**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, D.C.  20549**

 

**FORM 10-K**

 
| **(MARK ONE)** |   |                                                                                           |
|----------------|--------|------------------------------------------------------------------------------------------------|
|           |   |                                                                                           |
| **ý**     |   | **ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES EXCHANGE ACT OF 1934** |

 

**FORTHE FISCAL YEAR ENDED DECEMBER 31, 2003**

 

**OR**

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

 

**Forthe Transition periodfrom          to**

 

**COMMISSIONFILE NO.  000-19368**

 

**COMMUNITYFIRST BANKSHARES, INC.**

(Exact name of registrant as specified in itscharter)

 
| **DELAWARE**                                                    |   | **46-0391436**                         |
|-----------------------------------------------------------------|--------|----------------------------------------|
| (State or other jurisdiction of  incorporation or organization) |   | (I.R.S. Employer   Identification No.) |
|                                                            |   |                                   |
| **520 MAIN AVENUE  FARGO, ND 58124-0001**                       |
| (Address of principal executive offices and  zip code)          |
|                                                            |   |                                   |
| **(701) 298-5600**                                              |
| (Registrant’s telephone number, including  area code)      |

 

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:  **NONE**

 
| SECURITIES REGISTERED PURSUANT  TO  SECTION 12(g) OF THE ACT: |   |                                                                  |
|--------------------------------------------------------------------|--------|-----------------------------------------------------------------------|
|                                                               |   | **COMMON STOCK, $.01 PAR VALUE**

**PREFERRED STOCK PURCHASE RIGHTS** |
|                                                               |   | **8.125% CUMULATIVE CAPITAL SECURITIES,**                             |
|                                                               |   | **$25 LIQUIDATION AMOUNT(1)**                                         |
|                                                               |   | **7.60% CUMULATIVE CAPITAL SECURITIES,**                              |
|                                                               |   | **$25 LIQUIDATION AMOUNT(2)**                                         |
|                                                               |   | (Title of Class)                                                      |

 

Indicate by check mark whether the registrant (1) has filed all reportsrequired to be filed by Section 13 or 15(d) of the Securities Exchange Actof 1934 during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject to suchfiling requirements for the past 90 days.

YES ý NO o

 

Indicate by check mark if disclosure of delinquent filers pursuant toItem 405 of Regulation S-K is not contained herein, and will not be contained,to the best of registrant’s knowledge, in definitive proxy or informationstatements incorporated by reference in Part III of this Form 10-K or anyamendment to this Form 10-K.  o

 

Indicate by check mark whether the registrant is an accelerated filer(as defined in Exchange Act Rule 12b-2).

YES ý NO o

 

The aggregate market value of the Common Stock held by non-affiliatesof the Company was approximately $1,020,795,000, computed by reference to theaverage between the bid and asked sale price of the Common Stock on The NasdaqStock Market as of June 30, 2003, the last business day of theregistrant’s most recently completed second fiscal quarter.

 

As of March 10, 2004, the Company had outstanding 36,861,133shares of Common Stock, net of treasury shares.

 

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(1)       The 8.125% Cumulative Capital Securities (the“CFB Capital III Securities”) were issued by CFB Capital III (“CFB CapitalIII”), a wholly owned Delaware business trust subsidiary of the Company.  The Company has also fully andunconditionally guaranteed all of CFB Capital III’s obligations under the CFBCapital III Securities.

 

(2)       The 7.60% Cumulative Capital Securities (the“CFB Capital IV Securities”) were issued by CFB Capital IV (“CFB Capital IV”),a wholly owned Delaware business trust subsidiary of the Company.  The Company has also fully andunconditionally guaranteed all of CFB Capital IV’s obligations under the CFBCapital IV Securities.

 

**DOCUMENTS INCORPORATED BY REFERENCE**

 

Portions of the Annual Report to Stockholders for the fiscal year endedDecember 31, 2003 and the Proxy Statement for the Company’s Annual Meetingof Stockholders to be held April 20, 2004, are incorporated by referenceinto Parts II and III, respectively, of this Form 10-K, to the extent describedin such Parts.

 

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TABLE OF CONTENTS

 
| PART I         |      |
|----------------|-----------|
|           |      |
|           | ITEM 1.   | BUSINESS |   |
|           | ITEM 2.   | PROPERTIES |   |
|           | ITEM 3.   | LEGAL PROCEEDINGS |   |
|           | ITEM 4.   | SUBMISSION OF MATTERS TO A VOTE OF SECURITY  HOLDERS |   |
|           |      |   |   |
| PART II        |      |   |
|           |      |   |
|           | ITEM 5.   | MARKET  FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER  PURCHASES OF EQUITY SECURITIES |   |
|           | ITEM 6.   | SELECTED  FINANCIAL DATA |   |
|           | ITEM 7.   | MANAGEMENT’S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |   |
|           | ITEM  7A. | QUANTITATIVE  AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |   |
|           | ITEM 8.   | FINANCIAL  STATEMENTS AND SUPPLEMENTARY DATA |   |
|           | ITEM 9.   | CHANGES  IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |   |
|           | ITEM  9A. | CONTROLS  AND PROCEDURES |   |
|           |      |
| PART  III      |      |
|           |      |
|           | ITEM  10. | DIRECTORS  AND EXECUTIVE OFFICERS OF THE REGISTRANT |   |
|           | ITEM  11. | EXECUTIVE  COMPENSATION |   |
|           | ITEM  12. | SECURITY  OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER  MATTERS |   |
|           | ITEM  13. | CERTAIN  RELATIONSHIPS AND RELATED TRANSACTIONS |   |
|           | ITEM  14. | PRINCIPAL  ACCOUNTANT FEES AND SERVICES |   |
|           |      |
| PART IV        |      |
|           |      |
|           | ITEM  15. | EXHIBITS,  FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K |   |
|           |      |
| SIGNATURES     |      |
|           |      |
| CERTIFICATIONS |      |

 

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**PARTI**

 

**ITEM1.  BUSINESS**

 

**GENERAL**

 

Community First Bankshares, Inc., a Delaware corporation incorporatedin 1987 (the “Company” or “we”), is a bank holding company that, as ofDecember 31, 2003, operated through one bank subsidiary (the “bankingsubsidiary” or “bank”) with banking offices in 136 communities in Arizona, California,Colorado, Iowa, Minnesota, Nebraska, New Mexico, North Dakota, South Dakota,Utah, Wisconsin and Wyoming.  Totalassets of the Company were approximately $5.5 billion as of December 31,2003.

 

The banking offices are community banks that provide a full range ofcommercial and consumer banking services primarily to businesses andindividuals in small and medium-sized communities and the surrounding marketareas.  The Company provides its bankingoffices with the advantages of affiliation with a bank holding company, such asaccess to its lines of financial services, including trust products andadministration, insurance and investment services, data processing services,credit policy formulation and review and administration, investment managementand specialized staff support.  TheCompany grants autonomy to managers of the banking offices with respect today-to-day operations, customer service decisions and marketing.  Credit and product offerings are beingcentralized to increase efficiency.  Thebanking offices are encouraged to participate in community activities, supportlocal charities and community development, and otherwise enhance their imagesin their communities.

 

The Company has built a network of banks and a solid customer basethrough acquisitions.  The Company’splan is to increase the revenues and profit derived from that customer base byprofitably increasing the number of products and services delivered perhousehold and by expanding the channels through which customers can access thoseproducts and services.  An enhancedonline banking Web site is supplementing channels of in-person, mail, ATM, andtelephone banking.

 

**RECENT STRATEGIES ANDINITIATIVES**

 

**During 2003, the Company continued to implement a series of strategicinitiatives originally announced in 2001, designed to improve customer serviceand strengthen its position as a provider of diversified financialservices.  These initiatives includedredefining the Company’s model for delivery of services.**

 

*Redefining theCompany’s delivery model*

 

To bring product distribution focus to the Company’s extensive bankingnetwork, the Company has designated certain of its banking offices as RegionalFinancial Centers and others as Community Financial Centers.  Regional Financial Centers are located inmarkets that have shown strong commercial banking potential and offer a fullarray of financial products and services for both the corporate and retailmarkets, including banking, trust and investment products.  In some cases, Regional Financial Centersare typically aligned so that one larger banking office directs and supportssmaller banking offices in close geographic proximity.  Regional Financial Centers are managed bybank presidents.  As ofDecember 31, 2003, the Company had 92 Regional Financial Centers.

 

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Community Financial Centers are less geographically concentrated and,although they offer a complete line of financial products and services, theiremphasis is on retail banking products, investments and insurance. CommunityFinancial Centers are headed by branch managers.  As of December 31, 2003, the Company had 44 CommunityFinancial Centers.

 

During2003 the Company announced the transition of 16 Regional Financial Centers to CommunityFinancial Centers. Transitioning branches into the Community Financial Centermodel is consistent with the Company’s long-term strategic plan to specificallyaddress the client needs of its individual markets through highly targetedservice offerings. The Company expects to complete these transitions in early2004.

 

During 2003 the Companyalso announced a strategy, which consists of a market extension model, whereinthe Company intends to open additional offices in selected areas of theCompany’s current geographic footprint, that the Company believes are growth oremerging growth markets.  Additionaloffices are expected to be within the 12-state area within which the Companycurrently operates.  Services providedat the new locations will be determined by the opportunities identified in thatarea, and may include business, retail, investment sales, insurance products,mortgage products and wealth management. During 2003, the Company announced its initial five market extensionlocations in the metropolitan Minneapolis/St. Paul market.  The Company expects to open the first officeduring the first quarter of 2004 and the second office during the secondquarter of 2004.  The additionaloffices, which the Company expects to open in late 2004, are pending regulatoryapproval.  The addition of these officesis not expected to have a material impact on the Company’s financial conditionor results of operation during 2003 and 2004. The Company has announced that it plans to open 30 new offices by 2007.

** **

**TheCompany continues to focus on insurance agency acquisitions and is committed toproviding insurance in each of its markets. During 2003, through its insurance subsidiary, the Company completed thepurchase of five insurance agencies, which at the time of acquisition, had acombined annual commission revenue of approximately $1.3 million.  Acquisitions included the November 4,2003 purchase of a limited services agency in Englewood, Colorado; the October 1,2003 purchase of an insurance agency in Frisco, Colorado, with offices inFrisco, Leadville and Vail, Colorado; the June 2, 2003 purchase of anagency located in Rock Springs, Wyoming; the May 1, 2003 purchase of an agencyin Grand Junction, Colorado; and the April 1, 2003 purchase of a Thornton,Colorado agency.  On January 2,2004, the Company completed the purchase of an insurance agency in Littleton,Colorado, which had $250,000 in annual commission revenue.**

 

*Centralizing CreditOperations*

 

Under the redesigned delivery structure, the Company is implementing acentralized consumer credit process, which, when fully operational, will offera complete range of decision, organization, documentation and collectionservices for consumer lending for all banking offices from a Fargo, NorthDakota location.  As of December 31, 2003, all indirectconsumer underwriting, administration, documentation and all consumercollection have been centralized. Centralization of the underwriting, administration and documentation ofdirect consumer loans, as well as documentation of commercial and agriculturalloans, are expected to be completed by the second quarter of 2004, at whichtime the centralized delivery initiative will be completed.

 

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*Mortgage Loan Joint Venture*

 

In June 2001, theCompany, through its subsidiary bank, and Wells Fargo Home Mortgage, Inc.,through Wells Fargo Venture, LLC, a subsidiary LLC formed a joint venturemortgage company named Community First Mortgage, LLC. This joint venturemortgage company provides mortgage origination, documentation, servicingprocess and support for substantially all of the residential mortgage businessof the Company. The joint venture provides the Company access to competitivetechnology and the benefits of future technological developments, as well asexpertise in the processing and loan servicing of mortgage products. Thealliance allows the Company to expand its mortgage origination business throughaccess to a broader range of mortgage products, while improving efficiency andreducing operating, credit and capital market risks. The Company has 50%ownership and 50% voting rights over the affairs of the joint venture andrecords its investment and its continuing share of the income or loss of thejoint venture under the equity method. As a result of the formation of thejoint venture, substantially all residential mortgage originations are effectedthrough the joint venture rather than through the Company.

 

*Stock Repurchase Plan*

 

Since April 2000,the Company has conducted common stock repurchase programs providing for thesystematic repurchase of the Company’s common stock. Under these programs, theshares are purchased primarily on the open market, with timing depending uponmarket conditions. The program provides the Company with an alternativeopportunity for capital utilization. In addition, the shares acquired can beused for the issuance of common stock upon exercise of stock options, under theCompany’s compensation plans and for other purposes, including businesscombinations. On April 24, 2003, the Company approved an additional commonstock repurchase authorization wherein the Company may repurchase up to anadditional 3 million shares of its common stock outstanding.  As of December 31, 2003, the Companyhad repurchased 14.4 million shares of common stock under these plans, atprices ranging from $15.25 to $29.29. The Company repurchased 1.7 million and1.9 million shares of common stock during 2003 and 2002, at an average price of$26.93 and $25.62, respectively.  As ofDecember 31, 2003, 2.4 million shares remain available for repurchase.

 

**REVIEW OF ACQUISITIONOPPORTUNITIES**

 

As opportunities present themselves, the Company seeks to acquire banksin communities which generally have populations between 3,000 and 50,000 andare located in the Company’s key target acquisition states of Arizona,California, Colorado, Iowa, Minnesota, Nebraska, New Mexico, North

 

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Dakota, South Dakota, Utah, Wisconsin and Wyoming.  The Company takes a disciplined approach toacquisitions, requiring a certain return on equity for potential targets.  The Company reviewed several potentialtargets in 2003, and placed bids on a few opportunities.  In general, bank acquisitions have been, andcan be expected to continue to be, difficult to conclude by the Company becauseof the Company’s parameters of valuation, insistence that any acquired bank beaccretive to earnings per share within a short period of time and because otheracquirers with different valuation parameters and objectives have been and canbe expected in the foreseeable future to be prepared to make higher acquisitionbids than the Company.  Therefore, theCompany did not complete any bank acquisitions in 2003.  The Company routinely reviews acquisitionopportunities and, at any given time, may have bids outstanding or may beinvolved in negotiations with the owners of financial institutions or otherparties relative to a particular financial institution, its branches or its depositaccounts.  The Company currently has noagreements in place to acquire other banks, branches or deposit accounts.

 

**BANKING ACTIVITY**

 

The banking offices operated by the Company provide a full range ofcommercial and consumer banking services primarily to individuals andbusinesses in small and medium-sized communities and the surrounding marketareas.  The banking offices draw most oftheir deposits from, and make most of their loans within, their respective marketareas.  The banking offices owned by theCompany as of December 31, 2003, were located in Arizona, California,Colorado, Iowa, Minnesota, Nebraska, New Mexico, North Dakota, South Dakota,Utah, Wisconsin and Wyoming.

 

**COMMUNITIES SERVED**

 

As of December 31, 2003, the Company had banking offices incommunities with populations ranging from approximately 200 to 50,000, exceptfor the larger communities of Fargo, North Dakota; Denver, Englewood (a Denversuburb), and Boulder, Colorado; El Cajon (a San Diego suburb), California; SaltLake City, Utah; Cheyenne, Wyoming and Ramsey, Minnesota (a Minneapolis-St.Paul suburb).  The Company has operatedprofitably in these communities and, through the market extension strategy, hasbegun the process of opening offices in larger markets, seeking to reduce thepercentage of revenues derived from smaller markets.  Each of the banking offices seeks to expand its existingmarketing area to serve greater population. As with other small, non-metropolitan communities, many of the smallercommunities in which the banking offices presently operate have experienced orare expected to experience no growth or a decline in population.

 

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The economies of some of the smaller communities, especially those inNebraska, North Dakota and South Dakota, depend primarily on farming, farmservice and agricultural supply businesses. If reductions in population or adverse economic trends in specificcommunities result in decreased profitability in the banking offices in thosecommunities, the Company may consider selling bank assets and reducing thelevel of services provided in such communities.

 

Management believes that future growth in the business of the Companywill largely depend on successful execution of the Company’s strategies.  By offering customers a full suite offinancial products and services through a broader range of channels, theCompany will endeavor to increase the number of products sold to each customer.  Sophisticated customer analysis tools willenable the Company to target the marketing of these products moreeffectively.  In addition, the Companywill undertake Company-wide marketing initiatives to increase noninterestincome through sales of investment products, trust services and insurance.

 

**ADMINISTRATION OFBANKING OFFICES**

 

The Company provides policy and management direction and specializedstaff support while relying on bank managers for day-to-day operations,customer service decisions and community relations.  The Company is responsible for policy-related functions, such assupervisory credit review, audits, personnel policies and internal examinationactivities.  Resource allocations foradministrative support by the Company are balanced to provide adequate supportservices for each banking office’s operations. The major areas of administration are as follows:

 

CREDIT.  The Company’s lendingactivities are guided by the general loan policy established by the Board ofDirectors.  The Board of Directors ofthe banking subsidiary has established loan approval limits for each bankingoffice of the Company.  The limitsestablished for each bank location range from $5,000 to $500,000 per borrower,which is reduced to not more than $25,000 for any criticized or classifiedborrower.  Amounts in excess of the individualbanking office’s lending authority are presented to the corporate creditofficers.  The corporate credit officershave lending authority up to $1,000,000 for pass-rated borrower. Loans above$1,000,000 for pass-rated borrowers, $500,000 for watch-rated borrowers,$250,000 for classified borrowers, and $500,000 for Small BusinessAdministration government guaranteed borrowers are presented to the SeniorCredit Committee wherein approval must be unanimous.  The Senior Credit Committee is comprised of the Company’s chiefoperating officer, two executive vice president — division presidents, theexecutive vice president - credit administrative officer, and the seniorregional credit officer.

 

FINANCE.  The Board of Directorsof the Company has established policies in the areas of asset/liabilitymanagement, investments, capital expenditures, accounting procedures andcapital and dividend management. Policies are implemented and monitored for compliance by the ChiefFinancial Officer and the Asset/Liability Committee of the Company.

 

OPERATIONS.  Community FirstTechnologies, Inc. (“CFT”), a subsidiary of the Company, provides dataprocessing and operations support services to the Company by contract.  CFT’s system is designed to provide for allof the Company’s data processing needs and can be expanded to accommodatefuture growth and additional service applications.  In addition to its facilities in Fargo, North Dakota, CFT alsohas a data processing facility in Golden, Colorado. Additional expenditures forequipment, consistent with the increased data processing volumes, would likelybe necessary if any significant acquisitions occur during 2004.

 

MARKETING.  The Company’s marketing function includesmarketing communications, research and information, e-business and webdevelopment, product management, sales training and development, and operationof a customer call center.  Its primaryrole is to provide marketing support to management and sales personnel acrossthe Company’s banking, investment, insurance, mortgage and trust product lines.

 

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OTHER SERVICES.  The Companyprovides other services for the benefit of the banking offices, such as outsideprofessional services, central human resources services, benefitsadministration, marketing guidance and centralized purchasing of supplies.

 

**INSURANCE AGENCIES**

 

The Company currently owns and operates insurance agencies located in55 communities served by the bank through its bank subsidiary, Community FirstInsurance, Inc.  These agencies areprimarily engaged in the sale of property and casualty insurance and make somesales of other types of insurance, such as life, accident and crop hailinsurance.  The Company had commissionrevenue of $15.2 million in 2003.

 

**OTHER ACTIVITIES**

 

Although the Company intends to maintain its focus on the bankingbusiness in its targeted market areas, the Company will consider otherpermitted business activities as opportunities arise.  The noninterest income activities of the Company in insurance,trust and securities sales are expected to collectively continue to be amaterial source of revenue for the Company in the future.

 

The Company administers all of its trust activity through the trustdepartment in Fargo, North Dakota. Eight banking offices maintain trustdepartments, and their services are more broadly available in other Companybanking offices. Trust services are made available to customers in thoselocations through local trust officers or by appointment with members of thetrust department.

 

**In February 2001, the Company entered into an agreement withPrimeVest Financial Services, Inc. under which PrimeVest would providesecurities brokerage, insurance and investment advisory services to theCompany’s customers through PrimeVest centers located within the Company’sbanking offices.  The agreement providesfor shared sales commissions with the Company pursuant to an agreed uponcommission schedule and requires PrimeVest to perform various complianceand administrative functions related to its securities and insuranceactivities. In addition to full service brokerage, insurance and investmentadvisory services, the PrimeVest agreement also provides the Company’scustomers with online financial services to complement the Company’s focus ontechnology enhancements to improve product and service delivery.  The PrimeVest agreement had an initial termor three years and is currently subject to 30-day renewal terms.**

 

Federal bank regulation permits bank holding companies to engage inother limited activities, such as the distribution of certain types ofsecurities, and future changes in such regulation are expected to furtherexpand the types of activities in which the Company may engage.

 

**COMPETITION**

 

Commercial banking is highly competitive.  In the conduct of certain aspects of its business, the Companycompetes with other commercial banks, savings and loan institutions, issuers offixed income investments, finance corporations, credit unions and money marketfunds, and securities and insurance firms, among other types of institutions.The Company competes with these institutions in such areas as obtaining newdeposits, offering new types of services and setting loan rates and interestrates on various types of deposits, as well as other aspects of the bankingbusiness.  Management believes communityresidents and businesses prefer to deal with local banks and the Company hasgenerally been able to compete successfully in its respective communitiesbecause of the Company’s emphasis on local management and the autonomy ofmanagement in community relations.  Atthe same time, the Company

 

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provides its locations with the advantages of centralized sophisticatedadministration and the opportunity to make larger loans and diversify theirlending activity through group participations. Further, because most of the Company’s locations have a significantmarket share in the communities they serve, the Company believes the bankingoffices can, to a degree, influence deposit and loan pricing in their marketsand are subject to less competition based on deposit and loan pricing thanwould be the case in larger metropolitan markets with more competitors.  However, the Company has experienced increasedprice competition from credit unions and brokerage firms in certain marketareas in recent periods.

 

The Gramm-Leach-Bliley Financial Services Modernization Act of 1999(the “GLB Act”) permits affiliation among banks, securities firms and insurancecompanies by creating a new type of financial services company called a“financial holding company.” Financial holding companies may offer many kindsof financial services, including banking, securities underwriting, insurance(both agency and underwriting) and merchant banking. Under the GLB Act,securities firms and insurance companies that elect to become a financialholding company may acquire banks and other financial institutions. The GLB Actsignificantly changes the competitive environment in which the bank doesbusiness.  The GLB Act also imposes newrestrictions on the bank’s use of customer financial information that couldmake it difficult or costly for the Company to cross-sell banking, insuranceand investment products to its customers. See “Supervision and Regulation,”below.

 

**EMPLOYEES**

 

The Company had 2,292 employees at December 31, 2003, including1,862 full-time employees and 430 part-time employees.  Of these individuals, 231 were employed atthe holding company, 1,643 were employed at the bank, 262 were employed by CFTand 156 were employed by Community First Insurance, Inc.

 

**SUPERVISION ANDREGULATION**

 

GENERAL.  As a bank holdingcompany, the Company is subject to supervision and examination by the Board ofGovernors of the Federal Reserve System under the Bank Holding Company Act of1956, as amended (the “BHC Act”).  TheCompany’s national banking subsidiary is regulated by the Office of theComptroller of the Currency (“OCC”). The deposits of the Company’s banking subsidiary are insured by the BankInsurance Fund (“BIF”), which subjects the subsidiary to regulation by theFederal Deposit Insurance Corporation (“FDIC”).  This regulatory framework is intended to protect depositors,federal insurance funds and the banking system as a whole, and not to protectsecurity holders.  In addition to theimpact of direct regulation, commercial banks are affected significantly byactions taken by the Federal Reserve Board with respect to the money supply andcredit availability.

 

The Company has other financial services subsidiaries that are subjectto regulation by the Federal Reserve Board and other applicable federal andstate agencies.  For example, theCompany’s insurance subsidiary is subject to regulation by the state insurancelicensing and regulatory agencies having jurisdiction in each office location.

 

FINANCIAL MODERNIZATION.  OnNovember 12, 1999, the GLB Act became law.  The GLB Act repealed provisions of the Glass-Steagall Act of 1933and extensively revised the BHC Act by significantly expanding the range ofpermissible activities by banks and bank holding companies and permittingaffiliations between banking, insurance and securities organizations.  Under the GLB Act, a bank holding company maybecome certified as a financial holding company by filing a notice with theFederal Reserve Board, together with a certification that the bank holdingcompany meets certain criteria, including capital, management and CommunityReinvestment Act requirements.  Althoughthe Company currently satisfies the criteria for certification, the Company hasdetermined not to become certified as a financial holding company at thistime.  The Company continues to reviewthe implications of the GLB Act on its business activities.

 

The GLB Act and its implementing regulations impose additionalrequirements on financial institutions with respect to customer privacy bygenerally prohibiting disclosure of customer information

 

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to non-affiliated third parties unless the customer has been given theopportunity to object and has not objected to such disclosure.  Financial institutions are further requiredto disclose their privacy policies to customers annually.  Because the GLB Act does not preempt stateprivacy laws, there are risks that states will adopt additional, non-uniformrequirements, and this has occurred in California, North Dakota and NewMexico.  Other states in the Company’strade territory are also considering additional legislation.  Restrictions upon the Company’s use ofcustomer information makes it more difficult for the Company to carry out itsbusiness plan to provide more products and services to customers throughout asales-focused delivery system.

 

HOLDING COMPANY REGULATION.  TheCompany is a bank holding company within the meaning of the BHC Act.  As a result, the Company’s activities aresubject to limitations under the BHC Act, and certain transactions between theCompany and its affiliates are subject to restrictions.  Further, the Company is required to fileperiodic reports with the Federal Reserve Board and is subject to examination.The Federal Reserve Board has the enforcement authority over the Company andits subsidiaries to prevent and remedy actions that it determines are unsafe, unsoundor violate the law, including the authority to issue cease and desistorders.  The Federal Reserve hasexpressed its view that a bank holding company experiencing earnings weaknessesshould not pay cash dividends exceeding its net income or which could be fundedonly in ways that weakened the bank holding company’s financial health, such asborrowing.  Under a longstanding policyof the Federal Reserve, the Company is expected to serve as a source offinancial strength to its banking subsidiary and to commit resources to supportit.

 

Under the BHC Act, the Company must obtain prior Federal Reserve Boardapproval before the Company acquires direct or indirect ownership or control of5% or more of the voting stock of any bank or bank holding company, or theCompany merges or consolidates with another bank holding company.  Further, a bank holding company is generallyprohibited from acquiring direct or indirect ownership or control of a companythat is not a bank or bank holding company, unless (i) the Federal ReserveBoard has, by order or regulation, determined that the proposed non-bankingactivity is so closely related to banking or managing or controlling banks asto be a proper incident thereto, or (ii) the Company elects to become a“financial holding company” under the GLB Act and the proposed non-bankingactivity is a “financial activity,” within the terms of the GLB Act, or an“incidental” or “complementary” activity, as determined by order or regulationof the Federal Reserve Board and the Secretary of the Treasury.  In reviewing any application or proposal bya bank holding company, the Federal Reserve Board is required to consider thefinancial and managerial resources and future prospects of the bank holdingcompany and the banks concerned, the convenience and needs of the community tobe served, as well as the probable effect of the transaction upon competition.

 

BANK REGULATION.  The bankingsubsidiary is subject to detailed federal and state laws and regulation.  The national banking subsidiary of theCompany is primarily supervised by the OCC, a bureau of the United StatesDepartment of the Treasury.  The OCCregularly examines national banks in such areas as reserves, loans,investments, trust services, management practices, compliance with theCommunity Reinvestment Act and other aspects of bank operations andpolicies.  These examinations aredesigned for the protection of the deposit insurance system and the enforcementof federal and state laws and regulations and not for the shareholders of theCompany.  In addition to undergoingthese regular examinations, national banks must furnish quarterly reports tothe OCC containing detailed and accurate financial statements and schedules.

 

Federal and state banking laws and regulations govern, among otherthings, the scope of a bank’s business, the investments a bank may make, thereserves a bank must maintain, the loans a bank may make and the collateral ittakes, the activities of banks with respect to mergers and consolidations andthe establishment, and the closure of branches.  The OCC, in the case of national banks, is the primary federal

 

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regulatory authority under the Financial Institutions Supervisory Act,and is authorized by that Act to impose penalties, initiate civil andadministrative actions and take other steps intended to prevent a bank fromengaging in an unsafe or an unsound practice in the conduct of its business.

 

With the adoption of the Financial Institutions Reform, Recovery andEnforcement Act of 1989, the Federal Deposit Insurance Corporation ImprovementAct of 1991 (“FDICIA”) and the Interstate Banking and Branching Efficiency Actof 1994 (“IBBEA”), Congress made comprehensive revisions to the bank regulatoryand funding provisions of the Federal Deposit Insurance Act.  Under FDICIA and the IBBEA, the primaryregulatory authorities are required to take “prompt corrective action” withrespect to depository institutions insured by the FDIC that do not meet thecriteria for classification as either “well capitalized” or “adequatelycapitalized,” based upon the institution’s leverage ratio, risk-adjusted Tier Icapital ratio and risk-adjusted total capital ratio.  As of December 31, 2003, the Company’s banking subsidiarywas classified as “well capitalized.” Under-capitalized depository institutions are subject to a wide range oflimitations in operations and activities, including capital distributions,payment of management fees, and limitations upon institution growth.

 

FDICIA, as amended by IBBEA, directs each primary federal regulatoryagency to establish regulations or guidelines relating to operational andmanagerial standards.  The federalbanking agencies have published final rules implementing the safety andsoundness standards required by FDICIA in the areas of internal controls andinformation systems, internal audit systems, loan documentation, asset growth,asset quality, earnings and compensation, fees and benefits. The cost ofimplementing these standards has not been material.

 

FDIC INSURANCE.  The FDICinsures deposits of the national banking subsidiary up to the prescribed limitper depositor through the BIF, and the amount of FDIC assessments paid by eachBIF member institution is based upon its relative risk of default as measuredby regulatory capital ratios and other factors.  The BIF assessment rate currently ranges from zero to 27****cents per $100 of domestic deposits.  Under current FDIC assessment guidelines,the Company expects that it will not incur any FDIC deposit insuranceassessments during the next fiscal year, although the current system forassigning assessment risk classification to insured depository institutions isbeing reviewed by the FDIC and the deposit insurance assessments are subject tochange.  The Company is subject toseparate assessments to repay bonds (“FICO bonds”) issued in the late 1980’s torecapitalize the former Federal Savings and Loan Insurance Corporation.  The assessment for the payments on the FICObonds for the quarter beginning January 1, 2004 is 1.54 basis points forBIF-assessable deposits.  As ofDecember 31, 2003, each of the Company’s bank locations qualified for thelowest BIF assessment rate.

 

FDIC insurance on deposits may be terminated by the FDIC, after noticeand hearing, upon a finding by the FDIC that the insured bank has engaged or isengaging in unsafe or unsound practices, or is in an unsafe or unsoundcondition to continue operations as an insured bank, or has violated anyapplicable law, regulation, rule or order of or condition imposed by or writtenagreement entered into with the FDIC.

 

USA PATRIOT ACT.  OnOctober 26, 2001, the President signed the USA Patriot Act of 2001 (the“Patriot Act”) into law.  The PatriotAct contains sweeping anti-money laundering and financial transparencyprovisions, including:

 

•     Duediligence requirements for financial institutions that administer, maintain, ormanage private bank accounts or correspondent accounts for non-US persons;

 

•     Standardsfor verifying customer identification at account opening; and

 

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•     Rulesto promote cooperation among financial institutions, regulators, and lawenforcement entities in identifying parties that may be involved in terrorismor money laundering.

 

The Patriot Act now specifically requires the Federal Reserve Board,when reviewing applications by bank holding companies, to take intoconsideration the effectiveness of applicants in combating money-launderingactivities.  The Patriot Act grants theSecretary of the Treasury broad authority to establish regulations and toimpose requirements and restrictions on financial institutions’operations.  The Company will establishpolicies and procedures to ensure compliance with the Patriot Act.  The Company has determined that thus farcompliance with the Patriot Act has not had and is not expected to have amaterial impact on its operations.

 

To the extent that the foregoing discussiondescribes laws, regulations and policies, it is qualified in its entirety byreference to those provisions.  Further,such statutes, regulations and policies are continually under review byCongress and state legislatures, and federal and state regulatory agencies.  A change in statutes, regulations orregulatory policies applicable to the Company, including changes ininterpretation or implementation thereof, could have a material effect on theCompany’s business.

 

**AVAILABLE INFORMATION**

 

The Company maintains a Website atwww.CommunityFirst.com.  The Company’sannual reports on Form 10-K, quarterly reports on Form 10-Q, current reports onForm 8-K, and amendments to those reports filed or furnished pursuant toSection 13(a) or 15(d) of the Securities Exchange Act of 1934, areavailable via the Company’s website, as soon as reasonably practicable afterthese documents are filed with the SEC. To obtain copies of these reports, go to www.CommunityFirst.com andclick on “Investor Relations,” then click on “SEC Filings.”  A copy of any report filed by the Companywith the SEC will also be furnished without charge to any shareholder whorequests it in writing from Mark A. Anderson, President and Chief ExecutiveOfficer, Community First Bankshares, Inc., 520 Main Avenue, Fargo, North Dakota58124-0001.

 

You may also read and copy any materials that the Company files withthe SEC at the SEC’s Public Reference Room at 450 Fifth Street, NW, Washington, DC 20549 or by calling1-800-SEC-0330.  The SEC maintains anInternet site (http://www.sec.gov) that contains reports, proxy and informationstatements, and other information regarding issuers that file electronicallywith the SEC.

 

**FORWARD-LOOKINGSTATEMENTS**

 

This annual report on Form 10-K and other documents filed by theCompany with the SEC contain forward-looking statements under the PrivateSecurities Litigation Reform Act of 1995 that are subject to certain risks anduncertainties that could cause actual results to differ materially fromhistorical earnings or results from those presently anticipated or projected.  The Company wishes to caution readers not toplace undue reliance on any such forward-looking statements, which speak onlyas of the date made.  Forward-lookingstatements can be identified by the fact that they do not relate strictly tohistorical or current facts. They often include words such as “believe,”“expect,” “anticipate,” “intend,” “plan,” “estimate,” or words of similarmeaning, or future or conditional verbs such as “will,” “would,” “should,”“could” or “may.”

 

Forward-looking statements give the Company’s expectations orpredictions of future conditions, events or results. They are not guarantees offuture performance. By their nature, forward-looking statements are subject torisks and uncertainties. A number of factors, many of which are beyond theCompany’s control, could cause actual conditions, events or results to differsignificantly from those described in the forward-looking statements. Factorsthat could cause actual results to differ from the results discussed inforward-looking statements include, but are not limited the factors describedbelow.

 

**OurEarnings are Significantly Affected by General Business and Economic Conditions**.  Our business and financial results areaffected by general business and economic conditions in the United States andabroad. These conditions include short-term and long-term interest rates,inflation, monetary supply, fluctuations in both debt and equity capitalmarkets, and the condition of the U.S. economy, in general, and the localeconomies in which we operate.  Shouldeconomic conditions continue to worsen in the United States or abroad, demandfor loans and other products and services we offer could decrease

 

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and the number of borrowers who fail to repay their loans couldincrease. In addition, interest rates in the United States have been at theirlowest levels in decades and if interest rates now rise, demand for loans coulddecrease.  Banks depend largely on therelationship between the cost of funds, primarily deposits, and the yield onearning assets.  This relationship,known as the interest rate spread, is subject to fluctuation and is affected byeconomic and competitive factors that influence interest rates, including thevolume and mix of interest-earning assets and interest-bearing liabilities, andthe level of non-performing assets.  Ourperformance is subject to interest rate risk to the degree that ourinterest-bearing liabilities reprice or mature more slowly or more rapidly oron a different basis than our interest earning assets.  Although we have an asset liabilitymanagement strategy designed to control our risk from changes in marketinterest rates, rapid and sustained changes in interest rates still could havean adverse effect on our profitability. At December 31, 2003, based on the difference between repricingassets and repricing liabilities, we were liability sensitive, which means thatour liabilities (including the deposits we hold) would reprice more quicklythan our assets as interest rates change. This means that a rising interest rate environment would increase ourinterest expense faster than what we might earn on our earning assets.

 

**CreditLosses are Inherent in Our Business, and Our Allowance for Loan Losses May beInadequate to Cover Actual Loan Losses.**  Every loan carries a risk ofnon-payment.  We have adoptedunderwriting and credit monitoring procedures and credit policies, includingthe establishment and review of the allowance for credit losses, that webelieve are appropriate to minimize this risk by assessing the likelihood ofnonperformance, tracking loan performance and diversifying our loanportfolio.  We make a number ofassumptions and judgments about the collectibility of our loan portfolio whendetermining the amount of the loan loss allowance.  We determine the amount of the allowance through a periodicreview and consideration of several factors, including: the quality, size anddiversity of our loan portfolio; an evaluation of non-performing loans; ourhistorical loan loss experience; and the amount and quality of collateral,including guarantees, securing the loans.

 

If our assumptions are wrong, our allowance for loan losses may beinsufficient to cover our losses and have an adverse effect on our operatingresults and we may need to increase our allowance in the future.  During 2001, we modified the methodology weuse to allocate the allowance within individual loan portfolios.  These policies and procedures, however, maynot prevent unexpected losses and substantial allocations to our allowance forloan losses that could materially adversely affect our results ofoperations.  In the first quarter of2001 we recorded a special loan loss provision to maintain our loan loss reserves.  We cannot assure you that we will not needto record similar provisions in the future.

 

**TheFinancial Services Industry is Highly Competitive**.  The competition among financial servicescompanies to attract and retain customers is intense. Customer loyalty can beeasily influenced by a competitor’s new products, especially offerings thatprovide cost savings to the customer. Some of our competitors may be better able to provide a wider range ofproducts and services. We expect these competitive pressures to increase due tolegislative, regulatory and technological changes and the continuedconsolidation in the financial services industry. Technology has loweredbarriers to entry and made it possible for non-banks to offer products andservices traditionally provided by banks. Also, investment banks and insurance companies are competing with banksin traditional banking businesses such as lending and consumer banking. Many ofour competitors are larger and better capitalized than we are.  Many of our competitors may also have fewerregulatory constraints and lower cost structures.  We expect that the consolidation of the financial servicesindustry will result in larger, better-capitalized companies offering a widearray of financial services and products. The GLB Act permits affiliation among banks, securities firms andinsurance companies by creating a new type of financial services company calleda “financial holding company.” Financial holding companies may offer many kindsof financial services, including banking, securities underwriting, insurance(both agency and underwriting) and merchant banking. Under the GLB

 

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Act, securities firms and insurance companies that elect to become afinancial holding company may acquire banks and other financial institutions.The GLB Act significantly changes the competitive environment in which we dobusiness.  The GLB Act also imposes newrestrictions on our use of customer financial information that could make it difficultor costly for us to cross-sell banking, insurance and investment products toour customers.

 

**OurEarnings are Significantly Affected by the Fiscal and Monetary Policies of theFederal Government and its Agencies**. The policies ofthe Federal Reserve Board impact us significantly.  The Federal Reserve Board regulates the supply of money andcredit in the United States. Its policies directly and indirectly influence therate of interest that commercial banks pay on their interest-bearing depositsand can affect the value of financial instruments we hold. Those policies alsodetermine to a significant degree our cost of funds for lending and investing.Changes in those policies are beyond our control and are hard to predict.Federal Reserve Board policies can also affect our borrowers by increasinginterest rates, potentially increasing the risk that they may fail to repaytheir loans.

 

**Maintainingor Increasing our Market Share Depends on Market Acceptance of New Products andServices**.  Oursuccess depends, in part, on our ability to develop, and gain customeracceptance of, new products and services. Financial services companies face increasing pressure to provideproducts and services at lower prices. This can reduce our net interest marginand revenues from our fee-based products and services.  In addition, the widespread adoption of newtechnologies, including Internet-based services, could require us to makesubstantial expenditures to modify or adapt our existing products and services.We may not be able to successfully introduce new products and services, achievemarket acceptance of our products and services, or develop and maintain loyalcustomers.

 

**Changesin the regulatory structure or the statutes or regulations that apply to uscould have a material impact on our operations**.  We are subject to extensive regulation,supervision and examination by the Federal Reserve Board and the Office of theComptroller of the Currency. The supervision, regulation and examination ofbanks and bank holding companies by bank regulatory agencies are intendedprimarily for the protection of depositors rather than the shareholders ofthese entities. Our success depends on our continued ability to comply withthese regulations. Some of these regulations may increase our costs and thusplace non-bank financial institutions in stronger, more competitive positions.Regulatory authorities have extensive discretion in carrying out theirsupervisory and enforcement responsibilities. They have also implementedregulations that have increased capital requirements, increased insurancepremiums, required approval of acquisitions and other changes of control, andresulted in increased administrative and professional expenses. Any change inthe existing regulatory structure or the applicable statutes or regulations couldhave a material impact on our operations. Additional legislation andregulations may be enacted or adopted in the future which could significantlyaffect our powers, authority and operations, which in turn could have amaterial effect on our operations.

 

**Weare dependent upon key executives who would be difficult to replace.**  Our continued profitability is dependent onour senior management team.  We wouldlikely have a difficult transition period if the services of any of our seniorexecutives were lost for any reason. Recruiting talent in the competitive financial services industry isdifficult generally.  There is noassurance that we will be able to retain our current key executives or attractadditional qualified key persons as needed.

 

Other factors, such as credit, market, operational, liquidity, interestrate, governmental regulation and other risks are described elsewhere in thisreport. Forward-looking statements speak only as of the date they are made. TheCompany does not undertake to update forward-looking statements to reflectcircumstances or events that occur after the date the forward-lookingstatements are made.

 

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**EXECUTIVE OFFICERS**

 

The executive officers of the Company are as follows:

 
| **Name**            |   | **Age** |   | **Position**                                                                                                                            |
|---------------------|--------|---------|--------|-----------------------------------------------------------------------------------------------------------------------------------------|
|                |   |    |   |                                                                                                                                    |
| Mark A. Anderson    |   | 46      |   | President and Chief Executive Officer                                                                                                   |
|                |   |    |   |                                                                                                                                    |
| Ronald K. Strand    |   | 57      |   | Vice Chairman – Chief Operating Officer                                                                                            |
|                |   |    |   |                                                                                                                                    |
| Craig A. Weiss      |   | 42      |   | Executive Vice President – Chief Financial  Officer                                                       |
|                |   |    |   |                                                                                                                                    |
| Thomas R. Anderson  |   | 48      |   | Executive Vice President – Treasury, Treasurer  and Chief Investment Officer                                   |
|                |   |    |   |                                                                                                                                    |
| Dan M. Fisher       |   | 49      |   | Executive Vice President – Chief Information Officer, President and  Chief Executive Officer of Community First Technologies, Inc. |
|                |   |    |   |                                                                                                                                    |
| Bruce A. Heysse     |   | 52      |   | Executive Vice President – Senior Credit Officer                                                                                   |
|                |   |    |   |                                                                                                                                    |
| Gary A. Knutson     |   | 56      |   | Executive Vice President – Eastern/California Division President                                                                   |
|                |   |    |   |                                                                                                                                    |
| Charles A. Mausbach |   | 52      |   | Executive Vice President – Western Region President                                                                                |
|                |   |    |   |                                                                                                                                    |
| Bradley J. Rasmus   |   | 42      |   | Executive Vice President – Division President                                                                                      |
|                |   |    |   |                                                                                                                                    |
| Thomas J. Rohleder  |   | 39      |   | Senior Vice President – General Counsel and Corporate Secretary                                                                    |
|                |   |    |   |                                                                                                                                    |
| Patricia J. Staples |   | 48      |   | Executive Vice President – Director of Market Development                                                                          |
|                |   |    |   |                                                                                                                                    |
| Douglas G. Vang     |   | 45      |   | Executive Vice President – Director of Human Resources                                                                             |

 

Mark A. Anderson was appointed President and Chief Executive Officer ofthe Company on March 1, 2000. Prior to this time, he was Vice Chairman - Corporate Services of theCompany from October 1998 to March 2000.  He also served as Chief Financial Officer, Secretary andTreasurer of the Company since the Company began operation in 1987 toMarch 2000, and he was Chief Information Officer from****February 1998 toMarch 2000.  He was Vice Presidentand Regional Controller for First Bank System, now known as U.S. Bancorp, from1984 to 1987.  From 1979 to 1984, heheld various

 

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positions with U.S. Bancorp-affiliated banks in the finance and creditanalysis areas.  Mr. Anderson is aChartered Financial Analyst and a Certified Management Accountant.

 

Ronald K. Strand was appointed Vice Chairman - Chief Operating Officerof the Company on March 1, 2000. He had been Vice Chairman - Financial Services Division sinceOctober 1998.  Mr. Strand wasExecutive Vice President - Banking Group from February 1993 toOctober 1998, and was previously Senior Vice President and Region Managerfor South Dakota and North Dakota from January 1991 to February 1993.  Mr. Strand had been Vice President andRegional Manager for the Company and President, Chief Executive Officer and adirector of the Company’s affiliate bank in Wahpeton, North Dakota from 1988 toJanuary 1991.  Prior to hisaffiliation with the Company, he served as President and Chief ExecutiveOfficer of Norwest Bank of North Dakota, N.A., Wahpeton, from 1985 until1988.  He was employed by Norwest for atotal of 15 years, having previously worked in Norwest banks in Jamestown,North Dakota, and Moorhead, Minnesota.

 

Craig A. Weiss was appointed Chief Financial Officer on March 1,2000 and Executive Vice President – Chief Financial Officer inAugust 2001.  He was Senior VicePresident - Finance of the Company from February 1998 toMarch 2000.  He also served asVice  President - Finance of the Companyfrom 1988 to 1998 and Finance and Accounting Manager from 1987 to 1988.  Prior to 1987, he was employed by First BankSystem, most recently as a Regional Financial Analyst.  Mr. Weiss is a Certified Public Accountant.

 

Thomas R. Anderson was appointed Treasurer of the Company onMarch 1, 2000 and has been Executive Vice President - Treasury sinceAugust 2001.  From 1997 to 2001, hewas Senior Vice President - Treasury. He was previously Vice President/Funds Manager of the Company from 1988to 1997 and Funds Management Officer from 1987 to 1988.  Prior to 1987, he was employed by NorwestCorporation for seven years, most recently as a Senior Financial Analyst.

 

Dan M. Fisher was appointed Chief Information Officer of the Company onMarch 1, 2000 and Executive Vice President – Chief Information Officer inFebruary 2004.  He has beenPresident and Chief Executive Officer of Community First Technologies, Inc. (formerlyknown as Community First Service Corporation) since October 1998 andpreviously served as Executive Vice President - Bank Operations at thissubsidiary.  Mr. Fisher was DistrictManager and Senior Vice President of Fiserv Inc., a financial services data anditem processor from October 1996 to September 1998.  Prior to that, he served as Senior VicePresident and Operations Manager of Norwest Bank Texas, N.A. fromAugust 1988 to October 1996.

 

Bruce A. Heysse was appointed Executive Vice President and SeniorCredit Officer in February 2003. He was Senior Vice President – Credit Administration fromFebruary 2001 to February 2003. Prior to that time, he served as Senior Vice President – Acquisitionsand Integration from July 1996 to January 2001. He was Senior VicePresident and Integration Manager of the Company from November 1995 toJune 1996.  He was Vice Presidentand Senior Credit Officer of the Company from 1987 to November 1995.  He began his banking career at the Company’saffiliate bank in Wahpeton, North Dakota, and had a total of 11 years ofbanking experience prior to joining the Company.

 

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Gary A. Knutson has been Executive Vice President – Eastern/CaliforniaDivision President since August, 2001. He previously was Executive Vice President – Division President fromJuly 1996 to August 2001.  Heserved as Senior Vice President and Western Manager from September 1993 toJuly 1996.  He was President, ChiefExecutive Officer and a director of the Company’s affiliate bank in Wahpeton,North Dakota from January 1991 to September 1993.  He began his banking career at the Company’saffiliate bank in Lidgerwood, North Dakota, and had a total of 14 years ofbanking experience prior to joining the Company.

 

Charles A. Mausbach has been Executive Vice President-Western DivisionPresident since August 2001.  FromMarch 1998 to August 2001 he was Senior Vice President - SouthwesternRegion President.  He served asPresident of Community First National Bank, Worthington, Minnesota fromOctober 1992 to February 1998 and President of Community FirstNational Bank, Windom, Minnesota from March 1991 toOctober 1992.  He began his bankingcareer at the Company’s affiliate bank in Wahpeton, North Dakota and had atotal of 18 years of banking experience prior to joining the Company.

 

Bradley J. Rasmus was appointed Executive Vice President and DivisionPresident in February 2003.  He wasSenior Vice President – Community Financial Center President fromFebruary 2001 to February 2003. Prior to that time, he was Senior Vice President - Financial Servicesfrom February 1999 to January 2001. He was previously Vice President & Financial Services Sales Managerfrom 1995 to 1999.  From 1992 until1995, he was Regional Vice President of Account Development for Richard LeahyCorporation, a financial services company.

 

Thomas J. Rohleder has been Vice President — General Counsel andCorporate Secretary since February 2003 and was appointed Senior Vice President– General Counsel and Corporate Secretary in February 2004.  He was Vice President of Risk Managementfrom August 2001 to February 2003. Previously, he held legal and administrative positions at Banner HealthSystem, formerly of Fargo, North Dakota, and at Mayo Clinic, in Rochester,Minnesota. Mr. Rohleder holds a law degree and a masters degree.

 

Patricia J. Staples was appointed Executive Vice President – MarketDevelopment in February 2004.  Shewas Senior Vice President – Director of Market Development from July 1994to February 2004.  Previously, Ms.Staples was employed as the public relations manager with MeritCare HealthSystem in Fargo, North Dakota for 10 years.

 

Douglas G. Vang was appointed Executive Vice President – HumanResources in February 2004.  He wasSenior Vice President – Director of Human Resources from April 2001 toFebruary 2004.  From 1995 to 2001,he served in various senior executive officer positions, including Senior VicePresident, Chief Operating Officer and Division President for Banner HealthSystem, a nonprofit health care system. Mr. Vang is an attorney and certified public accountant.

 

ELECTION.  The Company’sofficers are elected by the Board of Directors.  The officers serve until their successors are elected or untiltheir earlier resignation, removal or death.

 

**ITEM2.  PROPERTIES**

 

The Company maintains its offices at 520 Main Avenue, Fargo, NorthDakota, consisting of approximately 55,000 square feet.  The Company believes these facilities willbe adequate for the foreseeable future. The Company also utilizes office space at the banking subsidiary’soffices located in Denver, Colorado and Cheyenne, Wyoming.  The banking subsidiary owns many of itsoffices and those of its branches, and these facilities range in size fromapproximately 1,200 to 36,000 square feet. In 1997

 

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The Company constructed, and now owns, a 47,000 square foot two-storybuilding in Fargo, North Dakota, which is leased to CFT.  The Company also leases a 15,000 square footcredit service center in Fargo, North Dakota, at an annual rental rate of$304,000.

 

**ITEM 3.  LEGAL PROCEEDINGS**

 

From time to time, the Company and its subsidiaries are subject tovarious legal actions and proceedings in the normal course of business, some ofwhich may involve substantial claims for compensatory damages.  In some cases, these actions and proceedingsrelate in whole or in part to activities of banks prior to their acquisitionand may be covered by agreements of former owners of these banks to indemnifythe Company.  Although litigation issubject to many uncertainties and the ultimate exposure with respect to currentmatters cannot be ascertained, management does not believe that the finaloutcome will have a material adverse effect on the financial condition of theCompany.

 

**ITEM4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**

 

None.

 

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**PARTII**

**ITEM 5.**   MARKET FORREGISTRANT’S COMMON EQUITY and RELATED STOCKHOLDER MATTERS

 

**MARKET FOR REGISTRANT’S COMMON EQUITY**

 

Information as to the principal market on which the Company’s CommonStock is traded, market price information for the Common Stock of the Company,the approximate number of holders of record as of the most recent practicabledate, and the Company’s dividend policy is incorporated herein by reference tothe inside back cover of the 2003 Annual Report to Stockholders (the “2003Annual Report”) attached hereto as Exhibit 13.1.

 

**ITEM 6.****  SELECTED FINANCIAL DATA**

 

Selected financial data for the five years ended December 31,2003, consisting of “Consolidated Statement of Condition — Five-Year Summary”on page 38 of the “Financial Review” section of the 2003 Annual Report and“Consolidated Statement of Income-Five Year Summary” on page 39 of the“Financial Review” section of the 2003 Annual Report are incorporatedherein by reference to such information included in the 2003 Annual Reportattached hereto as Exhibit 13.1.

 

**ITEM 7.**   MANAGEMENT’S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Management’s Discussion and Analysis of Financial Condition and Resultsof Operations on pages 9 through 22 of the “Financial Review” section ofthe 2003 Annual Report is incorporated hereby by reference, and attached heretoas Exhibit 13.1.

 

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**ITEM 7A.****  QUANTITATIVEAND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**

 

The information set forth on pages 11 through 22 of the “FinancialReview” section of the 2003 Annual Report under the captions “Management’sDiscussion and Analysis - Results of Operations, Financial Condition and Assetand Liability Management” is incorporated herein by reference, and attachedhereto as Exhibit 13.1.

 

**ITEM 8.****  FINANCIALSTATEMENTS AND SUPPLEMENTARY DATA**

 

The Consolidated Statements of Financial Condition of the Company as ofDecember 31, 2003 and 2002, and the related Consolidated Statements ofIncome, Comprehensive Income, Shareholders’ Equity and Cash Flows for each ofthe three years ended December 31, 2003, 2002, and 2001, the Notes to theConsolidated Financial Statements and the Report of Ernst & Young LLP,independent auditors, contained in the Company’s 2003 Annual Report on pages 23through 38 of the section entitled “Financial Review” are incorporatedherein by reference, and attached hereto as Exhibit 13.1.

 

**ITEM 9.**   CHANGES IN ANDDISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

 

None.

 

**ITEM 9A.****  CONTROLSAND PROCEDURES**

 

TheCompany, with the participation of management, including the Chief ExecutiveOfficer (“CEO”) and Chief Financial Officer (“CFO”), evaluated theeffectiveness of the Company’s disclosure controls and procedures as of the endof the period covered by this report. Disclosure controls and procedures aredesigned to provide a reasonable level of assurance that information requiredto be disclosed in the Company’s reports under the Securities and Exchange Actof 1934 is recorded and reported within the appropriate time periods. Basedupon that review, the CEO and CFO concluded that the Company’ s disclosurecontrols and procedures are effective. During the period covered by thisreport, there have been no changes in internal control over financial reportingthat have materially affected, or are reasonably likely to materially affect,the Company’s internal control over financial reporting.

 

**PARTIII**

 

**ITEM 10.****  DIRECTORSAND EXECUTIVE OFFICERS OF THE REGISTRANT**

 

The information set forth in the Company’s Proxy Statement for theAnnual Meeting of Stockholders to be held April 20, 2004, as filed with theSecurities and Exchange Commission under the captions “Proposal One: Electionof Directors,” “Corporate Governance and Board Matters — Audit Committee,” and“Section 16(a) Beneficial Ownership Reporting Compliance” is incorporatedherein by reference.  Informationregarding the executive officers of the Company is included under a separatecaption in Part I of this Form 10-K.

 

Theinformation set forth in the Proxy Statement for the Annual Meeting ofStockholders to be held on April 20, 2004, under the caption “CorporateGovernance and Board Matters — Code of Ethics and Business Conduct” isincorporated herein by reference, and the Code of Ethics and Business Conductis attached hereto as Exhibit 14.1.

 

**ITEM 11.****  EXECUTIVECOMPENSATION**

 

The information set forth in the Proxy Statement for the Annual Meetingof Stockholders to be held April 20, 2004, under the caption “ExecutiveCompensation and Other Information” is incorporated herein by reference, exceptthat information under the captions “Compensation Committee Report on ExecutiveCompensation,” “Comparative Stock Performance” and “Compensation CommitteeInterlocks” is not so incorporated.

 

**ITEM 12.**     **SECURITYOWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDERMATTERS**

 

The information set forth in the Proxy Statement for the Annual Meetingof Stockholders to be held April 20, 2004, under the caption “SecurityOwnership of Certain Beneficial Owners and Management” is incorporated hereinby reference.

 

**EQUITY COMPENSATION PLAN INFORMATION**

 

The following table provides information as of December 31, 2003with respect to the shares of the Company’s Common Stock that may be issuedunder its equity compensation plans.

 

| **Plan category**                                           |   | **Number of securities to be issued upon exercise of  outstanding options, warrants and rights** |   | **Weighted-average exercise price of outstanding  options, warrants and rights** |   | **Number of securities remaining available for future  Issuance under equity compensation plans (excluding securities reflected in  column (a))** |    |
|-------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------|---------|
|                                                        |   | **(a)**                                                                                          |   | **(b)**                                                                          |   | **(c)**                                                                                                                                           |    |
| Equity compensation Plans approved by  security holders(1)  |   | 2,533,949                                                                                        |   | $                                                                                | 22.52  |                                                                                                                                              | 691,938 |   |
| Equity compensation plans not approved by  security holders |   | - 0 -                                                                                            |   | - 0 -                                                                            |   | - 0 -                                                                                                                                             |    |
| Total                                                       |   | 2,533,949                                                                                        |   | $                                                                                | 22.52  |                                                                                                                                              | 691,938 |   |

 

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(1)       The Company’s 1996 Stock Option Plan wasoriginally approved by the stockholders in 1996, and amended and restated bythe Board of Directors in 2003 and subsequently approved by the stockholders atthe Annual Meeting of Stockholders in April 2003.

 

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**ITEM 13.****  CERTAINRELATIONSHIPS AND RELATED TRANSACTIONS**

 

The information set forth in the Proxy Statement for the Annual Meetingof Stockholders to be held April 20, 2004, under the caption “CertainTransactions” is incorporated herein by reference.

 

**ITEM 14.****  PRINCIPALACCOUNTANT FEES AND SERVICES**

 

The information set forth in the Proxy Statement for the Annual Meetingof Stockholders to be held on April 20, 2004, under the Captions “ProposalTwo: Appointment of Independent Auditors — Principal Accountant Fees andServices” and “—Audit Committee Pre-Approval Policies and Procedures” isincorporated herein by reference.

 

**PARTIV**

 

**ITEM 15. **** EXHIBITS, FINANCIAL STATEMENT SCHEDULES ANDREPORTS ON FORM 8-K**

 

(a)       DOCUMENTSFILED AS PART OF THIS FORM 10-K:

 

1.        FINANCIAL STATEMENTS.  See Item 8 above and Exhibit 13.1.

 

2.        FINANCIAL STATEMENT SCHEDULES.  All financial statement schedules areomitted as the required information is inapplicable or the information ispresented in the financial statements or related notes.

 

3.        PRO FORMA FINANCIAL INFORMATION.  None.

 

(b)       REPORTSON FORM 8-K.

 

Duringthe quarter ended December 31, 2003, the Company furnished to or filedwith the Commission the following Current Reports on Form 8-K:

 

•    On October 16,2003, the Company furnished a Current Report under Item 12 on Form8-K related to its press release dated October 16, 2003announcing the Company’s financial results for the quarterended September 30, 2003.

 

•    OnOctober 21, 2003, the Company filed a Current Report under Item 11 on Form8-K related to the Notice of Termination provided to the Company’s employeesthat the black out period under the Company’s 401(k) Retirement Plan terminatedon October 21, 2003.

 

•    On October 28,2003, the Company furnished a Current Report under Item 9 on Form 8-Krelated to a slide presentation that the Company’s Chief Executive Officerdelivered at an investor conference on October 28, 2003.

 

•    OnDecember 3, 2003, the Company filed a Current Report under Item 5 on Form8-K related to a press release dated December 3, 2003 reporting theresignation of Dennis Mathisen from the Board of Directors of the Company.

 

19

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(c)       EXHIBITS.

 
| **Exhibit Number** |   | **Description**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|--------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|               |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 3.1                |   | Restated Certificate of Incorporation of the Registrant (incorporated  by reference to Exhibit 3.1 to the Registrant’s Annual Report on Form 10-K  for the fiscal year ended December 31, 1996), as amended by a  Certificate of Amendment to the Registrant’s Certificate of Incorporation as  filed with the Delaware Secretary of State on May 7, 1998 (incorporated by  reference to Exhibit 3.1 to the Registrant’s Annual Report on Form 10-K, as  amended, for the fiscal year ended December 31, 1998 [the “1998 Form  10-K”]). |
|               |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 3.2                |   | Bylaws of the Registrant (incorporated by reference to Exhibit 3.2 to  the Registrant’s Registration Statement on Form S-1 [File No. 33-41246], as  declared effective by the Commission on August 13, 1991).                                                                                                                                                                                                                                                                                                                                                    |
|               |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 4.1                |   | Certificate of Designations, Preferences and Rights of Series A  Junior Participating Preferred Stock of the Registrant (incorporated by  reference to Exhibit A to Exhibit 1 to the Registrant’s Registration  Statement on Form 8-A, filed with the Commission on January 9, 1995 and  as amended on December 6, 2002 [the “Form 8-A”]).                                                                                                                                                                                                        |
|               |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 4.2                |   | Form of Rights Agreement dated as of January 5, 1995, between  the Registrant and Norwest Bank Minnesota, National Association (“Norwest  Bank”), which includes as Exhibit B thereto the form of Rights Certificate as  amended and restated as of August 13, 2002 (incorporated by reference to  Exhibit 1 to the Form 8-A.)                                                                                                                                                                                                                         |
|               |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 4.3                |   | Indenture dated June 24, 1997 relating to the Registrant’s 7.30%  Subordinated Notes Due 2004 between the Registrant and Norwest Bank, as trustee  (incorporated by reference to Exhibit 4.1  to the Registrant’s Registration Statement on Form S-4 [File No. 333-36091]  as declared effective by the Commission on November 10, 1997).                                                                                                                                                                                                         |

 

20

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| 4.4    |   | Subordinated Indenture dated December 10, 1997, between the  Registrant and Wilmington Trust Company, as Indenture Trustee, including form  of Junior Subordinated Indenture (incorporated by reference to Exhibit 4.1 to  the Registrant’s Registration Statement on Form S-3 [File No. 333-37521] as  declared effective by the Commission on December 4, 1997 [the “1997 CFB  Capital II Form S-3”]).                                                            |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 4.5    |   | Amended and Restated Trust Agreement of CFB Capital II dated  December 10, 1997, including Form of Capital Security Certificate of CFB  Capital II (incorporated by reference to Exhibit 4.5 to the 1997 CFB Capital  II Form S-3).                                                                                                                                                                                                                                                     |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 4.6    |   | Capital Securities Guarantee Agreement dated as of December 10,  1997, between the Registrant and Wilmington Trust Company as Trustee  (incorporated by reference to Exhibit 4.7 to the 1997 CFB Capital II Form  S-3).                                                                                                                                                                                                                                                                 |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 4.7    |   | Subordinated Indenture dated March 27, 2002 between the  Registrant and Wilmington Trust Company, as Indenture Trustee, including form  of Junior Subordinated Debenture (incorporated by reference to Exhibit 4.15  to the Registrant’s Registration Statement on Form S-3 [File No. 333-83240]  filed with the Commission on February 22, 2002 and delivered effective  by the Commission on March 14, 2002 [the “2002 CFB Capital III S-3”]).               |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 4.8    |   | Amended and Restated Trust Agreement of CFB Capital III dated  March 27, 2002, including Form of Capital Security Certificate of CFB  Capital III (incorporated by reference to Exhibit 4.3 to the Registrant’s  Form 8-K filed with the Commission on March 28, 2002 [the “2002 CFB  Capital III 8-K”]).                                                                                                                                                           |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 4.9    |   | Capital Securities Guarantee Agreement dated as of March 27,  2002, between the Registrant and Wilmington Trust Company as Trustee  (incorporated by reference to Exhibit 4.5 to the 2002 CFB Capital III 8-K).                                                                                                                                                                                                                                                                         |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 4.10   |   | Subordinated Indenture dated March 4, 2003 between the  Registrant and Wilmington Trust Company as Trustee including form of Junior  Subordinated Debenture (incorporated by reference to Exhibit 4.15 to the 2002  CFB Capital III S-3).                                                                                                                                                                                                                                               |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 4.11   |   | Amended and Restated Trust Agreement of CFB Capital IV dated  March 4, 2003 including form of Capital Security Certificate of CFB  Capital IV (incorporated by reference to Exhibit 4.3 of the Registrant’s Form  8-K filed with the Commission on March 6, 2003 [the “2003 CFB Capital IV  8-K”]).                                                                                                                                                                 |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 4.12   |   | Capital Securities Guarantee Agreement dated as of March 4, 2003  between the Registrant and Wilmington Trust Company as Trustee (incorporated  by reference to Exhibit 4.5 to the 2003 CFB Capital IV 8-K).                                                                                                                                                                                                                                                                            |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 10.1   |   | 2003 Annual Incentive Plan for Holding Company Management.*                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 10.2   |   | Amended and Restated 1996 Stock Option Plan as approved by the Board  of Directors on February 6, 1996, and amended by resolutions of the Board of  Directors on February 1, 1999 and February 4, 2003, and approved by the  Company’s stockholders on April 22, 2003 (incorporated by reference to  Appendix B to the Company’s Proxy Statement for the 2003 Annual  Meeting of Stockholders held on April 22, 2003, as filed with the  Commission on March 13, 2003).* |

 

21

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| 10.3    |   | Form of Tax Sharing Agreement between the Registrant and each of its  subsidiary Banks (incorporated by reference to Exhibit 10.3 to the  Registrant’s Annual Report on Form 10-K for the year ended December 31,  1995 [the “1995 Form 10-K”]).                                                                                                                                                                                                                                 |
|---------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 10.4    |   | Form of Service Agreement for Data Processing between Community First  Service Corporation and each of the subsidiary Banks of the Registrant  (incorporated by reference to Exhibit 10.4 to the 1995 Form 10-K).                                                                                                                                                                                                                                                                                    |
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 10.5    |   | Form of Bank Services Agreement between the Registrant and each of  its subsidiary Banks (incorporated by reference to Exhibit 10.5 to the 1995  Form 10-K).                                                                                                                                                                                                                                                                                                                                         |
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 10.6    |   | Form of Agency Agreement between the Registrant and each of its subsidiary  Banks, and Assignment of Agency Agreement and Second Assignment of Agency  Agreement, which assign the Registrant’s interest in the Agency Agreement to  Community First Financial, Inc. (relating to the Registrant’s subsidiary  Banks) (incorporated by reference to Exhibit 10.6 to the 1995 Form 10-K).                                                                                                   |
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 10.7    |   | Lease dated April 27, 1993, between Community First Properties,  Inc. (formerly Fargo Tower Partners) and the Registrant (incorporated by  reference to Exhibit 10.11 to the Registrant’s Annual Report on Form 10-K for  the year ended December 31, 1994).                                                                                                                                                                                                                          |
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 10.8    |   | Promissory Note dated July 14, 1997 (Term Note) in the principal  amount of $30,000,000, issued to Norwest Bank, as Agent, on behalf of Harris  Trust and Savings Bank (“Harris”), Bank of America National Trust and Savings  Association (“Bank of America”) and Norwest (incorporated by reference to  Exhibit 10.8 to Registrant’s Amendment No. 1 to its Annual Report on Form  10-K for the year ended December 21, 1997 [the “1997 Form 10-K”]). |
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 10.9    |   | Promissory Notes dated July 14, 1997 (Current Notes), each in  the principal amount of $8,333,333.33, issued to each of Harris, Bank of  America and Norwest Bank (incorporated by reference to Exhibit 10.9 to the  1997 Form 10-K).                                                                                                                                                                                                                                                           |
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 10.10   |   | Credit Agreement dated July 14, 1997 among the Company, Harris,  Bank of America, Norwest Bank as a lender, and Norwest Bank as Agent  (incorporated by reference to Exhibit 10.10   to the 1997 Form 10-K).                                                                                                                                                                                                                                                                               |
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 10.10.1 |   | Amended and Restated Credit Agreement dated as of April 30, 1999  between the Company, Harris and Wells Fargo National Association  (incorporated by reference to Exhibit 10.10.1 to the Registrant’s Annual  Report on Form 10-K for the year ended December 31, 2000 [the “2000 Form  10-K”]).                                                                                                                                                                            |
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 10.10.2 |   | First Amendment dated April 21, 2000 to Amended and Restated  Credit Agreement dated April 30, 1999 between the Company and Harris and  Wells Fargo National Association (incorporated by reference to Exhibit  10.10.2 to the 2000 Form 10-K).                                                                                                                                                                                                                                            |
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 10.10.3 |   | Second Amendment dated December 22, 2000 to Amended and Restated  Credit Agreement dated as of April 30, 1999 between the Company and  Harris and Wells Fargo National Association (incorporated by reference to  Exhibit 10.10.3 to the 2000 Form 10-K).                                                                                                                                                                                                                                  |

 

22

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| 10.10.4 |   | Current note dated December 22, 2000 in the principal amount of  $35,000,000 issued to Wells Fargo Bank Minnesota, National Association  (incorporated by reference to Exhibit 10.10.4 to the 2000 Form 10-K).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|---------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 10.10.5 |   | Sixth Amendment dated October 30, 2003 to Credit Agreement with US  Bank dated as of October 30, 1998.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 10.11   |   | Form of Indemnification Agreement entered into by and between the  Registrant and the Registrant’s officers and directors (incorporated by reference  to Exhibit 10.33 to Registrant’s Annual Report on Form 10-K for the year  ended December 31, 1992).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 10.12   |   | Platinum Overdraft Management Agreement between Alex Sheshunoff  Management Services, L.P. and Community First Bankshares, Inc., effective as  of September 26, 2003 (pursuant to Rule 24b-2, certain information has  been deleted from this Exhibit and filed separately with the Commission).                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 10.13   |   | Supplemental Executive Retirement Plan (2004 Restatement), effective  as of January 1, 2004. *                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 10.14   |   | Registrant’s Deferred Compensation Plan for Members of the Board of  Directors, effective August 1, 1993, including First Amendment to the  Registrant’s Deferred Compensation Plan for Members of the Board of  Directors, effective as of February 1, 1999 (incorporated by reference  to Exhibit 10.14 to the 1998 Form 10-K).                                                                                                                                                                                                                                                                                                                                                                                                                  |
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 10.15.5 |   | Amended and Restated Employment Agreement dated July 1, 1999,  among Valle de Oro Bank, N.A., Valley National Corporation and William V.  Ehlen, assumed by the Registrant effective October 7, 1999 (incorporated  by reference to Exhibit 10.15.5 to the Registrant’s Annual Report on Form  10-K for the year ended December 31, 1999 [the “1999 Form 10-K”]).*                                                                                                                                                                                                                                                                                                                                                                       |
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 10.15.6 |   | Salary Continuation Agreement dated January 10, 1996, by and  between Valle de Oro Bank, N.A. and William V. Ehlen, assumed by the  Registrant effective October 7, 1999. (incorporated by reference to  Exhibit 10.15.6 to the 1999 Form 10-K).*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 10.16   |   | Plan of Reorganization and Merger Agreement dated as of May 31, 2000  by and between Community First National Bank, Phoenix, Arizona, Community  First National Bank, Spring Valley, California, Community First National  Bank, Fort Morgan, Colorado, Community First National Bank, Decorah, Iowa,  Community First National Bank, Fergus Falls, Minnesota, Community First  National Bank, Alliance, Nebraska, Community First National Bank, Las Cruces,  New Mexico, Community First National Bank, Salt Lake City, Utah, Community  First National Bank, Spooner, Wisconsin, Community First National Bank,  Cheyenne, Wyoming and Community First National Bank, Fargo, North Dakota  (incorporated by reference to Exhibit 10.16 to the 2000 Form 10-K). |
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 10.17   |   | Credit Agreement dated as of December 22, 2000 between the  Company and Harris (incorporated by reference to Exhibit 10.17 to the 2000  Form 10-K).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |

 

23

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| 10.18  |   | Subordinated Term Note dated December 22, 2000 in the principal  amount of $25,000,000 issued to Harris (incorporated by reference to Exhibit  10.18 to the 2000 Form 10-K).                                                                                                                                                                                                                                               |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.19  |   | Plan of Reorganization and Merger Agreement dated as of  December 31, 2000, by and between Community First State Bank, a South  Dakota banking corporation and Community First National Bank, a national  banking association (incorporated by reference to Exhibit 10.19 to the 2000  Form 10-K).                                                                                                                         |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.20  |   | Agreement of Limited Liability Company of Community First Mortgage,  LLC dated June 15, 2001 between Wells Fargo Ventures, LLC and Community  First Home Mortgage, Inc. (incorporated by reference to Exhibit 10.20 to the  Registrant’s Form 10-K for the year ended December 31, 2001) (pursuant to  Rule 24b-2, certain information has been deleted from this Exhibit and filed  separately with the Commission). |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.21  |   | Separation Agreement, effective September 30, 2003, by and between  the Company and Dean D. Kling.*                                                                                                                                                                                                                                                                                                                             |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.22  |   | Executive Severance Plan, effective August 5, 2003 and amended  as of December 12, 2003. *                                                                                                                                                                                                                                                                                                                            |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 12.1   |   | Statement regarding  computation of ratios.                                                                                                                                                                                                                                                                                                                                                                                     |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 13.1   |   | 2003 Annual Report to Shareholders.                                                                                                                                                                                                                                                                                                                                                                                             |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 14.1   |   | Code of Ethics and Business Conduct.                                                                                                                                                                                                                                                                                                                                                                                            |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 21.1   |   | Subsidiaries of the Registrant.                                                                                                                                                                                                                                                                                                                                                                                                 |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 23.1   |   | Consent of Ernst & Young LLP.                                                                                                                                                                                                                                                                                                                                                                                               |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 31.1   |   | Certification of principal executive  officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rules  13a-14 and 15d-14 of the Exchange Act).                                                                                                                                                                                                                                                                    |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 31.2   |   | Certification of principal financial  officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rules  13a-14 and 15d-14 of the Exchange Act).                                                                                                                                                                                                                                                                    |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 32     |   | Certifications pursuant to Section 906  of the Sarbanes-Oxley Act of 2002 (18 U.S.C. § 1350).                                                                                                                                                                                                                                                                                                                    |

 

----

* Executive compensation plans and arrangements.

 

24

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**SIGNATURES**

 

Pursuant to the requirements of section 13 or 15(d) of the SecuritiesExchange Act of 1934, the Registrant has duly caused this report to be signedon its behalf by the undersigned, thereunto duly authorized.

 
|                  | COMMUNITY FIRST BANKSHARES, INC. |
|-----------------------|----------------------------------|
|                  | (“Registrant”)         |
|                  |                             |
|                  |                             |
| Dated: March 11, 2004 | By                               | /s/ Mark A. Anderson |   |
|                  |                             | Mark A. Anderson |
|                  |                             | President and Chief Executive Officer |

 

Pursuant to the requirements of the Securities Exchange Act of 1934,this Report has been signed by the following persons on behalf of theRegistrant, in the capacities and on the dates indicated.

 
| **Signature and Title**                              |   | **Date** |
|------------------------------------------------------|--------|----------|
|                                                 |   |     |
| /s/ Mark A. Anderson                                 |   |     | March 11, 2004 |
| Mark A. Anderson                                     |   |     |
| President and Chief Executive Officer                |   |     |
| (Principal Executive Officer)                        |   |     |
|                                                 |   |     |
| /s/ Craig A. Weiss                                   |   |     | March 11, 2004 |
| Craig A. Weiss                                       |   |     |
| Executive Vice President and Chief Financial Officer |   |     |
| (Principal Financial and Accounting Officer)         |   |     |
|                                                 |   |     |
| /s/ Patrick Delaney                                  |   |     | March 11, 2004 |
| Patrick Delaney, Director                            |   |     |
|                                                 |   |     |
| /s/ Dawn R. Elm                                      |   |     | March 10, 2004 |
| Dawn R. Elm, Director                                |   |     |
|                                                 |   |     |
| /s/ John Flittie                                     |   |     | March 11, 2004 |
| John Flittie, Director                               |   |     |
|                                                 |   |     |   |
| /s/ Thomas Gallagher                                 |   |     | March 11, 2004 |
| Thomas Gallagher, Director                           |   |     |
|                                                 |   |     |
| /s/ Darrell G. Knudson                               |   |     | March  9, 2004 |
| Darrell G. Knudson, Director                         |   |     |
|                                                 |   |     |
| /s/ Karen M. Meyer                                   |   |     | March 9, 2004 |
| Karen M. Meyer, Director                             |   |     |
|                                                 |   |     |
| /s/ Lauris N. Molbert                                |   |     | March 9, 2004 |
| Lauris N. Molbert, Director                          |   |     |
|                                                 |   |     |
| /s/ Rahn K. Porter                                   |   |     | March  10, 2004 |
| Rahn K. Porter, Director                             |   |     |
|                                                 |   |     |
| /s/ Marilyn R. Seymann                               |   |     | March 11, 2004 |
| Marilyn R. Seymann, Director                         |   |     |
|                                                 |   |     |
| /s/ Harvey L. Wollman                                |   |     | March 9, 2004 |
| Harvey L. Wollman, Director                          |   |     |

 

25

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