Years
  ended December 312001
  
  2000
  
  1999
  
  1998
  
  1997(In
  thousands, except per share date)EARNINGSTotal intrest
  income
  
  $
  434,016
  
  $
  477,558
  
  $
  465,206
  
  $
  467,270
  
  $
  342,789Total interest
  expense
  
  162,220
  
  210,281
  
  185,818
  
  194,787
  
  140,488Net interest
  income
  
  271,796
  
  267,277
  
  279,388
  
  272,483
  
  202,301Net income
  
  65,059
  
  71,634
  
  74,913
  
  45,463
  
  60,865PER
  COMMON AND COMMON EQUIVALENT SHAREBasic earnings
  per share
  
  $
  1.59
  
  $
  1.55
  
  $
  1.5
  
  $
  0.90
  
  $
  1.31Diluted earnings
  per share
  
  1.57
  
  1.54
  
  1.48
  
  0.89
  
  1.27Net book value
  
  8.86
  
  8.25
  
  8.12
  
  8.49
  
  8.11Dividends paid
  
  0.68
  
  0.60
  
  0.56
  
  0.44
  
  0.35AT
  YEAR - ENDTotal assets
  
  $
  5,772,326
  
  $
  6,089,729
  
  $
  6,302,235
  
  $
  6,239,772
  
  $
  5,660,218Total loans
  
  3,736,692
  
  3,738,202
  
  3,690,353
  
  3,537,537
  
  3,160,501Allowance for
  loan losses
  
  54,991
  
  52,168
  
  48,878
  
  51,860
  
  41,387Total deposits
  
  4,750,813
  
  5,019,891
  
  4,909,863
  
  5,101,065
  
  4,341,065Common equity
  
  356,705
  
  345,431
  
  407,269
  
  424,656
  
  405,039KEY
  PERFORMANCE RATIOSReturn on
  average common equity
  
  18.66
  %
  19.90
  %
  18.07
  %
  11.03
  %
  19.04
  %Return on
  average assets
  
  1.11
  %
  1.16
  %
  1.20
  %
  0.75
  %
  1.42
  %Net interest
  margin
  
  5.23
  %
  4.90
  %
  5.06
  %
  5.12
  %
  5.35
  %Dividend payout
  ratio
  
  43.31
  %
  38.96
  %
  37.84
  %
  49.44
  %
  27.56
  %Average common
  equity to average assets
  
  5.95
  %
  5.83
  %
  6.64
  %
  6.83
  %
  7.44
  %Nonperforming
  assets to period-end loans and OREO
  
  0.64
  %
  0.70
  %
  0.88
  %
  0.78
  %
  0.65
  %Allowance for
  loan losses to period-end loans
  
  1.47
  %
  1.40
  %
  1.32
  %
  1.47
  %
  1.31
  %Allowance for
  loan losses to nonperforming loans
  
  261
  %
  221
  %
  188
  %
  228
  %
  271
  %Net charge-offs
  to average loans
  
  0.39
  %
  0.34
  %
  0.66
  %
  0.43
  %
  0.24
  %Tier 1 capital
  
  8.67
  %
  8.13
  %
  10.01
  %
  9.44
  %
  11.54
  %Total risk-based
  capital
  
  11.11
  %
  10.73
  %
  12.45
  %
  12.09
  %
  14.89
  %Leverage ratio
  
  6.51
  %
  5.94
  %
  7.16
  %
  6.47
  %
  7.53
  %Efficiency ratio
  
  63.02
  %
  62.57
  %
  59.87
  %
  67.01
  %
  61.98
  %EARNINGS PER SHARE AND RATIOS
  EXCLUDING GOODWILL AND OTHER INTANGIBLE ASSETS AMORTIZATION AND BALANCESDiluted earnings
  per share
  
  $
  1.74
  
  $
  1.70
  
  $
  1.62
  
  $
  1.06
  
  $
  1.37Return on assets
  
  1.25
  %
  1.30
  %
  1.35
  %
  0.92
  %
  1.54
  %Return on
  average common equity
  
  20.67
  %
  21.94
  %
  19.84
  %
  13.20
  %
  20.45
  %Efficiency ratio
  
  60.23
  %
  59.58
  %
  56.95
  %
  63.47
  %
  59.73
  %   
   MANAGEMENT'S
DISCUSSION AND ANALYSIS Community First
Bankshares, Inc. BASIS OF PRESENTATION  The following represents managements discussion and analysis of
Community First Bankshares. Inc.s (the Company) financial condition as of
December 31, 2001 and 2000, and its results of operations for the years ended
December 31, 2001, 2000 and 1999. This discussion should be read in conjunction
with the consolidated financial statements and related footnotes and the five
year summary of selected financial data. The information has been restated to
reflect significant mergers accounted for as a pooling of interests as if they
had occurred at the beginning of the first period presented.  MERGER AND ACQUISITION ACTIVITY  The Company made two bank acquisitions during the periods reported in
the financial statements. Each of these acquisitions has had an effect upon the Companys results of operations
and financial condition.  In the following transactions during the periods
presented, the Company accounted for the acquisition using the pooling of
interests method.  POOLING
OF INTERESTS TRANSACTIONS  Acquisition Month
  and Year
  
  Location
  of Bank
  
  Number of
  Locations at Date of Acquisition
  
  Total
  Assets at
  Date of Acquisition(in Millions)December 1999
  
  Ramsey, Minnesota
  
  1
  
  $
  35October 1999
  
  El Cajon, California
  
  6
  
  252
  On December 21, 1999, the Company issued approximately 317,000 shares
of common stock to acquire River Bancorp, Inc. (River Bancorp), a one-bank holding
company headquartered in Ramsey, Minnesota. At acquisition, Ramsey had
approximately $35 million in assets at one office in Ramsey, Minnesota. Because
this acquisition was not material to the Companys financial condition or
operating results, the Companys financial information has not been restated to
reflect this merger.  On October 7, 1999, the Company issued approximately
3,022,000 shares of common stock to acquire Valley National Corporation
(Valley National), a one-bank holding company headquartered in El Cajon,
California. At acquisition, Valley National had approximately $252 million in
assets at six banking offices located in California. The Companys results of
operations and financial condition have been restated for all historical periods.  CRITICAL ACCOUNTING POLICIES  The Company has established various accounting policies which govern
the application of accounting principles generally accepted in the United
States in the preparation of the Companys financial statements. The significant
accounting policies of the Company are described in the footnotes to the
consolidated financial statements. Certain accounting policies involve
significant judgments and assumptions by management which have a material
impact on the carrying value of certain assets and liabilities; management
considers such accounting policies to be critical accounting policies. The
judgments and assumptions used by management are based on historical experience
and other factors, which are believed to be reasonable under the circumstances.
Because of the nature of the judgments and assumptions made by management,
actual results could differ from these judgments and estimates which could have
a material impact on the carrying values of assets and liabilities and the
results of operations of the Company.  The Company believes the allowance for loan losses is
a critical accounting policy that requires the most significant judgments and
estimates used in preparation of its consolidated financial statements. Refer
to the section entitled Allowance for Loan Losses and Footnote 1, Significant
Accounting Policies for a detailed description of the company's estimation
process and methodology related to the allowance for loan losses.  OVERVIEW  GENERAL  For the year ended December 31, 2001, the Company reported net income
of $65.1 million, a decrease of $6.5 million, or 9.1%, from the $71.6 million
earned during 2000. Diluted earnings per share were $1.57, compared to $1.54 in
2000. Return on average assets was 1.11% for 2001, compared with 1.16% for
2000. Return on average common shareholders equity for 2001 and 2000 was
18.66% and 19.90%, respectively. The decrease in return on assets and return on
equity is principally due to a reduction in net income, caused primarily by a
one-time after-tax charge recorded in the first quarter of 2001 related to the
impact of a $5.1 million restructuring charge and a $1.5 million special loan
loss provision to maintain the current loan loss reserve level, after the
Company charged off its largest non-performing asset.  For the year ended December 31, 2000, the Company
reported net income of $71.6 million, a decrease of $3.3 million, or 4.4%, from
the $74.9 million earned during 1999. Diluted earnings per share were $1.54,
compared to $1.48 in 1999. Return on average assets was 1.16% for 2000, compared with 1.20% for 1999. Return on average
common shareholders equity for 2000 and 1999 was 19.90% and 18.07%,
respectively. The decrease in return on assets is principally due to a reduction in net income, while the
increase in return on equity is principally due to a reduction in total
stockholders equity as a result of the Companys stock repurchase initiative.  Total assets were $5.8 billion and $6.1 billion at
December 31, 2001 and 2000, respectively. The decrease of $317 million, or
5.2%, during 2001 was principally due to the Companys planned balance sheet
contraction.  Strategic
Initiative and Related Restructuring Charge  During the first quarter of 2001, the Company announced a series of
strategic initiatives designed to improve customer service and strengthen its
position as a provider of diversified financial services. Initiatives included
a redefinition of the Companys delivery model and the sale or closure of
banking offices.  In an effort to properly align resources with market
opportunities and provide the delivery support structure to optimize individual
market   3 
    potential, each of the Companys offices was redefined as either a
Regional Financial Center or a Community Financial Center. Regional Financial
Centers are those locations exhibiting strong commercial banking potential,
requiring a broader based support structure. Community Financial Centers, which
are less geographically concentrated, typically offer greater retail
opportunities, including emphasis on insurance and investment product sales.  In conjunction with the restructuring of the banking
network, the Company sold 13 offices and closed eight additional offices.
Offices sold included nine Arizona offices, three Nebraska offices and one
office in North Dakota. Four of the eight offices closed were located in
communities where the Company maintains one or more additional offices, thus
the Company continues to serve those customers from existing locations.  The initiatives resulted in changes in staffing needs
within the Company. To accommodate these staffing needs, the Company made
available an early-out program that was accepted by 21 eligible management
personnel.  As a result of these initiatives, the Company recorded
a one-time after-tax restructuring charge totaling $5.1 million, or $0.12 per
share, during the first quarter. The restructuring charge included
approximately $3.1 million related to asset write-down, data processing, and
legal and accounting fees. Additionally the Company recorded an after-tax
expense of approximately $2.0 million to provide for severance-related costs
associated with the early-out and reduction-in-force programs.  As of December 31, 2001, all expected expenditures
associated with the restructuring have been recognized and recorded, including
the identification of specific personnel affected by the reduction in work
force. Certain severance-related payments to affected individuals will occur during
2002.  In preparation for the sale of the nine Arizona
offices, the Company charged off its largest non-performing asset, a credit
facility that originated in the Arizona bank prior to the Companys acquisition
of the Arizona operation in 1997. To maintain the current loan loss reserve
level, the Company recorded a special loan loss provision equal to the amount
of the charge-off. The special provision of $2.4 million, or approximately
$0.04 per share after tax was recorded during the first quarter.  Under the redesigned delivery structure, the Company
began implementation of a centralized consumer credit process. When fully
operational, the centralized structure will offer a complete range of decision,
origination, documentation and collection services to all Company offices
through a Fargo, North Dakota, location. As of December 31, 2001, decision
making, documentation and collection services for indirect consumer loans have
been centralized.  During the first quarter, the Company completed the
consolidation of its South Dakota state chartered bank into its national
chartered bank. As a result of the consolidation, all banking operations are
conducted under a single national charter.  Mortgage
Loan Joint Venture  In June 2001, the Company, through its subsidiary bank, and Wells Fargo
& Company formed a joint venture mortgage company named Community First
Mortgage, LLC. This joint venture mortgage company provides mortgage
origination, documentation, servicing process and support for all of the residential
mortgage business of the Company. The joint venture provides the Company with
access to competitive technology and the benefits of future technological
developments, as well as expertise in the processing and loan servicing of
mortgage products. The alliance allows the Company to expand its mortgage
origination business through access to a broader range of mortgage products,
while improving efficiency and reducing operating, credit and capital market
risks. The Company has a 50% equity stake in the joint venture and recorded its
initial investment of $125,000 and its continuing share of the income or loss
of the joint venture under the equity method. As a result of the formation of
the joint venture, mortgage originations will be effected through the joint
venture rather than through the Company. Accordingly, related loan fees and net
interest margin will decrease modestly in 2002. Because the Company has sold
most loans of this type in the past, the Company does not anticipate any
material change in loans recorded in its financial statements.  Stock
Repurchase Plan  The Company adopted a sequence of three common stock repurchase
programs providing for the systematic repurchase of the Companys common stock
in addition to shares available under existing programs. In August 2001, the
Company adopted a common stock repurchase program providing for the systematic
repurchase of up to 3 million shares of the Companys common stock. In August
2000, the Company adopted a common stock repurchase program providing for the
systematic repurchase of up to an additional 5 million shares of the Companys common stock. In April 2000, the
Company adopted a common stock repurchase program providing for the
initial repurchase of up to 5 million shares. Under each program, the shares
were to be purchased primarily on the open market, with timing depending upon
market conditions. Adoption of the three programs provides the Company with an
alternative opportunity for capital utilization. In addition, the shares
acquired can be used for the issuance of common stock upon exercise of stock
options, under the Companys compensation plans and for other purposes,
including business combinations. As of December 31, 2001, the Company had
repurchased 10.8 million shares of common stock under these plans, at prices
ranging from $15.25 to $25.00. The Company repurchased 2 million and 8.8
million shares of common stock under the programs during 2001 and 2000,
respectively.  RESULTS OF OPERATIONS  Net Interest Income  The principal source of the Companys earnings is net interest income,
the difference between total interest income on earning assets such as loans
and investments and interest paid on deposits and other interest-bearing
liabilities. The net interest margin is net interest income, on a
tax-equivalent basis, expressed as a percentage of average earning assets. The
margin is affected by volume and mix of earning assets and interest-bearing
liabilities, the level of interest- free funding sources, interest rate
environment, and income tax rates. As discussed later, management actively
monitors its interest rate sensitivity and seeks to balance assets and
liabilities to minimize the impact of changes in the interest rate environment.  4 
   The following table presents the Companys average balance sheets,
interest earned or paid and the related yields and rates on major categories of
the Companys earning assets and interest-bearing liabilities on a
tax-equivalent basis for the periods indicated: Years
  Ended December 312001
  
  2000
  
  1999Average
  Balance
  
  Interest
  
  Interest
  Yields and Rates
  
  Average
  Balance
  
  Interest
  
  Interest
  Yields and Rates
  
  Average
  Balance
  
  Interest
  
  Interest
  Yields and Rates(Dollars
  in thousands)ASSETSLoans (1) (2)
  
  $
  3,785,553
  
  $
  341,287
  
  9.02
  %
  $
  3,706,144
  
  $
  357,034
  
  9.63
  %
  $
  3,573,060
  
  $
  336,229
  
  9.41
  %Investment securities (2)
  
  1,561,896
  
  100,602
  
  6.44
  %
  1,909,479
  
  128,490
  
  6.73
  %
  2,104,661
  
  136,775
  
  6.50
  %Other earning assets
  
  11,923
  
  391
  
  3.28
  %
  12,375
  
  628
  
  5.07
  %
  24,886
  
  1,277
  
  5.13
  %Total earning assets
  
  5,359,372
  
  442,280
  
  8.25
  %
  5,627,998
  
  486,152
  
  8.64
  %
  5,702,607
  
  474,281
  
  8.32
  %Noninterest earning assets
  
  500,240
  
  
  
  
  
  551,194
  
  
  
  
  
  542,687Total assets
  
  $
  5,859,612
  
  
  
  
  
  $
  6,179,192
  
  
  
  
  
  $
  6,245,294LIABILITIES AND SHAREHOLDERS EQUITYInterest-bearing checking
  
  872,642
  
  9,943
  
  1.14
  %
  845,079
  
  13,437
  
  1.59
  %
  920,521
  
  13,345
  
  1.45
  %Savings deposits
  
  971,915
  
  19,428
  
  2.00
  %
  1,059,736
  
  35,673
  
  3.37
  %
  1,091,228
  
  31,558
  
  2.89
  %Time deposits
  
  2,053,548
  
  109,171
  
  5.32
  %
  2,132,327
  
  120,171
  
  5.64
  %
  2,099,426
  
  106,235
  
  5.06
  %Short-term borrowings
  
  361,563
  
  15,001
  
  4.15
  %
  568,540
  
  34,303
  
  6.03
  %
  557,920
  
  28,052
  
  5.03
  %Long-term borrowings
  
  133,030
  
  8,677
  
  6.52
  %
  95,814
  
  6,697
  
  6.99
  %
  97,732
  
  6,628
  
  6.78
  %Total interest-bearing liabilities
  
  4,392,698
  
  162,220
  
  3.69
  %
  4,701,496
  
  210,281
  
  4.47
  %
  4,766,827
  
  185,818
  
  3.90
  %Demand deposits
  
  921,855
  
  
  
  
  
  931,556
  
  
  
  
  
  880,484Noninterest-bearing liabilities
  
  76,383
  
  
  
  
  
  66,138
  
  
  
  
  
  63,339Trust owned preferred securities
  
  120,000
  
  
  
  
  
  120,000
  
  
  
  
  
  120,000Preferred shareholders equity
  
  0
  
  
  
  
  
  0
  
  
  
  
  
  0Common shareholders equity
  
  348,676
  
  
  
  
  
  360,002
  
  
  
  
  
  414,6441,466,914
  
  
  
  
  
  1,477,696
  
  
  
  
  
  1,478,467Total liabilities and shareholders equity
  
  $
  5,859,612
  
  
  
  
  
  $
  6,179,192
  
  
  
  
  
  $
  6,245,294Net interest income
  
  
  
  $
  280,060
  
  
  
  
  
  $
  275,871
  
  
  
  
  
  $
  288,463Net interest spread
  
  
  
  
  
  4.56
  %
  
  
  
  
  4.17
  %
  
  
  
  
  4.42
  %Net interest margin
  
  
  
  
  
  5.23
  %
  
  
  
  
  4.90
  %
  
  
  
  
  5.06
  %  
 (1)           Includes nonaccrual
loans and loan fees. (2)           Interest yields on
loans and investments are presented on a tax-equivalent basis to reflect the
tax-exempt nature of certain assets. The incremental tax rate applied was 35%.  The following table presents the components of changes in net interest
income by volume and rate on a tax-equivalent basis. The net change
attributable to the combined impact of volume and rate has been allocated
solely to the change in volume:  2001
  COMPARED TO 2000
  
  2000
  COMPARED TO 1999Volume
  
  Rate
  
  Total
  
  Volume
  
  Rate
  
  Total(In
  thousands)Interest income:Loans (1)
  
  $
  7,650
  
  $
  (23,397
  )
  $
  (15,747
  )
  $
  12,523
  
  $
  8,282
  
  $
  20,805Investment
  securities (1)
  
  (23,389
  )
  (4,499
  )
  (27,888
  )
  (12,684
  )
  4,399
  
  (8,285
  )Other earning
  assets
  
  (23
  )
  (214
  )
  (237
  )
  (642
  )
  (7
  )
  (649
  )Total interest
  income
  
  $
  (15,762
  )
  $
  (28,110
  )
  $
  (43,872
  )
  $
  (803
  )
  $
  12,674
  
  $
  11,871Interest
  expense:Savings deposits
  and interest-bearing checking
  
  (2,518
  )
  (17,221
  )
  (19,739
  )
  (2,004
  )
  6,211
  
  4,207Time deposits
  
  (4,440
  )
  (6,560
  )
  (11,000
  )
  1,665
  
  12,271
  
  13,936Short-term
  borrowings
  
  (12,488
  )
  (6,814
  )
  (19,302
  )
  534
  
  5,717
  
  6,251Long-term
  borrowings
  
  2,601
  
  (621
  )
  1,980
  
  (130
  )
  199
  
  69Total interest
  expense
  
  $
  (16,845
  )
  $
  (31,216
  )
  $
  (48,061
  )
  $
  65
  
  $
  24,398
  
  $
  24,463Increase
  (decrease) in net interest income
  
  $
  1,083
  
  $
  3,106
  
  $
  4,189
  
  $
  (868
  )
  $
  (11,724
  )
  $
  (12,592
  )  
 (1)           Fees on loans have
been included in interest on loans. Interest income is reported on a
tax-equivalent basis.  5 
   Net interest income on a tax-equivalent basis in 2001
was $280.1 million, a $4.2 million decrease from 2000. The decrease was
primarily due to a 4.8% decrease in earning assets partially offset by a 33
basis point increase in the net interest margin. The decrease in earning assets
is the result of the Companys planned balance sheet contraction, principally in the reduction of average investment
securities, offset by an increase in average loans. Average investment
securities in 2001 were $348 million less than in 2000. Average loans in 2001
increased $79 million from the 2000 average. Net interest income on a
tax-equivalent basis in 2000 was $275.9 million, a $12.6 million decrease from
1999. The decrease was primarily due to a 1.3% reduction in earning assets and
a 16 basis point reduction in the net interest margin.  The net interest
margin was 5.23%, 4.90%, and 5.06% in 2001, 2000 and 1999, respectively. This
increase in margin was due to a 39 basis point increase in the yield spread
between 2000 and 2001, and a change in the mix of earning assets and
liabilities to higher-yielding assets. Average loans to average earning assets
was 70.6% in 2001 compared to 65.9% in 2000 and to 62.7% in 1999.  Provision for Loan Losses  Annual fluctuations in the provision for loan losses result from
managements regular assessment of the adequacy of the allowance for loan losses. The provision for loan losses
for 2001 was $17.5 million, an increase of $1.7 million or 10.8%, from
the $15.8 million provision during 2000. The increase in the loan loss
provision was principally due to the Companys credit experience as reflected
in an increase in the level of net charge-offs and a $2.4 million charge-off of
the Companys largest non-performing asset, an Arizona-based credit facility
that was in place when the Company acquired its initial Arizona operation in
1997. The amount of the loan loss provision to be recorded in future periods
will depend on managements assessment of the adequacy of the allowance for
loan losses in relation to the entire loan portfolio. The provision for loan
losses for 2000 was $15.8 million, a decrease of $4.4 million, or 21.8% from
the 1999 provision of $20.2 million. The decrease was primarily due to the
operation and disposal of the Companys sub-prime lending affiliates in 1999.  Noninterest Income  The Company continues to expand noninterest income associated with the
Companys community banking operations. The primary sources of noninterest
income consist of service charges on deposit accounts, insurance commissions,
fees from the sale of investment products and fees for trust services.
Management is working to increase the contribution of noninterest income to
operating results by increasing the delivery of financial products and
services, including trust services, insurance policy sales and security sales
through a third party provider of standardized securities products.  Noninterest income
for 2001 was $76.7 million, an increase of $1.5 million, or 2.0%, from the
$75.2 million earned in 2000. The increase was principally due to an increase
of $1.9 million or 17.9% in insurance commissions to $12.5 million, from $10.6
million in 2000, and an increase of $739,000 in net gains on sales of
investment securities, to $804,000 in 2001 from $65,000 in 2000. Service
charges on deposit accounts decreased $580,000, or 1.5%, from $39.5 million in
2000 to $39.0 million in 2001. Commissions from the sale of investment
securities decreased to $6.6 million in 2001 from $6.8 million in 2000, a
decrease of $161,000 or 2.4%, due primarily to a softer market for investment
products. Trust revenue decreased $150,000, or 2.6%, to $5.7 million in 2001
from $5.8 million in 2000.  Noninterest income
for 2000 was $75.2 million, an increase of $2.7 million, or 3.7%, from the
$72.5 million earned in 1999. The increase was principally due to an increase
in service charges on deposit accounts in 2000 to $39.5 million from the $37.0
million in 1999, an increase of $2.5 million, or 6.8%. Insurance commissions
increased to $10.6 million in 2000, from $8.8 million in 1999, an increase of
$1.8 million, or 20.4%. Commissions from the sale of investment securities
increased to $6.8 million in 2000, from $5.3 million in 1999, an increase of
$1.5 million, or 28.3%. Trust revenue increased to $5.8 million in 2000, from
$5.1 million in 1999, an increase of $663,000 or 12.9%. Net gains on the sale
of investment securities were $2.1 million less in 2000 than in 1999.  Noninterest Expense  Noninterest expenses consist of salaries and benefits, occupancy,
equipment and other expenses such as legal and postage necessary for the
operation of the Company. Management is committed to improving the quality of
service while controlling such costs through improved efficiency and
consolidation of certain activities to achieve economies of scale.  The following table presents the components of
noninterest expense for the periods indicated:  Years Ended December 312001
  
  2000
  
  1999(in thousands)Salaries and
  employee benefits
  
  $
  115,743
  
  $
  110,024
  
  $
  106,542Net occupancy
  
  31,593
  
  31,941
  
  32,726FDIC insurance
  
  915
  
  1,039
  
  625Legal and
  accounting
  
  3,764
  
  3,874
  
  3,651Other
  professional services
  
  4,634
  
  4,415
  
  5,168Advertising
  
  5,037
  
  4,545
  
  4,065Telephone
  
  5,633
  
  5,203
  
  4,807Acqulaition, integration and conforming
  
  
  
  
  
  3,053Restructuring
  charge
  
  7,656
  
  
  
  Data processing
  
  4,047
  
  4,545
  
  4,116Company-obligated
  mandatorily
  redeemable preferred securities
  of CFB Capital I & II
  
  10,273
  
  10,245
  
  10,245Amortization of
  intangibles
  
  9,928
  
  10,481
  
  10,500Other
  
  33,200
  
  33,007
  
  32,729Total noninterest
  expense
  
  $
  232,423
  
  $
  219,319
  
  $
  218,227  Noninterest expense increased $13.1 million to $232.4 million in 2001.
The increase was principally due to an increase in salary and employee benefits and the restructuring charge.
Salaries and employee benefits increased to $115.7 million in 2001, from
$110.0 million in 2000, an increase of $5.7
million, or 5.2%. The Company incurred anon-recurring charge of $7.7
million as a result of a series of strategic initiatives designed to improve
customer service and strengthen the Companys position as a provider of
diversified financial services.  Noninterest expense increased $1.1 million to $219.3
million in 2000. The increase was principally due to an increase in salaries
and employee benefits, offset in part by a reduction in acquisition and related
expenses. Salaries and employee benefits increased to $110.0 million in 2000,
from $106.5 million in 1999, an increase of $3.5 million, or 3.3%. The increase
was attributed to annual merit increases, as the number of employees remained
stable during 2000. FDIC insurance increased to $1.0 million in 2000, from
$625,000 in 1999, an increase of $414,000, or 66.2%, as a result of an
industry-wide increase in the 2000 premium rate assessed by regulatory authorities. The Company recorded $3.1
million in acquisition,  6 
   integration and conforming expenses in 1999, related to the acquisition
through merger of Valley National and River Bancorp.  The Company will apply a new accounting principle in
2002, pursuant to which goodwill will no longer be amortized. This change is
expected to result in an increase in net income of $5.0 million. Refer to
Footnote 3, Accounting Changes. Additionally, this increase in net income will be
partially offset by an increase in noninterest expense of approximately $5.0
million related to the centralized loan center.  Provision for Income Taxes  The Company records a provision for income taxes currently payable and
for taxes payable in the future because of differences in the timing of
recognition of certain items for financial statement and income tax purposes.
The effective income tax rate differs from the statutory rate primarily due to
tax-exempt income from loans and investments and state income taxes. The 2001
effective tax rate is similar to the Companys anticipated effective tax rates
in future periods. The effective tax rate was 34.0%, 33.3%, and 34.0% for 2001,
2000 and 1999, respectively.  FINANCIAL CONDITION  INVESTMENT OF FUNDS  Loans  At December 31, 2001, total loans were $3.7 billion. The Company
experienced a $100 million increase in in-market loan growth in the Companys
existing markets, offset by the amortization of $102 million in purchased loans
which were permitted to run off during 2001.  During 2000, the Company elected to discontinue active
solicitation of purchased loans. Many of these assets have been originated by
selected Midwestern regional banks and national leasing and finance companies,
with which the Company has had ongoing relationships. The Companys portfolio
of purchased loan assets was $86 million at December 31, 2001, compared to $188
million at December 31, 2000. These assets are subject to the Companys
standard credit guidelines, as well as specific requirements for such assets,
and bear the credit risks attendant to commercial loans. It is anticipated that
the purchased loan asset volume will continue to decrease during 2002.  General.  The Companys loan mix remained relatively
constant from 2000 to 2001. Real estate loans continued to be the largest
category of loans, representing 54.4% of the total loan portfolio.  Real Estate and Real Estate
Construction Loans.  A
significant portion of the Companys real estate loan portfolio consists of
residential real estate first mortgages that have been underwritten and
documented to meet secondary mortgage requirements. Substantially all of the
Companys real estate loans are based in the Companys primary market area. As
of December 31, 2001, $766 million, or 37.7%, of the Companys real estate loan
portfolio consisted of residential real estate loans, including home equity
loans, $155 million, or 7.6%, were secured by farmland, $594 million, or 29.2%,
represented commercial and other real estate loans and $519 million, or 25.5%,
represented construction loans.  Commercial Loans.  Loans in this category include loans to
retail, wholesale, manufacturing and service businesses, including agricultural
service businesses and the Companys purchased loan asset portfolio. Commercial
loans are underwritten based on the financial strength and repayment ability of
the borrower, as well as the collateral securing the loans.  Consumer and Other Loans.  Loans classified as consumer and other loans
include automobile, personal loans, consumer lines of credit and overdrafts.
The consumer loan portfolio also includes dealer-generated installment
contracts for consumer goods, including automobiles and major home appliances.
The majority of these indirect loans are installment loans with fixed interest
rates.  Agricultural Loans.  Agricultural loans are made principally to
farmers and ranchers. The Company provides short-term credit for operating
loans and intermediate-term loans for machinery purchases and other
improvements.  The following table presents the Companys balance of
each major category of loans at the dates indicated:  2001
  
  2000
  
  1999
  
  1998
  
  1997Amount
  
  Percent of
  Total Loans
  
  Amount
  
  Percent of
  Total Loans
  
  Amount
  
  Percent of
  Total Loans
  
  Amount
  
  Percent of
  Total Loans
  
  Amount
  
  Percent of
  Total Loans(Dollars
  in thousands)Loan category:Real estate
  
  $
  1,515,118
  
  40.5
  %
  $
  1,458,494
  
  39.0
  %
  $
  1,319,678
  
  35.8
  %
  $
  1,291,287
  
  36.5
  %
  $
  1,213,272
  
  38.4
  %Real estate construction
  
  519,031
  
  13.9
  %
  466,616
  
  12.5
  %
  434,924
  
  11.8
  %
  366,277
  
  10.4
  %
  253,385
  
  8.0
  %Commercial
  
  824,318
  
  22.1
  %
  872,824
  
  23.4
  %
  994,624
  
  26.9
  %
  966,404
  
  27.3
  %
  834,653
  
  26.4
  %Consumer and other
  
  627,034
  
  16.8
  %
  686,064
  
  18.3
  %
  681,423
  
  18.5
  %
  618,530
  
  17.5
  %
  565,833
  
  17.9
  %Agricultural
  
  251,191
  
  6.7
  %
  254,204
  
  6.8
  %
  259,704
  
  7.0
  %
  295,039
  
  8.3
  %
  293,358
  
  9.3
  %Total loans
  
  $
  3,736,692
  
  100.0
  %
  $
  3,738,202
  
  100.0
  %
  $
  3,690,353
  
  100.0
  %
  $
  3,537,537
  
  100.0
  %
  $
  3,160,501
  
  100.0
  %Less allowance for loan losses
  
  (54,991
  )
  
  
  (52,168
  )
  
  
  (48,878
  )
  
  
  (51,860
  )
  
  
  (41,387
  )Total
  
  $
  3,681,701
  
  
  
  $
  3,686,034
  
  
  
  $
  3,641,475
  
  
  
  $
  3,485,677
  
  
  
  $
  3,119,114  Investments  The Company supplements the quality of its loan portfolio by maintaining
what it considers to be a high quality investment portfolio oriented toward
U.S. Treasury, U.S. Government agency and government guaranteed mortgage-backed
securities. The investment portfolio also provides the opportunity to structure
maturities and repricing timetables in a flexible manner and to meet applicable
requirements for pledging securities, which are principally adjustable rate and
collateralized mortgage obligations, as tools in managing its interest rate
exposure and enhancing its net interest margin.  7 
   The following
table sets forth the composition of the Companys available-for-sale securities
portfolio at estimated fair value as of the dates indicated:  Book Value
  at December 31,2001
  
  2000
  
  1999(in
  thousands)U.S. Treasury
  
  $
  69,297
  
  $
  77,951
  
  $
  114,798U.S. Government
  agencies
  
  231,380
  
  435,255
  
  438,608Mortgage-backed
  securities
  
  887,148
  
  993,939
  
  1,113,818Collateralized
  mortgage obligations
  
  4,377
  
  9,635
  
  25,978State and
  political securities
  
  97,603
  
  115,400
  
  148,502Other
  
  147,261
  
  82,330
  
  95,813Total
  
  $
  1,437,066
  
  $
  1,714,510
  
  $
  1,937,517  The following table sets forth the composition of the Companys
held-to-maturity securities portfolio at amortized cost as of the dates
indicated:  Book Value
  at December 31,2001
  
  2000
  
  1999(in
  thousands)Other
  
  $
  76,765
  
  $
  73,222
  
  $
  74,248Total
  
  $
  76,765
  
  $
  73,222
  
  $
  74,248  The following tables set forth the composition by
maturity of the Companys available-for-sale and held-to-maturity securities
portfolio:  AVAILABLE-FOR-SALE
  SECURITIESAt
  December 31, 2001, Maturing inOne Year
  or Less
  
  Over One
  Year Through 5 Years
  
  Over 5
  Years  Through 10 Years
  
  Over 10
  Years
  
  TotalAmount
  
  WeightedYield(1)
  
  Amount
  
  WeightedYield(1)
  
  Amount
  
  WeightedYield(1)
  
  Amount
  
  WeightedYield(1)
  
  Amount
  
  WeightedYield(1)(Dollars
  in thousands)U.S. Treasury
  
  $
  28,661
  
  6.07
  %
  $
  39,644
  
  5.85
  %
  $
  992
  
  5.03
  %
  $
  
  
  
  
  $
  69,297
  
  5.93
  %U.S. Government agencies
  
  56,298
  
  6.07
  %
  146,414
  
  5.28
  %
  28,668
  
  5.93
  %
  
  
  
  
  231,380
  
  5.55
  %Mortgage-backed securities
  
  86
  
  8.26
  %
  8,064
  
  7.09
  %
  45,559
  
  6.21
  %
  833,439
  
  6.35
  %
  887,148
  
  6.35
  %Collateralized mortgage obligations
  
  
  
  
  
  
  
  
  
  3,434
  
  3.52
  %
  943
  
  3.65
  %
  4,377
  
  3.55
  %State and political securities
  
  6,829
  
  7.16
  %
  11,530
  
  7.15
  %
  19,695
  
  7.39
  %
  59,549
  
  7.23
  %
  97,603
  
  7.25
  %Other
  
  60,939
  
  3.12
  %
  275
  
  3.29
  %
  362
  
  5.28
  %
  85,685
  
  6.19
  %
  147,261
  
  4.91
  %Total
  
  $
  152,813
  
  4.94
  %
  $
  205,927
  
  5.56
  %
  $
  98,710
  
  6.25
  %
  $
  979,616
  
  6.39
  %
  $
  1,437,066
  
  6.11
  %  
 (1)Interest
yields on investments are presented on a tax-equivalent basis to reflect the
tax-exempt nature of certain assets. Yields are based on a 35% incremental tax
rate and a 2.08% cost of funds.  HELD-TO-MATURITY SECURITIESAt
  December 31, 2001, Maturing inOne Year
  or Less
  
  Over One
  Year Through 5 Years
  
  Over 5
  Years
  Through 10
  Years
  
  Over 10
  Years
  
  TotalAmount
  
  WeightedYield(1)
  
  Amount
  
  WeightedYield(1)
  
  Amount
  
  WeightedYield(1)
  
  Amount
  
  WeightedYield(1)
  
  Amount
  
  WeightedYield(1)(Dollars
  in thousands)Other
  
  
  
  
  
  
  
  
  
  
  
  
  
  $
  76,765
  
  7.08
  %
  $
  76,765
  
  7.08
  %Total
  
  
  
  
  
  
  
  
  
  
  
  
  
  $
  76,765
  
  7.08
  %
  $
  76,765
  
  7.08
  %  
 (1)Interest
yields on investments are presented on a tax-equivalent basis to reflect the
tax-exempt nature of certain assets. Yields are based on a 35% incremental tax
rate.  The Companys investments, including available-for-sale and
held-to-maturity securities, decreased $274 million, or 15.3%, to $1.5 billion
at December 31, 2001, from $1.8 billion at December 31, 2000, due primarily to
the Companys balance sheet contraction strategy. At December 31, 2001, the
Companys investments represented 26.2% of total assets, compared to 29.4% at
December 31, 2000.  Credit Policy  The Companys lending activities are guided by the general loan policy
established by the Board of Directors. The Board of Directors of the bank
subsidiary has established loan approval limits for each banking office of the
Company. The limits established for each office range from $25,000 to $500,000
per borrower. Renewals of any criticized or classified loans have a limit of
$25,000. Amounts in excess of the individual bank lending authority are
presented to the regional credit officers. The regional credit officers have
lending authority up to $750,000 per nonclassified borrower. With concurrence
of a second regional credit officer or the respective division manager, the
limit increases to $1.5 million. Loans above $1.5 million for pass-rated
borrowers, $1 million for watch-rated borrowers and $250,000 for classified
borrowers are presented to the Senior Credit Committee for approval.  Although the Company has a diversified loan portfolio,
the economic health of significant portions of the Companys primary trade area
and the ability of many of the Companys borrowers to repay their loans
(including real estate and commercial loans, as well as agricultural loans) is
dependent to a large extent on the health of their local sector of the economy.
The Company has identified and implemented strategies to deal with these
factors, including an emphasis on quality 8local loan growth and the
diversification and performance of its earning asset portfolios.  8 
   Nonperforming Assets  The Company follows regulatory guidelines with respect to classifying
loans on a nonaccrual basis. Loans are placed on nonaccrual when they become
past due over 90 days or when the collection of interest or principal is
considered unlikely. The Company does not return a loan to accrual status until
it is brought current with respect to both principal and interest and future
principal payments are no longer in doubt. When a loan is placed on nonaccrual
status, any previously accrued and uncollected interest is reversed. Interest
income of $2,722,000, $4,693,000 and $5,534,000, on nonaccrual loans would have
been recorded during 2001, 2000 and 1999, respectively, if the loans had been
current in accordance with their original terms. The Company recorded interest
income of $1,113,000, $955,000 and $1,067,000 related to loans that were on
nonaccrual status as of December 31, 2001, 2000, and 1999, respectively.  The Company considers nonperforming assets to include
all nonaccrual loans, restructured loans defined as troubled debt
restructurings under SFAS No. 15 and other real estate owned (OREO).  Nonperforming assets of the Company are summarized in
the following table:  December
  312001
  
  2000
  
  1999
  
  1998
  
  1997(Dollars
  in thousands)Loans:Nonaccrual loans
  
  $
  20,818
  
  $
  23,426
  
  $
  25,764
  
  $
  22,609
  
  $
  15,151Restructured
  loans
  
  252
  
  224
  
  284
  
  162
  
  140Nonperforming
  loans
  
  21,070
  
  23,650
  
  26,048
  
  22,771
  
  15,291OREO
  
  2,869
  
  2,437
  
  6,525
  
  4,763
  
  5,433Nonperforming
  assets
  
  $
  23,939
  
  $
  26,087
  
  $
  32,573
  
  $
  27,534
  
  $
  20,724Loans 90 days or
  more past due but still accruing
  
  $
  6,270
  
  $
  2,482
  
  $
  1,949
  
  $
  3,525
  
  $
  4,292Nonperforming
  loans as a percentage of total loans
  
  0.56
  %
  0.63
  %
  0.71
  %
  0.64
  %
  0.48
  %Nonperforming
  assets as a percentage of total assets
  
  0.41
  %
  0.43
  %
  0.52
  %
  0.44
  %
  0.37
  %Nonperforming
  assets as a percentage of total loans and OREO
  
  0.64
  %
  0.70
  %
  0.88
  %
  0.78
  %
  0.65
  %Total loans
  
  $
  3,736,692
  
  $
  3,738,202
  
  $
  3,690,353
  
  $
  3,537,537
  
  $
  3,160,501Total assets
  
  $
  5,772,326
  
  $
  6,089,729
  
  $
  6,302,235
  
  $
  6,239,772
  
  $
  5,660,218  Nonperforming assets were $23.9 million at December 31, 2001, a
decrease of $2.2 million, or 8.4%, from $26.1 million at December 31, 2000.
Nonperforming loans decreased by $2.6 million during the same period. OREO
increased $432,000, or 17.7%, from $2.4 million at December 31, 2000 to $2.9
million at December 31, 2001. The ratio of nonperforming assets to total assets
at December 31, 2001, was .41%, compared to .43% at December 31, 2000.  Nonperforming assets were $26.1 million at December
31, 2000, a decrease of $6.5 million, or
19.9%, from $32.6 million at December 31, 1999. Nonperforming loans
decreased by $2.4 million during the same
period. OREO decreased $4.1 million, or 63.1%, from $6.5 million at
December 31, 1999 to $2.4 million at December 31, 2000. The ratio of
nonperforming assets to total assets at December 31, 2000, was .43%, compared
to .52% at December 31, 1999.  Allowance for Loan Losses  The current level of the allowance for loan losses is a result of
managements assessment of the risks within the portfolio based on the information
obtained through the credit evaluation processes. The Company utilizes a
risk-rating system on non-homogenous loans, including purchased loans, and a
monthly credit review and reporting process that results in the calculation of
the reserves based on the risk within the portfolio. This assessment of risk
takes into account the composition of the loan portfolio, previous loan
experience, current economic conditions and other factors that, in managements
judgment, deserve recognition.  The allowance is allocated to individual loan
categories based upon the relative risk characteristics of the loan portfolios
and actual loss experience. Additional reserves are provided to recognize the
Companys exposure to inherent, but undetected losses within the overall loan
portfolio. Risk is assessed and reserves are allocated to the individual loan
portfolios through the periodic application of risk assessment processes
including migration analysis, specific credit analysis and analysis of
portfolio sectors possessing common traits.  For commercial and agricultural loans, including
commercial real estate, real estate construction and purchased assets,
portfolio risk is determined using migration analysis wherein the actual loan
loss experience is tracked, on a loan-by-loan basis, over the previous 36
months to determine a weighted average loss rate inherent in the respective
portfolios. In addition, individual loans, which have been identified in the
periodic portfolio review as problem loans, are allocated reserves based on
managements assessment of loss probability. Also, on a quarterly basis,
management identifies sectors of each loan portfolio, which in their judgment
demonstrate more or less risk than that risk identified in the allocated
reserve calculated in the portfolio migration analysis. The basis of these
allocation adjustments includes historical and expected delinquency and
charge-off statistics; changes in underwriting criteria; assessment of lender
management and expertise and changes in loan volume. Portfolio sectors are
identified based on a combination of common characteristics, which may include
collateral type, term, purpose, geographic
concentration of borrowers or other common characteristics encountered
in managements assessment of the portfolio .  Consumer and residential real
estate loan portfolio risk is determined through the application of separate
migration analysis designed to identify estimated inherent losses, wherein the
actual portfolio losses are aggregated to determine the loss ratio applicable
to that period. The resulting loss ratio calculated in the analysis is applied
to the entire consumer and real estate portfolios respectively, based on the
average term of all portfolio loans. Also, on a quarterly basis, management
identifies sectors of the loan portfolio, which in their judgment demonstrate
more or less risk than that risk identified in the portfolio migration
analysis. The basis of these allocation adjustments includes historical
delinquency and charge-off statistics; changes in underwriting criteria;
assessment of lender management and expertise and changes in loan volume.
Portfolio sectors are identified based on a combination of common
characteristics, which may include collateral  9 
   type, term, purpose, geographic concentration of borrowers or other
common characteristics encountered in managements assessment of the portfolio.  The Company also records an additional allowance level
to recognize its exposure to inherent, but
undetected losses. This exposure is caused by inherent delays in
obtaining information regarding an individual borrowers financial condition or
change in their specific business condition; the judgmental nature of
individual loan evaluations, collateral assessments and the interpretation of
economic trends; the volatility of general economic or specific customer
conditions affecting the identification and quantification of losses for large
individual credits; and the sensitivity of assumptions used in establishing
allocated allowances for general categories of loans.  During 2001, the Company modified the methodology
utilized to allocate reserves within individual loan portfolios. The
modification was due to the Companys desire to more specifically identify
credit risk within each individual loan
portfolio. As a result, a greater portion of the reserve for loan loss
has been allocated to specific loan portfolios, which results in a smaller
percentage of additional allowance. While designed to more specifically
identify risk inherent in a specific loan portfolio, the methodology did not
result in a need for additional reserves, but rather permitted the Company to
better assign its reserve balance to specific loan portfolios. The resulting
increase in allocated reserve and decrease in additional allowance in 2001 is
primarily a result of the modified methodology.  The allocated portion of the allowance increased to
$41.3 million at December 31, 2001, an increase of $14.3 million, or 53.0% from
$27.0 million at December 31, 2000. The increase was principally due to the
methodology used in identifying specifically allocated reserves. The allocated
allowance as a percentage of loans outstanding was 1.11% at December 31, 2001
and .72% at December 31, 2000. The additional allowance decreased to $13.7
million at December 31, 2001, a decrease of $11.4 million, or 45.4% from $25.1
million at December 31, 2000. The additional allowance as a percentage of loans
outstanding was .36% at December 31, 2001 and .68% at December 31, 2000. The
decrease was principally due to the modification of methodology used in
identifying specifically allocated reserves. The accompanying table shows the
allocated and additional allowance for the various loan classifications.  As a result of the analytical processes implemented
during 2001, the allocated portion of the reserve increased in all portfolios,
except the agricultural portfolio, which decreased modestly. The allowance
allocated to real estate loans, including real estate construction, increased
to $16.8 million at December 31, 2001, an increase of $4.1 million or 32.3%
from $12.7 million at December 31, 2000. The increase was principally due to
the methodology utilized in identifying specific portfolio risk, as evidenced
by the $3.7 million increase in the real estate construction reserve. The
allowance allocated to the commercial loan portfolio increased to $10.3 million
at December 31, 2001, an increase of $3.2 million, or 45.1% from $7.1 million
at December 31, 2000. The increase was
principally due to the methodology utilized in identifying specific
portfolio risk. The allowance allocated to the consumer loan portfolio
increased to $11.3 million, or 175.6% from $4.1 million at December 31, 2000.
The increase is principally due to the methodology utilized in identifying
specific portfolio risk in addition to an increase in the level of past due and
charge off statistics in the consumer portfolio during 2001 and managements
expectations of portfolio performance in the current economic environment. The
allowance allocated to the agricultural loan portfolio was $3.0 million at
December 31, 2001 and December 31, 2000.  The actual amount of losses incurred can vary
significantly from the estimated amount. The Companys methodology includes
general factors intended to minimize the differences in estimate and actual
losses. These factors allow the Company to adjust its estimates of losses based
on the most recent information available. Although the Company determines the
amount of each element of the allowance for loan losses separately, and this
process is an important credit management tool, the entire allowance for loan
losses is available for the entire loan portfolio.  The Companys experience in the consumer loan and real
estate loan portfolios of its sub-prime lending subsidiaries during 1999 and 1998 resulted in increased allowance levels in
these loan classifications.  The following table sets
forth the allocation of the allowance for loan losses to various loan
categories, as well as the allocation as a percentage of loans outstanding in
each category, as of the dates indicated: Allowance
  for Loan
  
  Allowance
  as a Percent of LoansLosses at
  December 31,
  
  Outstanding
  by Category at December 31,2001
  
  2000
  
  1999
  
  1998
  
  1997
  
  2001
  
  2000
  
  1999
  
  1998
  
  1997(Dollars in thousands)Real estate
  
  $
  12,519
  
  $
  12,234
  
  $
  10,329
  
  $
  9,844
  
  $
  7,457
  
  0.83
  %
  0.84
  %
  0.78
  %
  0.76
  %
  0.61
  %Real estate construction
  
  4,256
  
  515
  
  218
  
  190
  
  135
  
  0.82
  %
  0.11
  %
  0.05
  %
  0.05
  %
  0.05
  %Commercial
  
  10,293
  
  7,117
  
  8,673
  
  7,705
  
  6,582
  
  1.25
  %
  0.82
  %
  0.87
  %
  0.80
  %
  0.79
  %Consumer and other
  
  11,272
  
  4,147
  
  4,657
  
  8,405
  
  4,257
  
  1.80
  %
  0.60
  %
  0.68
  %
  1.36
  %
  0.75
  %Agricultural
  
  2,996
  
  3,016
  
  2,643
  
  3,077
  
  2,487
  
  1.19
  %
  1.19
  %
  1.02
  %
  1.04
  %
  0.85
  %Total allocated allowance
  
  41,336
  
  27,029
  
  26,520
  
  29,221
  
  20,918
  
  1.11
  %
  0.72
  %
  0.72
  %
  0.83
  %
  0.66
  %Total additional allowance
  
  13,655
  
  25,139
  
  22,358
  
  22,639
  
  20,469
  
  0.36
  %
  0.68
  %
  0.60
  %
  0.64
  %
  0.65
  %Total allowance
  
  $
  54,991
  
  $
  52,168
  
  $
  48,878
  
  $
  51,860
  
  $
  41,387
  
  1.47
  %
  1.40
  %
  1.32
  %
  1.47
  %
  1.31
  %  At December 31, 2001, the allowance for loan losses
was $55.0 million, an increase of $2.8 million from the December 31, 2000 level
of $52.2 million. At December 31, 2001, the allowance for loan losses as a
percentage of total loans was 1.47%, as compared to 1.40% at December 31, 2000.
This increase was attributed to the Companys analysis of the loan portfolio
credit quality at the Companys bank subsidiary.  At December 31, 2000, the allowance for loan losses
was $52.2 million, an increase of $3.3 million from the December 31, 1999,
level of $48.9 million. At December 31, 2000, the allowance for loan losses as
a percentage of total loans was 1.40%, as compared to 1.32% at December 31,
1999. This increase was attributed to the Companys analysis of the loan
portfolio credit quality at the Companys bank subsidiaries.  10 
   During 2001, net charge-offs were $14.7 million, an
increase of $2.2 million from net charge-offs of the $12.5 million during 2000.
The increase is principally attributed to a $2.4 million charge-off of the
Companys largest non-performing asset, an Arizona-based credit facility that
was in place when the Company acquired its initial Arizona operation in 1997.
The Companys provision for loan losses increased from $15.8 million in 2000 to
$17.5 million in 2001. The provision for loan losses is recorded to bring the
allowance for loan losses to the level deemed appropriate by management.  During 2000, net charge-offs were $12.5 million, a
decrease of $10.9 million from the $23.4 million during 1999. The decrease is
principally attributed to losses recorded in the Companys sub-prime specialty
lending operation during 1999. The Companys provision for loan losses
decreased from $20.2 million in 1999 to $15.8 million in 2000. The provision
for loan losses is recorded to bring the allowance for loan losses to the level
deemed appropriate by management.  The following table sets forth the Companys allowance
for loan losses as of the dates indicated:  December
  312001
  
  2000
  
  1999
  
  1998
  
  1997(Dollars
  in thousands)Balance at beginning of year
  
  $
  52,168
  
  $
  48,878
  
  $
  51,860
  
  $
  41,387
  
  $
  31,354Allowance of
  acquired companies and other
  
  
  
  
  
  270
  
  1,950
  
  10,065Charge-offs:Real estate
  
  1,588
  
  1,176
  
  2,181
  
  2,340
  
  802Real estate
  construction
  
  2,538
  
  408
  
  2,965
  
  36
  
  635Commercial
  
  5,374
  
  6,644
  
  8,349
  
  2,771
  
  1,863Consumer and
  other
  
  10,033
  
  7,893
  
  13,802
  
  11,806
  
  5,326Agricultural
  
  336
  
  996
  
  553
  
  1,381
  
  726Total
  charge-offs
  
  19,869
  
  17,117
  
  27,850
  
  18,334
  
  9,352Recoveries:Real estate
  
  498
  
  155
  
  928
  
  237
  
  306Real estate
  construction
  
  70
  
  4
  
  
  
  
  
  Commercial
  
  839
  
  1,565
  
  468
  
  972
  
  650Consumer and
  other
  
  3,438
  
  2,648
  
  2,537
  
  2,113
  
  1,113Agricultural
  
  327
  
  254
  
  481
  
  399
  
  647Total recoveries
  
  5,172
  
  4,626
  
  4,414
  
  3,721
  
  2,716Net charge-offs
  
  14,697
  
  12,491
  
  23,436
  
  14,613
  
  6,636Provision
  charged to operations
  
  17,520
  
  15,781
  
  20,184
  
  23,136
  
  6,604Balance at end
  of year
  
  $
  54,991
  
  $
  52,168
  
  $
  48,878
  
  $
  51,860
  
  $
  41,387Allowance as a
  percentage of total loans
  
  1.47
  %
  1.40
  %
  1.32
  %
  1.47
  %
  1.31
  %Net charge-offs
  to average loans outstanding
  
  0.39
  %
  0.34
  %
  0.66
  %
  0.43
  %
  0.24
  %Total loans
  
  $
  3,736,692
  
  $
  3,738,202
  
  $
  3,690,353
  
  $
  3,537,537
  
  $
  3,160,501Average loans
  
  $
  3,785,553
  
  $
  3,706,144
  
  $
  3,573,060
  
  $
  3,383,724
  
  $
  2,747,123  SOURCE OF FUNDS  Deposits  The Companys major source of funds is provided by core deposits from
individuals, businesses and local government units. Core deposits consist of
all in-market noninterest-bearing deposits, interest-bearing savings and checking
accounts and time deposits of less than $100,000.  The following table sets forth a summary of the
deposits of the Company at the dates indicated:  December
  312001
  
  2000
  
  1999(in
  thousands)Noninterest-bearing
  
  $
  487,864
  
  $
  500,834
  
  $
  616,861Interest-bearing:Savings and
  checking accounts
  
  2,367,255
  
  2,349,606
  
  2,276,705Time accounts
  less than $100,000
  
  1,203,379
  
  1,496,483
  
  1,436,783Time accounts greater than $100,000
  
  692,315
  
  672,968
  
  579,514Total deposits
  
  $
  4,750,813
  
  $
  5,019,891
  
  $
  4,909,863  Total deposits at December 31, 2001, were $4.8
billion, a decrease of $269 million, or 5.4%, from $5.0 billion at December 31,
2000. The decrease is principally due to a $123 million reduction in the level
of certificates of deposits obtained through a brokered deposit relationship, a
result of the Companys effort to contract its balance sheet and $118 million
of deposits held in the 13 offices sold during 2001. The Companys core
deposits as a percentage of total deposits were 85.3% and 84.0% as of December
31, 2001 and December 31, 2000, respectively.  At December 31, 2001, $692 million, or 14.6% of total
deposits were in time accounts greater than
$100,000, an increase of $19 million, or 2.8%, from $673 million at
December 31, 2000. Management believes virtually all the deposits in excess of
$100,000 are with persons or entities that hold other deposit relationships
with the bank. Maturities of deposits in excess of $100,000 at December 31,
2001 were (in thousands):  Maturing in less than three months
  
  $
  253,164Maturing in
  three to six months
  
  85,728Maturing in six
  to twelve months
  
  211,092Maturing in over
  twelve months
  
  142,331Total deposits
  in excess of $100,000
  
  $
  692,315  At December 31, 2001, the Company had $8 million in
deposits obtained through a brokered deposit relationship. In addition to the
availability of core deposits, management has determined it may continue to
employ a brokered deposit program in an effort to attract lower cost sources of
funds.  11 
   Short-Term Borrowings  Short-term borrowings include securities sold under agreements to
repurchase, commercial paper, Federal Home Loan Bank advances and federal funds
purchased. These funds are used to fund the growth in loans and securities and
manage the Companys rate sensitivity risk. They are subject to short-term
interest rate changes as the Companys needs change or the overall market rates
for short-term investment funds change.  The Companys subsidiary bank has an arrangement with
the Federal Home Loan Bank that provides
for borrowing up to $631 million. As of December 31, 2001, $4 million in
advances were outstanding.  The Company
also had a $20 million balance outstanding on its $35 million short-term
commercial paper arrangement at December 31, 2001. The $67 million decrease in
short-term borrowings from December 31, 2000 is due to the Companys planned
balance sheet contraction and its decision to rely less upon short term
borrowings to fund asset growth. The Company has a $25 million short term line
of credit with a nonafilliated commercial bank for purposes of funding
operating expenses. As of December 31, 2001, there was no balance outstanding
on this line.  The following table sets forth a summary of the
short-term borrowings of the Company during 2001, 2000 and 1999, and as of the
end of each such period:  Outstanding
  at Year-End
  
  Average Daily Amount Outstanding
  
  Maximum Outstanding at any Month-End
  
  Weighted Average Interest Rate
  
  Average Interest Rate at Year-End(Dollars in thousands)2001Federal funds
  purchased and securities sold under agreements to repurchase
  
  $
  318,859
  
  $
  263,252
  
  $
  363,638
  
  3.47
  %
  2.46
  %Commercial paper
  
  19,780
  
  22,285
  
  34,051
  
  4.98
  %
  2.78
  %FHLB advances
  
  4,000
  
  72,513
  
  210,000
  
  6.27
  %
  4.39
  %Other
  
  
  
  3,513
  
  5,000
  
  6.40
  %
  Total
  
  $
  342,639
  
  $
  361,563
  
  $
  496,856
  
  4.15
  %
  2.51
  %2000Federal funds purchased
  and securities sold under agreements to repurchase
  
  $
  205,758
  
  $
  226,791
  
  $
  274,577
  
  5.31
  %
  5.33
  %Commercial paper
  
  28,952
  
  25,488
  
  32,078
  
  6.74
  %
  7.31
  %FHLB advances
  
  155,000
  
  258,935
  
  364,000
  
  6.41
  %
  6.55
  %Other
  
  20,000
  
  57,326
  
  88,000
  
  6.80
  %
  7.37
  %Total
  
  $
  409,710
  
  $
  568,540
  
  $
  739,564
  
  6.03
  %
  6.03
  %1999Federal funds
  purchased and securities sold under agreements to repurchase
  
  $
  252,760
  
  $
  186,267
  
  $
  261,191
  
  4.48
  %
  5.04
  %Commercial paper
  
  19,412
  
  18,403
  
  22,546
  
  5.60
  %
  6.03
  %FHLB advances
  
  383,500
  
  289,859
  
  383,500
  
  5.29
  %
  5.43
  %Other
  
  68,753
  
  63,391
  
  119,806
  
  5.30
  %
  5.77
  %Total
  
  $
  724,425
  
  $
  557,920
  
  $
  724,425
  
  5.03
  %
  5.35
  %  Long-Term Debt  Long-term debt of the Company was $137 million as of December 31, 2001,
and $124 million as of December 31, 2000.  Company-Obligated Mandatorily
Redeemable Preferred Securities  Company-obligated mandatorily redeemable preferred securities of the
Company were $120 million as of December 31, 2001 and 2000, which consisted of
$60 million of 8.20% Cumulative Capital Securities issued December 10, 1997
through CFB Capital II and $60 million of 8.875% Cumulative Capital Securities
issued February 5, 1997 through CFB Capital I. The proceeds of both offerings
were invested by CFB Capital II and CFB Capital I, respectively, in Junior Subordinated Debentures of the Company. The
debentures bear interest at the same rate as the Cumulative Capital
Securities and mature not earlier than February 1, 2002 and not later than
December 15, 2027.  Shareholders Equity  Total shareholders equity increased $11.3 million, or 3.3%, to $356.7
million at December 31, 2001, from $345.4 million at December 31, 2000, due
principally to the retention of a majority of earnings and a $13.3 million
increase in unrealized gains on available-for-sale securities, net of tax. This
was offset in part through an increase of $35.8 million in treasury stock as a
result of the Companys common stock repurchase program.  On April 10, 2000, the Company announced its intention
to repurchase up to 5 million shares of the Companys common stock. On August
9, 2000, the Company announced its intention to repurchase up to an additional
5 million shares of the Companys common stock. On August 7, 2001, the Company
announced its intention to repurchase up to 3 million shares of the Companys
common stock. As of December 31, 2001, the Company had repurchased 10,800,000
shares of common stock at prices ranging from $15.25 to $25.00. Two million
shares were repurchased during 2001 and 8.8 million were repurchased during
2000.  In April 1998, in conjunction with the Companys
shareholder approval of a charter amendment that facilitated a two-for-one
split of the Companys common stock in the form of a 100 percent dividend paid
to holders of record as of May 1, 1998, the Company increased the number of
authorized common shares from 30,000,000 to 80,000,000. The number of
authorized preferred shares remained at 2,000,000.  12 
   ASSET AND LIABILITY MANAGEMENT  Liquidity Management  Liquidity management is an effort of management to provide a continuing
flow of funds to meet its financial commitments, customer borrowing needs and
deposit withdrawal requirements. The liquidity position of the Company and its
subsidiary bank is monitored by the Asset and Liability Management Committee of
the Company. The largest category of assets representing a ready source of
liquidity for the Company is its short-term financial instruments, which
include federal funds sold, interest-bearing deposits at other financial
institutions, U.S. Treasury securities and other securities maturing within one
year. Liquidity is also provided through the regularly scheduled maturities of
assets. The investment portfolio contains a number of high quality issues with
varying maturities and regular principal payments. Maturities in the loan
portfolio also provide a steady flow of funds, and strict adherence to the
credit policies of the Company helps ensure the collectibility of these loans.
The liquidity position of the Company is also greatly enhanced by its
significant base of core deposits.  In the normal course of business, the Company is party
to financial instruments with off-balance-sheet risk. Because many of the
commitments are expected to expire without being drawn upon, total commitment
amounts do not necessarily represent the Companys future liquidity
requirements. These instruments are further described in Footnote 9, Financial
Instruments With Off-Balance-Sheet Risk and Concentrations of Credit Risk.  The liquidity ratio is one measure of a banks ability
to meet its current obligations and is defined as the percentage of liquid
assets to deposits. Liquid assets include cash and due from banks, unpledged
investment securities with maturities of less than one year and federal funds
sold. At year-end 2001, 2000 and 1999, the liquidity ratio was 6.72%, 5.21%,
and 5.39%, respectively. The level of loans maturing within one year greatly
added to the Companys liquidity position in 2001. Including loans maturing
within one year, the liquidity ratio was 29.86%, 24.98%, and 27.15%,
respectively, for the same periods.  The Company has revolving lines of credit with its primary
lenders, which provide for borrowing up to $60 million. These lines would be
utilized to finance stock repurchase activity, underwrite commercial paper, and
fund other operating expenses. At December 31, 2001, the Company had $20
million in commercial paper outstanding, underwritten by the Companys
revolving line of credit.  The Company also maintains available lines of federal
funds borrowings, as well as seasonal borrowing privileges, at the Federal
Reserve Bank of Minneapolis. The Companys subsidiary bank has the ability to
borrow an aggregate of $97 million in federal funds from four nonaffiliated
financial institutions. There was no balance outstanding on these lines at
December 31, 2001.  The Companys subsidiary bank has the ability to
borrow an aggregate of $55 million in Federal funds, on a funds available
basis, with two nonaffiliated institutions. There was no balance outstanding on
these lines at December 31, 2001.  Additionally, the Companys subsidiary bank is a
member of the Federal Home Loan Bank (FHLB) System. As part of membership,
the Companys subsidiary bank purchased a modest amount of stock of FHLB and
obtained advance lines of credit which represent an aggregate of $631 million
in additional funding capacity.  Interest Rate Sensitivity  Interest rate sensitivity indicates the exposure of a financial
institutions earnings to future fluctuations in interest rates. Management of
interest rate sensitivity is accomplished through the composition of loans and
investments and by adjusting the maturities on earning assets and
interest-bearing liabilities. Rate sensitivity and liquidity are related since
both are affected by maturing assets and liabilities.
However, interest rate sensitivity also takes into consideration those
assets and liabilities with interest rates that are subject to change prior to
maturity.  The Companys Asset and Liability Management Committee
(ALCO) attempts to structure the Companys balance sheet to provide for an
approximately equal amount of rate sensitive assets and rate sensitive
liabilities. In addition to facilitating liquidity needs, this strategy assists
management in maintaining relative stability in net interest income despite
unexpected fluctuations in interest rates. ALCO uses three methods for measuring
and managing interest rate risk: Repricing Mismatch Analysis, Balance Sheet
Simulation Modeling and Equity Fair Value Modeling.  Repricing Mismatch Analysis  Management performs a Repricing Mismatch Analysis (Gap Analysis)
which represents a point in time net position of assets, liabilities and
off-balance sheet instruments subject to repricing in specified time periods.
However, management believes Gap Analysis alone does not accurately measure the
magnitude of changes in net interest income since changes in interest rate do
not impact all categories of assets, liabilities and off-balance sheet
instruments equally or simultaneously. A summary of the Gap Analysis is
presented at the end of this section.  Balance Sheet Simulation Modeling  Balance Sheet Simulation Modeling allows management to analyze the
impact of short-term (12 months or less) interest rate fluctuations using
projected balance sheet information. The balance sheet changes are based on
forecasted repayments of loans and securities, growth in loans and deposits,
and historical pricing spreads.  Management uses the model to simulate the impact of
shifts in the yield curve. The results of these models are reviewed by ALCO and
used to develop the Companys strategies. Guidelines established by ALCO limit
the impact on net interest income to 1.4% in 2001 and 5.0% in 2000 and 1999,
given a 100 basis point change in interest rates. As of December 31, 2001,
2000, and 1999, the impact of such a change in interest rates would be
approximately .44%, 3.02%, and 2.46%, respectively, of net interest income.  Equity Fair Value Modeling  Because Balance Sheet Simulation Modeling is dependent on accurate
forecasts, its usefulness is limited to periods of one year or less. As a
result, the Company uses the Equity Fair Value Modeling to measure long-term
interest rate exposure. The method estimates the impact of interest rate
changes on the estimated discounted future cash flows of the Companys current
assets, liabilities and off-balance sheet instruments. Guidelines established
by ALCO limit the change in fair value to 10% given a 100 basis point change in
interest rates. As of December 31, 2001, 2000, and 1999, the impact of such a  13 
   change in interest rates would be approximately .10%, 6.37%, and 8.75%,
respectively, of equity fair value.  Based on each of these methods of measuring interest
rate risk, management believes the Company was liability sensitive as of
December 31, 2001.  The Company does not engage in the speculative use of
derivative financial instruments.  The following table sets forth
the Companys interest rate sensitivity analysis by contractual repricing or
maturity at December 31, 2001: Repricing
  or Maturing in1 Year or
  Less
  
  Over 1 to
  5 Years
  
  Over 5
  Years
  
  Total(In
  thousands)Rate sensitive
  assets:Loans
  
  $
  1,571,649
  
  $
  1,670,913
  
  $
  494,130
  
  $
  3,736,692Held-to-maturity securities
  
  
  
  
  
  76,765
  
  76,765Available-for-sale
  securities
  
  294,343
  
  287,695
  
  855,028
  
  1,437,066Other
  interest-bearing assets
  
  341
  
  
  
  
  
  341Total rate
  sensitive assets
  
  $
  1,866,333
  
  $
  1,958,608
  
  $
  1,425,923
  
  $
  5,250,864Rate sensitive
  liabilities:Savings deposits
  and interest-bearing checking
  
  $
  2,367,255
  
  $
  
  
  $
  
  
  $
  2,367,255Time deposits
  
  1,608,387
  
  286,819
  
  488
  
  1,895,694Short-term
  borrowings
  
  342,639
  
  
  
  
  
  342,639Long-term
  borrowings
  
  
  
  108,781
  
  28,060
  
  136,841Total rate
  sensitive liabilities
  
  $
  4,318,281
  
  $
  395,600
  
  $
  28,548
  
  $
  4,742,429Rate sensitive
  gap
  
  $
  (2,451,948
  )
  $
  1,563,008
  
  $
  1,397,375
  
  $
  508,435Cumulative rate
  sensitive gap
  
  (2,451,948
  )
  (888,940
  )
  508,435
  
  508,435  The following sets forth the Companys interest rate
sensitivity analysis at December 31, 2001, with respect to the individual
categories of loans and provides separate analyses with respect to fixed
interest rate loans and floating interest rate loans:  Repricing
  or Maturing in1 Year or Less
  
  Over 1 to
  5 Years
  
  Over 5
  Years
  
  Total(In
  thousands)Loan category:Real estate
  
  $
  392,290
  
  $
  856,351
  
  $
  266,477
  
  $
  1,515,118Real estate
  construction
  
  519,031
  
  
  
  
  
  519,031Agriculture
  
  187,459
  
  55,145
  
  8,587
  
  251,191Commercial
  
  406,457
  
  306,322
  
  111,539
  
  824,318Consumer and
  other
  
  66,412
  
  453,095
  
  107,527
  
  627,034Total loans
  
  $
  1,571,649
  
  $
  1,670,913
  
  $
  494,130
  
  $
  3,736,692Floating
  interest rate loans
  
  $
  380,275
  
  $
  1,268,318
  
  $
  415,619
  
  $
  2,064,212Fixed interest
  rate loans
  
  1,191,374
  
  402,595
  
  78,511
  
  1,672,480Total loans
  
  $
  1,571,649
  
  $
  1,670,913
  
  $
  494,130
  
  $
  3,736,692  Capital
Management  Risk-based guidelines established by regulatory agencies require the
Company to maintain minimum amounts and ratios of total and Tier I capital to
risk-weighted assets, and of Tier I capital to average assets.  As of December 31, 2001, the Company is considered
well capitalized under the regulatory framework for prompt corrective action. To
be categorized as well capitalized, the Company must maintain minimum total
risk-based, Tier I risk-based and Tier I leverage ratios as set forth in the
table.  Regulatory
  Capital Requirements:Tier 1
  Capital
  
  Total RiskBasedCapital
  
  Leverage
  
  Total RiskBased Assets(Dollars in thousands)Minimum
  
  4.00
  %
  8.00
  %
  3.00
  %
  N/AWell Capitalized
  
  6.00
  %
  10.00
  %
  5.00
  %
  N/ACommunity
  First Bankshares, Inc.December 31,
  2001
  
  8.67
  %
  11.11
  %
  6.51
  %
  $
  4,304,531December 31,
  2000
  
  8.13
  %
  10.73
  %
  5.94
  %
  $
  4,408,524  Due to the Companys level of Tier 1 capital and
substantial level of earning assets invested in low risk government agency and
mortgage-backed securities, the Companys risk-based capital ratios significantly
exceed the regulatory minimums. The Company conducts an ongoing assessment of
its capital needs in order to maintain an adequate level of capital to support
business growth, to ensure depositor protection and to facilitate corporate
expansion. Portions of the subordinated debt financing referred to under
Borrowings, above, are treated as Tier 2 capital.  FORWARD-LOOKING STATEMENTS  This Annual Report contains forward-looking statements under the
Private Securities Litigation Reform Act of 1995 that are subject to certain
risks and uncertainties that could cause actual results to differ materially
from historical earnings and those presently anticipated or projected. The
Company wishes to caution readers not to place undue reliance on any such forward-looking
statements, which speak only as of the date
made. Factors that could cause actual results to differ from the results
discussed in the forward-looking statements include, but are not limited to:
risks of loans and investments, including dependence on local economic
conditions; competition for the Companys customers from other providers of
financial services; possible adverse effects of changes in interest rates;
balance sheet and critical ratio risks related to the share repurchase program;
risks related to the Companys acquisition strategy, including risks of
adversely changing results of operations and possible factors affecting the
Companys ability to consummate further acquisitions; and other risks detailed
in the Companys filings with the Securities and Exchange Commission, all of
which are difficult to predict and many of which are beyond the control of the
Company.   14 
  CONSOLIDATED
STATEMENTS OF FINANCIAL CONDITION
Community First Bankshares, Inc.  December
  312001
  
  2000(Dollars
  in thousands, except per share data)AssetsCash and due
  from banks
  
  $
  248,260
  
  $
  256,136Interest-bearing
  deposits
  
  341
  
  1,110Available-for-sale
  securities
  
  1,437,066
  
  1,714,510Held-to-maturity
  securities (Fair Value: 2001  $76,765; 2000  $73,222)
  
  76,765
  
  73,222Loans
  
  3,736,692
  
  3,738,202Less: Allowance
  for loan losses
  
  (54,991
  )
  (52,168
  )Net loans
  
  3,681,701
  
  3,686,034Bank premises
  and equipment, net
  
  125,947
  
  121,675Accrued interest
  receivable
  
  39,491
  
  52,494Intangibles
  
  97,457
  
  114,971Other assets
  
  65,298
  
  69,577Total assets
  
  $
  5,772,326
  
  $
  6,089,729Liabilities and shareholders equityDeposits:Noninterest-bearing
  
  $
  487,864
  
  $
  500,834Interest-bearing:Savings and NOW
  accounts
  
  2,367,255
  
  2,349,606Time accounts
  over $100,000
  
  692,315
  
  672,968Other time
  accounts
  
  1,203,379
  
  1,496,483Total deposits
  
  4,750,813
  
  5,019,891Federal funds purchased
  and securities sold under agreements to repurchase
  
  318,859
  
  205,758Other short-term
  borrowings
  
  23,780
  
  203,952Long-term debt
  
  136,841
  
  123,957Accrued interest
  payable
  
  29,966
  
  45,489Other
  liabilities
  
  35,362
  
  25,251Total
  liabilities
  
  5,295,621
  
  5,624,298Company-obligated
  mandatorily redeemable preferred securities of CFB Capital I and II
  
  120,000
  
  120,000Shareholders
  equity:Common stock,
  par value $.01 per share:
  Authorized Shares  80,000,000
  Issued Shares  51,021,896
  
  510
  
  510Capital surplus
  
  193,103
  
  192,368Retained
  earnings
  
  348,101
  
  315,091Unrealized gain
  (loss) on available-for-sale securities, net of tax
  
  3,847
  
  (9,486
  )Less cost of
  common stock in treasury  2001  10,775,857 shares; 2000  9,155,144 shares
  
  (188,856
  )
  (153,052
  )Total
  shareholders equity
  
  356,705
  
  345,431Total
  liabilities and shareholders equity
  
  $
  5,772,326
  
  $
  6,089,729  See accompanying notes.  15 
  CONSOLIDATED
STATEMENTS OF INCOME
Community First Bankshares, Inc.  Years
  ended December 312001
  
  2000
  
  1999(Dollars
  in thousands, except per share data)INTEREST INCOME:Loans
  
  $
  336,937
  
  $
  353,405
  
  $
  332,974Investment
  securities
  
  96,688
  
  123,525
  
  130,955Interest-bearing
  deposits
  
  192
  
  184
  
  463Federal funds
  sold and resale agreements
  
  199
  
  444
  `
  814Total interest
  income
  
  434,016
  
  477,558
  
  465,206Interest expense:Deposits
  
  138,542
  
  169,281
  
  151,138Short-term and
  other borrowings
  
  15,001
  
  34,303
  
  28,052Long-term debt
  
  8,677
  
  6,697
  
  6,628Total interest
  expense
  
  162,220
  
  210,281
  
  185,818Net interest
  income
  
  271,796
  
  267,277
  
  279,388Provision for
  loan losses
  
  17,520
  
  15,781
  
  20,184Net interest
  income after provision for loan losses
  
  254,276
  
  251,496
  
  259,204Noninterest income:Service charges
  on deposit accounts
  
  38,957
  
  39,537
  
  37,013Insurance
  commissions
  
  12,535
  
  10,550
  
  8,791Security sales
  commissions
  
  6,644
  
  6,805
  
  5,258Fees from
  fiduciary activities
  
  5,661
  
  5,811
  
  5,148Net gains on
  sales of securities
  
  804
  
  65
  
  2,175Other
  
  12,081
  
  12,437
  
  14,124Total
  noninterest income
  
  76,682
  
  75,205
  
  72,509Noninterest expense:Salaries and
  employee benefits
  
  115,743
  
  110,024
  
  106,542Net occupancy
  
  31,593
  
  31,941
  
  32,726FDIC insurance
  
  915
  
  1,039
  
  625Legal and
  accounting
  
  3,764
  
  3,874
  
  3,651Other professional
  services
  
  4,634
  
  4,415
  
  5,168Advertising
  
  5,037
  
  4,545
  
  4,065Telephone
  
  5,633
  
  5,203
  
  4,807Acquisition,
  integration and conforming
  
  
  
  
  
  3,053Restructuring
  charge
  
  7,656
  
  
  
  Data processing
  
  4,047
  
  4,545
  
  4,116Company-obligated mandatorily redeemable
  preferred securities of CFB Capital I & II
  
  10,273
  
  10,245
  
  10,245Amortization of
  intangibles
  
  9,928
  
  10,481
  
  10,500Other
  
  33,200
  
  33,007
  
  32,729Total
  noninterest expense
  
  232,423
  
  219,319
  
  218,227Income before
  income taxes
  
  98,535
  
  107,382
  
  113,486Provision for
  income taxes
  
  33,476
  
  35,748
  
  38,573Net income
  
  $
  65,059
  
  $
  71,634
  
  $
  74,913
  `Earnings per
  common and common equivalent share:Basic net income
  
  $
  1.59
  
  $
  1.55
  
  $
  1.50Diluted net
  income
  
  $
  1.57
  
  $
  1.54
  
  $
  1.48Average common
  and common equivalent shares outstanding:Basic
  
  40,905,545
  
  46,219,120
  
  50,061,972Diluted
  
  41,471,404
  
  46,578,750
  
  50,670,559  See accompanying notes.  16 
  CONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOMECommunity First Bankshares, Inc.  Years
  ended December 312001
  
  2000
  
  1999(Dollars
  in thousands, except per share data)Net income
  
  $
  65,059
  
  $
  71,634
  
  $
  74,913Other
  comprehensive income, net of tax:Unrealized gains
  (losses) on securities:Unrealized
  holding gains (losses) arising during period
  
  13,815
  
  35,449
  
  (56,879
  )Less:
  Reclassification adjustment for gains included in net income
  
  (482
  )
  (39
  )
  (1,305
  )Other
  comprehensive income
  
  13,333
  
  35,410
  
  (58,184
  )Comprehensive
  income
  
  $
  78,392
  
  $
  107,044
  
  $
  16,729  See accompanying notes.  CONSOLIDATED
STATEMENTS OF SHAREHOLDERS EQUITYCommunity First Bankshares, Inc.  Years
  ended December 31, 2001, 2000, 1999Common
  Stock
  
  
  
  
  
  
  
  Treasury
  StockShares
  
  Amount
  
  Capital
  Surplus
  
  Retained
  Earnings
  
  Unrealized
  Gain(Loss)
  
  Shares
  
  Amount
  
  Total(Dollars
  in thousands, except per share data)Balance at
  December 31, 1998
  
  50,557,537
  
  $
  506
  
  $
  186,888
  
  $
  236,083
  
  $
  13,288
  
  564,588
  
  $
  (12,109
  )
  $
  424,656Net income
  
  
  
  
  
  
  
  74,913
  
  
  
  
  
  
  
  74,913Common stock dividends ($0.56 per share)
  
  
  
  
  
  
  
  (27,041
  )
  
  
  
  
  
  
  (27,041
  )Common stock dividends
  
  143,566
  
  1
  
  2,217
  
  (2,218
  )
  
  
  
  
  
  
  Cash in lieu of stock dividend
  
  
  
  
  
  
  
  (34
  )
  
  
  
  
  
  
  (34
  )Issuance of common stock
  
  3,198,079
  
  32
  
  2,645
  
  (414
  )
  
  
  
  
  
  
  2,263Retirement of common stock
  
  (2,877,286
  )
  (29
  )
  
  
  
  
  
  
  
  
  
  
  (29
  )Purchases of common stock for treasury, at cost
  
  
  
  
  
  
  
  
  
  
  
  625,457
  
  (11,844
  )
  (11,844
  )Exercise of options, net of stock tendered in payment
  
  
  
  
  
  321
  
  (4,787
  )
  
  
  (304,081
  )
  7,035
  
  2,569Change in unrealized loss on available-for-sale securities, net of
  income taxes of $35,508
  
  
  
  
  
  
  
  
  
  (58,184
  )
  
  
  
  
  (58,184
  )Balance at December 31, 1999
  
  51,021,896
  
  $
  510
  
  $
  192,071
  
  $
  276,502
  
  $
  (44,896
  )
  885,964
  
  $
  (16,918
  )
  $
  407,269Net income
  
  
  
  
  
  
  
  71,634
  
  
  
  
  
  
  
  71,634Common stock dividends ($0.60 per share)
  
  
  
  
  
  
  
  (27,601
  )
  
  
  
  
  
  
  (27,601
  )Purchases of common stock for treasury, at cost
  
  
  
  
  
  
  
  
  
  
  
  8,760,278
  
  (145,725
  )
  (145,725
  )Sales of treasury stock to employee benefit
  plans
  
  
  
  
  
  
  
  (793
  )
  
  
  (127,136
  )
  2,573
  
  1,780Exercise of options, net of stock tendered in payment
  
  
  
  
  
  297
  
  (4,651
  )
  
  
  (363,962
  )
  7,018
  
  2,664Change in unrealized loss on available-for-sale securities, net of
  income taxes of $21,576
  
  
  
  
  
  
  
  
  
  35,410
  
  
  
  
  
  35,410Balance at December 31, 2000
  
  51,021,896
  
  $
  510
  
  $
  192,368
  
  $
  315,091
  
  $
  (9,486
  )
  9,155,144
  
  $
  (153,052
  )
  $
  345,431Net income
  
  
  
  
  
  
  
  65,059
  
  
  
  
  
  
  
  65,059Common stock dividends ($0.68 per share)
  
  
  
  
  
  
  
  (27,793
  )
  
  
  
  
  
  
  (27,793
  )Purchases of common stock for treasury, at cost
  
  
  
  
  
  
  
  
  
  
  
  2,010,172
  
  (43,020
  )
  (43,020
  )Exercise of options, net of stock tendered in payment
  
  
  
  
  
  735
  
  (4,256
  )
  
  
  (389,459
  )
  7,216
  
  3,695Change in unrealized gain on available-for-sale securities, net of
  income taxes of $8,748
  
  
  
  
  
  
  
  
  
  13,333
  
  
  
  
  
  13,333Balance at December 31, 2001
  
  51,021,896
  
  $
  510
  
  $
  193,103
  
  $
  348,101
  
  $
  3,847
  
  10,775,857
  
  $
  (188,856
  )
  $
  356,705  See accompanying notes.  17 
  CONSOLIDATED
STATEMENTS OF CASH FLOWS
Community First Bankshares, Inc.  Years
  ended December 312001
  
  2000
  
  1999(In
  thousands)Cash flows
  from operating activitiesNet income
  
  $
  65,059
  
  $
  71,634
  
  $
  74,913Adjustments to
  reconcile net income to net cash provided by operating activities:Provision for
  loan losses
  
  17,520
  
  15,781
  
  20,184Depreciation
  
  13,553
  
  14,307
  
  15,186Amortization of
  intangibles
  
  9,928
  
  10,481
  
  10,500Net (accretion)
  amortization of premiums and discounts on securities
  
  (582
  )
  188
  
  1,067Deferred income
  tax benefit
  
  (2,223
  )
  (2,077
  )
  (1,088
  )Decrease
  (increase) in interest receivable
  
  13,003
  
  (1,464
  )
  2,230(Decrease)
  increase in interest payable
  
  (15,523
  )
  13,540
  
  4,876Other, net
  
  15,451
  
  (6,350
  )
  (5,501
  )Net cash
  provided by operating activities
  
  116,186
  
  116,040
  
  122,367Cash flows from investing activitiesAcquisitions,
  net of cash paid
  
  
  
  
  
  (1,956
  )Net decrease in
  interest bearing deposits
  
  769
  
  3,538
  
  6,815Purchases of
  available-for-sale securities
  
  (724,534
  )
  (129,097
  )
  (649,177
  )Maturities of
  available-for-sale securities
  
  985,009
  
  258,584
  
  497,314Sales of
  available-for-sale securities, net of gains
  
  39,632
  
  150,318
  
  151,635Purchases of
  held-to-maturity securities
  
  (3,543
  )
  (3,431
  )
  (4,710
  )Maturities of
  held-to-maturity securities
  
  
  
  4,457
  
  291Net increase in
  loans
  
  (13,187
  )
  (60,340
  )
  (147,967
  )Net increase in
  bank premises and equipment
  
  (17,825
  )
  (10,525
  )
  (11,205
  )Net cash
  provided by (used in) investing activities
  
  266,321
  
  213,504
  
  (158,960
  )Cash flows from financing activitiesNet increase
  (decrease) in demand deposits, NOW accounts and savings accounts
  
  4,679
  
  (43,126
  )
  (83,965
  )Net (decrease)
  increase in time accounts
  
  (273,757
  )
  153,154
  
  (137,804
  )Net (decrease)
  increase in short-term and other borrowings
  
  (67,071
  )
  (314,715
  )
  287,549Net increase
  (decrease) in long-term debt
  
  12,884
  
  48,335
  
  (17,902
  )Net proceeds
  from issuance of common stock
  
  
  
  
  
  2,234Purchase of
  common stock held in treasury
  
  (43,020
  )
  (145,725
  )
  (11,844
  )Net sale of
  common stock held in treasury
  
  3,695
  
  4,444
  
  2,569Cash dividends
  
  (27,793
  )
  (27,601
  )
  (27,075
  )Net cash (used
  in) provided by financing activities
  
  (390,383
  )
  (325,234
  )
  13,762Net (decrease)
  increase in cash and cash equivalents
  
  (7,876
  )
  4,310
  
  (22,831
  )Cash and cash
  equivalents at beginning of year
  
  256,136
  
  251,826
  
  274,657Cash and cash
  equivalents at end of year
  
  $
  248,260
  
  $
  256,136
  
  $
  251,826  See accompanying notes.  18 
  NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
Community First Bankshares, Inc.  1. Significant Accounting Policies  Community First Bankshares, Inc. (the Company) is a bank holding
company which, at the end of 2001, served 138 communities in Arizona, California,
Colorado, Iowa, Minnesota, Nebraska, New Mexico, North Dakota, South Dakota,
Utah, Wisconsin and Wyoming. The Companys community banks provide a full range
of banking services through its 52 Regional Financial Centers and 28 Community
Financial Centers, primarily in small and medium-sized communities and the
surrounding areas. In addition to its primary emphasis on commercial and
consumer banking services, the Company offers trust, mortgage, insurance and
nondeposit investment products and services.  Basis of
Presentation  The consolidated financial statements include the accounts of Community
First Bankshares, Inc., its wholly-owned data processing, credit origination
and insurance agency subsidiaries and its wholly-owned subsidiary bank. All significant
intercompany accounts and transactions have
been eliminated in consolidation. Certain amounts in  prior periods have been reclassified to conform
to the current presentation.  As discussed in Note 2, the Company acquired Valley
National Corporation (Valley National) on October 7, 1999. The acquisition
was accounted for using the pooling of interests method. Accordingly, the
consolidated financial information has been restated to reflect the results of
operations of Valley National on a combined basis for all periods presented.  Use of
Estimates  The preparation of financial statements in conformity with accounting principles generally accepted in the United
States requires management  to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.  Held-to-Maturity
and Available-for-Sale Securities  Management determines the classification of debt securities at the time
of purchase and re-evaluates such designation as of each balance sheet date.
Debt securities are classified as held-to-maturity when the Company has the
positive intent and ability to hold the securities to maturity.
Held-to-maturity securities are stated at amortized cost.  Debt securities not classified as held-to-maturity are
classified as available-for-sale. Available-for-sale securities are stated at
fair value, with the unrealized gains and losses, net of tax, reported within
comprehensive income in shareholders equity.  The amortized cost of debt securities classified as
held-to-maturity or available-for-sale is adjusted for amortization of premiums
and accretion of discounts to maturity or, in the case of mortgage-backed
securities, over the estimated life of the security. Such amortization and
accretion is included as an adjustment to interest income from investments.
Realized gains and losses and declines in value judged to be other than
temporary are included in net securities gains (losses). The cost of securities
sold is based on the specific identification method.  Loans  Loans are stated at their principal balance outstanding, less the
allowance for loan losses. Interest on loans is recognized on an accrual basis.
Loans are placed on nonaccrual when they become past due over 90 days, or earlier, if the collection of interest or
principal is considered unlikely. Thereafter, no interest income is
recognized unless received in cash and until such time as the borrower
demonstrates the ability to pay interest and principal.  Loan Fee
Income  The Company recognizes loan fees and certain direct origination costs,
utilizing a method that approximates a constant rate of return over the
estimated life of the loan.  Allowance
for Loan Losses  The allowance for loan losses is maintained through charges to expense
at an amount that will provide for estimated loan losses. The current level of the allowance for loan losses is
a result of managements assessment of the risks within the portfolio
based on the information revealed in credit evaluation processes. This
assessment of risk takes into account the composition of the loan portfolio,
previous loan experience, current economic conditions and other factors that,
in managements judgment, deserve recognition. An allowance is recorded for
individual loan categories based on the relative risk characteristics of the
loan portfolios. Commercial, commercial real estate, construction and
agricultural amounts are based on a quarterly review of the individual loans
outstanding, including outstanding commitments to lend. Residential real estate
and consumer amounts are based on a quarterly analysis of the performance of
the respective portfolios, including historical and expected delinquency and
charge-off statistics.  During 2001, the Company modified the methodology
utilized to allocate reserves within individual loan portfolios. The
modification was due to the Companys desire to more specifically identify
credit risk within each individual loan portfolio.  Ultimate losses may vary from
current estimates, and as adjustments become necessary, the allowance
for loan losses is adjusted in the periods in which such losses become known or
fail to occur. Actual loan charge-offs and subsequent recoveries are deducted
from and added to the allowance, respectively.  Bank
Premises and Equipment  Bank premises and equipment are stated at cost less accumulated depreciation.
Depreciation for financial reporting purposes is provided on the straight-line
method over the estimated lives of the assets and includes amortization of
assets recorded under capital leases. Estimated lives range from three to
twenty and fifteen to thirty-five years for equipment and premises,
respectively. Accelerated depreciation methods are used for income tax
reporting purposes.  19 
   Intangible
Assets  Goodwill, the excess cost over net assets acquired, of subsidiaries is
amortized over a period of fifteen years. At December 31, 2001, goodwill
totaled $62,903,000, net of accumulated amortization of $36,292,000. Other
intangible assets, principally deposit based intangibles, unexpired premium lists
and noncompetition agreements, totaled $34,554,000, net of accumulated
amortization of $13,599,000, and are amortized over their estimated useful
lives ranging from three to twenty-five years. The Company assesses the
recoverability of goodwill and other intangibles on an annual basis to
determine whether any impairment exists. This ongoing assessment includes
understanding and evaluating qualitative factors that would indicate the
potential for impairment. If the Company believes a potential impairment exists,
the Company estimates the relative market value of the corresponding business
activity to determine whether a permanent impairment exists.  Income Taxes  The Company provides for income taxes based on income reported for
financial statement purposes, rather than amounts currently payable under
statutory tax laws. Deferred taxes are recorded to reflect the tax consequences
on future years differences between the tax bases of assets and liabilities
and the financial reporting of amounts at each year-end.  Earnings Per
Share  Basic earnings per common share is calculated by dividing net income
applicable to common equity by the weighted-average number of shares of common
stock outstanding.  Diluted earnings per common share is calculated by
adjusting the weighted-average number of shares of common stock outstanding for
shares that would be issued assuming the exercise of stock options during each
period. Such adjustments to the weighted-average number of shares of common
stock outstanding are made only when such adjustments dilute earnings per
share.  Cash and
Cash Equivalents  Cash and cash equivalents is defined as cash and due from banks,
federal funds sold and securities purchased under agreements to resell.  Stock-Based
Compensation  The Company grants stock options for a fixed number of shares to
employees with an exercise price equal to the fair value of the shares at the
date of grant. The Company accounts for stock option grants in accordance with
APB Opinion No. 25, Accounting for Stock Issued to Employees, and,
accordingly, recognizes no compensation expense for the stock option grants.
See Footnote 15.2.  2.Business
Combinations And Divestitures  On November 5, 2001, the Company announced an agreement to sell its
Phoenix, Arizona, branch to Community Bank of Arizona. The branch has assets of
approximately $16 million. The transaction is subject to regulatory approval
and is expected to close in the first quarter of 2002.  On June 15, 2001, the Company, through its subsidiary
bank and Wells Fargo & Company formed a joint venture mortgage company
called Community First Mortgage, LLC. This joint venture mortgage company
provides mortgage origination, documentation, servicing process and support for
all of the residential mortgage business of Community First Bankshares. The
Company records its interest in the joint venture using the equity method of
accounting. Accordingly, the assets and liabilities of the joint venture are
not consolidated in the Companys financial
statements, but rather, are reflected as a single line item in the
income statement. The new mortgage company began operations in late 2001 and
expects to be fully operational in 2002.  During 2001, the Company sold nine offices in Arizona,
three offices in Nebraska, and one office in North Dakota. The transactions
included the disposition of $118 million in deposits.  During 2001, the Company completed the closure of
eight offices, including three offices in Colorado, two offices in each of
North Dakota and Wyoming and one in Minnesota. Four of the offices closed are
in communities where the Company maintains other offices. Thus, the Company
will continue to serve those communities. The closures are part of the
Companys strategic initiative announced during the first quarter of 2001.  During 2000, the Company sold one office in Colorado
and two offices in Utah. The transactions included the disposition of $45
million in deposits.  On December 21, 1999, the Company issued approximately
317,000 shares of common stock to acquire River Bancorp, Inc. (River
Bancorp), the holding company for Northland Security Bank, Ramsey, Minnesota.
At acquisition, River Bancorp had approximately $35 million in assets and $31
million in deposits. The Company used the pooling of interests method to
account for the transaction. This merger was not material to the Companys
consolidated financial information or operating results. Accordingly, the
Companys consolidated financial information has not been restated to reflect
this merger. The operating results are included in the Companys consolidated
statements from the date of the merger.  On October 7, 1999, the Company issued approximately
3,022,000 shares of common stock to acquire Valley National Corporation
(Valley National), the holding company for Valle de Oro Bank, El Cajon,
California. At acquisition, Valley National had approximately $252 million in
assets and $237 million in deposits. The Company used the pooling of interests
method to account for the transaction. The Companys consolidated financial
information has been restated to reflect this merger. The operating results are
included in the Companys consolidated statements for all periods presented.  20 
   3. Accounting Changes  SFAS No. 133  Accounting for Derivative Instruments and Hedging
Activities  In June 1998, the Financial Accounting Standards Board (FASB)
issued Statement No. 133, which was amended by SFAS Nos. 137 and 138. The
statement, as amended, was adopted by the Company on January 1, 2001. Because
of the Companys minimal use of derivatives, the adoption of the new Statement
did not have a significant effect on earnings or the financial position of the
Company.  SFAS No. 140  Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities  In September 2000, the
FASB issued Statement No. 140, that replaced, in its entirety, SFAS No. 125.
Although Statement 140 changed many of the rules regarding securitizations, it
continues to require an entity to recognize the financial and servicing assets
it controls and the liabilities it has incurred and to derecognize financial
assets when control has been surrendered in accordance with the criteria
provided in the Statement. The Statement
was applicable prospectively to transactions beginning in the second
quarter of 2001. Because the Company does not currently use securitizations or
other transfers of financial assets as a form of financing, the adoption of the
new Statement did not have a significant effect on earnings or the financial
position of the Company.  SFAS Nos. 141 and 142  Business Combinations and
Goodwill and Other Intangible Assets  In June 2001, the FASB issued SFAS Nos.
141 and 142. Statement 141 requires that the purchase method of accounting be
used for all business combinations initiated after June 30, 2001. Statement 142
prohibits the amortization of goodwill and intangible assets with indefinite
useful lives. Statement 142 requires that these assets be reviewed for
impairment at least annually. Intangible assets with finite lives will continue
to be amortized over their estimated useful lives.  The Company will apply Statement 142 beginning in the
first quarter of 2002. Application of the nonamortization provisions of
Statement 142 is expected to result in an increase in net income of $5.0
million (approximately $0.12 per share) in 2002. The Company will test goodwill
for impairment using the two-step process described in Statement 142. The first
step is a screen for potential impairment, while the second step measures the
amount of the impairment, if any. The Company expects to perform the first of
the required impairment steps of goodwill as of January 1, 2002 in the first
quarter of 2002. Any impairment charge resulting from these transitional
impairment tests will be reflected in the statement of income as the cumulative
effect of a change in accounting principle in the first quarter of 2002. The
Company has not yet determined what the effect of these tests will be on the
earnings and financial position of the Company.  4. Restructuring Charge  During the first quarter of 2001, the Company recorded a $5.1 million
after-tax, non-recurring charge as a result of a series of strategic
initiatives designed to improve customer service and strengthen the Companys
position as a provider of diversified financial services. As part of this
strategy, the Company designated each of its offices as either a Regional
Financial Center or a Community Financial Center. Regional Financial Centers
are those locations exhibiting strong commercial banking potential, while
Community Financial Centers offer greater
retail opportunities. As a consequence of the new delivery structure,
the Company sold 13 offices and closed eight additional offices. A further
consequence was to achieve a reduction in work force through implementation of
an early-out program, which was accepted by 21 eligible management personnel.
The restructuring charge included approximately $3.1 million related to asset
write-down, data processing, and legal and accounting fees. Additionally the
Company recorded an after-tax expense of approximately $2.0 million to provide
for severance-related costs associated with the early-out and
reduction-in-force programs.  21 
   5. Securities  The following is a summary of available-for-sale securities and
held-to-maturity securities at December 31, 2001 (in thousands):  Available-for-Sale
  SecuritiesAmortized Cost
  
  Gross
  Unrealized Gains
  
  Gross
  Unrealised Gains
  
  Estimated
  Fair ValueUnited States
  Treasury
  
  $
  66,953
  
  $
  2,349
  
  $
  5
  
  $
  69,297United States
  Government agencies
  
  227,848
  
  4,624
  
  1,092
  
  231,380Mortgage-backed
  securities
  
  877,670
  
  11,343
  
  1,865
  
  887,148Collateralized
  mortgage obligations
  
  4,337
  
  50
  
  10
  
  4,377State and
  political securities
  
  97,829
  
  1,029
  
  1,255
  
  97,603Other securities
  
  156,059
  
  691
  
  9,489
  
  147,261Total
  
  $
  1,430,696
  
  $
  20,086
  
  $
  13,716
  
  $
  1,437,066  Held-to-Maturity
  SecuritiesAmortized Cost
  
  Gross
  Unrealized Gains
  
  Gross
  Unrealized Gains
  
  Estimated
  Fair ValueOther securities
  
  $
  76,765
  
  
  
  
  
  $
  76,765Total
  
  $
  76,765
  
  
  
  
  
  $
  76,765  The following is a summary of available-for-sale
securities and held-to-maturity securities at December 31, 2000 (in thousands):  Available-for-Sale
  SecuritiesAmortized
  Cost
  
  Gross
  Unrealized  Gains
  
  Gross
  Unrealized Cost
  
  Estimated
  Fair ValueUnited States
  Treasury
  
  $
  76,939
  
  $
  1,040
  
  $
  28
  
  $
  77,951United States
  Government agencies
  
  436,975
  
  1,351
  
  3,071
  
  435,255Mortgage-backed
  securities
  
  998,147
  
  2,524
  
  6,732
  
  993,939Collateralized
  mortgage obligations
  
  9,649
  
  38
  
  52
  
  9,635State and
  political securities
  
  115,177
  
  974
  
  751
  
  115,400Other securities
  
  93,334
  
  1,215
  
  12,219
  
  82,330Total
  
  $
  1,730,221
  
  $
  7,142
  
  $
  22,853
  
  $
  1,714,510  Held-to-Maturity
  SecuritiesAmortized
  Cost
  
  Gross
  Unrealized Gains
  
  Gross
  Unrealized Losses
  
  Estimated
  Fair ValueOther securities
  
  $
  73,222
  
  
  
  
  
  $
  73,222Total
  
  $
  73,222
  
  
  
  
  
  $
  73,222  Proceeds from the sale of available-for-sale
securities during the years ended December 31, 2001, 2000 and 1999, were
$40,436,000, $150,383,000, and $153,810,000, respectively. Gross gains of
$1,088,000, $880,000, and $2,175,000 and gross losses of $284,000, $815,000,
and $0 were realized on those sales during 2001, 2000 and 1999, respectively.
The tax effect on the net gains during 2001, 2000 and 1999 was approximately
$281,000, $23,000, and $761,000, respectively. There were no sales of
held-to-maturity securities during 2001, 2000 or 1999.  The amortized cost and estimated fair value of debt
securities at December 31, 2001, by contractual maturity, are shown below.
Expected maturities may differ from contractual maturities because borrowers
may have the right to call or prepay obligations with or without call or
prepayment penalties.  Available-for-SaleAmortized
  Cost
  
  Estimated
  Fair Value(In
  thousands)Due in one year
  or less
  
  $
  150,947
  
  $
  152,726Due after one
  year through five years
  
  193,114
  
  197,864Due after five
  years through ten years
  
  49,667
  
  49,718Due after ten
  years
  
  154,961
  
  145,233548,689
  
  545,541Mortgage-backed
  securities
  
  877,670
  
  887,148Collateralized
  mortgage obligations
  
  4,337
  
  4,377Total
  
  $
  1,430,696
  
  $
  1,437,066  Held-to-MaturityAmortized
  Cost
  
  Estimated
  Fair Value(In
  thousands)Due after ten
  years
  
  $76,765
  
  $76,765Total
  
  $76,765
  
  $76,765  At December 31, 2001, available-for-sale securities
included no commitments to purchase specific investment securities at a future
date.  Available-for-sale and held-to-maturity securities
carried at $1,213,234,000 and $1,301,674,000 at December 31, 2001 and 2000,
respectively, were pledged to secure borrowings, public and trust deposits and
for other purposes required by law. Securities sold under agreement to
repurchase were collateralized by available-for-sale and held-to-maturity
securities with an aggregate carrying value of $246,759,000 and $205,758,000 at
December 31, 2001 and 2000, respectively.  22 
   6. Loans  The composition of the loan portfolio at December 31 was as follows (in
thousands):  2001
  
  2000Real estate
  
  $
  1,515,118
  
  $
  1,458,494Real estate
  construction
  
  519,031
  
  466,616Commercial
  
  824,318
  
  872,824Consumer and
  other
  
  627,034
  
  686,064Agriculture
  
  251,191
  
  254,2043,736,692
  
  3,738,202Less: Allowance
  for loan losses
  
  (54,991
  )
  (52,168
  )Net loans
  
  $
  3,681,701
  
  $
  3,686,034  At December 31, 2001, real estate loans totaling
$1,136,828,000 were pledged to secure borrowings  7. Allowance For Loan Losses  Activity in the allowance was as follows (in thousands):  2001
  
  2000
  
  1999Balance at beginning of year
  
  $
  52,168
  
  $
  48,878
  
  $
  51,860Allowance of
  acquired companies/other
  
  
  
  
  
  270Provision charged to operating expense
  
  17,520
  
  15,781
  
  20,184Loans charged
  off
  
  (19,869
  )
  (17,117
  )
  (27,850
  )Recoveries of
  loans charged off
  
  5,172
  
  4,626
  
  4,414Balance at end
  of year
  
  $
  54,991
  
  $
  52,168
  
  $
  48,878  Nonaccrual loans totaled $20,818,000, $23,426,000, and
$25,764,000 at December 31, 2001, 2000 and 1999, respectively. The Company
includes all loans considered impaired under SFAS No. 114 in nonaccrual loans.
Interest income of $2,722,000, $4,693,000 and $5,534,000 on nonaccrual loans
would have been recorded during 2001, 2000 and 1999, respectively, if the loans
had been current in accordance with their original terms. The Company recorded
interest income of $1,113,000, $955,000 and $1,067,000 related to loans that
were on nonaccrual status as of December 31, 2001, 2000 and 1999, respectively.  8. Fair Value Of Financial
Instruments  Due to the nature of its business and the financing needs of its
customers, the Company has a financial interest in a large number of financial
instruments, the majority for which an active market does not exist.
Accordingly, the Company has used various valuation techniques to estimate the fair
value of its financial instruments. These techniques are significantly affected
by the assumptions used, including the discount rate, the estimated timing and
amount of cash flows and the aggregation methods used to value similar
instruments. In this regard, the resulting
fair value estimates cannot be substantiated by comparison to
independent markets and, in a majority of cases, could not be realized by the
immediate sale or settlement of the instrument. Also, the estimates reflect a
point-in-time valuation that could change
significantly based on changes in outside economic factors, such as the
general level of interest rates. The required disclosures exclude the estimated
values of nonfinancial instrument cash flows and are not intended to provide or
estimate a market value of the Company. The following assumptions were used by
the Company in estimating the fair value of the specific financial instruments.  Cash and Due
from Banks  The carrying amounts reported in the statements of financial condition
approximate fair values for these items that have no interest rate or credit
risk.  Interest-Bearing
Deposits  The fair value of interest-bearing deposits is estimated using a
discounted cash flow analysis using current market rates of interest-bearing deposits
with similar maturities to discount the future cash flows.  Available-for-Sale
and Held-to-Maturity Securities  Fair values for these items are based on available market quotes. If
market quotes are not available, fair values are based on market quotes of
comparable securities.  Loans  The loan portfolio consists of both variable and fixed rate loans. The
fair value of variable rate loans, a majority of which reprice within the next
three months and for which there has been no significant change in credit risk,
are assumed to approximate their carrying amounts. The fair values for fixed
rate loans are estimated using discounted cash flow analyses. The discount
rates applied are based on the current interest rates for loans with similar
terms to borrowers of similar credit quality. 23 
   Deposit
Liabilities  The fair value of demand deposits, savings accounts and certain money
market deposits is defined by SFAS No. 107 to be equal to the amount payable on
demand at the date of the financial statements. Fair values for fixed rate
certificates of deposit are estimated using a discounted cash flow analysis
that uses the interest rates currently being offered on certificates of deposit
to discount the aggregated expected monthly maturities.  Short-Term
Borrowings  Federal funds purchased, borrowings under repurchase agreements and other short-term borrowings are at variable
rates or have short-term maturities, and their fair value is assumed to
approximate their carrying value.  Long-Term
Debt  The fair value of long-term debt is estimated using a discounted cash
flow analysis using current market rates of debt with similar maturities to
discount the future cash flows.  Loan
Commitments and Letters of Credit  The majority of the Companys commitments have variable rates and do
not expose the Company to interest rate risk. The Companys commitments for
fixed rate loans are evaluated, and it is estimated the probability of
additional loans being issued under these commitments is not significant and
there is not a fair value liability.  The estimated fair values of the Companys financial
instruments at December 31 are shown in the table below (in thousands):  2001
  
  2000Carrying
  Amount
  
  Fair Value
  
  Carrying
  Amount
  
  Fair ValueFinancial assets:Cash and due from banks
  
  $
  248,260
  
  $
  248,260
  
  $
  256,136
  
  $
  256,136Interest-bearing deposits
  
  341
  
  341
  
  1,110
  
  1,110Available-for-sale securities
  
  1,437,066
  
  1,437,066
  
  1,714,510
  
  1,714,510Held-to-maturity securities
  
  76,765
  
  76,765
  
  73,222
  
  73,222Loans
  
  3,736,692
  
  3,798,123
  
  3,738,202
  
  3,734,251Allowance for loan losses
  
  (54,991
  )
  (54,991
  )
  (52,168
  )
  (52,168
  )Net loans
  
  3,681,701
  
  3,743,132
  
  3,686,034
  
  3,682,083Financial liabilities:Deposits:Noninterest-bearing
  
  $
  487,864
  
  $
  487,864
  
  $
  500,834
  
  $
  500,834Interest-bearing:Savings and NOW
  
  2,367,255
  
  2,367,255
  
  2,349,606
  
  2,349,606Time accounts over $100,000
  
  692,315
  
  696,810
  
  672,968
  
  674,343Other time accounts
  
  1,203,379
  
  1,211,193
  
  1,496,483
  
  1,496,266Total deposits
  
  4,750,813
  
  4,763,122
  
  5,019,891
  
  5,021,049Federal funds purchased and repurchase agreements
  
  318,859
  
  318,859
  
  205,758
  
  205,758Other short-term borrowings
  
  23,780
  
  23,780
  
  203,952
  
  203,952Long-term debt
  
  136,841
  
  140,570
  
  123,957
  
  117,293  9. Financial Instruments With
Off-Balance-Sheet Risk And Concentrations Of Credit Risk  In the normal course of business, the Company is party to financial
instruments with off-balance-sheet risk. These transactions enable customers to
meet their financing needs and enable the Company to manage its interest rate
risk. These financial instruments include commitments to extend credit and
letters of credit. The contract or notional amounts of these financial
instruments at December 31, 2001 and 2000, were as follows (in thousands):  2001
  
  2000Commitments to
  extend credit
  
  $
  671,500
  
  $
  678,401Standby letters
  of credit
  
  21,042
  
  19,108Commercial
  letters of credit
  
  9,165
  
  5,602  Commitments to extend credit are legally binding and
have fixed expiration dates or other
termination clauses. The Companys exposure to credit loss on
commitments to extend credit, in the event of nonperformance by the
counterparty, is represented by the contractual amounts of the commitments. The
Company monitors its credit risk for commitments to extend credit by applying
the same credit policies in making commitments as it does for loans and by
obtaining collateral to secure commitments based on managements credit
assessment of the counterparty. Collateral held by the Company may include
marketable securities, receivables, inventory, agricultural commodities,
equipment and real estate. Because many of the commitments are expected to
expire without being drawn upon, total commitment amounts do not necessarily
represent the Companys future liquidity requirements. In addition, the Company
also offers various consumer credit line products to its customers that are
cancelable upon notification by the Company, which are included above in
commitments to extend credit.  Standby letters of credit are conditional commitments
issued by the Company to guarantee the financial performance of a customer to a third party. Those guarantees are primarily
issued to support public and private borrowing arrangements.  Commercial letters of credit are issued by the Company
on behalf of customers to ensure payments of amounts owed or collection of
amounts receivable in connection with trade transactions. The Companys
exposure to credit loss in the event of nonperformance by the counterparty is
the contractual amount of the letter of credit and represents the same exposure
as that involved in extending loans.  The amount of collateral obtained to support letters
of credit is based on a credit assessment of the counterparty. Collateral held
may include marketable securities, receivables, inventory, agricultural
commodities, equipment and real estate. Because the conditions under which the
Company is required to fund letters of credit may not materialize, the
liquidity requirements of letters of credit are expected to be less than the
total outstanding commitments.  The Companys bank subsidiary grants real estate,
agricultural, commercial, consumer and other loans and commitments and letters
of credit to customers throughout Arizona, California, Colorado, Iowa,
Minnesota, Nebraska, New Mexico, North Dakota, South Dakota, Utah, Wisconsin
and Wyoming. Although the Company has  24 
   a diversified loan portfolio, the ability of a significant portion of
its debtors to honor their contracts is dependent upon their local economic
sector. The maximum exposure to accounting loss that could occur, if the
borrowers fail to perform according to the loan agreements and the underlying
collateral proved to be of no value, is the
total loan portfolio balances and commitments and letters of credit.  10. Bank Premises And Equipment  Bank premises and equipment at December 31 consisted of the following
(in thousands):  2001
  
  2000Land
  
  $
  22,265
  
  $
  22,271Buildings
  
  133,701
  
  130,137Furniture,
  fixtures and equipment
  
  89,911
  
  84,966Leased property
  under capital lease obligations
  
  7,747
  
  10,177253,624
  
  247,551Less accumulated
  depreciation
  
  127,677
  
  125,876$
  125,947
  
  $
  121,675  11. Short-Term Borrowings  As of December 31, 2001, the Companys subsidiary bank had $4 million
in Federal Home Loan Bank (FHLB) borrowings, which are collateralized by
various investment securities and real estate loans. The interest rates on FHLB
borrowings are variable rates based on short-term market conditions and the
term of the advance, ranging from 4.32% to 4.45% at December 31, 2001. The
Companys subsidiaries had no additional short-term borrowings outstanding at
December 31, 2001.  The Company has a short-term line of credit bearing
interest at a variable rate of LIBOR plus .75% that provides for borrowing up
to $25 million through October 26, 2002, with a commitment fee of .25% of the
revolving commitment amount. As of December 31, 2001, the Company had no
balance outstanding under this line of credit. The Company has a short term
line of credit bearing interest at a variable rate of LIBOR plus 1.25% that
provides for borrowing up to $35 million, with a commitment fee of .25% of the
revolving commitment amount. This line may be accessed to fund the repurchase of the Companys common stock, fund
operating expenses  and underwrite
the Companys outstanding commercial paper obligations. As of December
31, 2001, the Company had no balance outstanding under this line of credit. The
Company has entered into an agreement that allows for its designated agent to
underwrite up to $35 million of commercial paper and has obtained lines of
credit to support these borrowings. As of December 31, 2001, there was a $20
million commercial paper balance outstanding with a blended rate of 2.78%. The
terms of the lines of credit include certain covenants with which the Company
must comply. At December 31, 2001, the Company was in compliance with all
covenants pertaining to the lines of credit.  12. Long-Term Debt  Long-term debt consisted of the following at December 31 (dollars in
thousands):  2001
  
  2000Parent Company:Subordinated
  notes payable, interest at 7.30%, payable semi-annually, maturing June 30,
  2004, unsecured
  
  $
  60,000
  
  $
  60,000Term note
  payable to bank, interest at 6.19% until February 1, 2008, then at .50% over
  One Year, Three Year, or Five Year U.S. Treasury rate, payable semi-annually,
  maturing February 1, 2013, secured by real property
  
  2,560
  
  2,773Subsidiaries:Federal Home
  Loan Bank advances, interest rates ranging from 3.45% to 6.55%, payable monthly,
  with maturities ranging from January 21, 2003 to October 2, 2008
  
  48,500
  
  34,834Subordinated
  term note payable to bank, interest of LIBOR plus 140 basis points, payable
  quarterly, maturing December 22, 2007, unsecured
  
  25,000
  
  25,000Term note
  payable to bank, interest at 3.50% payable monthly, principal payments
  ranging from $50 to $55, per schedule due monthly through March 31, 2003
  
  781
  
  1,350$
  136,841
  
  $
  123,957  The 7.30% subordinated notes payable are not
redeemable, in whole or in part, by the Company. These notes, of which 40% of
the balance qualifies as Tier II capital as of December 31, 2001, under the
Federal Reserve Board guidelines, are direct obligations of the Company and are
subordinated to all other indebtedness of the Company.
The terms of the subordinated notes payable include certain covenants
with which the Company must comply. At December 31, 2001, the Company was in
compliance with all covenants pertaining to the subordinated notes payable.  25 
   Maturities of long-term debt outstanding, at December
31, 2001, were (in thousands):  2002
  
  $
  8312003
  
  18,3762004
  
  65,2132005
  
  25,2132006
  
  213Thereafter
  
  26,995$
  136,841  13. Company-Obligated Mandatorily
Redeemable Preferred Securities  On December 10, 1997, the Company issued $60 million of 8.20%
Cumulative Capital Securities, through CFB Capital II, a business trust
subsidiary organized in December 1997. The proceeds of the offering were
invested by CFB Capital II in Junior Subordinated Debentures of the Company.
the debentures will mature not earlier than December 15, 2002, and not later
than December 15, 2027.  On February 5, 1997, the Company issued $60 million of
8.875% Cumulative Capital Securities, through CFB Capital I, a business trust
subsidiary organized in January 1997. The proceeds of the offering were
invested by CFB Capital I in Junior Subordinated Debentures of the Company. The
debentures will mature not earlier than February 1, 2002 and not later than
February 1, 2027.  At December 31, 2001, $118 million in Capital
Securities qualified as Tier I capital under capital guidelines of the Federal
Reserve Board.  14. Shareholders Equity  COMMON STOCK  In August 2001, the Company adopted a common stock repurchase program
providing for the systematic repurchase of up to 3 million shares of the
Companys common stock. The shares were to be purchased primarily on the open
market with timing depending upon market conditions. Adoption of the program
provided the Company with an alternative opportunity for capital utilization.
In addition, the shares acquired can be used for the issuance of common stock
upon exercise of stock options under the Companys compensation plans and for
other purposes, including business combinations. As of December 31, 2001, all 3
million shares were available for repurchase.  In April 2000, the Company adopted a common stock
repurchase program providing for the systematic repurchase of up to 5 million
shares of the Companys common stock. In addition, during August 2000, the
Company adopted an additional common stock repurchase program providing for the
repurchase of up to an additional 5 million shares. Under each program, the
shares were to be purchased primarily on the open market, with timing depending
upon market conditions. Adoption of the two programs provided the Company with
an alternative opportunity for capital utilization. In addition, the shares
acquired can be used for the issuance of common stock upon exercise of stock
options, under the Companys compensation plans and for other purposes,
including business combinations. As of December 31, 2001, the Company had
repurchased all 10.8 million shares of common stock under these programs, at
prices ranging from $15.25 to $25.00. During 2001, the Company repurchased 2
million shares of common stock, all under the August 2000 program.  In 1995, the Company extended the common stock
repurchase program established in 1992, which provided for the systematic
acquisition of up to 1,200,000 shares of the Companys common stock. In
addition, it adopted a new common stock repurchase program that provided for
the acquisition of an additional 1,200,000 shares of common stock. During 2000,
the repurchase of 385,000 shares under the 1992 program and its 1995 extensions
completed these programs, thus, as of December 31, 2001, no shares are
available under the 1992 and 1995 programs.  On April 3, 1998, the Company filed a shelf
registration statement with the Securities and Exchange Commission for the
purpose of issuing up to 3,500,000 shares of its common stock. The shares may
be offered in acquisition transactions in exchange for shares of capital stock,
partnership interests or other assets representing an interest, direct or
indirect, in other companies or entities, or in exchange for assets used in or
related to the business of such entities. Amendment No. 1, effective June 11,
1998, increased the shares under this registration statement to 7,000,000
shares, to reflect the effect of the shares remaining as of May 15, 1998, when
the shareholders approved a charter amendment to facilitate a two-for-one split
of the Companys common stock, in the form of a 100 percent stock dividend.
Subsequently, two additional acquisitions, totaling 1,843,447 shares, were
completed under this registration statement. At December 31, 2001, there remain
5,156,553 shares to be issued under the registration statement.  On December 31, 1997, the Company filed a shelf
registration statement with the Securities and Exchange Commission for the
purpose of issuing up to 3,000,000 shares of its common stock. The shares may
be offered in acquisition transactions in exchange for shares of capital stock,
partnership interests or other assets representing
an interest, direct or indirect, in other companies or entities, or in
exchange for assets used in or related to the business of such entities.
Amendment No. 2, effective June 22, 1998 increased the shares under this
registration statement to 4,438,207 shares, to reflect the effect of the shares
remaining as of May 15, 1998, when the shareholders approved a charter
amendment to facilitate a two-for-one split of the Companys common stock, in
the form of a 100 percent stock dividend. As of June 22, 1998, two acquisitions
were completed under the registration statement, totaling 1,561,793 shares,
resulting in a pre-split remaining authorized shares of 1,438,207.
Subsequently, two additional acquisitions, totaling 2,016,218 shares, were
completed under the December 31, 1997 registration statement. At December 31,
2001, there remain 860,196 shares to be issued under the registration
statement.  On April 1, 1999, prior to being acquired by the
Company, Valley National was formed as a one-bank holding company through a
reorganization of its affiliate bank, Valle de Oro Bank. In the reorganization,
former Valle de Oro Bank shareholders received two shares of Valley National
common stock for each share of bank stock owned. Equity records of Valley
National and subsequently, the Company, have been restated to reflect the
reorganization.  The former Valley National Corporation and its
predecessor, Valle de Oro Bank, declared and paid a common stock dividend equal
to 5% of its common stock outstanding as of May 3, 1999, April 24, 1998 and
April 25, 1997.  26 
   PREFERRED STOCK SHAREHOLDERS RIGHTS
PLAN  The Company adopted a shareholders rights plan in January 1995 that
attached one right to each share of common stock outstanding on January 19,
1995. Each right entitles the holder to purchase one one-hundredth of a share
of a new series of junior participating preferred stock of the Company, which
has an initial exercise price of $31.50. The rights become exercisable only
upon the acquisition of 15 percent or more
of the Companys voting stock, or an announcement of a tender offer or
exchange offer to acquire an interest of 15 percent or more by a person or
group, without the prior consent of the Company. If exercised, or if the Company
is acquired, the rights entitle the holders (not including the person or
persons acquiring or proposing to acquire an amount of common stock equal to 15
percent or more of the Company) to purchase, at the exercise price, common
stock with a market value equal to two times the exercise price. The rights,
which may be redeemed by the Company in certain circumstances, expire January
5, 2005.  CAPITAL REQUIREMENTS  The Company is subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet minimum capital
requirements can initiate certain mandatory, and possibly additional
discretionary, actions by regulators that, if undertaken, could have a direct
material effect on the Companys consolidated financial statements. Under
capital adequacy guidelines and the regulatory framework for prompt corrective
action, the Company must meet specific capital guidelines that involve
quantitative measures of the Companys assets, liabilities and certain
off-balance-sheet items as calculated under regulatory accounting practices.
The Companys capital amounts and classification are also subject to
qualitative judgments by the regulators about components, risk weightings and
other factors.  Quantitative measures established by regulation to
ensure capital adequacy require the Company to maintain minimum amounts and
ratios of total and Tier I capital to risk-weighted assets, and of Tier I
capital to average assets.  As of December 31, 2001, the Company is considered
well capitalized under the regulatory framework for prompt corrective action.
To be categorized as well capitalized, the Company must maintain minimum total
risk-based, Tier I risk-based, and Tier I leverage ratios as set forth in the
following table.  At DECEMBER
  31, 2001Regulatory Capital Requirements:
  
  Tier 1 Capital
  
  Total
  Risk-Based Capital
  
  Leverage
  
  Total
  Risk-Based Assets(Dollars
  in thousands)Minimum
  
  4.00
  %
  8.00
  %
  3.00
  %
  N/AWell Capitalized
  
  6.00
  %
  10.00
  %
  5.00
  %
  N/ABank
  Subsidiary:Community First
  National Bank, Fargo
  
  9.43
  %
  11.13
  %
  7.16
  %
  $
  4,254,919Community First
  Bankshares, Inc.
  
  8.67
  %
  11.11
  %
  6.51
  %
  $
  4,304,531  At DECEMBER 31, 2000Regulatory Capital Requirements:
  
  Tier 1
  Capital
  
  Total Risk-Based Capital
  
  Leverage
  
  Total Risk Based Assets(Dollars in thousands)Minimum
  
  4.00
  %
  8.00
  %
  3.00
  %
  N/AWell Capitalized
  
  6.00
  %
  10.00
  %
  5.00
  %
  N/ABank
  Subsidiaries:Community First
  National Bank, Fargo
  
  9.74
  %
  11.53
  %
  7.17
  %
  $
  4,162,469Community First
  State Bank, Vermillion (1)
  
  10.19
  %
  11.44
  %
  8.02
  %
  205,071Community First
  Bankshares, Inc.
  
  8.13
  %
  10.73
  %
  5.94
  %
  $
  4,408,524 
 (1) Merged into Community First National Bank, Fargo in March 2001.  27 
   15.Employee
Benefit Plans  STOCK OPTION PLAN  During 1996, the Company approved the 1996 Stock Option Plan under
which an additional 4,000,000 shares of the Companys common stock were
reserved for granting of future stock options. Similar to the 1987 Stock Option
Plan, the Company may grant key employees incentive or nonqualified options to
purchase common stock of the Company. Incentive stock options must have an
exercise price of at least fair market value on the date of the grant, as
determined by the Company. The options generally vest ratably over a three-year
period and are exercisable over five- or ten-year terms.  Stock options outstanding under the plans are as
follows:  2001
  
  2000Options
  Outstanding
  
  Weighted
  Average Price Per Share
  
  Options
  Outstanding
  
  Weighted
  Average Price Per ShareBeginning of
  Year
  
  2,441,862
  
  $
  16.32
  
  2,220,344
  
  $
  15.53Options Granted
  
  682,800
  
  19.45
  
  759,800
  
  14.08Options
  Exercised
  
  (507,061
  )
  20.27
  
  (385,317
  )
  14.41Options
  Forfeited
  
  (180,367
  )
  13.47
  
  (152,965
  )
  15.68End of Year
  
  2,437,234
  
  $
  17.98
  
  2,441,862
  
  $
  16.32Exercisable at
  end of year
  
  1,212,469
  
  $
  18.55
  
  1,223,586
  
  $
  16.06  2001
  
  2000Weighted average
  fair value of options granted
  
  $
  6.34
  
  $
  5.04  The range of exercise prices and the weighted-average
remaining contractual life of the options outstanding at December 31, 2001 were
as follows:  Range of Exercise Prices Per Share
  
  Options
  Outstanding at December 31, 2001
  
  Weighted
  Average Exercise Price Per Share
  
  Weighted
  Average Remaining ContractualLife$24.6875 to
  $24.8750
  
  353,000
  
  $
  24.86
  
  1.10 Years$17.2500 to
  $21.5000
  
  1,140,793
  
  $
  19.48
  
  8.31 Years$12.8200 to
  $15.8750
  
  889,608
  
  $
  14.05
  
  6.49 Years$  5.8700 to $  6.1600
  
  53,833
  
  $
  6.04
  
  4.75 Years  At December 31, 2001, a total of 3,435,891 shares of authorized common
stock was reserved for exercise of options granted under the 1996 and 1987
Stock Option Plans.  As described in Note 1, the Company has elected to
measure compensation costs as prescribed by APB Opinion No. 25, Accounting for
Stock Issued to Employees and, accordingly, does not recognize compensation
expense. SFAS No. 123 requires the Company to disclose pro forma information
reflecting net income and earnings per share had the Company elected to record
compensation expense based on the fair market value method described in SFAS
123. The fair value of the options was estimated at the grant date using a
Black-Scholes option pricing model. Option valuation models require the input
of highly subjective assumptions. Because the Companys employee stock options
have characteristics significantly different from traded options, and because
changes in the subjective input assumptions can materially affect the fair
value estimate, in managements opinion, the existing models do not necessarily
provide a reliable single measure of the fair value of its employee stock
options.  The following weighted-average assumptions were used
in the valuation model: risk-free interest
rates of 4.88 percent and 6.67 percent in 2001 and 2000, respectively;
dividend yield of 2.65 percent and 3.18 percent in 2001 and 2000, respectively;
stock price volatility factors of .329 and .362 in 2001 and 2000, respectively;
and expected life of options of 7.5 years.  The pro forma disclosures include options granted in
2001 and 2000 and are not likely to be representative of the pro forma
disclosures for future years. The estimated fair value of the options is
amortized to expense over the options vesting period.  2001
  
  2000(Dollars
  in thousands, 
  except per share data)Pro forma net
  income
  
  $
  62,770
  
  $
  69,711Pro forma net
  income (diluted)
  
  62,770
  
  69,711Pro forma
  earnings per share:Basic
  
  $
  1.53
  
  $
  1.51Diluted
  
  1.51
  
  1.50  EMPLOYEE STOCK OWNERSHIP PLAN  The Company had an employee stock ownership plan (ESOP) that was a
defined contribution plan covering all employees who are 21 years of age with
more than one year of service. Contributions were calculated using a formula
based on the Companys return on average assets on a yearly basis. The
contribution expense was $0, $0, and $1,335,000 in 2001, 2000 and 1999,
respectively. In 2001, the Company approved a plan which merged the ESOP into the
Companys Profit Sharing Plan, thus, the Company anticipates no contribution expense during 2002, and anticipates
no future contribution expenses.  PROFIT-SHARING PLAN  The Company offers a contributory profit-sharing and thrift plan that
qualifies under section 401(k) of the Internal Revenue Code. The plan covers
all employees who are 21 years of age with more than one year of service. The
plan provides for an employer-matching contribution of 100% of the first 3% and
50% of the next 3% of each participants eligible contribution, subject to a
limitation of the lesser of the participants contribution or the maximum
amount prescribed by the Internal Revenue Code. The Companys contribution was
$2,743,000, $1,456,000, and $1,639,000 in 2001, 2000 and 1999, respectively. In
2001, the Company adopted a plan which merged the Companys ESOP into the
Profit Sharing Plan and increased the employer-matching contribution. Prior to
2001, the employer-matching contribution was 50% based on each participants
eligible contribution for each plan year, subject to a limitation of the lesser
of 6% of the participants annual compensation or the maximum amount prescribed
by the Internal Revenue Code.  28 
   16.Restrictions
On Cash And Due From Banks  Bank subsidiaries are required to maintain average reserve balances
with the Federal Reserve Bank. Balances of $22,597,000 and $42,659,000 at
December 31, 2001 and 2000, respectively, exceeded required amounts.  17.Income
Taxes  The components of the provision for income taxes were (in thousands):  2001
  
  2000
  
  1999Federal:Current
  
  $
  32,587
  
  $
  34,443
  
  $
  36,509Deferred
  
  (1,961
  )
  (1,741
  )
  (742
  )30,626
  
  32,702
  
  35,767State:Current
  
  3,112
  
  3,382
  
  3,152Deferred
  
  (262
  )
  (336
  )
  (346
  )2,850
  
  3,046
  
  2,806Provision for
  income taxes
  
  $
  33,476
  
  $
  35,748
  
  $
  38,573  The reconciliation between the provision for income
taxes and the amount computed by applying the statutory federal income tax rate
was as follows (in thousands):  2001
  
  2000
  
  1999Tax at statutory
  rate (35%)
  
  $
  34,487
  
  $
  37,584
  
  $
  39,720State income
  tax, net of federal tax benefit
  
  1,853
  
  1,980
  
  1,830Tax-exempt
  interest
  
  (4,094
  )
  (3,726
  )
  (3,756
  )Amortization of
  goodwill
  
  919
  
  918
  
  919Other
  
  311
  
  (1,008
  )
  (140
  )Provision for
  income taxes
  
  $
  33,476
  
  $
  35,748
  
  $
  38,573  Deferred income tax assets and liabilities reflect the
net tax effect of temporary differences between the carrying amounts of assets
and liabilities for financial reporting purposes and the amounts used for
income tax reporting purposes. Significant components of the Companys deferred
tax assets and liabilities as of December 31, 2001 and 2000, are as follows (in
thousands):  2001
  
  2000Deferred tax
  assets:Loan loss
  reserves
  
  $
  20,695
  
  $
  19,209Other reserves
  
  376
  
  718Deferred
  compensation
  
  916
  
  868Deferred loan
  fees
  
  8
  
  54Other
  
  3,250
  
  2,98725,245
  
  23,836Deferred tax
  liabilities:Unrealized net
  gains (losses)
  
  2,522
  
  (6,225
  )Depreciation
  
  644
  
  (329
  )Purchase
  accounting
  
  126
  
  188Other
  
  228
  
  2,7163,520
  
  (3,650
  )Net deferred tax
  assets
  
  $
  21,725
  
  $
  27,486  The realization of the Companys deferred tax assets
is dependent upon the Companys ability to
generate taxable income in future periods and the reversal of deferred
tax liabilities during the same period. The Company has evaluated the available
evidence supporting the realization of its deferred tax assets and determined
it is more likely than not that the assets will be realized.  18. COMMITMENTS AND CONTINGENT
LIABILITIES  Total rent expense was $5,273,000, $5,704,000,and $5,507,000 in 2001,
2000 and 1999, respectively.  Future minimum payments, by year and in the aggregate,
under noncancelable leases with initial or remaining terms of one year or more,
consisted of the following at December 31, 2001: (In thousands)  Operating
  
  Capital(In
  Thousands)2002
  
  $
  2,962
  
  $
  3942003
  
  2,422
  
  1172004
  
  1,128
  
  1082005
  
  488
  
  1082006
  
  385
  
  108Thereafter
  
  2,489
  
  299$
  9,874
  
  $
  1,134Executory costs
  (taxes)
  
  
  
  0Net minimum
  lease payments
  
  
  
  $
  1,134Less:Amount
  representing interest
  
  
  
  (180
  )Present value of
  net minimum lease payments
  
  
  
  $
  954  In the normal course of business, there are various
outstanding legal proceedings, claims, commitments and contingent liabilities.
In the opinion of management, the Company and its subsidiaries will not be
materially affected by the outcome of such matters.  29 
   19. Community First Bankshares, Inc. (Parent Company Only)  CONDENSED STATEMENTS OF FINANCIAL
CONDITION  December 312001
  
  2000(In thousands)AssetsCash and due
  from subsidiary bank
  
  $
  4,698
  
  $
  2,994Interest-bearing
  deposits
  
  31
  
  2Available-for-sale
  securities
  
  13,040
  
  10,628Investment in
  subsidiaries
  
  521,938
  
  538,437Furniture and
  equipment
  
  7,884
  
  6,697Receivable from
  subsidiaries
  
  13,009
  
  12,919Other assets
  
  13,595
  
  17,027Total assets
  
  $
  574,195
  
  $
  588,704Liabilities
  and shareholders equityShort-term
  borrowings
  
  $
  19,780
  
  $
  48,952Long-term debt
  
  186,272
  
  186,485Other liabilities
  
  11,438
  
  7,836Shareholders
  equity
  
  356,705
  
  345,431Total
  liabilities and shareholders equity
  
  $
  574,195
  
  $
  588,704  CONDENSED STATEMENTS OF INCOME  Years ended December 312001
  
  2000
  
  1999(in thousands)Income:Dividends from
  subsidiaries
  
  $
  126,117
  
  $
  58,067
  
  $
  73,242Service fees
  from subsidiaries
  
  329
  
  411
  
  5,022Interest income
  
  614
  
  971
  
  991Other
  
  1,552
  
  1,559
  
  1,357Total income
  
  128,612
  
  61,008
  
  80,612Expense:Interest expense
  
  16,471
  
  18,462
  
  16,895Other expense
  
  29,839
  
  22,186
  
  20,596Total expense
  
  46,310
  
  40,648
  
  37,491Income before
  income tax benefit, equity in undistributed income of subsidiaries
  
  82,302
  
  20,360
  
  43,121Income tax
  benefit
  
  14,849
  
  13,120
  
  9,955Income before
  undistributed income of subsidiaries
  
  97,151
  
  33,480
  
  53,076Equity in(overdistributed) undistributedincome
  of subsidiaries
  
  (32,092
  )
  38,154
  
  21,837Net income
  
  $
  65,059
  
  $
  71,634
  
  $
  74,913  CONDENSED STATEMENTS OF CASH FLOWS  Years ended December 312001
  
  2000
  
  1999(in thousands)Cash flows from operating
  activities:Net income
  
  $
  65,059
  
  $
  71,634
  
  $
  74,913Adjustments to reconcile net income tonet cash used in
  operating activities:Equity in overdistributed (undistributed)income of
  subsidiaries
  
  32,092
  
  (38,154
  )
  (21,837
  )Depreciation
  
  730
  
  867
  
  992(Decrease) increase in interest payable
  
  (2,450
  )
  2,176
  
  (13
  )Other, net
  
  9,485
  
  (417
  )
  5,120Net cash provided by operating activities
  
  104,916
  
  36,106
  
  59,175Cash
  flows from investing activities:Purchases of
  stock in subsidiaries
  
  
  
  
  
  (4,878
  )Equity
  distribution (to) from subsidiaries
  
  (1,763
  )
  110,021
  
  Net loans to
  subsidiaries
  
  (90
  )
  8,945
  
  (10,808
  )Purchases of available-for-sale securities
  
  (355,456
  )
  (32,473
  )
  (27,877
  )Sales of
  available-for-sale securities, net of gains
  
  3,767
  
  1,630
  
  1,573Maturities of
  investment securities
  
  348,779
  
  23,009
  
  25,038Net increase in
  furniture and equipment
  
  (1,917
  )
  (932
  )
  (580
  )Net (increase)
  decrease in interest-bearing deposits
  
  (29
  )
  14
  
  94Net cash
  provided by (used in) investing activities
  
  (6,709
  )
  110,214
  
  (17,438
  )Cash
  flows from financing activities:Net (decrease)
  increase in short-term borrowings
  
  (29,172
  )
  23,345
  
  (9,928
  )Common stock
  dividends paid
  
  (27,793
  )
  (27,601
  )
  (27,075
  )Repayment of
  long-term debt
  
  (213
  )
  (214
  )
  (212
  )Sale of common stock held in treasury
  
  3,695
  
  4,444
  
  2,569Purchase of common stock held in treasury
  
  (43,020
  )
  (145,725
  )
  (11,844
  )Net proceeds
  from issuance of common stock
  
  
  
  
  
  2,234Net cash used in
  financing activities
  
  (96,503
  )
  (145,751
  )
  (44,256
  )Net increase
  (decrease) in cash and cash equivalents
  
  1,704
  
  569
  
  (2,519
  )Cash and cash
  equivalents at beginning of year
  
  2,994
  
  2,425
  
  4,944Cash and cash
  equivalents at end of year
  
  $
  4,698
  
  $
  2,994
  
  $
  2,425  Certain restrictions exist regarding the extent to which the bank
subsidiary may transfer funds to the Company in the form of dividends, loans or
advances. Federal law prevents the Company from borrowing from its bank
subsidiary unless the loans are secured by specified U.S. obligations. Secured
loans to the Company or any individual affiliate are generally limited in
amount to 10% of the banks equity. Further, loans to the Company and all
affiliates in total are limited to 20% of the banks equity. As of December 31,
2001 and 2000, $50,861,000 and $52,633,000, respectively, of individual
subsidiary banks capital was available for
credit extension to the parent company. At December 31, 2001 and 2000,
the bank subsidiary had no credit extended to the Company.  Payment of dividends to the Company by its subsidiary
bank is subject to various limitations by bank regulatory agencies.
Undistributed earnings of the bank subsidiary available for distribution as
dividends under these limitations were $25,898,000 and $45,687,000 as of
December 31, 2001 and 2000, respectively.  30 
   20. Related Party Transactions  Certain directors and executive officers of the Company and its
subsidiaries, including their immediate families, companies in which they are
principal owners and trusts in which they are involved, are loan customers of
the bank subsidiary. The aggregate dollar amounts of these loans did not exceed
five percent of stockholders equity at December 31, 2001, 2000 and 1999.  21. Earnings Per Share  The following table sets forth the computation of basic and diluted
earnings per share (dollars in thousands, except per share data):  Years ended December 312001
  
  2000
  
  1999Numerator:Income from continuing operations
  
  $
  65,059
  
  $
  71,634
  
  $
  74,913Numerator for
  basic earnings per share income available to common stockholders
  
  65,059
  
  71,634
  
  74,913Denominator:Denominator for
  basic earnings per share weighted-average shares outstanding
  
  40,905,545
  
  46,219,120
  
  50,061,972Effect of dilutive
  securities:Employee stock
  options
  
  565,859
  
  359,630
  
  608,587Dilutive
  potential common shares
  
  565,859
  
  359,630
  
  608,587Denominator for
  diluted earnings per share adjusted weighted-average shares and assumed
  conversions
  
  41,471,404
  
  46,578,750
  
  50,670,559Basic earnings
  per share
  
  $
  1.59
  
  $
  1.55
  
  $
  1.50Diluted earnings
  per share
  
  $
  1.57
  
  $
  1.54
  
  $
  1.48  22.
Supplemental Disclosures To Consolidated Statements Of Cash Flows  Years ended December 312001
  
  2000
  
  1999(in thousands)Noncash transfers of held-to-maturity securities to available-for-sale
  securities
  
  $
  
  
  $
  
  
  $
  22,974Unrealized gain
  (loss) on available-for-sale securities
  
  22,081
  
  56,986
  
  (93,922
  )Income taxes
  paid
  
  36,514
  
  35,149
  
  40,378Interest paid
  
  177,743
  
  196,741
  
  177,692Commitments to
  purchase investment securities
  
  
  
  
  
  386  Report of
Independent Auditors  The Board of Directors and
Shareholders Community First Bankshares, Inc.  We have audited the accompanying consolidated statements of financial
condition of Community First Bankshares, Inc. and subsidiaries as of December
31, 2001 and 2000, and the related consolidated statements of income,
comprehensive income, shareholders equity and cash flows for each of the three
years in the period ended December 31, 2001. These financial statements are the
responsibility of the Companys management. Our responsibility is to express an
opinion on these financial statements based on our audits.  We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.  In our opinion, the financial statements referred
to above present fairly, in all material respects, the consolidated
financial position of Community First Bankshares, Inc., and subsidiaries at
December 31, 2001 and 2000 and the consolidated results of their operations and
their cash flows for each of the three years in the period ended December 31,
2001, in conformity with accounting principles generally accepted in the United
States.  /s/ ERNST & YOUNG LLP  Minneapolis, Minnesota January 16, 2002  31 
   CONSOLIDATED
STATEMENT OF CONDITION  FIVE YEAR SUMMARYCommunity First Bankshares, Inc.  December
  312001
  
  2000
  
  1999
  
  1998
  
  1997(In
  thousands)ASSETSCash and due
  from banks
  
  $
  248,260
  
  $
  256,136
  
  $
  247,051
  
  $
  262,667
  
  $
  265,238Federal funds
  sold and securities purchased under agreement to resell
  
  
  
  
  
  4,775
  
  11,990
  
  85,186Interest-bearing
  deposits
  
  341
  
  1,110
  
  4,648
  
  11,463
  
  16,630Available-for-sale
  securities
  
  1,437,066
  
  1,714,510
  
  1,937,517
  
  2,004,584
  
  1,561,515Held-to-maturity
  securities
  
  76,765
  
  73,222
  
  74,248
  
  92,859
  
  238,046Total securities
  
  1,513,831
  
  1,787,732
  
  2,011,765
  
  2,097,443
  
  1,799,561Loans
  
  3,736,692
  
  3,738,202
  
  3,690,353
  
  3,537,537
  
  3,160,501Less: Allowance
  for loan losses
  
  54,991
  
  52,168
  
  48,878
  
  51,860
  
  41,387Net loans
  
  3,681,701
  
  3,686,034
  
  3,641,475
  
  3,485,677
  
  3,119,114Other assets
  
  328,193
  
  358,717
  
  392,521
  
  370,532
  
  374,489Total assets
  
  $
  5,772,326
  
  $
  6,089,729
  
  $
  6,302,235
  
  $
  6,239,772
  
  $
  5,660,218LIABILITIES
  AND SHAREHOLDERS EQUITYDeposits:Noninterest-bearing
  
  $
  487,864
  
  $
  500,834
  
  $
  616,861
  
  $
  591,718
  
  $
  740,425Interest-bearing
  
  4,262,949
  
  4,519,057
  
  4,293,002
  
  4,509,347
  
  3,600,640Total deposits
  
  4,750,813
  
  5,019,891
  
  4,909,863
  
  5,101,065
  
  4,341,065Short-term
  borrowings
  
  342,639
  
  409,710
  
  724,425
  
  435,726
  
  275,239Long-term debt
  
  136,841
  
  123,957
  
  75,622
  
  93,524
  
  124,612Other
  liabilities
  
  65,328
  
  70,740
  
  65,056
  
  64,801
  
  394,263Total
  liabilities
  
  5,295,621
  
  5,624,298
  
  5,774,966
  
  5,695,116
  
  5,135,179Company-obligated
  mandatorily redeemable preferred securities of CFB Capital I and II
  
  120,000
  
  120,000
  
  120,000
  
  120,000
  
  120,000Shareholders
  equity
  
  356,705
  
  345,431
  
  407,269
  
  424,656
  
  405,039Total liabilities
  and shareholders equity
  
  $
  5,772,326
  
  $
  6,089,729
  
  $
  6,302,235
  
  $
  6,239,772
  
  $
  5,660,218  32 
   CONSOLIDATED
STATEMENT OF INCOME  FIVE YEAR SUMMARYCommunity First Bankshares, Inc.  Years Ended
  December 312001
  
  2000
  
  1999
  
  1998
  
  1997(In
  thousands)INTEREST
  INCOME:Loans
  
  $
  336,937
  
  $
  353,405
  
  $
  332,974
  
  $
  337,771
  
  $
  271,912Investment
  securities
  
  96,688
  
  123,525
  
  130,955
  
  124,306
  
  66,316Other
  
  391
  
  628
  
  1,277
  
  5,193
  
  4,561Total interest
  income
  
  434,016
  
  477,558
  
  465,206
  
  467,270
  
  342,789INTEREST
  EXPENSE:Deposits
  
  138,542
  
  169,281
  
  151,138
  
  166,873
  
  124,964Short-term and
  other borrowings
  
  15,001
  
  34,303
  
  28,052
  
  19,576
  
  9,465Long-term debt
  
  8,677
  
  6,697
  
  6,628
  
  8,338
  
  6,059Total interest
  expense
  
  162,220
  
  210,281
  
  185,818
  
  194,787
  
  140,488Net interest
  income
  
  271,796
  
  267,277
  
  279,388
  
  272,483
  
  202,301Provision for loan
  losses
  
  17,520
  
  15,781
  
  20,184
  
  23,136
  
  6,604Net interest
  income after provision for loan losses
  
  254,276
  
  251,496
  
  259,204
  
  249,347
  
  195,697NONINTEREST
  INCOME:Service charges
  on deposit accounts
  
  38,957
  
  39,537
  
  37,013
  
  31,880
  
  22,701Insurance
  commissions
  
  12,535
  
  10,550
  
  8,791
  
  7,197
  
  5,375Securities sales
  commissions
  
  6,644
  
  6,805
  
  5,258
  
  4,249
  
  2,576Fees from
  fiduciary activities
  
  5,661
  
  5,811
  
  5,148
  
  4,944
  
  3,805Net gains on
  sales of securities
  
  804
  
  65
  
  2,175
  
  1,801
  
  466Other
  
  12,081
  
  12,437
  
  14,124
  
  13,196
  
  15,024Total
  noninterest income
  
  76,682
  
  75,205
  
  72,509
  
  63,267
  
  49,947NONINTEREST
  EXPENSE:Salaries and
  employee benefits
  
  115,743
  
  110,024
  
  106,542
  
  119,250
  
  83,331Net occupancy
  
  31,593
  
  31,941
  
  32,726
  
  33,929
  
  25,000FDIC insurance
  
  915
  
  1,039
  
  625
  
  771
  
  458Professional
  service fees
  
  8,398
  
  8,289
  
  8,819
  
  10,251
  
  5,702Advertising
  
  5,037
  
  4,545
  
  4,065
  
  4,281
  
  2,778Telephone
  
  5,633
  
  5,203
  
  4,807
  
  5,727
  
  4,263Amortization of
  intangibles
  
  9,928
  
  10,481
  
  10,500
  
  10,366
  
  5,550Acquisition,
  integration and conforming
  
  
  
  
  
  3,053
  
  3,721
  
  398Restructuring
  charge
  
  7,656
  
  
  
  
  
  
  
  Data processing
  
  4,047
  
  4,545
  
  4,116
  
  5,209
  
  2,262Company-obligated
  mandatorily redeemable preferred securities of CFB Capital I & II
  
  10,273
  
  10,245
  
  10,245
  
  10,218
  
  5,108Other
  
  33,200
  
  33,007
  
  32,729
  
  36,925
  
  24,783Total
  noninterest expense
  
  232,423
  
  219,319
  
  218,227
  
  240,648
  
  159,633Income from
  continuing operations before income taxes and extraordinary item
  
  98,535
  
  107,382
  
  113,486
  
  71,966
  
  86,011Provision for
  income taxes
  
  33,476
  
  35,748
  
  38,573
  
  22,595
  
  25,848Income from
  continuing operations before extraordinary item
  
  65,059
  
  71,634
  
  74,913
  
  49,371
  
  60,163Discontinued
  operations
  
  
  
  
  
  
  
  (2,232
  )
  967Disposal of
  discontinued operations
  
  
  
  
  
  
  
  (1,676
  )
  Extraordinary
  item
  
  
  
  
  
  
  
  
  
  (265
  )Net income
  
  $
  65,059
  
  $
  71,634
  
  $
  74,913
  
  $
  45,463
  
  $
  60,865Earnings per
  common and common equivalent share:Basic
  
  $
  1.59
  
  $
  1.55
  
  $
  1.50
  
  $
  0.90
  
  $
  1.31Diluted
  
  $
  1.57
  
  $
  1.54
  
  $
  1.48
  
  $
  0.89
  
  $
  1.27Average common
  shares outstanding:Basic
  
  40,905,545
  
  46,219,120
  
  50,061,972
  
  50,272,551
  
  46,416,814Diluted
  
  41,471,404
  
  46,578,750
  
  50,670,559
  
  51,114,703
  
  47,831,402  33 
   QUARTERLY
RESULTS OF OPERATIONS (UNAUDITED)Community First Bankshares, Inc.  The following is a summary of the quarterly results of
operations for the years ended December 31, 2001 and 2000 (in thousands, except
per share data):  Year ended December 31, 2001First
  Quarter
  
  Second
  Quarter
  
  Third
  Quarter
  
  Fourth
  QuarterInterest income
  
  $
  115,175
  
  $
  111,875
  
  $
  107,371
  
  $
  99,595Interest expense
  
  50,088
  
  43,585
  
  37,964
  
  30,583Net interest
  income
  
  65,087
  
  68,290
  
  69,407
  
  69,012Provision for
  loan losses
  
  5,617
  
  3,303
  
  5,301
  
  3,299Net interest
  income after provision for loan losses
  
  59,470
  
  64,987
  
  64,106
  
  65,713Net gains
  (losses) on sales of securities
  
  484
  
  (252
  )
  19
  
  553Noninterest
  income
  
  18,808
  
  19,049
  
  19,535
  
  18,486Noninterest
  expense
  
  63,015
  
  57,012
  
  55,715
  
  56,681Income before
  income taxes
  
  15,747
  
  26,772
  
  27,945
  
  28,071Provision for
  income taxes
  
  5,519
  
  9,039
  
  9,505
  
  9,413Net income
  
  $
  10,228
  
  $
  17,733
  
  $
  18,440
  
  $
  18,658Earnings per
  common and common equivalent shares:Basic net income
  
  $
  0.25
  
  $
  0.43
  
  $
  0.45
  
  $
  0.46Diluted net
  income
  
  $
  0.24
  
  $
  0.43
  
  $
  0.45
  
  $
  0.46Average common
  and common equivalent shares:Basic
  
  41,590,689
  
  41,126,894
  
  40,697,521
  
  40,224,374Diluted
  
  41,997,381
  
  41,633,795
  
  41,359,956
  
  40,911,780  Year ended December 31, 2000First
  Quarter
  
  Second
  Quarter
  
  Third
  Quarter
  
  Fourth
  QuarterInterest income
  
  $
  117,430
  
  $
  120,192
  
  $
  120,955
  
  $
  118,981Interest expense
  
  48,935
  
  52,871
  
  54,842
  
  53,633Net interest
  income
  
  68,495
  
  67,321
  
  66,113
  
  65,348Provision for
  loan losses
  
  4,990
  
  3,811
  
  2,976
  
  4,004Net interest
  income after provision for loan losses
  
  63,505
  
  63,510
  
  63,137
  
  61,344Net gains
  (losses) on sales of securities
  
  4
  
  144
  
  (87
  )
  4Noninterest
  income
  
  18,481
  
  18,826
  
  19,247
  
  18,586Noninterest
  expense
  
  54,147
  
  55,069
  
  55,431
  
  54,672Income before
  income taxes
  
  27,843
  
  27,411
  
  26,866
  
  25,262Provision for
  income taxes
  
  9,180
  
  9,150
  
  9,115
  
  8,303Net income
  
  $
  18,663
  
  $
  18,261
  
  $
  17,751
  
  $
  16,959Earnings per
  common and common equivalent shares:Basic net income
  
  $
  0.37
  
  $
  0.38
  
  $
  0.40
  
  $
  0.40Diluted net
  income
  
  $
  0.37
  
  $
  0.38
  
  $
  0.40
  
  $
  0.40Average common
  and common equivalent shares:Basic
  
  50,312,866
  
  48,060,322
  
  44,399,867
  
  42,167,936Diluted
  
  50,613,345
  
  48,437,386
  
  44,810,942
  
  42,517,836  34 
  CORPORATE
INFORMATION CORPORATE HEADQUARTERS 520 Main Avenue Fargo, North Dakota 58124-0001 (701) 298-5600  INTERNET HOME PAGE www.CommunityFirst.com  STOCK TRANSFER AGENT Wells Fargo Bank Minnesota, N.A. 161 N. Concord Exchange South St. Paul, Minnesota 55075-1139  For change of name, address, or to replace lost stock certificates,
write to: Wells Fargo Bank Minnesota, N.A. at the above address, or phone (651)
450-4064 or (800) 468-9716  SEC FORM 10-K Shareholders may receive a copy of the Companys Form 10-K without
charge by writing to:  Mark A. Anderson, CFA President & CEO Community First Bankshares, Inc. 520 Main Avenue Fargo, North Dakota 58124-0001 IPR@CommunityFirst.com  ANNUAL MEETING The Annual Meeting of Shareholders will be held on Tuesday, April 23,
2002, at 10 a.m. at the Holiday Inn, I-29 and 13th Ave. S., Fargo,
North Dakota 58103  INDEPENDENT AUDITORS Ernst & Young LLP Minneapolis, Minnesota  GENERAL COUNSEL Lindquist & Vennum P.L.L.P. Minneapolis, Minnesota  INVESTOR RELATIONS COUNSEL Weber Shandwick Minneapolis, Minnesota (952) 832 5000  COMMUNITY FIRST SHAREHOLDER RELATIONS (701) 298-5601 or toll-free (888) CFB-BEST IPR@CommunityFirst.com  SHAREHOLDERS As of February 13, 2002, the Company had 2,215 shareholders of record
and an estimated 9,000 additional beneficial holders whose stock was held in
street name.  DIVIDEND POLICY The Board of Directors has adopted a policy of declaring regular
quarterly dividends. A dividend of 14 cents per share was paid for each quarter
of 1999. A dividend of 15 cents per share was paid for each quarter of 2000. A
dividend of 16 cents was paid for the first and second quarters of 2001. A
dividend of 18 cents per share was paid for the third and fourth quarters of
2001.  MARKET PRICE RANGE OF COMMON SHARES Community First
Bankshares, Inc. common stock trades on The Nasdaq Stock Market® under the
symbol CFBX. The following table sets forth the high, low and closing sales
prices for the Companys common stock during the periods indicated: 2001
  
  2000High
  
  Low
  
  Close
  
  High
  
  Low
  
  CloseFirst Quarter
  
  20.44
  
  18.06
  
  20.19
  
  16.00
  
  12.41
  
  16.00Second Quarter
  
  23.25
  
  18.88
  
  23.00
  
  17.56
  
  15.19
  
  16.31Third Quarter
  
  26.25
  
  22.15
  
  24.02
  
  18.00
  
  16.19
  
  17.56Fourth Quarter
  
  26.97
  
  22.84
  
  25.69
  
  19.13
  
  14.94
  
  18.88