                      |  | $                       | 724,425 |                                  | $ | 557,920                              |  | $                              | 724,425 |                                   | 5.03
|                                                                           |  |                         |         |                                  |   |                                      |  |                                |         |                                   |     
|1998                                                                       |  |                         |         |                                  |   |                                      |  |                                |         |                                   |     
|Federal funds purchased and securities sold under agreements to repurchase |  | $                       | 143,057 |                                  | $ | 87,094                               |  | $                              | 152,748 |                                   | 4.92
|Commercial paper                                                           |  |                         | 14,310  |                                  |   | 23,998                               |  |                                | 34,570  |                                   | 5.87
|FHLB advances                                                              |  |                         | 210,000 |                                  |   | 200,902                              |  |                                | 304,000 |                                   | 5.95
|Other                                                                      |  |                         | 68,359  |                                  |   | 33,066                               |  |                                | 68,359  |                                   | 5.70
|                                                                           |  |                         |         |                                  |   |                                      |  |                                |         |                                   |     
|Total                                                                      |  | $                       | 435,726 |                                  | $ | 345,060                              |  | $                              | 466,763 |                                   | 5.67
|                                                                           |  |                         |         |                                  |   |                                      |  |                                |         |                                   |     
|1997                                                                       |  |                         |         |                                  |   |                                      |  |                                |         |                                   |     
|Federal funds purchased and securities sold under agreements to repurchase |  | $                       | 44,462  |                                  | $ | 67,871                               |  | $                              | 57,287  |                                   | 5.34
|Commercial paper                                                           |  |                         | 11,167  |                                  |   | 8,812                                |  |                                | 23,346  |                                   | 5.91
|FHLB advances                                                              |  |                         | 216,506 |                                  |   | 98,774                               |  |                                | 267,326 |                                   | 5.06
|Other                                                                      |  |                         | 3,104   |                                  |   | 2,460                                |  |                                | 4,731   |                                   | 5.24
|                                                                           |  |                         |         |                                  |   |                                      |  |                                |         |                                   |     
|Total                                                                      |  | $                       | 275,239 |                                  | $ | 177,917                              |  | $                              | 275,848 |                                   | 5.32
|                                                                           |  |                         |         |                                  |   |                                      |  |                                |         |                                   |     

Long-Term Debt

Long-term debt of the Company was $76 million as of December 31, 1999, and $94 million as of December 31, 1998.

Company-Obligated Mandatorily Redeemable Preferred Securities

Company-obligated mandatorily redeemable preferred securities of the Company was $120 million as of December 31, 1999 and 1998, which consisted
of $60 million of 8.20% Cumulative Capital Securities issued December 10, 1997 through CFB Capital II and $60 million of 8.875% Cumulative Capital Securities issued
February 5, 1997 through CFB Capital I. The proceeds of both offerings were invested by CFB Capital II and CFB Capital I, respectively, in Junior Subordinated Debentures of the Company. The
debentures mature not earlier than February 1, 2002 and not later than December 15, 2027.

Shareholders' Equity

Total shareholders' equity decreased $17.4 million, or 4.1%, to $407.3 million at December 31, 1999, from $424.7 million at
December 31, 1998, as a result of the retention of a majority of earnings, the issuance of common stock and $58.2 million reduction in unrealized gains on
available-for-sale securities,

21



net
of tax. During 1999, 317,000 shares of common stock were issued related to the 1999 acquisition of River Bancorp, resulting in an increase in shareholders' equity of $2.0 million.

In
April 1998, in conjunction with the Company's shareholder approval of a charter amendment that facilitated a two-for-one split of the Company's
common stock in the form of a 100 percent dividend paid to holders of record as of May 1, 1998, the Company increased the number of authorized common shares from 30,000,000 to
80,000,000. The number of authorized preferred shares remained at 2,000,000. The increases are expected to provide the Company greater ability to utilize common and preferred stock in connection with
raising additional capital, expanding its business through acquisitions and other general purposes.

On
February 28, 1997, the Company issued notice of redemption to the holders of its Depositary Shares, which represented ownership of shares of 7% Cumulative Convertible
Preferred Stock (approximately $23 million in stated value). Virtually all of such holders elected to convert to common stock prior to redemption, which resulted in the issuance of
approximately 2,886,000 shares of Common Stock.

ASSET/LIABILITY MANAGEMENT

Liquidity Management

Liquidity management is an effort of management to provide a continuing flow of funds to meet its financial commitments, customer borrowing needs and deposit
withdrawal requirements. The liquidity
position of the Company and its subsidiary banks is monitored by the Asset/Liability Management Committee of the Company. The largest category of assets representing a ready source of liquidity for
the Company is its short-term financial instruments, which include federal funds sold, interest-bearing deposits at other financial institutions, U.S. Treasury securities and other
securities maturing within one year. Liquidity is also provided through the regularly scheduled maturities of assets. The investment portfolio contains a number of high quality issues with varying
maturities and regular principal payments. Maturities in the loan portfolio also provide a steady flow of funds, and strict adherence to the credit policies of the Company helps ensure the
collectibility of these loans. The liquidity position of the Company is also greatly enhanced by its significant base of core deposits.

The
liquidity ratio is one measure of a bank's ability to meet its current obligations and is defined as the percentage of liquid assets to deposits. Liquid assets include cash and
due from banks, unpledged investment securities with maturities of less than one year and federal funds sold. At year-end 1999, 1998 and 1997, the liquidity ratio was 5.39%, 5.93% and
10.17%, respectively. The level of loans maturing within one year greatly added to the Company's liquidity position in 1999. Including loans maturing within one year, the liquidity ratio was 27.15%,
26.94% and 32.42%, respectively, for the same periods.

The
Company has revolving lines of credit with its primary lenders, which provide for borrowing up to $40 million. This line would be utilized to finance acquisitions which may
be completed in 2000. There was an outstanding balance of $6.2 million on this line of credit at December 31, 1999.

The
Company also maintains available lines of federal funds borrowings, as well as seasonal borrowing privileges, at the Federal Reserve Bank of Minneapolis. The Company's subsidiary
banks have the ability to borrow an aggregate of $206.9 million in federal funds from 13 nonaffiliated financial institutions.

Additionally,
most of the Company's subsidiary banks have joined the Federal Home Loan Bank ("FHLB") System. As part of membership, the Company's subsidiary banks purchased a modest
amount of stock of FHLB and obtained advance lines of credit which represent an aggregate of $685 million in additional funding capacity.

22



Interest Rate Sensitivity

Interest rate sensitivity indicates the exposure of a financial institution's earnings to future fluctuations in interest rates. Management of interest rate
sensitivity is accomplished through the composition of loans and investments and by adjusting the maturities on earning assets and interest-bearing liabilities. Rate sensitivity and liquidity are
related since both are affected by maturing assets and liabilities. However, interest rate sensitivity also takes into consideration those assets and liabilities with interest rates that are subject
to change prior to maturity.

The
Company's Asset and Liability Management Committee ("ALCO") attempts to structure the Company's balance sheet to provide for an approximately equal amount of rate sensitive assets
and rate sensitive liabilities. In addition to facilitating liquidity needs, this strategy assists management in maintaining relative stability in net interest income despite unexpected fluctuations
in interest rates. ALCO uses three methods for measuring and managing interest rate risk: Repricing Mismatch Analysis, Balance Sheet Simulation Modeling and Equity Fair Value Modeling.

Repricing Mismatch AnalysisManagement performs a Repricing Mismatch ("Gap Analysis") analysis which represents a point in
time net position of assets, liabilities and off-balance sheet instruments
subject to repricing in specified time periods. Guidelines established by ALCO, and approved by the Company's Board of Directors, limit the impact on net interest income to five percent given a 100
basis point change in interest rates over one year. However, management believes Gap Analysis alone does not accurately measure the magnitude of changes in net interest income since changes in
interest rate do not impact all categories of assets, liabilities and off-balance sheet instruments equally or simultaneously. A summary of the Gap Analysis is presented on page 22.

Balance Sheet Simulation ModelingBalance Sheet Simulation Modeling allows management to analyze the impact of
short-term (less than 12 months) interest rate fluctuations using projected balance sheet information. The balance sheet changes are based on forecasted repayments of loans and
securities, growth in loans and deposits, and historical pricing spreads.

Management
uses the model to simulate the impact of immediate and longer-term shifts in the yield curve. The results of these models are reviewed by ALCO and used to
develop the Company's strategies. Guidelines established by ALCO limit the impact on net interest income to five percent given a 100 basis point change in interest rates. As of December 31,
1999, the impact of such a change in interest rates would be approximately 2.46 percent of net interest income.

Equity Fair Value ModelingBecause Balance Sheet Simulation Modeling is dependent on accurate forecasts, its usefulness is
limited to periods of one year or less. As a result, the Company uses the Equity Fair Value Modeling to measure long-term interest rate exposure. The method estimates the impact of
interest rate changes on the estimated discounted future cash flows of the Company's current assets, liabilities and off-balance sheet instruments. Guidelines established by ALCO limit the
change in fair value to 15 percent given a 100 basis point change in interest rates. As of December 31, 1999, the impact of such a change in interest rates would be approximately
8.75 percent of equity fair value.

Based
on each of these methods of measuring interest rate risk, management believes the Company is slightly asset sensitive as of December 31, 1999.

The
Company does not engage in the speculative use of derivative financial instruments.

23



The
following table sets forth the Company's interest rate sensitivity analysis by contractual repricing or maturity at December 31, 1999:

|                                               |  | Repricing or Maturing in
|---------------------------------------------- |  | ------------------------
|
|
|Rate sensitive assets:                         |  |                         
|Loans                                          |  | $                       
|Held to maturity securities                    |  |                         
|Available-for-sale securities                  |  |                         
|Other interest-bearing assets                  |  |                         
|                                               |  |                         
|Total rate sensitive assets                    |  | $                       
|                                               |  |                         
|Rate sensitive liabilities:                    |  |                         
|Savings deposits and interest-bearing checking |  | $                       
|Time deposits                                  |  |                         
|Short-term borrowings                          |  |                         
|Long-term borrowings                           |  |                         
|                                               |  |                         
|Total rate sensitive liabilities               |  | $                       
|                                               |  |                         
|Rate sensitive gap                             |  | $                       
|Cumulative rate sensitive gap                  |  | $                       

The
following sets forth the Company's interest rate sensitivity analysis at December 31, 1999, with respect to the individual categories of loans and provides separate
analysis with respect to fixed interest rate loans and floating interest rate loans:

|                             |  | Repricing or Maturing in
|---------------------------- |  | ------------------------
|
|
|Loan category:               |  |                         
|Real estate                  |  | $                       
|Real estate construction     |  |                         
|Agriculture                  |  |                         
|Commercial                   |  |                         
|Consumer and other           |  |                         
|                             |  |                         
|Total loans                  |  | $                       
|                             |  |                         
|Fixed interest rate loans    |  | $                       
|Floating interest rate loans |  |                         
|                             |  |                         
|Total loans                  |  | $                       
|                             |  |                         

Capital Management

Risk-based guidelines established by regulatory agencies require the Company to maintain minimum amounts and ratios of total and Tier I capital to
risk-weighted assets, and of Tier I capital to average assets.

24



As
of December 31, 1999, the Company is considered well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the
Company must maintain minimum total risk-based, Tier I risk-based, Tier I leverage ratios as set forth in the table.

|                                 |  | Regulatory Capital Requirements
|-------------------------------- |  | -------------------------------
|
|
|Minimum                          |  | 4.00                           
|Well Capitalized                 |  | 6.00                           
|Community First Bankshares, Inc. |  |                                
|December 31, 1999                |  | 10.01                          
|December 31, 1998                |  | 9.44                           

Due
to the Company's level of Tier 1 capital and substantial level of earning assets invested in low risk government agency and mortgage-backed securities, the Company's
risk-based capital ratios significantly exceed the regulatory minimums. The Company conducts an ongoing assessment of its capital needs in order to maintain an adequate level of capital to
support business growth, to ensure depositor protection and to facilitate corporate expansion. Management continues to explore steps to increase its capital levels to permit it to make future
acquisitions. Portions of the subordinated debt financing referred to under "Borrowings," above, are treated as Tier 2 capital.

This
Annual Report contains forward-looking statements under the Private Securities Litigation Reform Act of 1995 that are subject to certain risks and uncertainties that could cause
actual results to differ materially from historical earnings and those presently anticipated or projected. The Company wishes to caution readers not to place undue reliance on any such forward-looking
statements, which speak only as of the date made. Factors that could cause actual results to differ from the results discussed in the forward-looking statements include, but are not limited to: risks
related to the Company's acquisition strategy, including risks of adversely changing results of operations and possible factors affecting the Company's ability to consummate further acquisitions;
risks of loans and investments, including dependence on local economic conditions; competition for the Company's customers from other providers of financial services; possible adverse effects of
changes in interest rates; and other risks detailed in the Company's filings with the Securities and Exchange Commission, which risks are difficult to predict and many of which are beyond the control
of the Company.

25



## 

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION Community First Bankshares, Inc.

|                                                                                      |  | Years ended December 31 |          
|------------------------------------------------------------------------------------- |  | ----------------------- | ---------
|
|
|
|Assets                                                                                |  |                         |          
|Cash and due from banks                                                               |  | $                       | 247,051  
|Federal funds sold and securities purchased under agreements to resell                |  |                         | 4,775    
|Interest-bearing deposits                                                             |  |                         | 4,648    
|Available-for-sale securities                                                         |  |                         | 1,937,517
|Held-to-maturity securities (Fair Value: 1999$74,248; 1998$93,538)                  |  |                         | 74,248   
|Loans                                                                                 |  |                         | 3,690,353
|Less: Allowance for loan losses                                                       |  |                         | (48,878  
|                                                                                      |  |                         |          
|Net loans                                                                             |  |                         | 3,641,475
|Bank premises and equipment, net                                                      |  |                         | 125,457  
|Accrued interest receivable                                                           |  |                         | 51,030   
|Intangibles                                                                           |  |                         | 126,378  
|Other assets                                                                          |  |                         | 89,656   
|                                                                                      |  |                         |          
|Total assets                                                                          |  | $                       | 6,302,235
|                                                                                      |  |                         |          
|Liabilities and shareholders' equity                                                  |  |                         |          
|Deposits:                                                                             |  |                         |          
|Noninterest-bearing                                                                   |  | $                       | 616,861  
|Interest-bearing:                                                                     |  |                         |          
|Savings and NOW accounts                                                              |  |                         | 2,276,705
|Time accounts over $100,000                                                           |  |                         | 579,514  
|Other time accounts                                                                   |  |                         | 1,436,783
|                                                                                      |  |                         |          
|Total deposits                                                                        |  |                         | 4,909,863
|Federal funds purchased and securities sold under agreements to repurchase            |  |                         | 252,760  
|Other short-term borrowings                                                           |  |                         | 471,665  
|Long-term debt                                                                        |  |                         | 75,622   
|Accrued interest payable                                                              |  |                         | 31,949   
|Other liabilities                                                                     |  |                         | 33,107   
|                                                                                      |  |                         |          
|Total liabilities                                                                     |  |                         | 5,774,966
|Company-obligated mandatorily redeemable preferred securities of CFB Capital I and II |  |                         | 120,000  
|Shareholders' equity:                                                                 |  |                         |          
|Common stock, par value $.01 per share:                                               |  |                         |          
|Authorized Shares80,000,000                                                          |  |                         |          
|Issued Shares51,021,896                                                              |  |                         | 510      
|Capital surplus                                                                       |  |                         | 192,071  
|Retained earnings                                                                     |  |                         | 276,502  
|Unrealized (loss) gain on available-for-sale securities, net of tax                   |  |                         | (44,896  
|Less cost of common stock in treasury1999-885,964 shares; 1998-564,588 shares        |  |                         | (16,918  
|                                                                                      |  |                         |          
|Total shareholders' equity                                                            |  |                         | 407,269  
|                                                                                      |  |                         |          
|Total liabilities and shareholders' equity                                            |  | $                       | 6,302,235
|                                                                                      |  |                         |          

See accompanying notes.

26



CONSOLIDATED STATEMENTS OF INCOME

Community First Bankshares, Inc.

|                                                                                    |  | Years ended December 31 |        
|----------------------------------------------------------------------------------- |  | ----------------------- | -------
|
|
|
|Interest income:                                                                    |  |                         |        
|Loans                                                                               |  | $                       | 332,974
|Investment securities                                                               |  |                         | 130,955
|Interest-bearing deposits                                                           |  |                         | 463    
|Federal funds sold and resale agreements                                            |  |                         | 814    
|Total interest income                                                               |  |                         | 465,206
|Interest expense:                                                                   |  |                         |        
|Deposits                                                                            |  |                         | 151,138
|Short-term and other borrowings                                                     |  |                         | 28,052 
|Long-term debt                                                                      |  |                         | 6,628  
|                                                                                    |  |                         |        
|Total interest expense                                                              |  |                         | 185,818
|Net interest income                                                                 |  |                         | 279,388
|Provision for loan losses                                                           |  |                         | 20,184 
|                                                                                    |  |                         |        
|Net interest income after provision for loan losses                                 |  |                         | 259,204
|Noninterest income:                                                                 |  |                         |        
|Service charges on deposit accounts                                                 |  |                         | 37,013 
|Insurance commissions                                                               |  |                         | 8,791  
|Fees from fiduciary activities                                                      |  |                         | 5,148  
|Net gains on sales of securities                                                    |  |                         | 2,175  
|Other                                                                               |  |                         | 19,382 
|                                                                                    |  |                         |        
|Total noninterest income                                                            |  |                         | 72,509 
|Noninterest expense:                                                                |  |                         |        
|Salaries and employee benefits                                                      |  |                         | 106,542
|Net occupancy                                                                       |  |                         | 32,726 
|FDIC insurance                                                                      |  |                         | 625    
|Legal and accounting                                                                |  |                         | 3,651  
|Other professional services                                                         |  |                         | 5,168  
|Acquisition, integration and conforming                                             |  |                         | 3,053  
|Data processing                                                                     |  |                         | 4,116  
|Company-obligated mandatorily redeemable preferred securities of CFB Capital I & II |  |                         | 10,245 
|Amortization of intangibles                                                         |  |                         | 10,500 
|Other                                                                               |  |                         | 41,601 
|Total noninterest expense                                                           |  |                         | 218,227
|Income from continuing operations before income taxes and extraordinary item        |  |                         | 113,486
|Provision for income taxes                                                          |  |                         | 38,573 
|                                                                                    |  |                         |        
|Income from continuing operations before extraordinary item                         |  |                         | 74,913 
|Discontinued operations:                                                            |  |                         |        
|Income from operations of discontinued operations (less applicable income taxes)    |  |                         |       

27



|Loss on disposal of discontinued operations, including provision for operating losses during phase-out period (less applicable income taxes) |  |   |           |  |   | (1,676     | ) |   |           |  
|-------------------------------------------------------------------------------------------------------------------------------------------- |  | - | ---------- |  | - | ---------- | - | - | ---------- | -
|                                                                                                                                             |  |   |            |  |   |            |  
|Income before extraordinary item                                                                                                             |  |   | 74,913     |  |   | 45,463     |   |   | 61,130     |  
|Extraordinary item:                                                                                                                          |  |   |            |  |   |            |   |   |            |  
|Loss on early extinguishment of debt, net of taxes                                                                                           |  |   |           |  |   |           |   |   | (265       | )
|Net income applicable to common equity                                                                                                       |  |   | 74,913     |  |   | 45,463     |   |   | 60,865     |  
|                                                                                                                                             |  |   |            |  |   |            |  
|Earnings per common and common equivalent share:                                                                                             |  |   |            |  |   |            |   |   |            |  
|Basic income per share from continuing operations before extraordinary item                                                                  |  | $ | 1.50       |  | $ | 0.98       |   | $ | 1.30       |  
|Discontinued operations                                                                                                                      |  |   | 0.00       |  |   | (0.08      | ) |   | 0.02       |  
|Extraordinary item                                                                                                                           |  |   | 0.00       |  |   | 0.00       |   |   | (0.01      | )
|Basic net income                                                                                                                             |  | $ | 1.50       |  | $ | 0.90       |   | $ | 1.31       |  
|Diluted income per share from continuing operations before extraordinary item                                                                |  | $ | 1.48       |  | $ | 0.97       |   | $ | 1.26       |  
|Discontinued operations                                                                                                                      |  |   | 0.00       |  |   | (0.08      | ) |   | 0.02       |  
|Extraordinary item                                                                                                                           |  |   | 0.00       |  |   | 0.00       |   |   | (0.01      | )
|Diluted net income                                                                                                                           |  | $ | 1.48       |  | $ | 0.89       |   | $ | 1.27       |  
|Average common and common equivalent shares outstanding:                                                                                     |  |   |            |  |   |            |   |   |            |  
|Basic                                                                                                                                        |  |   | 50,061,972 |  |   | 50,272,551 |   |   | 46,416,814 |  
|Diluted                                                                                                                                      |  |   | 50,670,559 |  |   | 51,114,703 |   |   | 47,831,402 |  

See accompanying notes.

28



CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Community First Bankshares, Inc.

|                                                               |  | Years ended December 31 |        
|-------------------------------------------------------------- |  | ----------------------- | -------
|
|
|Net income                                                     |  | $                       | 74,913 
|Other comprehensive income, net of tax:                        |  |                         |        
|Unrealized gains on securities:                                |  |                         |        
|Unrealized holding gains arising during period                 |  |                         | (58,184
|Less: Reclassified adjustment for gains included in net income |  |                         | (1,305 
|                                                               |  |                         |        
|Other comprehensive income                                     |  |                         | (59,489
|                                                               |  |                         |        
|Comprehensive income                                           |  | $                       | 15,424 
|                                                               |  |                         |        

See accompanying notes.

29



CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

Community First Bankshares, Inc.

|                                                                                           |  | Years ended December 31, 1999, 1998, 1997 |  
|------------------------------------------------------------------------------------------ |  | ----------------------------------------- | -
|
|
|
|
|Balance at December 31, 1996                                                               |  | 229,875                                   |  
|Net income                                                                                 |  |                                          |  
|Common stock dividends ($0.35 per share)                                                   |  |                                          |  
|Common stock dividends                                                                     |  |                                          |  
|Cash in lieu of stock dividend                                                             |  |                                          |  
|Issuance of common stock                                                                   |  |                                          |  
|Retirement of common stock                                                                 |  |                                          |  
|Purchases of common stock for treasury, at cost                                            |  |                                          |  
|Sales of common stock to employee benefit plans                                            |  |                                          |  
|Exercise of options, net of stock tendered in payment                                      |  |                                          |  
|Conversion of convertible preferred                                                        |  | (229,875                                  | )
|Change in unrealized loss on available-for-sale securities, net of income taxes of $2,216  |  |                                          |  
|                                                                                           |  |                                           |  
|Balance at December 31, 1997                                                               |  |                                          |  
|Net income                                                                                 |  |                                          |  
|Common stock dividends ($0.44 per share)                                                   |  |                                          |  
|Common stock dividends                                                                     |  |                                          |  
|Cash in lieu of stock dividend                                                             |  |                                          |  
|Issuance of common stock                                                                   |  |                                          |  
|Purchases of common stock for treasury, at cost                                            |  |                                          |  
|Exercise of options, net of stock tendered in payment                                      |  |                                          |  
|Change in unrealized loss on available-for-sale securities, net of income taxes of $4,788  |  |                                          |  
|                                                                                           |  |                                           |  
|Balance at December 31, 1998                                                               |  |                                          |  
|Net income                                                                                 |  |                                          |  
|Common stock dividends ($0.56 per share)                                                   |  |                                          |  
|Common stock dividends                                                                     |  |                                          |  
|Issuance of common stock                                                                   |  |                                          |  
|Retirement of common stock                                                                 |  |                                          |  
|Purchases of common stock for treasury, at cost                                            |  |                                          |  
|Exercise of options, net of stock tendered in payment                                      |  |                                          |  
|Change in unrealized loss on available-for-sale securities, net of income taxes of $35,508 |  |                                          |  
|                                                                                           |  |                                           |  
|Balance at December 31, 1999                                                               |  |                                          |  
|                                                                                           |  |                                           |  

See accompanying notes.

30



CONSOLIDATED STATEMENTS OF CASH FLOWS

Community First Bankshares, Inc.

|                                                                                                                    |  | Years ended December 31 |         
|------------------------------------------------------------------------------------------------------------------- |  | ----------------------- | --------
|
|
|Cash flows from operating activities                                                                                |  |                         |         
|Net income                                                                                                          |  | $                       | 74,913  
|Adjustments to reconcile net income to net cash provided by operating activities:                                   |  |                         |         
|Provision for loan losses                                                                                           |  |                         | 20,184  
|Depreciation                                                                                                        |  |                         | 15,186  
|Amortization of intangibles                                                                                         |  |                         | 10,500  
|Net amortization of premiums and discounts on securities                                                            |  |                         | 1,067   
|Deferred income tax benefit                                                                                         |  |                         | (1,088  
|Decrease (increase) in interest receivable                                                                          |  |                         | 2,230   
|Increase in interest payable                                                                                        |  |                         | 4,876   
|Other, net                                                                                                          |  |                         | (5,501  
|                                                                                                                    |  |                         |         
|Net cash provided by operating activities                                                                           |  |                         | 122,367 
|Cash flows from investing activities                                                                                |  |                         |         
|Acquisitions, net of cash paid                                                                                      |  |                         | (1,956  
|Net decrease (increase) in interest-bearing deposits                                                                |  |                         | 6,815   
|Purchases of available-for-sale securities                                                                          |  |                         | (649,177
|Maturities of available-for-sale securities                                                                         |  |                         | 497,314 
|Sales of securities, net of gains                                                                                   |  |                         | 151,635 
|Purchases of held-to-maturity securities                                                                            |  |                         | (4,710  
|Maturities of held-to-maturity securities                                                                           |  |                         | 291     
|Net increase in loans                                                                                               |  |                         | (147,967
|Net increase in bank premises and equipment                                                                         |  |                         | (11,205 
|Net decrease in minority interest                                                                                   |  |                         |        
|                                                                                                                    |  |                         |         
|Net cash used in investing activities                                                                               |  |                         | (158,960
|Cash flows from financing activities                                                                                |  |                         |         
|Net (decrease) increase in demand deposits, NOW accounts and savings accounts                                       |  |                         | (83,965 
|Net (decrease) increase in time accounts                                                                            |  |                         | (137,804
|Net increase in short-term and other borrowings                                                                     |  |                         | 287,549 
|Net decrease (increase) in long-term debt                                                                           |  |                         | (17,902 
|Net proceeds from issuance of Company-obligated mandatorily redeemable preferred securities of CFB Capital I and II |  |                         |        
|Net proceeds from issuance of common stock                                                                          |  |                         | 2,234   
|Conversion of preferred stock to common stock                                                                       |  |                         |        
|Purchase of common stock held in treasury                                                                           |  |                         | (11,844 
|Sale of common stock held in treasury                                                                               |  |                         | 2,569   
|Common stock dividends paid                                                                                         |  |                         | (27,075 
|                                                                                                                    |  |                         |         
|Net cash provided by financing activities                                                                           |  |                         | 13,762  
|                                                                                                                    |  |                         |         
|Net (decrease) increase in cash and cash equivalents                                                                |  |                         | (22,831 
|Cash and cash equivalents at beginning of year                                                                      |  |                         | 274,657 
|                                                                                                                    |  |                         |         
|Cash and cash equivalents at end of year                                                                            |  | $                       | 251,826 
|                                                                                                                    |  |                         |         

See accompanying notes.

31



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Community First Bankshares, Inc.

December 31, 1999, 1998, 1997

1. SIGNIFICANT ACCOUNTING POLICIES

Community First Bankshares, Inc. (the "Company") is a multi-bank holding company which, at the end of 1999, served 158 communities in
Arizona, California, Colorado, Iowa, Minnesota, Nebraska, New Mexico, North Dakota, South Dakota, Utah, Wisconsin and Wyoming. The Company's community banks provide a full range of banking services,
primarily in small and medium-sized communities and the surrounding communities. In addition to its primary emphasis on commercial and consumer banking services, the Company offers trust, insurance
and nondeposit investment products and services.

Basis of Presentation

The consolidated financial statements include the accounts of Community First Bankshares, Inc., its wholly-owned data processing, credit origination and
insurance agency subsidiaries and its thirteen wholly-owned subsidiary banks. All significant intercompany accounts and transactions have been eliminated in consolidation. Certain amounts in prior
periods have been reclassified to conform to the current presentation.

As
discussed in Note 2, the Company acquired Valley National Corporation ("Valley National"), on October 7, 1999. This acquisition was accounted for using the pooling of
interests method. In addition, the Company acquired Community Bancorp, Inc. ("CBI") on April 3, 1998; Pioneer Bank of Longmont ("Longmont") on April 30, 1998; FNB, Inc.
("FNB") on May 7, 1998; Western Bancshares of Las Cruces, Inc. ("Western") on July 1, 1998; and Guardian Bancorp ("Guardian") on August 7, 1998. These acquisitions were
accounted for using the pooling of interests method. The 1999 Valley National acquisition was material to the Company's financial condition and operating results. While none of the 1998 transactions,
individually, were material to the Company's financial condition or operating results, the aggregation of these business combinations does have a material effect on the Company's financial condition
and operating results. Accordingly, the consolidated financial information has been restated to reflect the results of operations of the seven companies on a combined basis for all periods presented.

On
April 28, 1998, the shareholders approved a charter amendment that facilitated a two-for-one split of the Company's common stock, in the form of a
100 percent dividend payable to shareholders of record on May 1, 1998 and distributed on May 15, 1998. Accordingly, the historical consolidated information has been restated to
reflect the impact of the two-for-one split on the common share, weighted average common share and basic and diluted earnings per share data.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

Held-to-Maturity and Available-for-Sale Securities

Management determines the classification of debt securities at the time of purchase and reevaluates such designation as of each balance sheet date. Debt
securities are classified as held-to-maturity when the

32



Company
has the positive intent and ability to hold the securities to maturity. Held-to-maturity securities are stated at amortized cost. The cost of securities sold is
determined on a specific identification basis.

Debt
securities not classified as held-to-maturity are classified as available-for-sale. Available-for-sale
securities are stated at fair value, with the unrealized gains and losses, net of tax, reported as a component of retained earnings in shareholders' equity.

The
amortized cost of debt securities classified as held-to-maturity or available-for-sale is adjusted for amortization of premiums and
accretion of discounts to maturity or, in the case of mortgage-backed securities, over the estimated life of the security. Such amortization and accretion is included as an adjustment to interest
income from investments. Realized gains and losses and declines in value judged to be other than temporary are included in net securities gains (losses). The cost of securities sold is based on the
specific identification method.

Loans

Loans are stated at their principal balance outstanding, less the allowance for loan losses. Interest on loans is recognized on an accrual basis. Loans are
placed on nonaccrual when they become past due over 90 days, or earlier, if the collection of interest or principal is considered unlikely. Thereafter, no interest income is recognized unless
received in cash and until such time as the borrower demonstrates the ability to pay interest and principal.

Loan Fee Income

The Company recognizes loan fees and certain direct origination costs as a yield adjustment over the estimated life of the loan, utilizing a method that
results in a constant rate of return.

Allowance for Loan Losses

The allowance for loan losses is maintained through charges to expense at an amount that will provide for estimated loan losses. The current level of the
allowance for loan losses is a result of management's assessment of the risks within the portfolio based on the information revealed in credit reporting processes. This assessment of risk takes into
account the composition of the loan portfolio, previous loan experience, current economic conditions and other factors that, in management's judgment, deserve recognition. The allowance is allocated
to individual loan categories based on the relative risk characteristics of the loan portfolios. Commercial and agricultural allocations are based on a quarterly review of the individual loans
outstanding, including outstanding commitments to lend. Real estate and consumer allocations are based on a quarterly analysis of the performance of the respective portfolios, including historical and
expected delinquency and charge-off statistics.

Ultimate
losses may vary from current estimates, and as adjustments become necessary, the allowance for loan losses is adjusted in the periods in which such losses become known or
fail to occur. Actual loan charge-offs and subsequent recoveries are deducted from and added to the allowance, respectively.

33



Bank Premises and Equipment

Bank premises and equipment are stated at cost less accumulated depreciation. Depreciation for financial reporting purposes is provided on the
straight-line method over the estimated lives of the assets and includes amortization of assets recorded under capital leases. Estimated lives range from three to twenty and
twenty-five to forty years for equipment and premises, respectively. Accelerated depreciation methods are used for income tax reporting purposes.

Intangible Assets

Goodwill, the excess cost over net assets acquired, of banking subsidiaries is amortized over a period of fifteen years. At December 31, 1999, goodwill
totaled $75,439,000, net of accumulated amortization of $23,725,000. Other intangible assets, principally deposit base intangibles, unexpired premium lists and noncompetition agreements, totaled
$50,939,000, net of accumulated amortization of $9,118,000, and are amortized over their estimated useful lives ranging from three to twenty-five years. The Company assesses the
recoverability of goodwill and other intangibles on an annual basis to determine whether any impairment exists. This ongoing assessment includes understanding and evaluating qualitative factors that
would indicate the potential for impairment. If the Company believes a potential impairment exists, the Company estimates the relative market value of the corresponding business activity to determine
whether a material permanent impairment exists.

Income Taxes

The Company provides for income taxes based on income reported for financial statement purposes, rather than amounts currently payable under statutory tax
laws. Deferred taxes are recorded to reflect the tax consequences on future years' differences between the tax bases of assets and liabilities and the financial reporting of amounts at each
year-end.

Earnings Per Share

Basic earnings per common share is calculated by dividing net income applicable to common equity by the weighted-average number of shares of common stock
outstanding.

Diluted
earnings per common share is based on net income before considering the preferred stock dividends declared. The weighted-average number of shares of common stock outstanding
is increased by the assumed conversion of convertible preferred stock outstanding and the number of shares of common stock that would be issued assuming the exercise of stock options and warrants
during each period. Such adjustments to the weighted-average number of shares of common stock outstanding are made only when such adjustments dilute earnings per share.

Cash and Cash Equivalents

Cash and cash equivalents is defined as cash and due from banks, federal funds sold and securities purchased under agreements to resell.

34



Stock-Based Compensation

The Company grants stock options for a fixed number of shares to employees with an exercise price equal to the fair value of the shares at the date of grant.
The Company accounts for stock option grants in accordance with APB Opinion No. 25, "Accounting for Stock Issued to Employees," and, accordingly, recognizes no compensation expense for the
stock option grants. See Footnote 14.

2. BUSINESS COMBINATIONS AND DIVESTITURES

On December 21, 1999, the Company issued approximately 317,000 shares of common stock to acquire River Bancorp, Incorporated ("River Bancorp"), the
holding company for Northland Security Bank, Ramsey, Minnesota. At acquisition, River Bancorp had approximately $35 million in assets and $31 million in deposits. The Company used the
pooling of interests method to account for the transaction. This merger was not material to the Company's consolidated financial information or operating results. Accordingly, the Company's
consolidated financial information has not been restated to reflect
this merger. The operating results are included in the Company's consolidated statements from the date of the merger.

On
October 7, 1999, the Company issued approximately 3,022,000 shares of common stock to acquire Valley National Corporation ("Valley National"), the holding company for Valle
de Oro Bank, El Cajon, California. At acquisition, Valley National had approximately $252 million in assets and $237 million in deposits. The Company used the pooling of interests method
to account for the transaction. The Company's consolidated financial information has been restated to reflect this merger. The operating results are included in the Company's consolidated statements
for all periods presented.

The
operating results of the Company and Valley National for the years ended December 31, 1998 and 1997 prior to restatement were:

|                                       |  | The Company |         | Valley National |   | Combined
|-------------------------------------- |  | ----------- | ------- | --------------- | - | --------
|
|Year ended December 31, 1998:          |  |             |         |                 |   |         
|Net interest income                    |  | $           | 260,760 |                 | $ | 11,723  
|Net income                             |  |             | 43,063  |                 |   | 2,400   
|Net income applicable to common equity |  |             | 43,063  |                 |   | 2,400   
|Earnings per share:                    |  |             |         |                 |   |         
|Basic                                  |  | $           | 0.91    |                 | $ | 0.80    
|Diluted                                |  | $           | 0.90    |                 | $ | 0.74    
|Year ended December 31, 1997:          |  |             |         |                 |   |         
|Net interest income                    |  | $           | 191,979 |                 | $ | 10,322  
|Net income                             |  |             | 59,013  |                 |   | 1,852   
|Net income applicable to common equity |  |             | 59,013  |                 |   | 1,852   
|Earnings Per Share:                    |  |             |         |                 |   |         
|Basic                                  |  | $           | 1.36    |                 | $ | 0.63    
|Diluted                                |  | $           | 1.32    |                 | $ | 0.58    

35



On
August 7, 1998, the Company issued approximately 1,526,000 shares of common stock to acquire Guardian Bancorp ("Guardian"), the holding company for Guardian State Bank, Salt
Lake City, Utah, with offices in Salt Lake City and Sandy, Utah. At acquisition, Guardian had approximately $99 million in assets and $89 million in deposits. The Company used the
pooling of interests method to account for the transaction. The Company's consolidated financial information has been restated to reflect this merger. The operating results are included in the
Company's consolidated statements for all periods presented.

On
July 1, 1998, the Company issued approximately 1,932,000 shares of common stock to acquire Western Bancshares of Las Cruces, Inc. ("Western"), the holding company for
Western Bank, Las Cruces, New Mexico, with offices in Anthony, Hatch and Las Cruces, New Mexico. At acquisition, Western had approximately $159 million in assets and $136 million in
deposits. The Company used the pooling of interests method to account for the transaction. The Company's consolidated financial information has been restated to reflect this merger. The operating
results are included in the Company's consolidated statements for all periods presented.

On
May 7, 1998, the Company issued approximately 1,135,000 shares of common stock to acquire FNB, Inc. ("FNB") a bank holding company with banks in Greeley and Fort
Collins, Colorado. At acquisition, FNB had approximately $120 million in assets and $109 million in deposits. The Company used the pooling of interests method to account for the
transaction. The Company's consolidated financial information has been restated to reflect this merger. The operating results are included in the Company's consolidated statements for all periods
presented.

On
April 30, 1998, the Company issued approximately 1,432,000 shares of common stock to acquire Pioneer Bank of Longmont ("Longmont"), Longmont, Colorado, with offices in
Berthoud, Longmont, Lyons and Niwot, Colorado. At acquisition, Longmont had approximately $138 million in assets and $128 million in deposits. The Company used the pooling of interests
method to account for the transaction. The Company's consolidated financial information has been restated to reflect this merger. The operating results are included in the Company's consolidated
statements for all periods presented.

On
April 3, 1998, the Company issued approximately 853,000 shares of common stock to acquire Community Bancorp, Inc. ("CBI"), the parent company of Community First
National Bank, Thornton, Colorado, with two offices in Thornton, Colorado. At acquisition, CBI had approximately $78 million in assets and $72 million in deposits. The Company used the
pooling of interests method to account for the transaction. The Company's consolidated financial information has been restated to reflect this
merger. The operating results are included in the Company's consolidated statements for all periods presented.

In
July 1998, the Company sold the operating assets of its two sub-prime lending subsidiaries. Seven loan production offices of Equity Lending, Inc. ("Equity
Lending") were sold to FIRSTPLUS Financial Group, Inc., in a cash transaction on July 27, 1998. Servicing rights to the portfolio of automobile installment contracts originated by
Mountain Parks Financial Services, Inc. ("MPFS") were acquired by Cygnet Financial Services, Inc. on July 31, 1998. At December 31, 1998, the Company retained
$25 million in loans originated by Equity Lending and servicing rights on an additional $100 million in Equity Lending loans sold to other parties. At December 31, 1998, the
Company also retained $40 million in auto installment contracts originated by MPFS. In addition to a fourth quarter 1998 charge of $10 million in anticipation of liquidating these
companies, the Company recorded a $3.9 million loss on these companies during the first and second quarters of 1998, when the companies were classified as discontinued

36



operations.
Losses on the discontinued operations included a $2.2 million operating loss and $1.7 million expected loss on disposal. As of December 31, 1999 the Company had
approximately $10 million in sub-prime mortgages and $237,000 in sub-prime automobile contracts remaining. Equity Lending, which originated residential
non-conforming mortgages, and MPFS, which purchased sub-prime auto installment contracts, were acquired in December 1996, as a result of the Company's merger with
Mountain Parks Financial Corporation. The two companies were classified as discontinued operations on the Company's 1997 financial statements.

On
June 12, 1998, the Company, through its Colorado subsidiary, completed the sale of its office in Ault, Colorado. The Ault office was acquired on January 23, 1998 as
part of the Company's purchase and assumption of 37 offices of Banc One Corporation located in Arizona, Colorado and Utah. The transaction included the disposition of approximately $9 million
in deposits.

On
January 23, 1998, the Company completed the purchase and assumption of approximately $730 million in assets and liabilities of 37 offices of Banc One Corporation
located in Arizona, Colorado and Utah. The 25 Arizona and four Utah offices were merged into the Company's Arizona affiliate. The eight Colorado offices were merged into one of the Company's Colorado
affiliates. The transaction was accounted for as a purchase of certain assets and assumption of certain liabilities and resulted in the recognition of a deposit based intangible of approximately
$44 million.

The
operating results of all of the companies acquired in purchase transactions subsequent to the dates of acquisition are included in the Company's consolidated financial statements
for the years ended December 31, 1999, 1998 and 1997.

3. ACCOUNTING CHANGES

SFAS No. 133Accounting for Derivative Instruments and Hedging ActivitiesIn June 1998, the Financial Accounting
Standards Board issued Statement No. 133, Accounting for Derivative Instruments and Hedging Activities, which was amended by SFAS No. 137. The statement, as amended, is required to be
adopted in years beginning after June 15, 2000. Because of the Company's minimal use of derivatives, management does not anticipate that the adoption of the new Statement will have a
significant effect on earnings or the financial position of the Company.

37



4. SECURITIES

The following is a summary of available-for-sale securities and held-to-maturity securities at
December 31, 1999 (in thousands):

|                                    |  | Available-for-Sale Securities
|----------------------------------- |  | -----------------------------
|
|United States Treasury              |  | $                            
|United States Government agencies   |  |                              
|Mortgage-backed securities          |  |                              
|Collateralized mortgage obligations |  |                              
|State and political securities      |  |                              
|Other securities                    |  |                              
|                                    |  |                              
|Total                               |  | $                            
|                                    |  |                              

|                 |  | Held-to-Maturity Securities
|---------------- |  | ---------------------------
|
|Other securities |  | $                          
|                 |  |                            
|Total            |  | $                          
|                 |  |                            

The
following is a summary of available-for-sale securities and held-to-maturity securities at December 31, 1998 (in thousands):

|                                    |  | Available-for-Sale Securities
|----------------------------------- |  | -----------------------------
|
|United States Treasury              |  | $                            
|United States Government agencies   |  |                              
|Mortgage-backed securities          |  |                              
|Collateralized mortgage obligations |  |                              
|State and political securities      |  |                              
|Other securities                    |  |                              
|                                    |  |                              
|Total                               |  | $                            
|                                    |  |                              

|                                  |  | Held-to-Maturity Securities
|--------------------------------- |  | ---------------------------
|
|United States Government agencies |  | $                          
|State and political securities    |  |                            
|Other securities                  |  |                            
|                                  |  |                            
|Total                             |  | $                          
|                                  |  |                            

38



Proceeds
from the sale of available-for-sale securities during the years ended December 31, 1999, 1998 and 1997, were $153,810,000, $146,926,000 and
$76,275,000, respectively. Gross gains of $2,175,000, $1,870,000 and $550,000 and gross losses of $0, $69,000 and $86,000 were realized on those sales during 1999, 1998 and 1997, respectively. The tax
effect on the net gains during 1999, 1998 and 1997 was approximately $761,000, $630,000 and $162,000, respectively. There were no sales of held-to-maturity securities during
1999, 1998 or 1997.

The
amortized cost and estimated fair value of debt securities at December 31, 1999, by contractual maturity, are shown below. Expected maturities may differ from contractual
maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

|                                       |  | Available-for-Sale
|-------------------------------------- |  | ------------------
|
|
|Due in one year or less                |  | $                 
|Due after one year through five years  |  |                   
|Due after five years through ten years |  |                   
|Due after ten years                    |  |                   
|                                       |  |                   
|                                       |  |                   
|Mortgage-backed securities             |  |                   
|Collateralized mortgage obligations    |  |                   
|                                       |  |                   
|Total                                  |  | $                 
|                                       |  |                   

|                           |  | Held-to-Maturity
|-------------------------- |  | ----------------
|
|
|Due after ten years        |  | $               
|                           |  |                 
|Mortgage-backed securities |  |                 
|                           |  |                 
|Total                      |  | $               
|                           |  |                 

At
December 31, 1999, available-for-sale securities included $386,000 in commitments to purchase specific investment securities at a future date.

Available-for-sale
and held-to-maturity securities carried at $1,274,663,000 and $998,209,000 at December 31, 1999 and 1998,
respectively, were pledged to secure borrowings, public and trust deposits and for other purposes required by law. Securities sold under agreement to repurchase were collateralized by
available-for-sale and held-to-maturity securities with an aggregate carrying value of $155,490,000 and $134,557,000 at December 31, 1999 and
1998, respectively.

39



5. LOANS

The
composition of the loan portfolio at December 31 was as follows (in thousands):

|                               |  | 1999 |           | 1998 |  
|------------------------------ |  | ---- | --------- | ---- | -
|Real estate                    |  | $    | 1,319,678 |      | $
|Real estate construction       |  |      | 434,924   |      |  
|Commercial                     |  |      | 994,624   |      |  
|Consumer and other             |  |      | 681,423   |      |  
|Agriculture                    |  |      | 259,704   |      |  
|                               |  |      |           |      |  
|                               |  |      | 3,690,353 |      |  
|Less allowance for loan losses |  |      | (48,878   | )    |  
|                               |  |      |           |      |  
|Net loans                      |  | $    | 3,641,475 |      | $
|                               |  |      |           |      |  

At
December 31, 1999, real estate loans totaling $663,394,000 and consumer loans totaling $232,854,000 were pledged to secure borrowings.

6. ALLOWANCE FOR LOAN LOSSES

Activity in the allowance was as follows (in thousands):

|                                         |  | 1999 |         | 1998 |   | 1997    |  
|---------------------------------------- |  | ---- | ------- | ---- | - | ------- | -
|Balance at beginning of year             |  | $    | 51,860  |      | $ | 41,387  |  
|Allowance of acquired companies/other(1) |  |      | 270     |      |   | 1,950   |  
|Provision charged to operating expense   |  |      | 20,184  |      |   | 23,136  |  
|Loans charged off                        |  |      | (27,850 | )    |   | (18,334 | )
|Recoveries of loans charged off          |  |      | 4,414   |      |   | 3,721   |  
|                                         |  |      |         |      |   |         |  
|Balance at end of year                   |  | $    | 48,878  |      | $ | 51,860  |  
|                                         |  |      |         |      |   |         |  

---

Nonaccrual loans totaled $25,764,000, $22,609,000 and $15,151,000 at December 31, 1999, 1998 and 1997, respectively. The Company includes all loans
considered impaired under SFAS No. 114 in nonaccrual loans. The amount of impaired loans was not material at December 31, 1999. Interest income of $5,534,000 on nonaccrual loans would
have been recorded during 1999 if the loans had been current in accordance with their original terms. During 1999, the Company recorded interest income of $1,067,000 related to loans that were on
nonaccrual status as of December 31, 1999.

7. FAIR VALUE OF FINANCIAL INSTRUMENTS

Due to the nature of its business and the financing needs of its customers, the Company has a financial interest in a large number of financial instruments,
the majority for which an active market does not exist. Accordingly, the Company has used various valuation techniques to estimate the fair value of its financial instruments. These techniques are
significantly affected by the assumptions used, including the discount rate, the estimated timing and amount of cash flows and the aggregation methods used to value

40



similar
instruments. In this regard, the resulting fair value estimates cannot be substantiated by comparison to independent markets and, in a majority of cases, could not be realized by the immediate
sale or settlement of the instrument. Also, the estimates reflect a point in time valuation that could change significantly based on changes in outside economic factors, such as the general level of
interest rates. The required disclosures exclude the estimated values of nonfinancial instrument cash flows and are not intended to provide or estimate a market value of the Company. The following
assumptions were used by the Company in estimating the fair value of the specific financial instruments.

Cash and Cash Equivalents

The carrying amounts reported in the statement of financial condition approximate fair values for these items that have no interest rate or credit risk.

Federal Funds Purchased and Short-Term Borrowed Funds

The carrying amount approximates fair value due to the short maturity of the instruments and floating interest rates which are tied to market conditions.

Available-for-Sale and Held-to-Maturity Securities

Fair values for these items are based on available market quotes. If market quotes are not available, fair values are based on market quotes of comparable
securities.

Interest-Bearing Deposits

The fair value of interest-bearing deposits is estimated using a discounted cash flow analysis using current market rates of interest-bearing deposits with
similar maturities to discount the future cash flows.

Loans

The loan portfolio consists of both variable and fixed rate loans. The carrying amounts of variable rate loans, a majority of which reprice within the next
three months and for which there has been no significant change in credit risk, are assumed to approximate fair values. The fair values for fixed rate
loans are estimated using discounted cash flow analysis. The discount rates applied are based on the current interest rates for loans with similar terms to borrowers of similar credit quality.

Deposit Liabilities

The fair value of demand deposits, savings accounts and certain money market deposits is defined by SFAS No. 107 to be equal to the amount payable on
demand at the date of the financial statements. Fair values for fixed rate certificates of deposit are estimated using a discounted cash flow analysis that used the interest rates currently being
offered on certificates of deposit to discount the aggregated expected monthly maturities.

41



Short-Term Borrowings

Federal funds purchased, borrowings under repurchase agreements and other short-term borrowings are at variable rates or have
short-term maturities, and their fair value is assumed to approximate their carrying amount.

Long-Term Debt

The fair value of long-term debt is estimated using a discounted cash flow analysis using current market rates of debt with similar maturities to
discount the future cash flows.

Loan Commitments and Letters of Credit

The majority of the Company's commitments have variable rates and do not expose the Company to interest rate risk. The Company's commitments for fixed rate
loans are evaluated, and it is estimated the probability of additional loans being issued under these commitments is not significant and there is not a fair value liability.

The
estimated fair values of the Company's financial instruments at December 31 are shown in the table below (in thousands):

|                                                  |  | 1999 |           | 1998 |  
|------------------------------------------------- |  | ---- | --------- | ---- | -
|
|Financial assets:                                 |  |      |           |      |  
|Cash and due from banks                           |  | $    | 247,051   |      | $
|Federal funds sold and resale agreements          |  |      | 4,775     |      |  
|Interest-bearing deposits                         |  |      | 4,648     |      |  
|Available-for-sale securities                     |  |      | 1,937,517 |      |  
|Held-to-maturity securities                       |  |      | 74,248    |      |  
|Loans                                             |  |      | 3,690,353 |      |  
|Allowance for loan losses                         |  |      | (48,878   | )    |  
|                                                  |  |      |           |      |  
|Net loans                                         |  |      | 3,641,475 |      |  
|Financial liabilities:                            |  |      |           |      |  
|Deposits:                                         |  |      |           |      |  
|Noninterest-bearing                               |  | $    | 616,861   |      | $
|Interest-bearing:                                 |  |      |           |      |  
|Savings and NOW                                   |  |      | 2,276,705 |      |  
|Time accounts over $100,000                       |  |      | 579,514   |      |  
|Other time accounts                               |  |      | 1,436,783 |      |  
|                                                  |  |      |           |      |  
|Total deposits                                    |  |      | 4,909,863 |      |  
|Federal funds purchased and repurchase agreements |  |      | 252,760   |      |  
|Other short-term borrowings                       |  |      | 471,665   |      |  
|Long-term debt                                    |  |      | 75,622    |      |  

42



8. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK AND CONCENTRATIONS OF CREDIT RISK

In the normal course of business, the Company is party to financial instruments with off-balance-sheet risk. These transactions enable customers to
meet their financing needs and enable the Company to manage its interest rate risk. These financial instruments include commitments to extend credit and letters of credit. The contract or notional
amounts of these financial instruments at December 31, 1999 and 1998, were as follows (in thousands):

|                             |  | 1999 |         | 1998
|---------------------------- |  | ---- | ------- | ----
|Commitments to extend credit |  | $    | 686,689 |     
|Standby letters of credit    |  |      | 22,397  |     
|Commercial letters of credit |  |      | 6,147   |     

Commitments
to extend credit are legally binding and have fixed expiration dates or other termination clauses. The Company's exposure to credit loss on commitments to extend credit,
in the event of nonperformance by the counterparty, is represented by the contractual amounts of the commitments. The Company monitors its credit risk for commitments to extend credit by applying the
same credit policies in making commitments as it does for loans and by obtaining collateral to secure commitments based on management's credit assessment of the counterparty. Collateral held varies,
but may include marketable securities, receivables, inventory, agricultural commodities, equipment and real estate. Because many of the commitments are expected to expire without being drawn upon,
total commitment amounts do not necessarily represent the Company's future liquidity requirements. In addition, the Company also offers various consumer credit line products to its customers that are
cancelable upon notification by the Company, which are included above in commitments to extend credit.

Standby
letters of credit are conditional commitments issued by the Company to guarantee the financial performance of a customer to a third party. Those guarantees are primarily
issued to support public and private borrowing arrangements.

Commercial
letters of credit are issued by the Company on behalf of customers to ensure payments of amounts owed or collection of amounts receivable in connection with trade
transactions. The Company's exposure to credit loss in the event of nonperformance by the counterparty is the contractual amount of the letter of credit and represents the same exposure as that
involved in extending loans.

The
amount of collateral obtained to support letters of credit is based on a credit assessment of the counterparty. Collateral held may include marketable securities, receivables,
inventory, agricultural commodities, equipment and real estate. Because the conditions under which the Company is required to fund letters of credit may not materialize, the liquidity requirements of
letters of credit are expected to be less than the total outstanding commitments.

The
Company's bank subsidiaries grant real estate, agricultural, commercial, consumer and other loans and commitments and letters of credit to customers throughout Arizona,
California, Colorado, Iowa,
Minnesota, Nebraska, New Mexico, North Dakota, South Dakota, Utah, Wisconsin and Wyoming. Although the Company has a diversified loan portfolio, the ability of a significant portion of its debtors to
honor their contracts is dependent upon their local economic sector. The maximum exposure to accounting loss that could occur, if the borrowers fail to perform according to the loan agreements and the
underlying collateral proved to be of no value, is the total loan portfolio balances and commitments and letters of credit.

43



9. BANK PREMISES AND EQUIPMENT

Bank premises and equipment at December 31 consisted of the following (in thousands):

|                                                |  | 1999 |         | 1998
|----------------------------------------------- |  | ---- | ------- | ----
|Land                                            |  | $    | 22,217  |     
|Buildings                                       |  |      | 126,754 |     
|Furniture, fixtures and equipment               |  |      | 91,556  |     
|Leased property under capital lease obligations |  |      | 10,586  |     
|                                                |  |      |         |     
|                                                |  |      | 251,113 |     
|Less accumulated depreciation                   |  |      | 125,656 |     
|                                                |  |      |         |     
|                                                |  | $    | 125,457 |     
|                                                |  |      |         |     

10. SHORT-TERM BORROWINGS

As of December 31, 1999, the Company's subsidiary banks had $383,500,000 in Federal Home Loan Bank ("FHLB") borrowings, which are collateralized by
various investment securities and real estate loans. The interest rates on FHLB borrowings are variable rates based on short-term market conditions and the term of the advance, ranging
from 4.23% to 5.99% at December 31, 1999. The Company's subsidiaries had additional short-term borrowings of $68,753,000 outstanding at December 31, 1999.

The
Company has a short-term line of credit bearing interest at the Federal Funds rate plus 1.25% that provides for borrowing up to $5,000,000 through December 31,
1999, with no commitment fee. As of
December 31, 1999, the Company had a balance of $3,195,000 outstanding under this line of credit. The Company also has a short-term line of credit bearing interest at a variable
rate of LIBOR plus .30% that provides for borrowing up to $25,000,000 through October 27, 2000, with a commitment fee of .25% of the revolving commitment amount. As of December 31, 1999,
the Company had a balance of $3,000,000 outstanding under this line of credit. The Company has entered into an agreement that allows for its designated agent to underwrite up to $35,000,000 in
commercial paper and has obtained lines of credit to support these borrowings. As of December 31, 1999, there was a $19,412,000 commercial paper balance outstanding with a blended rate of
6.03%. The terms of the lines of credit include certain covenants with which the Company must comply. At December 31, 1999, the Company was in compliance with all covenants pertaining to the
lines of credit.

44



11. LONG-TERM DEBT

Long-term debt consisted of the following at December 31 (in thousands):

|                                                                                                                                                                                                                         |  | 1999 |        | 1998
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ---- | ------ | ----
|Parent Company:                                                                                                                                                                                                          |  |      |        |     
|Subordinated notes payable, interest at 7.30%, payable semi-annually, maturing June 30, 2004, unsecured                                                                                                                  |  | $    | 60,000 |     
|Term note payable to bank, interest at 6.19% until February 1, 2008, then at .50% over One Year, Three Year, or Five Year U.S. Treasury rate, payable semi-annually, maturing February 1, 2013, secured by real
property |  |      | 2,987  |     
|Subsidiaries:                                                                                                                                                                                                            |  |      |        |     
|Federal Home Loan Bank advances, interest rates ranging from 5.33% to 8.33%, payable quarterly, with maturities ranging from November 18, 2002 to March 10, 2010                                                         |  |      | 10,653 |     
|Term Note payable to bank, interest at 5.19% payable monthly, principal payments ranging from $42,000 to $54,700, per schedule due monthly through March 31, 2003                                                        |  |      | 1,874  |     
|Other Notes Payable                                                                                                                                                                                                      |  |      | 108    |     
|                                                                                                                                                                                                                         |  |      |        |     
|                                                                                                                                                                                                                         |  | $    | 75,622 |     
|                                                                                                                                                                                                                         |  |      |        |     

The
Company has a long-term line of credit bearing interest at the Federal Funds rate plus 1.25% that provides for borrowing up to $10,000,000 through January 23,
2006, with a .20% fee on the unfunded amount. As of December 31, 1999, the Company had no balance outstanding.

The
7.30% subordinated notes payable are not redeemable, in whole or in part, by the Company. These notes, of which 100% of the balance qualifies as Tier II capital under the Federal
Reserve Board
guidelines, are direct obligations of the Company and are subordinated to all other indebtedness of the Company. The terms of the subordinated notes payable include certain covenants with which the
Company must comply. At December 31, 1999, the Company was in compliance with all covenants pertaining to the subordinated notes payable.

On
October 30, 1998, the Company redeemed all of its 9.00% Exchangeable Subordinated Notes due August 15, 2005 at a redemption price of 103% of the principal amount,
plus accrued interest to the redemption date. The total outstanding principal amount of the notes, which were issued on July 1995, was $11.5 million. The early redemption resulted in a
one-time pre-tax charge of $345,000.

Maturities
of long-term debt outstanding, primarily of the parent company, at December 31, 1999, were (in thousands):

|2000       |  | $ | 736   
|---------- |  | - | ------
|2001       |  |   | 782   
|2002       |  |   | 5,939 
|2003       |  |   | 4,153 
|2004       |  |   | 1,554 
|Thereafter |  |   | 62,458
|           |  |  
|           |  | $ | 75,622
|           |  |  

45



12. COMPANY-OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES

On December 10, 1997, the Company issued $60 million of 8.20% Cumulative Capital Securities, through CFB Capital II, a business trust subsidiary
organized in December 1997. The proceeds of the offering were invested by CFB Capital II in Junior Subordinated Debentures of the Company. The Company used the net proceeds in part to
capitalize its bank subsidiaries in Colorado and Arizona, which acquired branches of Banc One, in their respective states. The debentures will mature not earlier than December 15, 2002, and not
later than December 15, 2027.

On
February 5, 1997, the Company issued $60 million of 8.875% Cumulative Capital Securities, through CFB Capital I, a business trust subsidiary organized in
January 1997. The proceeds of the offering were invested by CFB Capital I in Junior Subordinated Debentures of the Company. The Company used a portion of the net proceeds to redeem
$23 million in aggregate principal amount of 7.75% Subordinated Notes. The remainder of the proceeds of the offering were used for general corporate purposes, including in part, the purchase of
KeyBank Wyoming. The debentures will mature not earlier than February 1, 2002 and not later than February 1, 2027.

At
December 31, 1999, the combined $120 million in Capital Securities qualified as Tier I capital under capital guidelines of the Federal Reserve.

13. SHAREHOLDERS' EQUITY

Common Stock

On April 3, 1998, the Company filed a shelf registration statement with the Securities and Exchange Commission for the purpose of issuing up to
3,500,000 shares of its common stock. The shares may be offered in acquisition transactions in exchange for shares of capital stock, partnership interests or other assets representing an interest,
direct or indirect, in other companies or entities, or in exchange for assets used in or related to the business of such entities. Amendment No. 1, effective June 11, 1998, increased the
shares under this registration statement to 7,000,000 shares, to reflect the effect of the shares remaining as of May 15, 1998, when the shareholders approved a charter amendment to facilitate
a two-for-one split of the Company's common stock, in the form of a 100 percent stock dividend. Subsequently, two additional acquisitions, totaling 1,843,447 shares,
were completed under this registration statement. At December 31, 1999, there remain 5,156,553 shares to be issued under the registration statement.

On
December 31, 1997, the Company filed a shelf registration statement with the Securities and Exchange Commission for the purpose of issuing up to 3,000,000 shares of its
common stock. The shares may be offered in acquisition transactions in exchange for shares of capital stock, partnership interests or other assets representing an interest, direct or indirect, in
other companies or entities, or in exchange for assets used in or related to the business of such entities, or in exchange for assets used in or related to the business of such entities. Amendment
No. 2, effective June 22, 1998 increased the shares under this registration statement to 4,438,207 shares, to reflect the effect of the shares remaining as of May 15, 1998, when
the shareholders approved a charter amendment to facilitate a two-for-one split of the Company's common stock, in the form of a 100 percent stock dividend. As of
June 22, 1998, two acquisitions were completed under the registration statement, totaling 1,561,793 shares, resulting in a pre-split remaining authorized shares of 1,438,207.
Subsequently, two additional acquisitions, totaling 2,016,218 shares, were completed under the December 31, 1997 registration statement. At December 31, 1999, there remain 860,196 shares
to be issued under the registration statement.

On
December 10, 1997, the Company completed the issuance of 2,000,000 million shares of common stock. The issuance of these shares occurred at a selling price of $24.75
per share with an underwriting discount of $.87 per share paid by the Company. The Company used the proceeds, in combination with the

46



$60 million
Capital Securities issue to capitalize its bank subsidiaries in Colorado and Arizona which acquired branches of Banc One.

On
October 9, 1997, the Company filed a shelf registration with the Securities and Exchange Commission for the offering, from time to time, of up to $150 million in any
combination of common stock, preferred stock or debt securities. Proceeds from the sale of securities offered under this shelf registration will be used to finance acquisitions by the Company and for
general corporate purposes.

In
1995, the Company extended the common stock repurchase program established in 1992, which provided for the systematic acquisition of up to 1,200,000 shares of the Company's common
stock. In addition, the Company adopted a new common stock repurchase program providing for a systematic repurchase of up to 1,200,000 additional shares. The shares acquired are used primarily for the
issuance of common stock upon exercise of stock options, issuance of common stock under compensation plans, which might include contributions directly to employees or to an employee stock ownership
plan, for preferred stock conversion, and issuance of common stock for purposes that do not include business combinations.

On
April 1, 1999, prior to being acquired by the Company, Valley National was formed as a one-bank holding company through a reorganization of its affiliate bank,
Valle de Oro Bank. In the reorganization, former Valle de Oro Bank shareholders received two shares of Valley National common stock for each share of bank stock owned. Equity records of Valley
National and subsequently, the Company, have been restated to reflect the reorganization.

The
former Valley National Corporation and its predecessor, Valle de Oro Bank, declared and paid a common stock dividend equal to 5% of its common stock outstanding as of
May 3, 1999, April 24, 1998 and April 25, 1997.

Preferred Stock

Shareholders' Rights Plan

The Company adopted a shareholders' rights plan in January 1995 that attached one right to each share of common stock outstanding on January 19,
1995. Each right entitles the holder to purchase one one-hundredth of a share of a new series of junior participating preferred stock of the Company, which has an initial exercise price of
$31.50. The rights become exercisable only upon the acquisition of 15% or more of the Company's voting stock, or an announcement of a tender offer or exchange offer to acquire an interest of 15% or
more by a person or group, without the prior consent of the Company. If exercised, or if the Company is acquired, the rights entitle the holders (not including the person or persons acquiring or
proposing to acquire an amount of common stock equal to 15% or more of the Company) to purchase, at the exercise price, common stock with a market value equal to two times the exercise price. The
rights, which may be redeemed by the Company in certain circumstances, expire January 5, 2005.

Capital Requirements

The Company is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements
can initiate certain mandatory, and possibly additional discretionary, actions by regulators that, if undertaken, could have a direct material effect on the Company's consolidated financial
statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company must meet specific capital guidelines that involve quantitative measures of the
Company's assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices. The Company's capital amounts and classification are also subject to
qualitative judgments by the regulators about components, risk weightings and other factors.

47



Quantitative
measures established by regulation to ensure capital adequacy require the Company to maintain minimum amounts and ratios of total and Tier I capital to
risk-weighted assets, and of Tier I capital to average assets.

As
of December 31, 1999, the Company is considered well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the
Company must maintain minimum total risk-based, Tier I risk-based, and Tier I leverage ratios as set forth in the following table.

Regulatory Capital Requirements:

|                                              |  | At December 31, 1999
|--------------------------------------------- |  | --------------------
|
|
|Minimum                                       |  | 4.00                
|Well Capitalized                              |  | 6.00                
|                                              |  |                     
|Bank Subsidiaries:                            |  |                     
|Community First National Bank, Fergus Falls   |  | 9.68                
|Community First National Bank, Fargo          |  | 9.55                
|Community First State Bank, Vermillion        |  | 9.67                
|Community First National Bank, Decorah        |  | 10.01               
|Community First National Bank, Alliance       |  | 11.99               
|Community First National Bank, Spooner        |  | 10.08               
|Community First National Bank, Fort Morgan    |  | 9.78                
|Community First National Bank, Cheyenne       |  | 13.32               
|Community First National Bank, Phoenix        |  | 14.89               
|Community First National Bank, Las Cruces     |  | 11.82               
|Community First National Bank, Salt Lake City |  | 10.72               
|Valle de Oro Bank, El Cajon                   |  | 11.17               
|Northland Security, Ramsey                    |  | 10.94               
|Community First Bankshares, Inc.              |  | 10.01               

48



## 

Regulatory Capital Requirements:

|                                              |  | At December 31, 1998
|--------------------------------------------- |  | --------------------
|
|
|Minimum                                       |  | 4.00                
|Well Capitalized                              |  | 6.00                
|                                              |  |                     
|Bank Subsidiaries:                            |  |                     
|Community First National Bank, Fergus Falls   |  | 9.40                
|Community First National Bank, Fargo          |  | 9.91                
|Community First State Bank, Vermillion        |  | 10.29               
|Community First National Bank, Decorah        |  | 10.62               
|Community First National Bank, Alliance       |  | 9.84                
|Community First National Bank, Spooner        |  | 9.81                
|Community First National Bank, Fort Morgan    |  | 9.25                
|Community First National Bank, Cheyenne       |  | 13.96               
|Community First National Bank, Phoenix        |  | 17.28               
|Community First National Bank, Las Cruces     |  | 11.17               
|Community First National Bank, Salt Lake City |  | 9.27                
|Valle de Oro Bank, El Cajon                   |  | 11.47               
|Community First Bankshares, Inc.              |  | 9.44                

14. EMPLOYEE BENEFIT PLANS

Stock Option PlanDuring 1996, the Company approved the 1996 Stock Option Plan under which an
additional 4,000,000 shares of the Company's common stock were reserved for granting of future stock options. Similar to the 1987 Stock Option Plan, the Company may grant key employees incentive or
nonqualified options to purchase common stock of the Company. Incentive stock options must have an exercise price of at least fair market value on the date of the grant, as determined by the Company.
The options generally vest ratably over a three-year period and are exercisable over five- or ten-year terms.

Stock
options outstanding under the plans are as follows:

|                                               |  | 1999      |   | 1998 
|---------------------------------------------- |  | --------- | - | -----
|
|Beginning of Year                              |  | 2,053,978 |   | $    
|Options Granted                                |  | 608,795   |   |      
|Options Exercised                              |  | (333,961  | ) |      
|Options Forfeited                              |  | (108,468  | ) |      
|                                               |  |           |   |      
|End of Year                                    |  | 2,220,344 |   | $    
|                                               |  |           |   |      
|Exercisable at end of year                     |  | 1,150,217 |   | $    
|                                               |  | 1999      |   | 1998 
|Weighted-average fair value of options granted |  | $5.62     |   | $4.44

49



The
range of exercise prices and the weighted-average remaining contractual life of the options outstanding at December 31, 1999 were as follows:

|Range of Exercise
Prices Per Share |  | Options
Outstanding at
December 31
1999 |  | Weighted
Average
Exercise Price
Per Share |       | Weighted
Average
Remaining
Contractual Life
|---------------------------------- |  | --------------------------------------- |  | ----------------------------------------- | ----- | -------------------------------------------
|$24.69 to $24.88                   |  | 484,400                                 |  | $                                         | 24.86 |                                            
|$17.25 to $21.50                   |  | 597,200                                 |  | $                                         | 19.51 |                                            
|$10.63 to $14.25                   |  | 612,048                                 |  | $                                         | 12.76 |                                            
|$3.86 to $7.375                    |  | 526,696                                 |  | $                                         | 5.69  |                                            

At
December 31, 1999, a total of 4,328,269 shares of authorized common stock was reserved for exercise of options granted under the 1996 and 1987 Stock Option Plans.

As
described in Note 1, the Company has elected to measure compensation costs as prescribed by APB Opinion No. 25, "Accounting for Stock Issued to Employees" and,
accordingly, does not recognize compensation expense. SFAS No. 123 requires the Company to disclose pro forma information reflecting net income and earnings per share had the Company elected to
record compensation expense based on the fair market value method described in SFAS 123. The fair value of the options was estimated at the grant date using a Black-Sholes option pricing model.
Option valuation models require the input of highly subjective assumptions. Because the Company's employee stock options have characteristics significantly different from traded options, and because
changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair
value of its employee stock options.

The
following weighted-average assumptions were used in the valuation model: risk-free interest rates of 4.60 percent and 5.35 percent in 1999 and 1998,
respectively; dividend yield of 3.56 percent and 2.09 percent in 1999 and 1998, respectively; stock price volatility factors of .336 and .178 in 1999 and 1998, respectively; and expected
life of options of 7.5 years and 4 years in 1999 and 1998, respectively.

The
pro forma disclosures include options granted in 1999 and 1998 and are not likely to be representative of the pro forma disclosures for future years. The estimated fair value of
the options is amortized to expense over the options' vesting period.

|                               |  | 1999 |        | 1998
|------------------------------ |  | ---- | ------ | ----
|
|Pro forma net income           |  | $    | 73,417 |     
|Pro forma net income (diluted) |  |      | 73,417 |     
|Pro forma earnings per share:  |  |      |        |     
|Basic                          |  | $    | 1.47   |     
|Diluted                        |  |      | 1.45   |     

Employee Stock Ownership PlanThe Company has an employee stock ownership plan ("ESOP") that is a defined contribution plan
covering all employees who are 21 years of age with more than one year of service. Contributions are calculated using a formula based on the Company's return on average assets on a yearly
basis. The contribution expense was $1,335,000, $1,890,000 and $1,407,000 in 1999, 1998 and 1997, respectively.

Profit-Sharing PlanThe Company offers a contributory profit-sharing and thrift plan that qualifies under
section 401(k) of the Internal Revenue Code. The plan covers all employees who are 21 years of age with more than one year of service. The plan provides for an employer-matching
contribution of 50%

50



based
on each participant's eligible contribution for each plan year, subject to a limitation of the lesser of 6% of the participant's annual compensation or the maximum amount prescribed by the
Internal Revenue Code. The Company's contribution was $1,639,000, $1,630,000 and $1,364,000 in 1999, 1998 and 1997, respectively.

15. RESTRICTIONS ON CASH AND DUE FROM BANKS

Bank subsidiaries are required to maintain average reserve balances with the Federal Reserve Bank. Balances of $37,859,000 and $48,096,000 at
December 31, 1999 and 1998, respectively, exceeded required amounts.

16. INCOME TAXES

The components of the provision for income taxes were (in thousands):

|                           |  | 1999 |        | 1998 |   | 1997   |  
|-------------------------- |  | ---- | ------ | ---- | - | ------ | -
|Federal:                   |  |      |        |      |   |        |  
|Current                    |  | $    | 36,509 |      | $ | 26,636 |  
|Deferred                   |  |      | (742   | )    |   | (6,177 | )
|                           |  |      |        |      |   |        |  
|                           |  |      | 35,767 |      |   | 20,459 |  
|State:                     |  |      |        |      |   |        |  
|Current                    |  |      | 3,152  |      |   | 2,937  |  
|Deferred                   |  |      | (346   | )    |   | (801   | )
|                           |  |      |        |      |   |        |  
|                           |  |      | 2,806  |      |   | 2,136  |  
|                           |  |      |        |      |   |        |  
|Provision for income taxes |  | $    | 38,573 |      | $ | 22,595 |  
|                           |  |      |        |      |   |        |  

The
reconciliation between the provision for income taxes and the amount computed by applying the statutory federal income tax rate was as follows (in thousands):

|                                             |  | 1999 |        | 1998 |   | 1997   |  
|-------------------------------------------- |  | ---- | ------ | ---- | - | ------ | -
|Tax at statutory rate (35%)                  |  | $    | 39,720 |      | $ | 25,188 |  
|State income tax, net of federal tax benefit |  |      | 1,830  |      |   | 1,283  |  
|Tax-exempt interest                          |  |      | (3,756 | )    |   | (3,171 | )
|Amortization of goodwill                     |  |      | 919    |      |   | 892    |  
|Other                                        |  |      | (140   | )    |   | (1,597 | )
|                                             |  |      |        |      |   |        |  
|Provision for income taxes                   |  | $    | 38,573 |      | $ | 22,595 |  
|                                             |  |      |        |      |   |        |  

Deferred
income tax assets and liabilities reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for

51



income
tax reporting purposes. Significant components of the Company's deferred tax assets and liabilities as of December 31, 1999 and 1998, are as follows (in thousands):

|                              |  | 1999 |        | 1998 |  
|----------------------------- |  | ---- | ------ | ---- | -
|Deferred tax assets:          |  |      |        |      |  
|Unrealized net (gains) losses |  | $    | 27,801 |      | $
|Loan loss reserves            |  |      | 16,332 |      |  
|Depreciation                  |  |      | 1,665  |      |  
|Other reserves                |  |      | 2,385  |      |  
|Deferred compensation         |  |      | 1,965  |      |  
|Deferred loan fees            |  |      | 130    |      |  
|Other                         |  |      | 2,398  |      |  
|                              |  |      |        |      |  
|                              |  |      | 52,676 |      |  
|Deferred tax liabilities:     |  |      |        |      |  
|Purchase accounting           |  |      | (233   | )    |  
|Other                         |  |      | 1,486  |      |  
|                              |  |      |        |      |  
|                              |  |      | 1,253  |      |  
|                              |  |      |        |      |  
|Net deferred tax assets       |  | $    | 51,423 |      | $
|                              |  |      |        |      |  

The
realization of the Company's deferred tax assets is dependent upon the Company's ability to generate taxable income in future periods and the reversal of deferred tax liabilities
during the same period. The Company has evaluated the available evidence supporting the realization of its deferred tax assets and determined it is more likely than not that the assets will be
realized.

17. COMMITMENTS AND CONTINGENT LIABILITIES

Total rent expense was $5,507,000, $5,030,000 and $3,811,000 in 1999, 1998 and 1997, respectively.

Future
minimum payments, by year and in the aggregate, under noncancelable leases with initial or remaining terms of one year or more, consisted of the following at
December 31, 1999:

|                                            |  | Operating |       | Capital |  
|------------------------------------------- |  | --------- | ----- | ------- | -
|
|2000                                        |  | $         | 2,024 |         | $
|2001                                        |  |           | 1,841 |         |  
|2002                                        |  |           | 1,826 |         |  
|2003                                        |  |           | 1,786 |         |  
|2004                                        |  |           | 537   |         |  
|Thereafter                                  |  |           | 137   |         |  
|                                            |  |           |       |         |  
|                                            |  | $         | 8,151 |         | $
|Executory costs (taxes)                     |  |           |       |         |  
|                                            |  |           |       |         |  
|Net minimum lease payments                  |  |           |       |         |  
|Less:                                       |  |           |       |         |  
|Amount representing interest                |  |           |       |         |  
|                                            |  |           |       |         |  
|Present value of net minimum lease payments |  |           |       |         | $
|                                            |  |           |       |         |  

In
the normal course of business, there are various outstanding legal proceedings, claims, commitments and contingent liabilities. In the opinion of management, the
Company and its subsidiaries will not be materially affected by the outcome of such matters.

52



18. COMMUNITY FIRST BANKSHARES, INC.

(Parent Company Only)

CONDENSED STATEMENTS OF FINANCIAL CONDITION

|                                           |  | December 31
|------------------------------------------ |  | -----------
|
|
|
|Assets                                     |  |            
|Cash and due from subsidiary banks         |  | $          
|Interest-bearing deposits                  |  |            
|Available-for-sale securities              |  |            
|Investment in subsidiaries                 |  |            
|Furniture and equipment                    |  |            
|Receivable from subsidiaries               |  |            
|Other assets                               |  |            
|                                           |  |            
|Total assets                               |  | $          
|                                           |  |            
|Liabilities and shareholders' equity       |  |            
|Short-term borrowings                      |  |            
|Long-term debt                             |  |            
|Other liabilities                          |  |            
|Shareholders' equity                       |  |            
|                                           |  |            
|Total liabilities and shareholders' equity |  | $          
|                                           |  |            

53



CONDENSED STATEMENTS OF INCOME

|                                                                                                        |  | Years ended December 31 |       
|------------------------------------------------------------------------------------------------------- |  | ----------------------- | ------
|
|
|
|Income:                                                                                                 |  |                         |       
|Dividends from subsidiaries                                                                             |  | $                       | 73,242
|Service fees from subsidiaries                                                                          |  |                         | 5,022 
|Interest income                                                                                         |  |                         | 991   
|Other                                                                                                   |  |                         | 1,357 
|Total income                                                                                            |  |                         | 80,612
|Expense:                                                                                                |  |                         |       
|Interest expense                                                                                        |  |                         | 16,895
|Other expense                                                                                           |  |                         | 20,596
|Total expense                                                                                           |  |                         | 37,491
|Income before income tax benefit, equity in undistributed income of subsidiaries and extraordinary item |  |                         | 43,121
|Income tax benefit                                                                                      |  |                         | 9,955 
|Income before undistributed income of subsidiaries and extraordinary item                               |  |                         | 53,076
|Equity in undistributed income of subsidiaries                                                          |  |                         | 21,837
|                                                                                                        |  |                         |       
|Income before cumulative effect of extraordinary item                                                   |  |                         | 74,913
|Extraordinary item, net of tax                                                                          |  |                         |      
|Net income                                                                                              |  |                         | 74,913
|                                                                                                        |  |                         |       
|Net income applicable to common equity                                                                  |  | $                       | 74,913
|                                                                                                        |  |                         |       

54



CONDENSED STATEMENTS OF CASH FLOWS

|                                                                                                                     |  | Years ended December 31 |        
|-------------------------------------------------------------------------------------------------------------------- |  | ----------------------- | -------
|
|
|
|Cash flows from operating activities:                                                                                |  |                         |        
|Net income                                                                                                           |  | $                       | 74,913 
|Adjustments to reconcile net income to net cash used in operating activities:                                        |  |                         |        
|Equity in income of subsidiaries                                                                                     |  |                         | (21,837
|Depreciation                                                                                                         |  |                         | 992    
|Decrease in interest payable                                                                                         |  |                         | (13    
|Other, net                                                                                                           |  |                         | 5,120  
|                                                                                                                     |  |                         |        
|Net cash provided by operating activities                                                                            |  |                         | 59,175 
|Cash flows from investing activities:                                                                                |  |                         |        
|Dividends received from subsidiaries                                                                                 |  |                         | 73,242 
|Purchases of stock in subsidiaries                                                                                   |  |                         | (78,120
|Net loans to subsidiaries                                                                                            |  |                         | (10,808
|Purchases of available-for-sale securities                                                                           |  |                         | (27,877
|Sales of available-for-sale securities, net of gains                                                                 |  |                         | 1,573  
|Maturities of investment securities                                                                                  |  |                         | 25,038 
|Net increase in furniture and equipment                                                                              |  |                         | (580   
|Net decrease in interest-bearing deposits                                                                            |  |                         | 94     
|                                                                                                                     |  |                         |        
|Net cash used in investing activities                                                                                |  |                         | (17,438
|Cash flows from financing activities:                                                                                |  |                         |        
|Net (decrease) increase in short-term borrowings                                                                     |  |                         | (9,928 
|Proceeds from issuance of long-term debt                                                                             |  |                         |       
|Common stock dividends paid                                                                                          |  |                         | (27,041
|Repayment of long-term debt                                                                                          |  |                         | (212   
|Net proceeds from the issuance of Company obligated mandatorily redeemable preferred securities CFB Capital I and II |  |                         |       
|Sale of common stock held in treasury                                                                                |  |                         | 2,248  
|Purchase of common stock held in treasury                                                                            |  |                         | (11,844
|Net proceeds from issuance of common stock                                                                           |  |                         | 2,521  
|Net cash (used in) provided by financing activities                                                                  |  |                         | (44,256
|Net decrease in cash and cash equivalents                                                                            |  |                         | (2,519 
|Cash and cash equivalents at beginning of year                                                                       |  |                         | 4,944  
|                                                                                                                     |  |                         |        
|Cash and cash equivalents at end of year                                                                             |  | $                       | 2,425  
|                                                                                                                     |  |                         |        

Certain
restrictions exist regarding the extent to which bank subsidiaries may transfer funds to the Company in the form of dividends, loans or advances. Federal law prevents the
Company from borrowing from bank subsidiaries unless the loans are secured by specified U.S. obligations. Secured loans to the Company or any individual affiliate are generally limited in amount to
10% of the banks' equity. Further, loans to the Company and all affiliates in total are limited to 20% of the banks' equity. As of December 31, 1999 and 1998, $56,348,000 and $59,500,000,
respectively, of individual subsidiary banks' capital was

55



available
for credit extension to the parent company. At December 31, 1999 and 1998, bank subsidiaries had no credit extended to the Company.

Payment
of dividends to the Company by its subsidiary banks is subject to various limitations by bank regulatory agencies. Undistributed earnings of the bank subsidiaries available
for distribution as dividends under these limitations were $36,801,000 and $35,837,000 as of December 31, 1999 and 1998, respectively.

19. RELATED PARTY TRANSACTIONS

Certain directors and executive officers of the Company and its subsidiaries, including their immediate families, companies in which they are principal owners
and trusts in which they are involved, are loan customers of the bank subsidiaries. The aggregate dollar amounts of these loans were $15,142,000 and $11,503,000 at December 31, 1999 and 1998,
respectively. During 1999, 1998 and 1997, $12,967,000, $10,362,000 and $6,486,000 of new loans were made and repayments totaled $9,328,000, $19,335,000 and $4,591,000, respectively.

20. EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted earnings per share:

(Dollars
in thousands, except per share data)

|                                                                                                    |  | Years ended December 31,
|--------------------------------------------------------------------------------------------------- |  | ------------------------
|
|Numerator:                                                                                          |  |                         
|Income from continuing operations                                                                   |  | $                       
|Numerator for basic earnings per share income available to common stockholders                      |  |                         
|Denominator:                                                                                        |  |                         
|Denominator for basic earnings per share weighted-average share                                     |  |                         
|Effect of dilutive securities:                                                                      |  |                         
|Employee stock options                                                                              |  |                         
|Convertible preferred stock                                                                         |  |                         
|Dilutive potential common shares                                                                    |  |                         
|Denominator for diluted earnings per share adjusted weighted-average shares and assumed conversions |  |                         
|Basic earnings per share                                                                            |  | $                       
|Diluted earnings per share                                                                          |  | $                       

---

56





21. SUPPLEMENTAL DISCLOSURES TO CONSOLIDATED STATEMENTS OF CASH FLOWS

|                                                                                  |  | Years ended December 31
|--------------------------------------------------------------------------------- |  | -----------------------
|
|
|Noncash transfers of held-to-maturity securities to available-for-sale securities |  | $                      
|Unrealized (loss) gain on available-for-sale securities                           |  |                        
|Income taxes paid                                                                 |  |                        
|Interest paid                                                                     |  |                        
|Commitments to purchase investment securities                                     |  |                        

57



INDEPENDENT AUDITOR'S LETTER

The Board of Directors and Shareholders
Community First Bankshares, Inc.

We have audited the accompanying consolidated statements of financial condition of Community First Bankshares, Inc., and subsidiaries as of
December 31, 1999 and 1998, and the related consolidated statements of income, comprehensive income, shareholders' equity and cash flows for each of the three years in the period ended
December 31, 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We
conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.

In
our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Community First Bankshares, Inc.,
and subsidiaries at December 31, 1999 and 1998 and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1999, in
conformity with accounting principles generally accepted in the United States.

/s/
Ernst & Young LLP

Minneapolis,
Minnesota
January 20, 2000

58



CONSOLIDATED STATEMENT OF CONDITION

FIVE YEAR SUMMARY

Community First Bankshares, Inc.

|                                                                                      |  | December 31
|------------------------------------------------------------------------------------- |  | -----------
|
|
|
|Assets                                                                                |  |            
|Cash and due from banks                                                               |  | $          
|Federal funds sold and securities purchased under agreement to resell                 |  |            
|Interest-bearing deposits                                                             |  |            
|Available-for-sale securities                                                         |  |            
|Held-to-maturity securities:                                                          |  |            
|U.S. Treasury                                                                         |  |            
|U.S. Government agencies                                                              |  |            
|Mortgage-backed securities                                                            |  |            
|Collateralized mortgage-obligations                                                   |  |            
|State and political securities                                                        |  |            
|Other                                                                                 |  |            
|                                                                                      |  |            
|Total securities                                                                      |  |            
|Loans                                                                                 |  |            
|Less: allowance for loan losses                                                       |  |            
|                                                                                      |  |            
|Net loans                                                                             |  |            
|Other assets                                                                          |  |            
|                                                                                      |  |            
|Total assets                                                                          |  | $          
|                                                                                      |  |            
|Liabilities and shareholders' equity                                                  |  |            
|Deposits:                                                                             |  |            
|Noninterest-bearing                                                                   |  | $          
|Interest-bearing                                                                      |  |            
|                                                                                      |  |            
|Total deposits                                                                        |  |            
|Short-term borrowings                                                                 |  |            
|Long-term debt                                                                        |  |            
|Other liabilities                                                                     |  |            
|                                                                                      |  |            
|Total liabilities                                                                     |  |            
|Company-obligated mandatorily redeemable preferred securities of CFB Capital I and II |  |            
|Shareholders' equity                                                                  |  |            
|                                                                                      |  |            
|Total liabilities and shareholders' equity                                            |  | $          
|                                                                                      |  |            

59



CONSOLIDATED STATEMENT OF INCOME

FIVE YEAR SUMMARY

Community First Bankshares, Inc.

|                                                                                               |  | Years Ended December 31
|---------------------------------------------------------------------------------------------- |  | -----------------------
|
|
|
|Interest income:                                                                               |  |                        
|Loans                                                                                          |  | $                      
|Investment securities                                                                          |  |                        
|Other                                                                                          |  |                        
|                                                                                               |  |                        
|Total interest income                                                                          |  |                        
|Interest expense:                                                                              |  |                        
|Deposits                                                                                       |  |                        
|Short-term and other borrowings                                                                |  |                        
|Long-term debt                                                                                 |  |                        
|                                                                                               |  |                        
|Total interest expense                                                                         |  |                        
|                                                                                               |  |                        
|Net interest income                                                                            |  |                        
|Provision for loan losses                                                                      |  |                        
|                                                                                               |  |                        
|Net interest income after provision for loan losses                                            |  |                        
|Noninterest income:                                                                            |  |                        
|Service charges on deposit accounts                                                            |  |                        
|Insurance commissions                                                                          |  |                        
|Fees from fiduciary activities                                                                 |  |                        
|Net gains on sales of securities                                                               |  |                        
|Other                                                                                          |  |                        
|                                                                                               |  |                        
|Total noninterest income                                                                       |  |                        
|Noninterest expense:                                                                           |  |                        
|Salaries and employee benefits                                                                 |  |                        
|Net occupancy                                                                                  |  |                        
|FDIC insurance                                                                                 |  |                        
|Professional service fees                                                                      |  |                        
|Amortization of intangibles                                                                    |  |                        
|Data processing and loan servicing fees                                                        |  |                        
|Company-obligated mandatorily redeemable preferred securities of CFB Capital I & II            |  |                        
|Other                                                                                          |  |                        
|                                                                                               |  |                        
|Total noninterest expense                                                                      |  |                        
|                                                                                               |  |                        
|Income from continuing operations before income taxes, cumulative effect of extraordinary item |  |                        
|Provision for income taxes                                                                     |  |                        
|                                                                                               |  |                        
|Income from continuing operations before cumulative effect of extraordinary item               |  |                        
|Discontinued operations                                                                        |  |                        
|Disposal of discontinued operations                                                            |  |                        
|Extraordinary item                                                                             |  |                        
|                                                                                               |  |                        
|Net income                                                                                     |  | $                      
|                                                                                               |  |                        
|Preferred dividend                                                                             |  |                        
|Net income applicable to common equity                                                         |  | $                      
|                                                                                               |  |                        
|Earnings per common and common equivalent share:                                               |  |                        
|Basic                                                                                          |  | $                      
|Diluted                                                                                        |  | $                      
|Average common shares outstanding:                                                             |  |                        
|Basic                                                                                          |  |                        
|Diluted                                                                                        |  |                        

60



QUARTERLY RESULTS OF OPERATIONS

(unaudited)

Community First Bankshares, Inc.

The
following is a summary of the quarterly results of operations for the years ended December 31, 1999 and 1998 (in thousands, except per share and per share data):

|                                                    |  | First
Quarter |            | Second
Quarter |   | Third
Quarter |  | Fourth
Quarter
|--------------------------------------------------- |  | ------------- | ---------- | -------------- | - | ------------- |  | --------------
|Year ended December 31, 1999                        |  |               |            |                |   |               |  |               
|Interest income                                     |  | $             | 114,729    |                | $ | 116,046       |  | $             
|Interest expense                                    |  |               | 45,556     |                |   | 45,923        |  |               
|                                                    |  |               |            |                |   |               |  |               
|Net interest income                                 |  |               | 69,173     |                |   | 70,123        |  |               
|Provision for loan losses                           |  |               | 4,881      |                |   | 6,348         |  |               
|                                                    |  |               |            |                |   |               |  |               
|Net interest income after provision for loan losses |  |               | 64,292     |                |   | 63,775        |  |               
|Net gains on sales of securities                    |  |               | 530        |                |   | 1,254         |  |               
|Noninterest income                                  |  |               | 15,950     |                |   | 17,647        |  |               
|Noninterest expense                                 |  |               | 52,987     |                |   | 54,021        |  |               
|                                                    |  |               |            |                |   |               |  |               
|Income before income taxes                          |  |               | 27,785     |                |   | 28,655        |  |               
|Provision for income taxes                          |  |               | 9,530      |                |   | 9,452         |  |               
|                                                    |  |               |            |                |   |               |  |               
|Net income applicable to common equity              |  | $             | 18,255     |                | $ | 19,203        |  | $             
|                                                    |  |               |            |                |   |               |  |               
|Earnings per common and common equivalent shares:   |  |               |            |                |   |               |  |               
|Basic net income                                    |  | $             | 0.36       |                | $ | 0.38          |  | $             
|                                                    |  |               |            |                |   |               |  |               
|Diluted net income                                  |  | $             | 0.36       |                | $ | 0.38          |  | $             
|                                                    |  |               |            |                |   |               |  |               
|Average common and common equivalent shares:        |  |               |            |                |   |               |  |               
|Basic                                               |  |               | 50,161,750 |                |   | 50,110,945    |  |               
|Diluted                                             |  |               | 50,770,799 |                |   | 50,752,010    |  |               

61



QUARTERLY RESULTS OF OPERATIONS

(unaudited)

Community First Bankshares, Inc.

|                                                                                                                                                      |  | First
Quarter |            | Second
Quarter |   | Third
Quarter |   | Fourth
Quarter
|----------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | ---------- | -------------- | - | ------------- | - | --------------
|Year ended December 31, 1998                                                                                                                          |  |               |            |                |   |               |   |               
|Interest income                                                                                                                                       |  |               | 108,437    |                |   | 116,433       |   |               
|Interest expense                                                                                                                                      |  |               | 45,569     |                |   | 49,092        |   |               
|                                                                                                                                                      |  |               |            |                |   |               |   |               
|Net interest income                                                                                                                                   |  |               | 62,868     |                |   | 67,341        |   |               
|Provision for loan losses                                                                                                                             |  |               | 1,933      |                |   | 4,372         |   |               
|                                                                                                                                                      |  |               |            |                |   |               |   |               
|Net interest income after provision for loan losses                                                                                                   |  |               | 60,935     |                |   | 62,969        |   |               
|Net gains on sales of securities                                                                                                                      |  |               | 481        |                |   | 504           |   |               
|Noninterest income                                                                                                                                    |  |               | 14,361     |                |   | 16,292        |   |               
|Noninterest expense                                                                                                                                   |  |               | 52,053     |                |   | 64,577        |   |               
|                                                                                                                                                      |  |               |            |                |   |               |   |               
|Income before income taxes and extraordinary item                                                                                                     |  |               | 23,724     |                |   | 15,188        |   |               
|Provision for income taxes                                                                                                                            |  |               | 6,509      |                |   | 4,305         |   |               
|                                                                                                                                                      |  |               |            |                |   |               |   |               
|Income from continuing operations before extraordinary item                                                                                           |  |               | 17,215     |                |   | 10,883        |   |               
|                                                                                                                                                      |  |               |            |                |   |               |   |               
|Discontinued operations:                                                                                                                              |  |               |            |                |   |               |   |               
|Income from operations of discontinued operations (less applicable income taxes)                                                                      |  |               | (68        | )              |   | (2,164        | ) |               
|Loss on disposal of discontinued operations including provision for operating losses during phase-out period (less effect of applicable income taxes) |  |               |           |                |   | (1,676        | ) |               
|                                                                                                                                                      |  |               |            |                |   |               |   |               
|Net income applicable to common equity                                                                                                                |  |               | 17,147     |                |   | 7,043         |   |               
|                                                                                                                                                      |  |               |            |                |   |               |   |               
|Earnings per common and common equivalent share:                                                                                                      |  |               |            |                |   |               |   |               
|Basic income from continuing operations                                                                                                               |  | $             | 0.34       |                | $ | 0.22          |   | $             
|Discontinued operations                                                                                                                               |  |               | 0.00       |                |   | (0.08         | ) |               
|                                                                                                                                                      |  |               |            |                |   |               |   |               
|Basic net income                                                                                                                                      |  | $             | 0.34       |                | $ | 0.14          |   | $             
|                                                                                                                                                      |  |               |            |                |   |               |   |               
|Diluted income from continuing operations                                                                                                             |  | $             | 0.33       |                | $ | 0.21          |   | $             
|Discontinued operations                                                                                                                               |  |               | 0.00       |                |   | (0.07         | ) |               
|                                                                                                                                                      |  |               |            |                |   |               |   |               
|Diluted net income                                                                                                                                    |  | $             | 0.33       |                | $ | 0.14          |   | $             
|                                                                                                                                                      |  |               |            |                |   |               |   |               
|Average common and common equivalent shares:                                                                                                          |  |               |            |                |   |               |   |               
|Basic                                                                                                                                                 |  |               | 50,260,750 |                |   | 50,335,692    |   |               
|Diluted                                                                                                                                               |  |               | 51,267,591 |                |   | 51,242,452    |   |               

62



## 

CORPORATE INFORMATION

Corporate Headquarters

520 Main Avenue
Fargo, North Dakota 58124-0001
(701) 298-5600

Internet Home Page

www.cfbx.com

Stock Transfer Agent

Norwest Bank Minnesota, N.A.
161 N. Concord Exchange
South St. Paul, Minnesota 55075-1139

For change of name, address, or to replace lost stock certificates, write to:

Norwest Bank Minnesota, N.A. at the above address, or phone (651) 450-4064 or (800) 468-9716

SEC Form 10-K

Shareholders may receive a copy of the Company's Form 10-K without charge by writing to:

Mark A. Anderson, CFA, CMA, CFM
President and CEO
Community First Bankshares, Inc.
520 Main Avenue
Fargo, North Dakota 58124-0001

Annual Meeting

The Annual Meeting of Shareholders will be held on Tuesday, April 25, 2000, at 10 a.m. at the Holiday Inn, I-29 and 13th Ave. S., Fargo, North Dakota
58103

Independent Auditors

Ernst & Young LLP
Minneapolis, Minnesota

General Counsel

Lindquist & Vennum P.L.L.P.
Minneapolis, Minnesota

Investor Relations Counsel

Shandwick International
Minneapolis, Minnesota
(612) 832-5000

Community First Shareholder Relations

(701) 298-5601 or toll-free (888) CFB-BEST

63



Market Price Range Of Common Shares

The Company's common stock trades on the Nasdaq Stock Market® under the symbol CFBX. The following table sets forth the high and low sales prices for the Company's
common stock during the periods indicated:

|               |  | 1999  |  | 1998   
|-------------- |  | ----- |  | -------
|
|First Quarter  |  | 211/2 |  | 18     
|Second Quarter |  | 237/8 |  | 181/4  
|Third Quarter  |  | 24    |  | 1621/32
|Fourth Quarter |  | 201/2 |  | 1315/16

Shareholders

As of February 18, 2000, the Company had 2,208 shareholders of record and an estimated 9,200 additional beneficial holders whose stock was held in street name by
brokerage houses.

Dividend Policy

The Board of Directors has adopted a policy of declaring regular quarterly dividends. A dividend of 11 cents per share was paid for each quarter of 1998. A dividend of 14 cents
per share was paid for each quarter of 1999.

64



## 

Please
send me information about Community First's Dividend Reinvestment Plan.

Please
send me a Community First Investor's Kit.

|name    | 
|------- | 
|address | 
|city    | 
|state   | 

Do
you currently own your Community First Stock directly?

Or
through a broker

REPLY

Online Annual Report Available

Community
First offers an online version of our 1999 Annual Report. Visit us at www.cfbx.com for additional information about the Company.

Dividend Reinvestment Plan

The
Company maintains a Dividend Reinvestment Plan which offers shareholders a convenient and inexpensive way to increase their holdings of common stock in Community First Bankshares, Inc.

The
Plan allows shareholders to purchase shares by reinvesting dividends earned on existing shares or by making additional cash purchases. There are no sales commissions or service
fees in connection with any purchase and shareholders receive an easy-to-understand statement after every transaction.

The
plan is available to all registered shareholders of the Company. To obtain information about the Plan, just complete and return the attached postcard. No postage is necessary.



[LOGO]

520 Main Avenue

Fargo, North Dakota 58124-0001

701-298-5600

www. cfbx.com



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