<PAGE>

                                                                    EXHIBIT 13.1


<TABLE>
<CAPTION>

                               TABLE OF CONTENTS

<S>                                                                <C>
BEST OF BOTH WORLDS                                                  1
LETTER TO SHAREHOLDERS                                               3
REGIONAL REVIEW                                                      4
FINANCIAL REVIEW                                                    14
AFFILIATED BANKS                                                    47
BOARD OF DIRECTORS                                                  54
SENIOR OFFICERS                                                     55
CORPORATE INFORMATION                                               56

</TABLE>


                             FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>

YEARS ENDED DECEMBER 31
(In thousands, except per share data)       1997        1996        1995        1994        1993
----------------------------------------------------------------------------------------------------
EARNINGS
----------------------------------------------------------------------------------------------------
<S>                                       <C>         <C>         <C>         <C>         <C>
Total interest income.................... $  278,597  $  229,426  $  192,868  $  143,237  $  121,146
Total interest expense................... $  117,253      95,234      82,891      53,468      47,271
Net interest income......................    161,344     134,192     109,977      89,769      73,875
Net income...............................     46,552      32,510      29,953      22,729      18,614

PER COMMON AND COMMON EQUIVALENT SHARE
----------------------------------------------------------------------------------------------------
Basic earnings per share................. $     2.52  $     1.87  $     1.85  $     1.50  $     1.35
Diluted earnings per share...............       2.44        1.79        1.75        1.43        1.30
Net book value...........................      16.70       12.92       12.01        9.69        9.10
Dividends paid...........................        .70         .58         .48         .44         .40

AT YEAR-END
----------------------------------------------------------------------------------------------------
Total assets............................. $4,855,526  $3,116,398  $2,769,976  $2,130,619  $1,883,794
Total loans..............................  2,637,057   2,064,108   1,767,193   1,330,146   1,037,666
Allowance for loan losses................     36,194      26,215      22,712      17,333      14,332
Total deposits...........................  3,619,334   2,537,440   2,359,716   1,794,565   1,627,989
Common equity............................    339,294     221,583     181,004     134,701     125,071

KEY PERFORMANCE RATIOS
----------------------------------------------------------------------------------------------------
Return on average common equity..........      18.13%      15.69%      18.19%      16.77%      16.64%
Return on average assets.................       1.31%       1.13%       1.24%       1.13%       1.10%
Net interest margin......................       5.17%       5.32%       5.06%       4.95%       4.74%
Dividend payout ratio....................      28.69%      32.40%      27.43%      30.77%      30.77%
Average common equity to average assets..       7.21%       6.87%       6.43%       6.43%       6.59%
Nonperforming assets to period-end 
  loans and OREO.........................       0.61%       0.70%       0.31%       0.34%       0.62%
Allowance for loan losses to period-end
  loans..................................       1.37%       1.27%       1.29%       1.30%       1.38%
Allowance for loan losses to 
  nonperforming loans....................     286.19%     200.68%     608.09%     537.12%     295.99%
Net charge-offs to aveage loans..........       0.24%       0.22%       0.17%       0.00%       0.08%
Tier I capital...........................      10.65%       8.88%       8.51%      10.64%      10.16%
Total risk-based capital.................      14.24%      11.10%      11.18%      13.46%      13.44%
Leverage ratio...........................       7.25%       6.62%       6.10%       7.12%       6.12%

-----------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

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, 1997 and 1996, and its results of operations for the years ended December 
31, 1997, 1996, and 1995. This discussion should be read in conjunction with 
the consolidated financial statements and related footnotes and the five year 
summary of selected financial data. The information has been restated to 
reflect significant mergers accounted for as a pooling-of-interests as if 
they had occurred at the beginning of the first period presented. Purchases 
have been reflected in the Company's results of operations for all periods 
following the acquisition and are reflected in the Company's financial 
condition at all dates subsequent to the acquisition.

                        MERGER AND ACQUISITION ACTIVITY

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

    On December 18, 1996, the Company issued approximately 5.2 million shares 
of common stock to acquire Mountain Parks Financial Corporation ("Mountain 
Parks"), a one-bank holding company headquartered in Denver, Colorado. At 
acquisition, Mountain Parks had approximately $600 million in assets at 
seventeen banking offices located in Colorado. On February 22, 1995, the 
Company issued approximately 2.4 million shares of common stock to acquire 
Minowa Bancshares, Inc. ("Minowa"), a three-bank holding company 
headquartered in Decorah, Iowa. At acquisition, Minowa had approximately $224 
million in assets at three banks located in Iowa and Minnesota. On July 3, 
1995, the Company issued approximately 1.2 million shares to acquire First 
Community Bankshares, Inc. ("First Community"), a five-bank holding company 
headquartered in Fort Morgan, Colorado. At acquisition, First Community had 
total assets of $153 million at its five Colorado banks. All three 
acquisitions were accounted for using the pooling of interests method.

    Also during the periods presented, the Company made the following 
acquisitions of banks (or associated holding companies), each of which was 
accounted for as a purchase, except the acquisitions in Trinidad, Colorado, 
Gunnison, Colorado, and Phoenix, Arizona, each of which was accounted for as 
a pooling of interests. Because the pooling acquisitions were not material to 
the Company's financial condition or operating results, the Company's 
financial information has not been restated to reflect these mergers.

<TABLE>
<CAPTION>
Acquisition          Location of Bank or         Total Assets at Date of
Month and Year       Name of Acquired Entity     Acquisition (In Millions)
--------------------------------------------------------------------------
<S>                  <C>                         <C>
December 1997        Gunnison, Colorado                      $    90
November 1997        Phoenix, Arizona                        $    54
July 1997            Cheyenne, Wyoming                       $ 1,100
October 1996         Trinidad, Colorado                      $    70
July 1996            Kiowa, Colorado                         $    58
July 1996            Englewood, Colorado                     $    19
October 1995         Beach, North Dakota                     $    44
September 1995       Aurora, Colorado                        $    41
July 1995            Louisville, Colorado                    $    36
July 1995            Boulder, Colorado                       $    60
May 1995             Alliance, Nebraska                      $   293
--------------------------------------------------------------------------
</TABLE>

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

    On January 23, 1998, the Company completed the purchase and assumption of 
approximately $730 million in assets and liabilities of 37 offices of Banc 
One Corporation located in Arizona, Colorado, and Utah. The transaction will 
be accounted for as a purchase of certain assets and assumption of certain 
liabilities and resulted in the recognition of approximately $44 million of 
deposit premium. The purchase was funded through a combination of net 
proceeds from the issuance of 1,000,000 shares of common stock in December 
1997 and the proceeds of the issuance of $60 million 8.20% Cumulative Capital 
Securities by a business trust subsidiary in December 1997.

    On January 14, 1998, the Company signed a definitive merger agreement 
with FNB, Inc. ("FNB"), a two-bank holding company headquartered in Greeley, 
Colorado. At December 31, 1997, FNB had total assets of $118 million at 
offices in Greeley and Fort Collins, Colorado. To facilitate completion of 
the transaction, which is expected to be accounted for using the pooling of 
interests method of accounting, the Company will issue approximately 570,000 
shares of common stock to holders of FNB common stock. The transaction is 
subject to regulatory approval and is expected to close during the second 
quarter of 1998.

    On January 9, 1998, the Company signed a definitive merger agreement with 
Community Bancorp, Inc. ("CBI"), a one-bank, holding company headquartered in 
Thornton, Colorado. At December 31, 1997, CBI had total assets of $78 million 
at offices in Thornton and Arvada, Colorado. To facilitate completion of the 
transaction, which is expected to be accounted for using the pooling of 
interests method of accounting, the Company will issue approximately 452,000 
shares of common stock to holders of CBI common stock. The transaction is 
subject to regulatory approval and is expected to close during the second 
quarter of 1998.

    On November 7, 1997, the Company signed a definitive merger agreement 
with Pioneer Bank of Longmont ("Longmont"), Longmont, Colorado. At December 
31, 1997, Longmont had total assets of $130 million and banking offices in 
four Colorado communities. To facilitate completion of the transaction, which 
is expected to be accounted for using the pooling of interests method of 
accounting, the Company will issue approximately 700,000 shares of common 
stock to holders of Longmont common stock. The transaction is subject to 
regulatory approval and is expected to close during the second quarter of 
1998.

                                    OVERVIEW

For the year ended December 31, 1997, the Company reported net income of 
$46.6 million, an increase of $14.1 million, or 43.4%, from the $32.5 million 
earned during 1996. Diluted earnings per share were $2.44, compared to $1.79 
in 1996 and $1.75 in 1995. Return on average assets was 1.31% for 1997, 
compared with 1.13% for 1996. Return on average common shareholders' equity 
for 1997 and 1996 was 18.13% and 15.69%, respectively. Factors contributing 
to these changes included


                                                                              15
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS          

Community First Bankshares, Inc.


approximately $6.3 million of incremental net income provided by entities
acquired during 1997 and 1996.

    For the year ended December 31, 1996, the Company reported net income of
$32.5 million, an increase of $2.5 million, or 8.3% from the $30.0 million
earned during 1995. Diluted earnings per share were $1.79, compared to $1.75 in
1995. Return on average assets was 1.13% for 1996, compared with 1.24% for 1995.
Return on average common shareholders' equity for 1996 and 1995 was 15.69% and
18.19%, respectively. Factors contributing to these changes included
approximately $1.4 million of incremental net income provided by entities
acquired during 1996 and 1995.

    During 1997, the Company made the determination to dispose of its sub-prime
lending affiliates, Mountain Parks Financial Services, Inc. ("MPFS") and Equity
Lending, inc. ("ELI"). Both MPFS, which purchases auto contracts and ELI, which
originates residential, non-conforming mortgages were acquired by the Company in
December 1996 through the merger with Mountain Parks Financial Corporation. The
Company has accounted for these entities as discontinued operations on the
consolidated financial statements. At December 31, 1997, the net balance sheet
effect of $72 million from these entities has been included as an Other Asset.
The Company recognized income of $967,000 net of tax, from these entities during
1997.

    Total assets were $4,856 million and $3,116 million at December 31, 1997 
and 1996, respectively. The increase of $1,740 million, or 55.8%, during
1997 was principally due to the 1997 acquisitions of the banks in Wyoming,
Phoenix, and Gunnison, as well as loan growth in the Company's subsidiary banks.

                             RESULTS OF OPERATIONS

NET INTEREST INCOME

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

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

<TABLE>
<CAPTION>

YEARS ENDED DECEMBER 31                                          1997                                 1996
--------------------------------------------------------------------------------------------------------------------------
                                                                            INTEREST                              INTEREST
                                                    AVERAGE               YIELDS AND       AVERAGE              YIELDS AND
(DOLLARS IN THOUSANDS)                              BALANCE      INTEREST      RATES       BALANCE    INTEREST       RATES
--------------------------------------------------------------------------------------------------------------------------
<S>                                              <C>             <C>      <C>           <C>           <C>       <C>
ASSETS
Loans (1) (2) .................................. $2,264,150      $219,843      9.71%    $1,873,073    $185,005       9.88%
Investment securities (2) ......................    942,974        63,362      6.72%       727,822      48,579       6.67%
Other earning assets ...........................     16,720           866      5.18%        17,324         960       5.47%
                                                 -------------------------------------------------------------------------
    Total earning assets .......................  3,223,844       284,071      8.81%     2,618,219     234,544       8.96%
Noninterest-earning assets .....................    337,729                                248,560
                                                 -------------------------------------------------------------------------
    Total assets ............................... $3,561,573                             $2,866,779
                                                 -------------------------------------------------------------------------
                                                 -------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing checking ...................... $  367,683         6,536      1.78%    $  445,501    $  8,702       1.95%
Savings deposits ...............................    731,751        19,870      2.72%       444,333      11,534       2.60%
Time deposits ..................................  1,385,924        75,873      5.47%     1,114,617      61,419       5.51%
Short-term borrowings ..........................    177,190         9,236      5.21%       168,311       9,247       5.49%
Long-term borrowings ...........................     76,595         5,738      7.49%        60,433       4,332       7.17%
                                                 -------------------------------------------------------------------------
    Total interest-bearing liabilities .........  2,739,143       117,253      4.28%     2,233,195      95,234       4.26%
Demand deposits ................................    463,601                                378,325
Noninterest-bearing liabilities ................     39,786                                 35,365
Trust Owned Preferred Securities ...............     57,699                                     --
Preferred shareholders' equity .................      4,506                                 22,999
Common shareholders' equity ....................    256,838                                196,895
                                                 -------------------------------------------------------------------------
 ...............................................    822,430                                633,584
                                                 -------------------------------------------------------------------------
Total liabilities and shareholders' equity ..... $3,561,573                             $2,866,779
                                                 -------------------------------------------------------------------------
                                                 -------------------------------------------------------------------------
Net interest income ............................                 $166,818                             $139,310
                                                 -------------------------------------------------------------------------
                                                 -------------------------------------------------------------------------
Net interest spread ............................                               4.53%                                 4.70%
                                                 -------------------------------------------------------------------------
                                                 -------------------------------------------------------------------------
Net interest margin ............................                               5.17%                                 5.32%
                                                 -------------------------------------------------------------------------
                                                 -------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31                                         1995
------------------------------------------------------------------------------------
                                                                            INTEREST
                                                    AVERAGE               YIELDS AND
(DOLLARS IN THOUSANDS)                              BALANCE      INTEREST      RATES
------------------------------------------------------------------------------------
<S>                                              <C>             <C>      <C>
ASSETS
Loans (1) (2) .................................. $1,545,497      $151,154      9.78%
Investment securities (2) ......................    656,435        43,009      6.55%
Other earning assets ...........................     29,369         1,710      5.82%
                                                 -----------------------------------
    Total earning assets .......................  2,231,301       195,873      8.78%
Noninterest-earning assets .....................    192,912
                                                 -----------------------------------
    Total assets ............................... $2,424,213
                                                 -----------------------------------
                                                 -----------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing checking ......................  $ 406,080      $  8,805      2.17%
Savings deposits ...............................    349,522         9,748      2.79%
Time deposits ..................................    963,594        53,227      5.52%
Short-term borrowings ..........................    111,784         6,184      5.53%
Long-term borrowings ...........................     65,379         4,927      7.54%
                                                 -----------------------------------
    Total interest-bearing liabilities .........  1,896,359        82,891      4.37%
Demand deposits ................................    317,806
Noninterest-bearing liabilities ................     31,189
Trust Owned Preferred Securities ...............         --
Preferred shareholders' equity .................     23,000
Common shareholders' equity ....................    155,859
                                                 -----------------------------------
 ...............................................    527,854
                                                 -----------------------------------
Total liabilities and shareholders' equity ..... $2,424,213
                                                 -----------------------------------
                                                 -----------------------------------
Net interest income ............................                 $112,982
                                                 -----------------------------------
                                                 -----------------------------------
Net interest spread ............................                               4.41%
                                                 -----------------------------------
                                                 -----------------------------------
Net interest margin ............................                               5.06%
                                                 -----------------------------------
                                                 -----------------------------------
------------------------------------------------------------------------------------
</TABLE>

(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% IN 1997, 1996, AND 1995.


16
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS

Community First Bankshares, Inc.


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:

<TABLE>
<CAPTION>
                                                                   1997 COMPARED TO 1996            1996 COMPARED TO 1995
                                                           ---------------------------------------------------------------------
(IN THOUSANDS)                                                VOLUME        RATE      TOTAL     VOLUME        RATE      TOTAL
--------------------------------------------------------------------------------------------------------------------------------
<S>                                                          <C>         <C>        <C>         <C>        <C>        <C>
Interest income:
    Loans (1) (2) ..........................................  $38,627    $(3,789)    $34,838    $32,038    $ 1,813     $33,851
    Investment securities (2) ..............................   14,360        423      14,783      4,677        893       5,570
    Other earning assets ...................................      (33)       (61)        (94)      (701)       (62)       (763)
                                                            --------------------------------------------------------------------
Total interest income ......................................   52,954     (3,427)     49,527     36,014      2,644      38,658
                                                            --------------------------------------------------------------------
Interest expense:
    Savings deposits and interest-bearing checking .........    5,941        229       6,170      3,499     (1,816)      1,683
    Time deposits ..........................................   14,949       (495)     14,454      8,342       (150)      8,192
    Short-term borrowings ..................................      488       (499)        (11)     3,127        (64)      3,063
    Long-term borrowings ...................................    1,159        247       1,406       (373)      (222)       (595)
                                                            --------------------------------------------------------------------
Total interest  expense ....................................   22,537       (518)     22,019     14,595     (2,252)     12,343
                                                            --------------------------------------------------------------------
Increase (decrease) in net interest income .................  $30,417    $(2,909)    $27,508    $21,419    $ 4,896     $26,315
                                                            --------------------------------------------------------------------
                                                            --------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1) INCLUDES LOAN FEES.
(2) INTEREST INCOME IS PRESENTED ON A TAX EQUIVALENT BASIS.


    Net interest income on a tax equivalent basis in 1997 was $166.8 million, a
$27.5 million increase from 1996. The increase was primarily due to a 23.1%
increase in earning assets partially offset by a 15 basis point reduction in the
net interest margin. The increase in earning assets was due to six bank
acquisitions completed by the Company between the third quarter of 1996 and
December 1997, and loan growth in existing markets. Net interest income on a tax
equivalent basis in 1996 was $139.3 million, a $26.3 million increase from 1995.
The increase was primarily due to a 17.3% increase in earning assets and a 26
basis point increase in the net interest margin. The increase was primarily
influenced by bank acquisitions completed by the Company and loan growth in
existing markets.

    The net interest margin was 5.17%, 5.32%, and 5.06% in 1997, 1996 and 1995,
respectively. This decrease in margin was due to a 17 basis point decrease in
the yield spread between 1996 and 1997, and a change in the mix of earning
assets to lower-yielding loans. Average loans to average earning assets changed
from 69.3% in 1995, to 71.5% in 1996, and 70.2% in 1997.

PROVISION FOR LOAN LOSSES

Annual fluctuations in the provision for loan losses result from management's
regular assessment of the adequacy of the allowance for loan losses. The
provision for loan losses for 1997 was $5.4 million, a decrease of $1.4 million
or 20.6%, from the $6.8 million provision during 1996. The decreased loan loss
provision was principally due to the Company's decision to dispose of its
sub-prime lending affiliates and subsequently accounting for these entities as
discontinued operations. 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 1996 was $6.8 million, an increase of $4.1
million, or 151.9% from the 1995 provision of $2.7 million.

NONINTEREST INCOME

The Company continues to expand noninterest income associated with the Company's
community banking operations. The primary sources of noninterest income consist
of service charges on deposit accounts, service fees on checking accounts,
insurance commissions and fees for trust services. Management regularly weighs
opportunities to increase noninterest income by considering the delivery of
financial products and services in its markets.

    Noninterest income for 1997 was $36.6 million, an increase of $9.2 million,
or 33.6%, from the $27.4 million earned in 1996. The increase was principally
due to an increase in service charges on deposit accounts in 1997 to $17.0
million from the $12.3 million in 1996, an increase of $4.7 million, or 38.2%.
The increase is attributed to $2.7 million in service charges on deposit
accounts at banks acquired during 1997 and $494,000 at banks acquired during
1996.

    Noninterest income for 1996 was $27.4 million, an increase of $4.9 million,
or 21.8%, from the $22.5 million earned in 1995. The increase was principally
due to an increase in service charges on deposit accounts in 1996 from $10.1
million earned during 1995 to $12.3 million earned in 1996, an increase of $2.2
million, or 21.8%.

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.

                                                                              17

<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS       

Community First Bankshares, Inc.

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

<TABLE>
<CAPTION>

YEARS ENDED DECEMBER 31 (IN THOUSANDS)           1997       1996         1995
--------------------------------------------------------------------------------
<S>                                              <C>          <C>        <C>

Salaries and employee benefits ................. $  64,868    $ 54,870   $42,796
Net occupancy ..................................    19,139      15,085    10,563
FDIC insurance .................................       357         669     2,532
Legal and accounting ...........................     1,710       1,989     1,311
Other professional service .....................     2,378       1,892     2,700
Acquisition expenses ...........................       398       2,928       768
Data processing and loan servicing fees ........     1,290       1,506     1,607
Permanent impairment of equity
  method investment ............................        --         940        --
Minority interest ..............................       (55)        222       175
Company-obligated mandatorily redeemable
  preferred securities of CFB Capital I & II ...     5,108          --        --
Amortization of Intangibles ....................     5,519       3,362     2,551
Other ..........................................    24,478      20,825    17,590
                                                 -------------------------------
    Total noninterest expense .................. $ 125,190    $104,288   $82,593
                                                 -------------------------------
                                                 -------------------------------
</TABLE>
--------------------------------------------------------------------------------

    Noninterest expense for 1997 was $125.2 million, an increase of $20.9 
million, or 20.0%, from the level of $104.3 million during 1996. The increase 
was principally due to an increase of $10.0 million, or 18.2%, in salaries 
and employee benefits, of which $5.8 million was due to the 1997 acquisitions 
and $1.7 million was due to the banks acquired during 1996. Net occupancy 
expense increased $4.1 million to $19.1 million, $2.1 million due to 1997 and 
1996 acquisitions. Acquisition expenses of $398,000 were incurred in 1997 in 
conjunction with the acquisitions of Republic and Summit. Intangibles expense 
increased $2.2 million, or 64.2%, due to the additional intangible assets 
recognized in connection with the Company's acquisitions. Other noninterest 
expense was $24.5 million, an increase of $3.7 million, or 17.8%, from $20.8 
million during 1996.

    Noninterest expense increased $21.7 million to $104.3 million in 1996. 
The increase was principally due to an increase in salaries and employee 
benefits, net occupancy expense, and acquisition and related expenses. The 
$12.1 million increase in salaries and employee benefits reflects $4.6 
million in additional expenses related to acquisitions completed by the 
Company in 1995 and 1996. The $4.5 million increase in net occupancy is also 
due primarily to acquisitions completed by the Company. Legal and accounting 
fees increased $678,000, or 51.7%, from $1,311,000 to $1,989,000 during 1996. 
The Company incurred acquisition expenses of $2.9 million in 1996 in 
connection with the mergers with Mountain Parks and Financial Bancorp. These 
expenses relate to legal, accounting and other professional services expenses 
incurred to complete the mergers. In addition, the Company incurred 
noninterest expenses of $1.0 million to facilitate the integration of certain 
operating activities of Mountain Parks into those of the Company. During 
1996, the Company recorded a $940,000 writedown in the value of its 
investment in an unconsolidated subsidiary, which was divested to satisfy 
regulators' competitive issues related to the Mountain Parks merger. 
Amortization of intangibles increased $811,000, or 31.8%, due to intangible 
assets, such as goodwill, noncompete agreements and insurance agency customer 
policy expirations recorded in connection with the Company's acquisitions. 
Other noninterest expense was $20.8 million, an increase of $3.2 million, or 
18.2%, from $17.6 million in 1995. Federal Deposit Insurance Corporation 
("FDIC") insurance expense decreased $1.9 million as a result of a reduction 
in the insurance assessment rate paid by most affiliate banks from a rate of 
$.23 per $100 to $.04 per $100 of qualifying deposits. This was partially 
offset by increased deposits obtained through 1996 and 1995 bank acquisitions 
and an increase in average deposits for 1996 to $2,383 million from $2,037 
million in 1995, an increase of $346 million, or 17.0%.

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 
effective tax rate was 31.9%, 35.6%, and 36.4% for 1997, 1996, and 1995, 
respectively.

YEAR 2000 ISSUE
The Company is evaluating the potential impact of what is commonly referred 
to as the "Year 2000" issue, concerning the inability of certain information 
systems to properly recognize and process dates containing the year 2000 and 
beyond. If not corrected, these systems could fail or create erroneous 
results. The Company is in the process of determining which of its systems, 
if any, may present Year 2000 issues, the magnitude of these issues, and the 
steps that may be necessary to correct them. Therefore, the potential 
liabilities and costs associated with Year 2000 compliance cannot be 
estimated at this time. Regardless of the Year 2000 compliance of the 
Company's systems, there can be no assurance that the Company will not be 
adversely affected by the failure of others to become Year 2000 compliant. 
Such risks may include potential losses related to loans made to third 
parties whose businesses are adversely affected by the Year 2000 issue, the 
disruption or inaccuracy of data provided by non-Year 2000 compliant third 
parties and business disruption caused by the failure of service providers, 
such as security and data processing companies, to become Year 2000 
compliant. Because of these uncertainties, there can be no assurance that the 
Year 2000 issue will not have a material financial impact in any future 
period.

                             FINANCIAL CONDITION

INVESTMENT OF FUNDS

LOANS
At December 31, 1997, total loans were $2.6 billion, an increase of $573 
million, or 27.8%, from the December 31, 1996, level of $2.1 billion. A 
significant portion of this increase is attributable to in-market loan growth 
in the Company's existing markets. In addition, the purchase of three banking 
institutions in 1997 added $536 million in loans.

    The Company has continued to purchase commercial loan assets to enhance 
earning asset yield performance. Many of such loan assets have been 
originated by selected Midwestern regional banks and national leasing and 
finance companies with whom the Company has ongoing relationships. The 
Company's portfolio of purchased loan assets was $208 million at December 31, 
1997, compared to $202 million at December 31, 1996. 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 increase during 1998.


18

<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS          

Community First Bankshares, Inc.

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

<TABLE>
<CAPTION>
                                   1997                 1996                 1995                 1994                 1993
-----------------------------------------------------------------------------------------------------------------------------------

                                      PERCENT              PERCENT               PERCENT              PERCENT              PERCENT
                                      OF TOTAL             OF TOTAL              OF TOTAL             OF TOTAL             OF TOTAL
(DOLLARS IN THOUSANDS)       AMOUNT     LOANS      AMOUNT    LOANS      AMOUNT     LOANS       AMOUNT   LOANS      AMOUNT    LOANS
-----------------------------------------------------------------------------------------------------------------------------------
<S>                       <C>         <C>      <C>         <C>       <C>         <C>      <C>         <C>      <C>         <C>
Loan category:
 Real estate ............ $1,158,822   43.94%  $  871,432    42.22%  $  744,477    42.13% $  544,809    40.96% $  403,716    38.90%
 Commercial .............    708,084   26.85%     624,456    30.25%     527,620    29.86%    397,869    29.91%    316,565    30.51%
 Consumer and other .....    499,924   18.96%     346,139    16.77%     270,459    15.30%    225,256    16.93%    170,271    16.41%
 Agricultural ...........    270,227   10.25%     222,081    10.76%     224,637    12.71%    162,212    12.20%    147,114    14.18%
                          ---------------------------------------------------------------------------------------------------------
Total loans .............  2,637,057  100.00%   2,064,108   100.00%   1,767,193   100.00%  1,330,146   100.00%  1,037,666   100.00%
                          ---------------------------------------------------------------------------------------------------------
                          ---------------------------------------------------------------------------------------------------------
Less allowance for 
 loan losses ............    (36,194)             (26,215)              (22,712)             (17,333)             (14,332)
                          ---------------------------------------------------------------------------------------------------------
Total ................... $2,600,863           $2,037,893            $1,744,481           $1,312,813           $1,023,334
                          ---------------------------------------------------------------------------------------------------------
                          ---------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

GENERAL. The Company's loan mix remained relatively constant from 1996 to 
1997. Real estate loans continued to be the largest category of loans, 
representing 43.9% of the total loan portfolio.

REAL ESTATE LOANS. A significant portion of the Company's real estate loan 
portfolio consists of residential real estate first mortgages that have been 
underwritten and documented to meet secondary mortgage requirements. 
Substantially all of the Company's real estate loans are based in the 
Company's primary market area. As of December 31, 1997, $464 million, or 
40.0%, of the Company's real estate loan portfolio consisted of residential 
real estate loans, $137 million, or 11.8%, were secured by farmland, $363 
million, or 31.4%, represented commercial and other real estate loans and 
$195 million, or 16.8%, represented construction loans.

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

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

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

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

                                                                              19

<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS  

Community First Bankshares, Inc.

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

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
                                                   BOOK VALUE AT DECEMBER 31,
(IN THOUSANDS)                                    1997        1996       1995
--------------------------------------------------------------------------------
<S>                                            <C>          <C>        <C>
U.S. Treasury ...............................  $     --     $   --     $   --
U.S. Government agencies ....................         228        879      3,318
Mortgage-backed securities ..................      67,959     86,506    106,429
Collateralized mortgage obligations .........        --         --         --
State and political securities ..............      48,064     56,694     55,267
Other securities ............................      64,261     78,269     65,806
                                               ----------   --------   --------
Total .......................................  $  180,512   $222,348   $230,820
                                               ----------   --------   --------
                                               ----------   --------   --------

--------------------------------------------------------------------------------
</TABLE>


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:

<TABLE>
<CAPTION>
                                                   BOOK VALUE AT DECEMBER 31,
(IN THOUSANDS)                                     1997       1996       1995
--------------------------------------------------------------------------------
<S>                                             <C>          <C>        <C>
U.S. Treasury ...............................   $  147,126   $120,193   $154,508
U.S. Government agencies ....................      266,696     85,311    121,588
Mortgage-backed securities ..................      829,943    236,833    143,359
Collateralized mortgage obligations .........      108,103     43,259     58,053
State and political securities ..............       68,677     15,122      1,443
Other securities ............................       78,332      6,170      7,571
                                                ----------   --------   --------
Total .......................................   $1,498,877   $506,888   $486,522
                                                ----------   --------   --------
                                                ----------   --------   --------

--------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
HELD-TO-MATURITY SECURITIES                                     AT DECEMBER 31, 1997, MATURING IN
-----------------------------------------------------------------------------------------------------------------------------------
                                                    OVER ONE YEAR           OVER 5 YEARS
                              ONE YEAR OR LESS    THROUGH 5 YEARS       THROUGH 10 YEARS        OVER 10 YEARS               TOTAL
-----------------------------------------------------------------------------------------------------------------------------------
                                      WEIGHTED           WEIGHTED               WEIGHTED             WEIGHTED            WEIGHTED
(DOLLARS IN THOUSANDS)         AMOUNT YIELD(1)    AMOUNT YIELD(1)         AMOUNT YIELD(1)      AMOUNT YIELD(1)     AMOUNT YIELD(1)
-----------------------------------------------------------------------------------------------------------------------------------
<S>                           <C>         <C>    <C>         <C>        <C>         <C>      <C>         <C>     <C>          <C>  
U.S. Government agencies .... $    --       --   $    --       --       $    --       --     $    228    7.25%   $    228     7.25%
Mortgage-backed securities ..     780     8.51%    7,262      7.54%      29,653     6.43%      30,264    6.63%     67,959     6.66%
Municipal bonds .............   3,958     7.13%    8,342      7.54%      18,834     8.13%      16,930    8.20%     48,064     7.97%
Other .......................      --       --        62     10.03%          --       --       64,199    7.99%     64,261     7.99%
                              -------     -----  -------     ------     -------     -----    --------    -----   --------     -----
Total ....................... $ 4,738     7.36%  $15,666     7.55%      $48,487     7.09%    $111,621    7.65%   $180,512     7.48%
                              -------     -----  -------     ------     -------     -----    --------    -----   --------     -----
                              -------     -----  -------     ------     -------     -----    --------    -----   --------     -----

-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1)  INTEREST YIELDS ON INVESTMENTS ARE PRESENTED ON A TAX EQUIVALENT BASIS TO
     REFLECT THE TAX EXEMPT NATURE OF CURRENT ASSETS. YIELDS ARE BASED ON A 
     35% INCREMENTAL TAX RATE AND A 3.51% COST OF FUNDS.

<TABLE>
<CAPTION>
AVAILABLE-FOR-SALE SECURITIES                                     AT DECEMBER 31, 1997, MATURING IN
-----------------------------------------------------------------------------------------------------------------------------------
                                                     OVER ONE YEAR         OVER 5 YEARS
                               ONE YEAR OR LESS     THROUGH 5 YEARS     THROUGH 10 YEARS          OVER 10 YEARS              TOTAL
-----------------------------------------------------------------------------------------------------------------------------------
                                         WEIGHTED             WEIGHTED          WEIGHTED               WEIGHTED           WEIGHTED 
(DOLLARS IN THOUSANDS)         AMOUNT    YIELD(1)   AMOUNT    YIELD(1)  AMOUNT   YIELD(1)    AMOUNT    YIELD(1)    AMOUNT  YIELD(1)
-----------------------------------------------------------------------------------------------------------------------------------
<S>                           <C>        <C>        <C>        <C>     <C>        <C>       <C>         <C>     <C>          <C>
U.S. Treasury ............... $ 27,956   5.78%      $119,170   6.28%   $   --      --       $   --       --     $  147,126   6.19%
U.S. Government agencies ....   54,585   5.59%       166,783   6.12%     44,330   6.45%          998    7.27%      266,696   6.07%
Mortgage-backed securities ..    4,019   7.30%         8,242   6.88%     33,482   7.41%      784,200    6.81%      829,943   6.84%
Collateralized mortgage 
   obligations ..............       97   5.95%         2,905   6.47%     13,041   6.35%       92,060    6.38%      108,103   6.38%
Municipal bonds .............    8,180   7.28%        30,550   7.59%      7,055   8.79%       22,892    7.57%       68,677   7.67%
Other .......................   30,434   6.36%           731   6.63%         43   7.05%       47,124    7.44%       78,332   7.01%
                              -------    -----       -------   ------  -------    -----     --------    -----   --------     -----
Total ....................... $125,271   5.98%      $328,381   6.34%   $ 97,951   6.93%     $947,274    6.82%   $1,498,877   6.65%
                              -------    -----       -------   ------  -------    -----     --------    -----   --------     -----
                              -------    -----       -------   ------  -------    -----     --------    -----   --------     -----

-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1)  INTEREST YIELDS ON INVESTMENTS ARE PRESENTED ON A TAX EQUIVALENT BASIS 
     TO REFLECT THE TAX EXEMPT NATURE OF CURRENT ASSETS.   YIELDS ARE BASED 
     ON A 35% INCREMENTAL TAX RATE AND A 3.51% COST OF FUNDS.


20
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS    

Community First Bankshares, Inc.


    The Company's investments, including available-for-sale and 
held-to-maturity securities, increased $950 million, or 130.3%, to $1,679 
million at December 31, 1997, from $729 million at December 31, 1996. This 
increase was due to the addition of $496 million of securities obtained 
through 1997 bank acquisitions and offset by maturing securities which were 
not replaced, in response to loan demand. At December 31, 1997, the Company's 
investments represented 34.6% of total assets, compared to 23.4% at December 
31, 1996.

CREDIT EXPERIENCE 
The Company's lending activities are guided by the general loan policy 
established by the Board of Directors. The Senior Credit Committee of the 
Company has established loan approval limits for each region of the Company 
and each subsidiary bank. The limits established for each bank range from 
$50,000 to $300,000 per borrower (except for the Fargo bank, which has a 
$750,000 limit per borrower). However, renewals of any criticized or 
classified loans have a limit of $25,000. Amounts in excess of the individual 
bank lending authority are presented to the regional credit officers. The 
regional credit officers for Arizona, Colorado, Iowa, Minnesota, Nebraska, 
Wisconsin, Wyoming and the Dakotas have lending authority of $750,000 per 
nonclassified borrower when a second regional credit officer or the 
respective regional managing officer concurs. Loans above $1,500,000 per 
nonclassified borrower and $250,000 per classified borrower are presented to 
the Senior Credit Committee for approval.

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

NONPERFORMING ASSETS
The Company follows regulatory guidelines with respect to classifying loans 
on a nonaccrual basis. Loans are placed on nonaccrual when they become past 
due over 90 days or when the collection of interest or principal is 
considered unlikely. The Company does not return a loan to accrual status 
until it is brought current with respect to both principal and interest and 
future principal payments are no longer in doubt. When a loan is placed on 
nonaccrual status, any previously accrued and uncollected interest is 
reversed. Interest income of $364,000 on nonaccrual loans would have been 
recorded during 1997 if the loans had been current in accordance with their 
original terms. During 1997, the Company recorded interest income of $361,000 
related to loans that were on nonaccrual status as of December 31, 1997.

    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:

<TABLE>
<CAPTION>
DECEMBER 31, (DOLLARS IN THOUSANDS)                                  1997          1996         1995          1994         1993
----------------------------------------------------------------------------------------------------------------------------------
<S>                                                             <C>           <C>          <C>          <C>           <C>         
Loans:
    Nonaccrual loans ........................................... $    12,507  $   12,796   $    3,252   $     3,087   $    3,742
    Restructured loans .........................................         140         267          483           140        1,100
                                                                 -----------  ----------   ----------   -----------   ----------
    Nonperforming loans ........................................      12,647      13,063        3,735         3,227        4,842
OREO ...........................................................       3,406       1,426        1,701         1,265        1,622
                                                                 -----------  ----------   ----------   -----------   ----------
    Nonperforming assets ....................................... $    16,053  $   14,489   $    5,436   $     4,492   $    6,464
                                                                 -----------  ----------   ----------   -----------   ----------
Loans 90 days or more past due but still accruing .............. $     3,616  $    1,956   $      779   $       722   $      761
                                                                 -----------  ----------   ----------   -----------   ----------
Nonperforming loans as a percentage of total loans .............        0.48%       0.63%        0.21%         0.24%        0.47%
Nonperforming assets as a percentage of total assets ...........        0.33%       0.46%        0.20%         0.21%        0.34%
Nonperforming assets as a percentage of total loans and OREO ...        0.61%       0.70%        0.31%         0.34%        0.62%
Total loans .................................................... $ 2,637,057  $2,064,108   $1,767,193   $ 1,330,146   $1,037,666
Total assets ................................................... $ 4,855,526  $3,116,398   $2,769,976   $ 2,130,619   $1,883,794
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>


    Nonperforming assets were $16.1 million at December 31, 1997, an increase 
of $1.6 million, or 11.0%, from $14.5 million at December 31, 1996. 
Nonperforming loans decreased by $416,000. OREO increased $2.0 million, or 
142.9%, from $1.4 million at December 31, 1996 to $3.4 million at December 
31, 1997. The ratio of nonperforming assets to total assets at December 31, 
1997, was .33%, compared to .46% at December 31, 1996.

    Nonperforming assets were $14.5 million at December 31, 1996, an increase 
of $9.1 million, or 168.5% from $5.4 million at December 31, 1995. 
Nonperforming loans increased by $9.3 million due principally to an increase 
in nonaccrual loans at the former Mountain Parks Bank of $7.6 million, 
including $4.6 million in the specialty lending area. At December 31, 1997, 
the Company has announced its intent to discontinue the operations of this 
subsidiary.

                                                                             21

<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS   

Community First Bankshares, Inc.


ALLOWANCE FOR LOAN LOSSES

The current level of the allowance for loan losses is a result of management's 
assessment of the risks within the portfolio based on the information revealed 
in credit reporting processes. The Company utilizes a risk-rating system on all 
loans, including purchased loans, and a monthly credit review and reporting 
process that results in the calculation of the guidelines reserves based on the 
risk within the portfolio. This assessment of risk takes into account the 
composition of the loan portfolio, previous loan experience, current economic 
conditions and other factors that, in managements' judgment, deserve 
recognition. Regulators have reviewed the Company's methodology for determining 
allowance requirements and have made no recommendations for increases in the 
allowances during the five-year period ended December 31, 1997.

    The Company has historically maintained a positive variance from the 
minimum estimated allowance for loan losses based on the analyses that are 
conducted by bank management and corporate credit personnel. Management has 
reviewed the allocations in the various classifications of loans and believes 
the allowance was adequate at all times during the five-year period ended 
December 31, 1997.

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

<TABLE>
<CAPTION>

DECEMBER 31, (DOLLARS IN THOUSANDS)                    1997          1996          1995           1994          1993
---------------------------------------------------------------------------------------------------------------------
<S>                                              <C>            <C>           <C>           <C>           <C>        
Balance at beginning of year ................... $   26,215    $   22,712     $  17,333     $   14,332    $   11,196
Allowance of acquired companies ................     10,065           784         5,230          1,153         1,714
Charge-offs:
    Real estate ................................      1,284         1,087           303            109           303
    Commercial .................................      1,462         1,176         1,285            484           617
    Consumer and other .........................      4,385         2,265         1,502            584           461
    Agricultural ...............................        726           443           373             38            58
                                                 -------------------------------------------------------------------
    Total charge-offs ..........................      7,857         4,971         3,463          1,215         1,439

Recoveries:
    Real estate ................................        248           269            63            549           162
    Commercial .................................        559           225           245            247           325
    Consumer and other .........................        965           361           536            218           188
    Agricultural ...............................        647            78            57            210            37
                                                 -------------------------------------------------------------------
    Total recoveries ...........................      2,419           933           901          1,224           712
                                                 -------------------------------------------------------------------
Net charge-offs ................................      5,438         4,038         2,562            (9)           727
Provision charged to operations ................      5,352         6,757         2,711          1,839         2,149
                                                 -------------------------------------------------------------------
Balance at end of year ......................... $   36,194    $   26,215     $  22,712     $   17,333    $   14,332
                                                 -------------------------------------------------------------------
                                                 -------------------------------------------------------------------
Allowance as a percentage of total loans .......       1.37%          1.27%         1.29%         1.30%         1.38%
Net charge-offs to average loans outstanding ...       0.24%          0.22%         0.17%           --          0.08%
Total loans .................................... $2,637,057    $2,064,108     $1,767,193    $1,330,146    $1,037,666
Average loans .................................. $2,264,150    $1,873,073     $1,545,497    $1,171,925    $  909,890
--------------------------------------------------------------------------------------------------------------------------
</TABLE>

    At December 31, 1997, the allowance for loan losses was $36.2 million, an 
increase of $10.0 million from the December 31, 1996, level of $26.2 million. 
The Company's 1997 acquisitions accounted for $10.4 million of the change, with 
the remaining change due to maintaining an adequate reserve in recognition of 
the Company's loan growth and the increase in net charge-offs during 1997. At 
December 31, 1997, the allowance for loan losses as a percentage of total loans 
was 1.37%, as compared to 1.27% at December 31, 1996.

    At December 31, 1996, the allowance for loan losses was $26.2 million, an 
increase of $3.5 million from the December 31, 1995, level of $22.7 million. 
The Company's 1996 acquisitions accounted for $784,000 of the increase, with 
the remaining increase due to maintaining an adequate reserve in recognition of 
the Company's loan growth during 1996. At December 31, 1996, the allowance for 
loan losses as a percentage of total loans was 1.27%, as compared to 1.29% at 
December 31, 1995. This decrease was attributed to strong loan growth and 
improvement in loan portfolio credit quality at the Company's bank subsidiaries.

    During 1997, net charge-offs were $5.4 million, an increase of $1.4 million 
from the net charge-offs of $4.0 million in 1996. The principal causes for the 
increase were the increase of real estate loan net charge-offs of $218,000; the 
decrease in commercial loan net charge-offs of $48,000; the decrease in 
agricultural loan net charge-offs of $286,000; and an increase in consumer loan 
and other loan net charge-offs of $1,516,000. The Company's provision for loan 
loss was $5.4 million in 1997 and $6.8 million in 1996.

    During 1996, net charge-offs were $4.0 million, an increase of $1.4 million 
from the $2.6 million during 1995. The increase included an increase of 
$938,000 in consumer and other loan net charge-offs and a $578,000 increase in 
real estate loan net charge offs. The Company's provision for loan loss 
increased from $2.7 million in 1995 to $6.8 million in 1996.


22
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS      

Community First Bankshares, Inc.


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:

<TABLE>
<CAPTION>
                                                                                   ALLOWANCE AS A PERCENT OF LOANS OUTSTANDING
                                    ALLOWANCE FOR LOAN LOSSES AT DECEMBER 31,              BY CATEGORY AT DECEMBER 31,
                                 ----------------------------------------------     ------------------------------------------
(DOLLARS IN THOUSANDS)             1997      1996      1995      1994      1993       1997    1996    1995    1994    1993
------------------------------------------------------------------------------------------------------------------------------
<S>                             <C>       <C>       <C>       <C>       <C>          <C>     <C>      <C>    <C>     <C>
Real estate ................... $ 5,820   $ 4,059   $ 4,208   $ 3,252   $ 2,801      0.50%   0.47%    .57%   0.60%   0.69%
Commercial ....................   5,603     4,781     4,400     3,605     3,509      0.79%   0.77%    .83%   0.91%   1.11%
Consumer and other ............   3,677     1,997     1,690     1,614     1,346      0.74%   0.58%    .62%   0.72%   0.79%
Agricultural ..................   2,091     2,056     1,615     1,737     1,529      0.77%   0.93%    .72%   1.07%   1.04%
                                -----------------------------------------------      ---------------------------------------
Total Allocated Allowance .....  17,191    12,893    11,913    10,208     9,185      0.65%   0.62%   0.67%   0.77%   0.89%
Total Unallocated Allowance ...  19,003    13,322    10,799     7,125     5,147      0.72%   0.65%   0.62%   0.53%   0.49%
                                -----------------------------------------------      ---------------------------------------
Total Allowance ............... $36,194   $26,215   $22,712   $17,333   $14,332      1.37%   1.27%   1.29%   1.30%   1.38%
                                -----------------------------------------------      ---------------------------------------
                                -----------------------------------------------      ---------------------------------------
----------------------------------------------------------------------------------------------------------------------------
</TABLE>

SOURCE OF FUNDS

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

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

<TABLE>
<CAPTION>

DECEMBER 31, (IN THOUSANDS)                       1997         1996         1995
--------------------------------------------------------------------------------
<S>                                         <C>          <C>          <C>       
Noninterest-bearing ....................... $  597,333   $  431,078   $  398,314
Interest-bearing:
  Savings and checking accounts ...........  1,371,546      964,829      873,025
  Time accounts less than $100,000 ........  1,252,164      907,658      885,857
  Time accounts greater than $100,000 .....    398,291      233,875      202,520
                                            ----------   ----------   ----------
Total deposits ............................ $3,619,334   $2,537,440   $2,359,716
                                            ----------   ----------   ----------
</TABLE>


    Total deposits at December 31, 1997, were $3,619 million, an increase of 
$1,082 million, or 42.6%, from $2,537 million at December 31, 1996. The 
Company's core deposits as a percentage of total deposits were 89.0% and 90.8% 
as of December 31, 1997 and December 31, 1996, respectively. The increase in 
total deposits was primarily due to the 1997 bank acquisitions, with aggregate 
total deposits of $1,063 million as of the respective acquisition dates.

    At December 31, 1997, $398 million, or 11.0% of total deposits were in time 
accounts greater than $100,000. The increase of $164 million, or 70.1%, from 
$234 million at December 31, 1996, was due to $155 million of deposits obtained 
through the institutions acquired during 1997. Management believes virtually 
all the deposits in excess of $100,000 are with persons or entities that hold 
other deposit relationships with the banks. Maturities of deposits in excess of 
$100,000 at December 31, 1997 were (in thousands):

<TABLE>
<S>                                              <C>
Maturing in less than three months               $161,669
Maturing in three to six months                    80,544
Maturing in six to twelve months                  115,413
Maturing in over twelve months                     40,665
                                                 --------
Total deposits in excess of $100,000             $398,291
                                                 --------
                                                 --------
</TABLE>

    In addition to the availability of core deposits, management has determined 
it may, in the future employ a brokered deposit program in an effort to attract 
lower cost sources of funds. The Company intends to continue to expand its core 
deposit base through acquisitions.


                                                                              23
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS      

Community First Bankshares, Inc.


SHORT-TERM BORROWINGS

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

    The Company's subsidiary banks had arrangements with the Federal Home 
Loan Bank that provide for borrowing up to $410 million. As of December 31, 
1997, $216 million advances were outstanding. The Company also had a $11 
million balance outstanding on its $25 million short-term commercial paper 
arrangement at December 31, 1997. The $26 million increase in short-term 
borrowings from December 31, 1996 is due to strong loan demand at the 
Company's bank subsidiaries.

The following table sets forth a summary of the short-term borrowings of 
the Company during 1997, 1996, and 1995, and as of the end of each such 
period:

<TABLE>
<CAPTION>
                                                                               AVERAGE      MAXIMUM      WEIGHTED      AVERAGE
                                                                                 DAILY  OUTSTANDING       AVERAGE     INTEREST
                                                             OUTSTANDING        AMOUNT       AT ANY      INTEREST      RATE AT
(IN THOUSANDS)                                               AT YEAR-END   OUTSTANDING    MONTH-END          RATE     YEAR-END
-------------------------------------------------------------------------------------------------------------------------------
<S>                                                           <C>           <C>          <C>                <C>          <C> 
1997
Federal funds purchased and securities sold 
  under agreements to repurchase ...........................  $   43,002    $   67,144   $   55,218         5.33%        3.14%
Commercial paper ...........................................      11,167         8,812       23,346         5.91%        5.78%
FHLB advances ..............................................     216,300        98,774      267,120         5.06%        5.70%
Other ......................................................       3,104         2,460        4,731         5.24%        6.02%
                                                              ------------------------
    Total ..................................................  $  273,573    $  177,190   $  273,573         5.21%        5.31%
                                                              ------------------------
                                                              ------------------------

1996
Federal funds purchased and securities sold 
  under agreements to repurchase ...........................  $   78,369   $    56,356   $   83,451         4.75%        5.55%
Commercial paper ...........................................      14,062        12,643       14,965         5.72%        5.63%
FHLB advances ..............................................     152,000        96,130      182,000         5.91%        6.30%
Other ......................................................       3,203         3,182        4,140         5.58%        5.95%
                                                              ------------------------
    Total ..................................................  $  247,634    $  168,311   $  272,895         5.49%        6.01%
                                                              ------------------------
                                                              ------------------------

1995
Federal funds purchased and securities sold 
  under agreements to repurchase ...........................  $   50,102    $   67,421   $  100,627         5.59%        4.69%
Commercial paper ...........................................      10,000         6,352       10,000         6.11%        5.91%
FHLB advances ..............................................      28,775        36,345       61,975         6.07%        5.88%
Other ......................................................       2,004         1,666        2,917         5.70%        6.05%
                                                              ------------------------
    Total ..................................................  $   90,881    $  111,784   $  152,523         5.78%        5.23%
                                                              ------------------------
                                                              ------------------------
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>

LONG TERM DEBT
Long-term debt of the Company was $116 million as of December 31, 1997, and 
$47 million as of December 31, 1996. The increase is due to the Company's 
June 1997 completion of an unsecured $60 million subordinated debt offering, 
which carries interest at 7.30% payable semi-annually. The subordinated notes 
payable mature June 20, 2004. The Company does not have the option of 
redeeming the notes prior to maturity. Long-term debt also includes $12 
million of exchangeable subordinated notes maturing August 15, 2005.

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

SHAREHOLDERS' EQUITY
Total shareholders' equity increased $94.7 million, or 38.7%, to $339.3 
million at December 31, 1997, from $244.6 million at December 31, 1996, as a 
result of the retention of a majority of earnings, the conversion of 
debentures and the issuance of common stock. During 1997 the equivalent of 
3,156,617 shares of common stock were issued, including 1,000,000 shares 
issued pursuant to the December 1997 shelf registration; 1,439,521 related to 
the conversion of debentures; 314,834 and 368,019 related to the acquisition 
of Republic and Summit, respectively, and 34,243 related to sales of common 
stock to Company sponsored employee benefit plans, resulting in an increase 
in shareholders' equity of $81.5 million.

    In 1996, the Company increased the number of authorized common shares 
from 20,000,000 to 30,000,000. The number of authorized preferred shares 
remained at 2,000,000. The increases are expected to provide the Company 
greater ability to utilize common and preferred stock in connection with 
raising additional capital, expanding its business through acquisitions and 
other general purposes.

    On February 28, 1997, the Company issued notice of redemption to the 
holders of its Depositary Shares, which represent ownership of one-quarter 
share of 7% Cumulative Convertible Preferred Stock (approxi-

24

<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS    

Community First Bankshares, Inc.

mately $23 million in stated value). The redemption price is $26.40 (plus 
accrued and unpaid dividends) for each Depositary Share with a stated value 
of $25.00 per share. Holders of the Depositary Shares have the right to 
convert their investment into Common Stock, prior to redemption, at a rate of 
1.569 shares of Common Stock for each Depositary Share. Virtually all of such 
holders elected to convert prior to redemption, which resulted in the 
issuance of approximately 1,443,000 shares of Common Stock.

                 ASSET/LIABILITY MANAGEMENT

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

    The liquidity ratio is one measure of a bank's ability to meet its 
current obligations and is defined as the percentage of liquid assets to 
deposits. Liquid assets include cash and due from banks, unpledged investment 
securities with maturities of less than one year and federal funds sold. At 
year-end 1997, 1996 and 1995, the liquidity ratio was 8.78%, 7.77%, and 
8.96%, respectively. The level of loans maturing within one year greatly 
added to the Company's liquidity position in 1997. Including loans maturing 
within one year, the liquidity ratio was 29.54%, 34.41%, and 40.23%, 
respectively, for the same periods.

    The Company has a revolving line of credit with its primary lender, which 
provides for borrowing up to $38 million. This line would be utilized to 
finance acquisitions which may be completed in 1998. There was no outstanding 
balance on this line of credit at December 31, 1997.

    The Company also maintains available lines of federal funds borrowings, 
as well as seasonal borrowing privileges, at the Federal Reserve Bank of 
Minneapolis. The Company's subsidiary banks have the ability to borrow an 
aggregate of $128 million in federal funds from 10 nonaffiliated financial 
institutions.

    Additionally, most of the Company's subsidiary banks have joined the 
Federal Home Loan Bank ("FHLB") System. As part of membership, the Company's 
subsidiary banks purchased a modest amount of stock of FHLB and obtained 
advance lines of credit which represent an aggregate of $410 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 ("Gap 
Analysis") analysis which represents a point in time net position of assets, 
liabilities and off-balance sheet instruments subject to repricing in 
specified time periods. Guidelines established by ALCO, and approved by the 
Company's Board of Directors, limit the impact on net interest income to five 
percent given a 100 basis point change in interest rates over one year. 
However, Management believes Gap Analysis alone does not accurately measure 
the magnitude of changes in net interest income since changes in interest 
rate do not impact all categories of assets, liabilities and off-balance 
sheet instruments equally or simultaneously. A summary of the Gap Analysis is 
presented on page 26.

BALANCE SHEET SIMULATION MODELING -- Balance Sheet Simulation Modeling allows 
management to analyze the impact of short-term (less than 12 months) interest 
rate fluctuations using projected balance sheet information. The balance 
sheet changes are based on forecasted repayments of loans and securities, 
growth in loans and deposits, and historical pricing spreads. Management uses 
the model to simulate the impact of immediate and longer-term shifts in the 
yield curve. The results of these models are reviewed by ALCO and used to 
develop the Company's strategies. Guidelines established by ALCO limit the 
impact on net interest income to five percent given a 100 basis point change 
in interest rates. As of December 31, 1997, the impact of such a change in 
interest rates would be approximately .45 percent of net interest income.

EQUITY FAIR VALUE MODELING -- Because Balance Sheet Simulation Modeling is 
dependent on accurate forecasts, its usefulness is limited to periods of one 
year or less. As a result, the Company uses the Equity Fair Value Modeling to 
measure long-term interest rate exposure. The method estimates the impact of 
interest rate changes on the estimated discounted future cash flows of the 
Company's current assets, liabilities, and off-balance sheet instruments. 
Guidelines established by ALCO limit the change in fair value to 15 percent 
given a 100 basis point change in interest rates. As of December 31, 1997, 
the impact of such a change in interest rates would be approximately 6.53 
percent of net interest income.     

     Based on each of these methods of measuring interest rate risk, 
management believes the Company is slightly asset sensitive as of December 
31, 1997.

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

                                                                            25
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS    

Community First Bankshares, Inc.

    The following table sets forth the Company's interest rate sensitivity
analysis by contractual repricing or maturity at December 31, 1997:

<TABLE>
<CAPTION>

                                                 REPRICING OR MATURING IN
---------------------------------------------------------------------------------------
                                        1 YEAR         OVER 1    OVER 5
(DOLLARS IN THOUSANDS)                 OR LESS     TO 5 YEARS     YEARS        TOTAL
---------------------------------------------------------------------------------------
<S>                                    <C>          <C>          <C>          <C>
Rate sensitive assets:
 Loans..............................   $1,296,659   $1,069,562   $  270,836   $2,637,057
 Held-to-maturity securities........        8,038       23,341      149,133      180,512
 Available-for-sale securities......      332,984      438,798      727,095    1,498,877
 Other interest-bearing assets......       13,977           --           --       13,977
                                       -------------------------------------------------
  Total rate sensitive assets.......   $1,651,658   $1,531,701   $1,147,064   $4,330,423
                                       -------------------------------------------------

Rate sensitive liabilities:
 Savings deposits and interest-
    bearing checking................   $       --   $       --   $1,371,546   $1,371,546
 Time deposits......................    1,352,010      298,445           --    1,650,455
 Short-term borrowings..............      273,144          429           --      273,573
 Long-term borrowings...............       20,880       25,953       74,852      121,685
                                       -------------------------------------------------
 Total rate sensitive liabilities...   $1,646,034   $  324,827   $1,446,398   $3,417,259
                                       -------------------------------------------------
                                       -------------------------------------------------

Rate sensitive gap..................   $    5,624   $1,206,874   $ (299,334)  $  913,164
Cumulative rate sensitive gap.......   $    5,624   $1,212,498   $  913,164   $  913,164
----------------------------------------------------------------------------------------
</TABLE>

    The following sets forth the Company's interest rate sensitivity analysis 
at December 31, 1997, with respect to the individual categories of loans and 
provides separate analyses with respect to fixed interest rate loans and 
floating interest rate loans:

<TABLE>
<CAPTION>
                                             REPRICING OR MATURING IN
----------------------------------------------------------------------------------
                                      1 YEAR         OVER 1  OVER 5
(DOLLARS IN THOUSANDS)               OR LESS     TO 5 YEARS   YEARS       TOTAL
----------------------------------------------------------------------------------
<S>                                <C>          <C>          <C>        <C>       
Loan category:
  Real estate....................  $  582,564   $  425,306   $150,952   $1,158,822
  Agricultural...................     217,353       46,663      6,211      270,227
  Commercial.....................     430,825      224,032     53,227      708,084
  Consumer and other.............      65,918      373,562     60,444      499,924
                                   -----------------------------------------------
  Total loans....................  $1,296,660   $1,069,563   $270,834   $2,637,057
                                   -----------------------------------------------

Fixed interest rate loans........  $  366,772   $  932,960   $262,140   $1,561,872
Floating interest rate loans.....     929,888      136,603      8,694    1,075,185
                                   -----------------------------------------------
  Total loans....................  $1,296,660   $1,069,563   $270,834   $2,637,057
                                   -----------------------------------------------
                                   -----------------------------------------------
----------------------------------------------------------------------------------
</TABLE>

CAPITAL MANAGEMENT
Risk-based guidelines established by regulatory agencies require the Company 
to maintain minimum amounts and ratios of total and Tier 1 capital to 
risk-weighted assets, and of Tier 1 capital to average assets.

    As of December 31, 1997, 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 1 
risk-based, Tier 1 leverage ratios as set forth in the table.

<TABLE>
<CAPTION>
                                             REGULATORY CAPITAL REQUIREMENTS:
----------------------------------------------------------------------------------------
                                       TIER 1    TOTAL RISK-              TOTAL RISK-
(DOLLARS IN THOUSANDS)                CAPITAL  BASED CAPITAL  LEVERAGE   BASED ASSETS
----------------------------------------------------------------------------------------
<S>                                   <C>      <C>            <C>         <C>
Minimum.............................   4.00%        8.00%       3.00%           N/A
Well-Capitalized....................   6.00%       10.00%       5.00%           N/A

COMMUNITY FIRST BANKSHARES, INC
December 31, 1997...................  10.65%       14.24%       7.25%      $3,266,648
December 31, 1996...................   8.88%       11.10%       6.62%      $2,312,632
----------------------------------------------------------------------------------------
</TABLE>

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

------------------------------------------------------------------------------

THIS ANNUAL REPORT CONTAINS FORWARD-LOOKING STATEMENTS UNDER THE PRIVATE 
SECURITIES LITIGATION REFORM ACT OF 1995 THAT ARE SUBJECT TO CERTAIN RISKS 
AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM 
HISTORICAL EARNINGS AND THOSE PRESENTLY ANTICIPATED OR PROJECTED. THE COMPANY 
WISHES TO CAUTION READERS NOT TO PLACE UNDUE RELIANCE ON ANY SUCH 
FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE MADE. FACTORS 
THAT COULD CAUSE ACTUAL RESULTS TO DIFFER FROM THE RESULTS DISCUSSED IN THE 
FORWARD-LOOKING STATEMENTS INCLUDE, BUT ARE NOT LIMITED TO: RISKS RELATED TO 
THE COMPANY'S ACQUISITION STRATEGY, INCLUDING RISKS OF ADVERSELY CHANGING 
RESULTS OF OPERATIONS AND POSSIBLE FACTORS AFFECTING THE COMPANY'S ABILITY TO 
CONSUMMATE FURTHER ACQUISITIONS; RISKS OF LOANS AND INVESTMENTS, INCLUDING 
DEPENDANCE ON LOCAL ECONOMIC CONDITIONS; COMPETITION FOR THE COMPANY'S 
CUSTOMERS FROM OTHER PROVIDERS OF FINANCIAL SERVICES; POSSIBLE ADVERSE 
EFFECTS OF CHANGES IN INTEREST RATES; AND OTHER RISKS DETAILED IN THE 
COMPANY'S FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION, WHICH RISKS 
ARE DIFFICULT TO PREDICT AND MANY OF WHICH ARE BEYOND THE CONTROL OF THE 
COMPANY.

26

<PAGE>

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

Community First Bankshares, Inc.

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
DECEMBER 31                                                                                      1997                 1996
---------------------------------------------------------------------------------------------------------------------------
<S>                                                                                      <C>                  <C>         
ASSETS
Cash and due from banks ................................................................ $    222,088         $    175,732
Federal funds sold and securities purchased under agreements to resell .................       12,690                3,600
Interest-bearing deposits ..............................................................        1,287                3,598
Available-for-sale securities ..........................................................    1,498,877              506,888
Held-to-maturity securities (Fair Value: 1997 -- $182,335, 1996 -- $223,200) ...........      180,512              222,348
Loans ..................................................................................    2,637,057            2,064,108
    Less: Allowance for loan losses ....................................................      (36,194)             (26,215)
                                                                                         ---------------------------------
Net loans ..............................................................................    2,600,863            2,037,893
Bank premises and equipment, net .......................................................      101,820               65,705
Accrued interest receivable ............................................................       40,105               29,233
Intangibles ............................................................................       97,307               39,182
Other assets ...........................................................................       99,977               32,219
                                                                                         ---------------------------------
Total assets ........................................................................... $  4,855,526         $  3,116,398
                                                                                         ---------------------------------
                                                                                         ---------------------------------

LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
    Noninterest-bearing ................................................................ $    597,333         $    431,078
    Interest-bearing:
       Savings and NOW accounts ........................................................    1,371,546              964,829
       Time accounts over $100,000 .....................................................      398,291              233,875
       Other time accounts .............................................................    1,252,164              907,658
                                                                                         ---------------------------------
Total deposits .........................................................................    3,619,334            2,537,440

Federal funds purchased and securities sold under agreements to repurchase .............       43,002               78,369
Other short-term borrowings ............................................................      230,571              169,265
Long-term debt .........................................................................      116,476               46,750
Accrued interest payable ...............................................................       20,842               17,027
Due to brokers .........................................................................      340,457                   --
Other liabilities ......................................................................       25,550               21,665
                                                                                         ---------------------------------
Total liabilities ......................................................................    4,396,232            2,870,516

Company-obligated mandatorily redeemable preferred securities of CFB Capital I and II ..      120,000                   --
Minority interest ......................................................................           --                1,311
Shareholders' equity:
    Preferred stock ....................................................................           --               22,988
    Common stock, par value $.01 per share:
       Authorized Shares - 30,000,000
       Issued Shares - 20,359,301 ......................................................          204                  172
    Capital surplus ....................................................................      157,138               77,029
    Retained earnings ..................................................................      177,748              144,239
    Unrealized gain on available-for-sale securities, net of tax .......................        5,587                1,368
    Less cost of common stock in treasury - 1997 - 36,255 shares; 1996 - 50,810 shares .      (1,383)               (1,225)
                                                                                         ---------------------------------
Total shareholders' equity .............................................................      339,294              244,571
                                                                                         ---------------------------------
Total liabilities and shareholders' equity ............................................. $  4,855,526         $  3,116,398
                                                                                         ---------------------------------
                                                                                         ---------------------------------
----------------------------------------------------------------------------------------------------------------------------
</TABLE>

See ACCOMPANYING NOTES.


                                                                              27

<PAGE>

CONSOLIDATED STATEMENTS OF INCOME

Community First Bankshares, Inc.

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31                                                                          1997            1996          1995
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                       <C>             <C>           <C>        
INTEREST INCOME:
    Loans ............................................................................... $    218,588    $   183,530   $   150,948
    Investment securities ...............................................................       59,103         44,936        40,210
    Interest-bearing deposits ...........................................................          575            163           366
    Federal funds sold and resale agreements ............................................          331            797         1,344
                                                                                          -----------------------------------------
Total interest income ...................................................................      278,597        229,426       192,868

INTEREST EXPENSE:
    Deposits ............................................................................      102,632         81,655        71,780
    Short-term and other borrowings .....................................................        8,734          9,247         6,184
    Long-term debt ......................................................................        5,887          4,332         4,927
                                                                                          -----------------------------------------
Total interest expense ..................................................................      117,253         95,234        82,891
                                                                                          -----------------------------------------
Net interest income .....................................................................      161,344        134,192       109,977
Provision for loan losses ...............................................................        5,352          6,757         2,711
                                                                                          -----------------------------------------
Net interest income after provision for loan losses .....................................      155,992        127,435       107,266

NONINTEREST INCOME:
    Service charges on deposit accounts .................................................       17,023         12,328        10,116
    Insurance commissions ...............................................................        5,375          5,213         4,283
    Fees from fiduciary activities ......................................................        3,805          3,332         2,718
    Net gains on sales of securities ....................................................          463             93            52
    Other ...............................................................................        9,898          6,404         5,319
                                                                                          -----------------------------------------
Total noninterest income ................................................................       36,564         27,370        22,488

NONINTEREST EXPENSE:
    Salaries and employee benefits ......................................................       64,868         54,870        42,796
    Net occupancy .......................................................................       19,139         15,085        10,563
    FDIC insurance ......................................................................          357            669         2,532
    Legal and accounting ................................................................        1,710          1,989         1,311
    Other professional service ..........................................................        2,378          1,892         2,700
    Acquisition expense .................................................................          398          2,928           768
    Data processing .....................................................................        1,290          1,506         1,607
    Company-obligated mandatorily redeemable preferred securities of CFB Capital I & II .        5,108           --            --
    Amortization of intangibles .........................................................        5,519          3,362         2,551
    Permanent impairment of equity method investment ....................................         --              940          --
    Other ...............................................................................       24,423         21,047        17,765
                                                                                          -----------------------------------------
Total noninterest expense ...............................................................      125,190        104,288        82,593
                                                                                          -----------------------------------------
Income from continuing operations before income taxes and extraordinary item ............       67,366         50,517        47,161
Provision for income taxes ..............................................................       21,516         18,007        17,208
                                                                                          -----------------------------------------
Income from continuing operations before extraordinary item .............................       45,850         32,510        29,953
Discontinued Operations:
    Income from operations of discontinued operations
      (Less applicable income taxes of $583) ............................................          967           --            --
                                                                                          -----------------------------------------
Income before extraordinary item ........................................................       46,817         32,510        29,953
Extraordinary item:
Loss on early extinguishment of debt, net of taxes ......................................         (265)          --            --
                                                                                          -----------------------------------------
Net Income ..............................................................................       46,552         32,510        29,953
Preferred stock dividend ................................................................         --            1,610         1,610
                                                                                          -----------------------------------------
Net income applicable to common equity .................................................. $     46,552    $    30,900   $    28,343
                                                                                          -----------------------------------------
Earnings per common and common equivalent share:
Basic income per share from continuing operations before extraordinary item ............. $       2.48    $      1.87   $      1.85
Discontinued operations .................................................................         0.05           --            --
Extraordinary item ......................................................................        (0.01)          --            --
                                                                                          -----------------------------------------
Basic net income ........................................................................ $       2.52    $      1.87   $      1.85
                                                                                          -----------------------------------------
Diluted income per share from continuing operations before extraordinary item ........... $       2.40    $      1.79   $      1.75
Discontinued operations .................................................................         0.05           --            --
Extraordinary item ......................................................................        (0.01)          --            --
                                                                                          -----------------------------------------
Diluted net income ...................................................................... $       2.44    $      1.79   $      1.75
                                                                                          -----------------------------------------
Average common and common equivalent shares outstanding:
    Basic ...............................................................................   18,474,749     16,509,289    15,361,370
    Diluted .............................................................................   19,069,078     18,142,377    17,167,650
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>


See ACCOMPANYING NOTES.

28

<PAGE>

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY 

Community First Bankshares, Inc.

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                PREFERRED STOCK       COMMON STOCK                                     TREASURY STOCK
YEARS ENDED DECEMBER 31,        ----------------     ---------------   CAPITAL  RETAINED  UNREALIZED   ----------------
1997,1996,1995                  SHARES    AMOUNT     SHARES   AMOUNT   SURPLUS  EARNINGS  GAIN(LOSS)   SHARES    AMOUNT       TOTAL
-----------------------------------------------------------------------------------------------------------------------------------
<S>                            <C>      <C>       <C>          <C>    <C>       <C>       <C>        <C>       <C>          <C>
BALANCE AT DECEMBER 31, 1994.. 230,000   $23,000   14,744,919   $148   $48,915   $92,755   $(5,182)   144,344   $(1,935)   $157,701
Net income....................      --        --           --     --        --    29,953        --         --        --      29,953
Preferred stock dividends
    ($7.00 per share).........      --        --           --     --        --    (1,610)       --         --        --      (1,610)
Common stock dividends
    ($0.48 per share).........      --        --           --     --        --    (5,279)       --         --        --      (5,279)
Issuance of common stock......      --        --      891,863      9    11,568        --        --         --        --      11,577
Purchases of common stock
    for treasury, at cost.....      --        --           --     --        --        --        --      4,000       (56)        (56)
Sales of treasury stock to
    employee benefit plans....      --        --           --     --        22        --        --    (18,194)      237         259
Exercise of options, net 
    of stock tendered in 
    payment...................      --        --       20,635     --       156      (209)       --    (51,526)      690         637
Exercise of warrants, net
    of stock tendered in 
    payment...................      --        --       21,602     --        --        --        --         --        --          --
Conversion of debentures......      --        --      485,338      5     3,915        --        --         --        --       3,920
Liquidation of investment
    in subsidiary to 
    shareholders..............       --        --           --     --        --      (456)       --         --        --       (456)
Termination of ESOP loan 
    guarantee upon 
    satisfaction of debt......       --        --           --     --       200        --        --         --        --        200
Change in unrealized loss 
    on available-for-sale 
    securities, net of income   
    taxes of $4,219...........      --        --           --     --        --        --     7,158         --        --       7,158
-----------------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1995.. 230,000    23,000   16,164,357    162    64,776   115,154     1,976     78,624    (1,064)    204,004
Net income....................      --        --           --     --        --    32,510        --         --        --      32,510
Preferred stock dividends
    ($7.00 per share).........      --        --           --     --        --    (1,610)       --         --        --      (1,610)
Common stock dividends
    ($0.58 per share).........      --        --           --     --        --    (6,714)       --         --        --      (6,714)
Issuance of common stock......      --        --      842,253      8     9,810     5,226        --         --        --      15,044
Retirement of common stock....      --        --      (19,125)    --      (349)       --        --         --        --        (349)
Purchases of common stock 
    for treasury, at cost.....      --        --           --     --        --        --        --     64,900    (1,535)     (1,535)
Sales of treasury stock to
    employee benefit plans....      --        --           --     --       162        --        --    (22,582)      307         469
Exercise of options, net of
    stock tendered in payment.      --        --      215,199      2     2,630      (322)       --    (69,349)    1,050       3,360
Conversion of convertible 
    preferred Stock...........    (125)      (12)          --     --        --        (5)       --       (783)       17          --
Change in unrealized loss on 
    available-for-sale 
    securities, net of income 
    tax benefit of $336.......      --        --           --     --        --        --      (608)        --        --        (608)
-----------------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1996.. 229,875    22,988   17,202,684    172    77,029   144,239     1,368     50,810    (1,225)    244,571
Net income....................      --        --           --     --        --    46,552        --         --        --      46,552
Common stock dividends
    ($0.70 per share).........      --        --           --     --        --   (12,837)       --         --        --     (12,837)
Purchases of common stock for
    treasury, at cost.........      --        --           --     --        --        --        --     78,500    (2,777)     (2,777)
Sales of common stock to
    employee benefit plans ...      --        --       34,243      1     1,066        --        --         --        --       1,067
Issuance of common stock......      --        --    3,122,374     31    79,043     1,315        --         --        --      80,389
Exercise of options, net of
    stock tendered in payment.      --        --           --     --        --    (1,521)       --    (93,055)    2,619       1,098
Conversion of convertible 
    preferred.................(229,875)  (22,988)          --     --        --        --        --         --        --     (22,988)
Change in unrealized loss on
    available-for-sale 
    securities, net of income
    taxes of $2,244...........      --        --           --     --        --        --     4,219         --        --       4,219
-----------------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1997..      --        --   20,359,301   $204  $157,138  $177,748    $5,587     36,255   $(1,383)   $339,294
-----------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES.

</TABLE>

                                                                              29

<PAGE>

CONSOLIDATED STATEMENTS OF CASH FLOWS    

Community First Bankshares, Inc.

(IN THOUSANDS)

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31                                                                        1997            1996          1995
---------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                     <C>            <C>          <C>       
CASH FLOWS FROM OPERATING ACTIVITIES
Net income .............................................................................. $  46,552      $   32,510    $   29,953
Adjustments to reconcile net income to net cash provided by operating activities:
    Provision for loan losses ...........................................................     5,352           6,757         2,711
    Depreciation ........................................................................     9,205           6,974         5,373
    Amortization of intangibles .........................................................     5,519           3,362         2,551
    Net amortization of premiums and discounts on securities ............................       (68)          1,867         1,946
    Deferred income tax benefit .........................................................    (3,133)         (3,906)       (4,009)
    (Increase) decrease in interest receivable ..........................................    (4,047)            422        (2,309)
    Increase in interest payable ........................................................     1,066             282         4,746
    Other, net ..........................................................................     5,800          (4,236)       (6,066)
                                                                                          ---------------------------------------
Net cash provided by operating activities ...............................................    66,246          44,032        34,896

CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions, net of cash acquired ......................................................   145,351          14,026        35,667
Net increase (decrease) in interest-bearing deposits ....................................     2,311            (158)         (462)
Purchases of available-for-sale securities ..............................................  (736,619)       (218,601)      (86,629)
Maturities of available-for-sale securities .............................................   366,438         217,771        75,262
Sales of securities, net of gains .......................................................    74,636          29,720        50,530
Purchases of held-to-maturity securities ................................................   (29,250)        (23,344)      (75,871)
Maturities of held-to-maturity securities ...............................................    27,555          30,986        54,990
Net increase in loans ...................................................................  (114,732)       (237,802)     (139,434)
Net increase in bank premises and equipment .............................................   (19,327)        (18,194)      (10,438)
Net (decrease) increase in minority interest ............................................    (1,311)            355        (4,828)
                                                                                          ---------------------------------------
Net cash used in investing activities ...................................................  (284,948)       (205,241)     (101,213)

CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in demand deposits, NOW accounts and savings accounts ...........    11,634          51,952       (44,603)
Net increase (decrease) in time accounts ................................................     7,056          (5,807)      141,005
Net increase (decrease) in short-term and other borrowings ..............................    22,366         156,753       (23,088)
Proceeds from issuance of long-term debt ................................................    69,140              --        56,624
Repayment of long-term debt .............................................................        --         (34,538)      (10,000)
Net proceeds from issuance of Company-obligated mandatorily redeemable
    preferred securities of CFB Capital I and II ........................................   120,000              --            --
Net proceeds from issuance of common stock ..............................................    81,456          15,044        11,577
Conversion of convertible preferred stock ...............................................   (22,988)             --            --
Purchase of common stock held in treasury ...............................................    (2,777)         (1,535)          (56)
Sale of common stock held in treasury ...................................................     1,098           3,829           896
Retirement of common stock ..............................................................        --            (349)           --
Preferred stock dividends paid ..........................................................        --          (1,610)       (1,610)
Common stock dividends paid .............................................................   (12,837)         (6,714)       (5,279)
                                                                                          ---------------------------------------
Net cash provided by financing activities ...............................................   274,148         177,025       125,466
                                                                                          ---------------------------------------
Net increase in cash and cash equivalents ...............................................    55,446          15,816        59,149
Cash and cash equivalents at beginning of year ..........................................   179,332         163,516       104,367
                                                                                          ---------------------------------------
Cash and cash equivalents at end of year ................................................ $ 234,778      $  179,332    $  163,516
                                                                                          ---------------------------------------
                                                                                          ---------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES.
</TABLE>

30

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   

Community First Bankshares, Inc.

DECEMBER 31, 1997, 1996 AND 1995

                  1. SIGNIFICANT ACCOUNTING POLICIES

Community First Bankshares, Inc. (the "Company") is multi-bank holding 
company which, at the end of 1997, served 109 communities in Arizona, 
Colorado, Iowa, Minnesota, Nebraska, North Dakota, South Dakota, Wisconsin, 
and Wyoming. The Company's community banks provide a full range of banking 
services, primarily in small and medium-sized communities and the surrounding 
communities. In addition to its primary emphasis on commercial and consumer 
banking services, the Company offers trust, insurance and nondeposit 
investment products and services.

BASIS OF PRESENTATION 
The consolidated financial statements include the accounts of Community First 
Bankshares, Inc., its wholly-owned data processing, credit origination and 
insurance agency subsidiaries and its ten majority-owned subsidiary banks. 
Minority interest which existed at December 31, 1996 and 1995 is reflected in 
consolidation and is the portion of the subsidiary banks that was not owned 
by the Company. Minority interest ranged from 0.00% to 1.29% and 0.00% to 
2.87% at December 31, 1996 and 1995, respectively. 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 Mountain Parks Financial 
Corporation ("Mountain Parks"), on December 18, 1996, Minowa Bancshares, Inc. 
("Minowa"), on February 22, 1995, and First Community Bankshares, Inc. 
("FCB"), on July 3, 1995. These acquisitions were accounted for using the 
pooling of interests method. Accordingly, the consolidated financial 
information has been restated to reflect the results of operations of the 
four companies on a combined basis for all periods presented.

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

HELD-TO-MATURITY AND AVAILABLE-FOR-SALE SECURITIES
Management determines the classification of debt securities at the time of 
purchase and reevaluates such designation as of each balance sheet date. Debt 
securities are classified as held-to-maturity when the 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 as a component of retained
earnings in shareholders' equity.

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


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

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

ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is maintained through charges to expense at an 
amount that will provide for estimated loan losses. These estimates are based 
principally on a continual review of the loan portfolio, loan charge-off 
experience, economic conditions and industry guidelines. 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 twenty-five to forty years for equipment and 
premises, respectively. Accelerated depreciation methods are used for income 
tax reporting purposes.

INTANGIBLE ASSETS
Goodwill, the excess cost over net assets acquired, of banking subsidiaries 
is amortized over a period of fifteen years. At December 31, 1997, goodwill 
totaled $87,348,000, net of accumulated amortization of $10,749,000. Other 
intangible assets, principally deposit base intangibles, unexpired premium 
lists and noncompetition agreements, totaled $9,959,000, net of accumulated 
amortization of $4,127,000, and are amortized over their estimated useful 
lives ranging from three to twenty-five years.

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

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

    Diluted earnings per common share is based on net income before 
considering the preferred stock dividends declared and interest expense, net 
of tax, paid on convertible exchangeable redeemable subordinated


                                                                       31
<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   

Community First Bankshares, Inc.

debentures (the "Debentures"). Interest expense on the Debentures, net of 
tax, was $86,000 for the year ended December 31, 1995. There was no similar 
expense for the years ended December 31, 1997 and 1996. The weighted average 
number of shares of common stock outstanding is increased by the assumed 
conversion of convertible preferred stock outstanding and the Debentures 
outstanding from the beginning of the period or date of issuance, if later, 
and the number of shares of common stock that would be issued assuming the 
exercise of stock options and warrants during each period. Such adjustments 
to the weighted average number of shares of common stock outstanding are made 
only when such adjustments dilute earnings per share.

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

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 Footnotes 
4 and 15.

                 2. BUSINESS COMBINATIONS AND DIVESTITURES

On December 1, 1997, the Company issued approximately 314,800 shares of 
common stock to acquire First National Summit Bankshares, Inc. ("Summit"), a 
one-bank holding company headquartered in Gunnison, Colorado. At acquisition, 
Summit had approximately $90 million in assets and $82 million in deposits at 
banking offices located in Crested Butte, Fruitvale, Grand Junction, 
Gunnison, and Mt. Crested Butte, Colorado. The Company used the pooling of 
interests method to account for the transaction. This merger was not material 
to the Company's financial condition 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 
financial statement from the date of merger.

    On November 24, 1997, the Company issued approximately 368,000 shares of 
common stock to acquire Republic National Bancorp, Inc. ("Republic"), a 
holding company with one bank in Phoenix, Arizona. At acquisition, Republic 
had approximately $54 million in assets and $49 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 financial 
statements from the date of the merger.

    On July 14, 1997, the Company completed the acquisition of KeyBank 
National Association, Cheyenne, Wyoming ("KeyBank Wyoming") with 28 banking 
offices located in 24 communities throughout the state of Wyoming. The 
transaction, which was accounted for as a purchase, resulted in the addition 
of approximately $1.1 billion in assets and $900 million in deposits and the 
recognition of goodwill of approximately $60 million. The operating results 
of KeyBank Wyoming, subsequent to the date of acquisition, are included in 
the Company's consolidated financial statements as of and for the period 
ended December 31, 1997.

    The following unaudited pro forma consolidated financial information for 
the year ended December 31, 1997, reflects the results of operations as if 
the acquisition of KeyBank Wyoming had occurred on January 1, 1997. In 
addition to combining the historical results of operations of the two 
companies, the pro forma operating results include adjustments for the 
estimated effect of purchase accounting on the Company's results, principally 
amortization of intangibles, adjustments to reflect the estimated impact on 
income and expense related to the assets and liabilities retained by KeyCorp 
and assumes the following were completed at the beginning of the period 
presented: (i) the $60 million offering of 8-7/8% Cumulative Capital 
Securities of CFB Capital I completed in February 1997; (ii) the redemption 
on March 31, 1997 of the Company's 7.75% Subordinated Notes due 2000 in the 
principal amount of $23 million; and (iii) the conversion during March 1997 
of substantially all of the Company's 7% Cumulative Convertible Preferred 
Stock.

<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE DATA)               YEAR ENDED DECEMBER 31, 1997
--------------------------------------------------------------------------------
<S>                                                                     <C>     
Net interest income ..................................................  $179,014
Income from continuing operations ....................................    48,365
Income before extraordinary item .....................................    49,332
Net income ...........................................................    49,067
Earnings per common share.............................................
    Basic ............................................................  $   2.62
    Diluted ..........................................................  $   2.57
</TABLE>

The proforma information may not be indication of the results that actually 
would have occurred if the combination had been in effect on the date 
indicated or that may be obtained in the future. 

    On November 7, 1997, the Company signed a definitive merger agreement 
with Pioneer Bank of Longmont ("Longmont"), Longmont, Colorado, with offices 
in Berthoud, Longmont, Lyons, and Niwot, Colorado. Upon completion of the 
transaction, the Company will issue approximately 700,000 shares of common 
stock to the holders of Longmont common stock. Longmont had total assets of 
approximately $130 million as of December 31, 1997. The completion of the 
transaction is subject to regulatory approvals, approval by the shareholders 
of Longmont and other conditions. The transaction, is expected to be 
completed during the second quarter of 1998 and is expected to be accounted 
for by using the pooling of interests method of accounting.

    On April 30, 1997, the Company sold its 24.36% minority interest in Vail 
Banks, inc., the parent company of WestStar Bank, Vail, Colorado for 
approximately $3 million. The sale was completed in response to regulatory 
requirements with regard to competitive factors resulting from the Company's 
December 1996 acquisition of Mountain Parks.

    On April 4, 1997, the Company, through its Colorado subsidiary, completed 
the sale of its offices in Granby and Grand Lake, Colorado in response to 
regulatory requirements with regard to competitive factors resulting from the 
Company's merger with Mountain Parks. The transaction included approximately 
$24 million in deposits and resulted in the recognition of a gain of 
approximately $2.8 million.

    On December 18, 1996, the Company issued 5,176,672 shares of common stock 
to complete its merger with Mountain Parks, a one bank holding company with 
seventeen offices in Colorado. The merger was

32

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   

Community First Bankshares, Inc.

accounted for using the pooling of interests method. Operating results of the 
Company and Mountain Parks for the years ended December 31, 1995 and the nine 
months ended September 30, 1996, prior to restatement were:

<TABLE>
<CAPTION>
                                                THE       MOUNTAIN
(IN THOUSANDS, EXCEPT PER SHARE DATA)         COMPANY       PARKS       COMBINED
--------------------------------------------------------------------------------
<S>                                           <C>          <C>          <C>     
NINE MONTHS ENDED 
SEPTEMBER 30, 1996 (unaudited):
  Net interest income ....................    $75,240      $23,148      $ 98,388
  Net income .............................     21,070        5,392        26,462
  Net income applicable to
    common equity ........................     19,862        5,392        25,254
  Earnings per common and
    common equivalent share:
       Basic .............................    $  1.74      $  1.42      $   1.55
       Diluted ...........................    $  1.61      $  1.40      $   1.47

YEAR ENDED DECEMBER 31, 1995:
  Net interest income ....................    $88,148      $21,829      $109,977
  Net income .............................     22,819        7,134        29,953
  Net income applicable to
    common equity ........................     21,209        7,134        28,343
  Earnings per common and common
    equivalent share:
       Basic .............................    $  1.86      $  2.29      $   1.85
       Diluted ...........................    $  1.77      $  2.17      $   1.75
--------------------------------------------------------------------------------
</TABLE>

(NO MATERIAL ADJUSTMENTS WERE REQUIRED TO RESTATE COMBINED RESULTS OF 
OPERATIONS.)

    During 1996, the Company completed the acquisition of several smaller 
financial institutions in its existing markets. These acquisitions, except as 
described below, were accounted for using the purchase method and were not 
material to the financial condition or operating results of the Company.

    On October 1, 1996, the Company acquired Financial Bancorp, Inc. 
("Financial"), a holding company with one bank in Trinidad, Colorado. In the 
transaction, which was accounted for using the pooling of interests method, 
the Company issued 538,803 shares of common stock in exchange for 100% of 
Financial common stock. This merger was not material to the Company's 
financial condition or operating results. Accordingly, the Company's 
consolidated financial information has not been restated to reflect this 
merger. The operating results of Financial are included in the Company's 
consolidated financial statements subsequent to the date of the merger.

    On July 31, 1996, the Company acquired High Plains Bancorp, Inc. ("High 
Plains"), with offices in Kiowa, Elizabeth, and Parker, Colorado. The company 
paid approximately $7,100,000 for 100% of High Plains common stock. The 
transaction resulted in the recognition of goodwill of approximately 
$3,448,000.

    On July 3, 1996, the Company acquired Charter Bancorporation ("Charter"), 
Englewood, Colorado. The Company paid approximately $4,600,000 for 100% of 
Charter common stock. The transaction resulted in the recognition of goodwill 
of approximately $2,723,000. The equivalent of approximately 232,050 shares 
of common stock were issued in the transaction.

    The operating results of all of the companies acquired in purchase 
transactions subsequent to the dates of acquisition are included in the 
Company's consolidated financial statements for the years ended December 31, 
1997, 1996 and 1995.

    During 1997, the Company made the determination to dispose of its 
sub-prime lending affiliates, Mountain Parks Financial Services, Inc. 
("MPFS") and Equity Lending, inc. ("ELI"). Both MPFS, which purchases auto 
contracts and ELI, which originates residential, non-conforming mortgages 
were acquired by the Company in December 1996 through the merger with 
Mountain Parks Financial Corporation. The Company has accounted for these 
entities as discontinued operations on the consolidated financial statements. 
At December 31, 1997, the net balance sheet effect of $72 million from these 
entities has been included as an Other Asset. The Company recognized income 
of $967,000 net of tax, from these entities during 1997.

                  3. SUBSEQUENT EVENTS (UNAUDITED)

On February 3, 1998, the Company announced that its Board of Directors 
approved a two-for-one split of the Company's common stock, to be in the form 
of a 100 percent stock dividend. The action is subject to shareholder 
approval of an increase in the Company's authorized common stock at the April 
28, 1998 annual shareholders meeting. The stock dividend is expected to be 
distributed May 15, 1998 to shareholders of record on May 1, 1998.

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

    On January 14, 1998, the Company signed a definitive agreement to acquire 
FNB, Inc., ("FNB") Greeley, Colorado, the bank holding company that owns 
First National Bank of Greeley and Poudre Valley Bank in Fort Collins, 
Colorado, through the issuance of Company common stock to holders of FNB 
common stock. The transaction which is expected to be completed during the 
second quarter of 1998 will be accounted for using the pooling of interests 
method of accounting. FNB had assets of $118 million and deposits of $105 
million as of December 31, 1997.

    On January 9, 1998, the Company signed a definitive agreement to acquire 
Community Bancorp, Inc. ("CBI"), the parent company of Community First 
National Bank, Thornton, Colorado, through the issuance of Company common 
stock to holders of CBI common stock. The transaction is expected to be 
completed during the second quarter of 1998 and will be accounted for using 
the pooling of interests method of accounting. CBI had assets of $78 million 
and deposits of $72 million as of December 31, 1997.

                      4. ACCOUNTING CHANGES

Effective January 1, 1996, the Company adopted Statement of Financial 
Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of 
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," which 
requires that long-lived assets and certain identifiable intangibles be 
reviewed for impairment whenever events or changes in circumstances


                                                                            33

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Community First Bankshares, Inc.

indicate that the carrying amount of an asset is not recoverable. The Company's
adoption of SFAS No. 121 did not have a material impact on the Company's
financial position. During December 1996, the Company recorded a $940,000
writedown in the value of its investment in an unconsolidated subsidiary, which
is being divested to satisfy regulators' competitive issues related to the
merger with Mountain Parks. The amount of impairment is based on the estimated
net proceeds from the sale of the investment, expected to be completed in early
1997.

    SFAS No. 123, "Accounting for Stock-Based Compensation," establishes a new
fair value-based accounting method for stock-based compensation plans. As
permitted by SFAS No. 123, management has elected to measure compensation costs
as prescribed by APB Opinion No. 25, "Accounting for Stock Issued to Employees."
Note 14 includes the required pro forma disclosures reflecting the impact on net
income and earnings per share as if the Company had recorded compensation
expense based on the fair value method described in SFAS 123.

    SFAS No. 125, "Accounting for Transfers and Servicing of Financial Assets
and Extinguishment of Liabilities," addresses whether the transfer of financial
assets should be accounted for as a sale and removed from the balance sheet, or
as a financing recognized as a borrowing. SFAS No. 125 uses a "financial
components" approach to determine the accounting results of the transfers of
financial assets and focuses on control to determine whether assets have been
sold. If the entity has surrendered control over the transferred assets, the
transaction is considered a sale. Control is considered surrendered only if the
seller has no legal right to the assets, even in bankruptcy; the buyer has the
right to pledge or exchange the assets; and the seller does not maintain
effective control over the assets through an agreement to repurchase or redeem
them. SFAS No. 125 was effective on a prospective basis for all transactions
occurring after December 31, 1996. The Company regularly uses participations of
loans to manage its asset/liability mix. The accounting for such transactions is
included in SFAS No. 125. However, the adoption of SFAS No. 125 did not have a
material effect on the Company's operations or financial position.

    SFAS No.128 -- Earnings Per Share -- In February 1997, the FASB issued
Statements of Financial Accounting Standard ("SFAS"), No. 128, Earnings Per
Share. Under this Statement, primary and fully diluted earnings per share is
replaced with basic and diluted earnings per share. For basic EPS, the dilutive
effect of stock options is excluded from the calculation. Diluted EPS is
calculated similarly to the previously reported fully diluted earnings per
share. SFAS 128 became effective for the Company's 1997 year-end financial
statements. All prior period earnings per share data presented have been
restated to conform to the provisions of this statement. The Company's adoption
of SFAS 128 did not have a material impact on the Company's reported earnings
per share.

    SFAS No. 130 -- Reporting Comprehensive Income -- In June 1997, the FASB
issued Statement 130, Reporting Comprehensive Income. This statement establishes
standards for the reporting and display of comprehensive income and its
components in a full set of financial statements. The Statement requires that
all items that are required to be recognized under accounting standards as
components of comprehensive income be reported in a financial statement that is
displayed as prominently as other financial statements. The Statement requires
the classification of items of other comprehensive income separately from
retained earnings and capital surplus in the equity section of the statement of
financial position. SFAS 130 is effective January 1, 1998, with all prior
periods presented restated to conform to the provisions of this statement.


                             5. SECURITIES

The following is a summary of available-for-sale securities and held-to-maturity
securities at December 31, 1997 (in thousands):

<TABLE>
<CAPTION>
                                                         AVAILABLE-FOR-SALE SECURITIES
--------------------------------------------------------------------------------------------------------
                                                                GROSS           GROSS          ESTIMATED
                                           AMORTIZED       UNREALIZED      UNREALIZED               FAIR
                                                COST            GAINS          LOSSES              VALUE
--------------------------------------------------------------------------------------------------------
<S>                                       <C>                   <C>            <C>            <C>
United States Treasury .................  $  146,228            $1,048         $  150         $  147,126
United States Government agencies ......     266,082               963            349            266,696
Mortgage-backed securities .............     823,712             6,660            429            829,943
Collateralized mortgage obligations ....     107,799               403             99            108,103
State and political securities .........      67,919               858            100             68,677
Other securities .......................      78,409                34            111             78,332
                                          --------------------------------------------------------------
Total ..................................  $1,490,149            $9,966         $1,238         $1,498,877
                                          --------------------------------------------------------------
                                          --------------------------------------------------------------
--------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
                                              HELD-TO-MATURITY SECURITIES
----------------------------------------------------------------------------------
                                                      GROSS       GROSS  ESTIMATED
                                      AMORTIZED  UNREALIZED  UNREALIZED       FAIR
                                           COST       GAINS      LOSSES      VALUE
----------------------------------------------------------------------------------
<S>                                   <S>        <C>         <C>         <C>
United States Government agencies ...  $    228      $   --        $ --   $    228
Mortgage-backed securities ..........    67,959         453         428     67,984
State and political securities ......    48,064       1,816           9     49,871
Other securities ....................    64,261          --           9     64,252
                                       -------------------------------------------
Total ...............................  $180,512      $2,269        $446   $182,335
                                       -------------------------------------------
                                       -------------------------------------------
----------------------------------------------------------------------------------
</TABLE>

The following is a summary of available-for-sale securities and held-to-maturity
securities at December 31, 1996 (in thousands):

<TABLE>
<CAPTION>
                                                    AVAILABLE-FOR-SALE SECURITIES
-----------------------------------------------------------------------------------------
                                                            GROSS        GROSS  ESTIMATED
                                           AMORTIZED   UNREALIZED   UNREALIZED       FAIR
                                                COST        GAINS       LOSSES      VALUE
-----------------------------------------------------------------------------------------
<S>                                        <C>         <C>          <C>         <C>
United States Treasury ...................  $119,601       $1,014       $  422   $120,193
United States Government agencies ........    85,827          214          730     85,311
Mortgage-backed securities ...............   234,782        2,690          639    236,833
Collateralized mortgage obligations ......    43,320          184          245     43,259
State and political securities ...........    14,913          215            6     15,122
Other securities .........................     6,178           92          100      6,170
                                            ---------------------------------------------
Total ....................................  $504,621       $4,409       $2,142   $506,888
                                            ---------------------------------------------
                                            ---------------------------------------------
-----------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
                                                     HELD-TO-MATURITY SECURITIES
-------------------------------------------------------------------------------------------
                                                             GROSS        GROSS   ESTIMATED
                                            AMORTIZED   UNREALIZED   UNREALIZED        FAIR
                                                 COST        GAINS       LOSSES       VALUE
-------------------------------------------------------------------------------------------
<S>                                         <C>         <C>          <C>           <C>     
United States Government agencies ........   $    879      $   468       $   20    $  1,327
Mortgage-backed securities ...............     86,506          525        1,162      85,869
State and political securities ...........     56,694        1,149          104      57,739
Other securities .........................     78,269           --            4      78,265
                                             ----------------------------------------------
Total ....................................   $222,348      $ 2,142       $1,290    $223,200
                                             ----------------------------------------------
                                             ----------------------------------------------
-------------------------------------------------------------------------------------------
</TABLE>


34
<PAGE>


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 

Community First Bankshares, Inc.

    Proceeds from the sale of available-for-sale securities during the years
ended December 31, 1997, 1996 and 1995, were $75,100,000, $29,812,000, and
$50,596,000, respectively. Gross gains of $550,000, $195,000, and $633,000 and
gross losses of $86,000, $103,000, and $567,000 were realized on those sales
during 1997, 1996 and 1995, respectively. The tax effect on the net gains during
1997, 1996 and 1995 was approximately $162,000, $32,000, and $22,000,
respectively. There were no sales of held-to-maturity securities during 1997,
1996 or 1995.

    The amortized cost and estimated fair value of debt securities at December
31, 1997, 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.


<TABLE>
<CAPTION>
                                                          AMORTIZED    ESTIMATED
AVAILABLE-FOR-SALE (IN THOUSANDS)                              COST   FAIR VALUE
--------------------------------------------------------------------------------
<S>                                                      <C>          <C>
Due in one year or less ...............................  $  121,120   $  121,155
Due after one year through five years .................     315,822      317,234
Due after five years through ten years ................      51,058       51,429
Due after ten years ...................................      70,638       71,013
                                                         -----------------------
                                                            558,638      560,831
Mortgage-backed securities ............................     823,712      829,943
Collateralized mortgage obligations ...................     107,799      108,103
                                                         -----------------------
Total .................................................  $1,490,149   $1,498,877
                                                         -----------------------
                                                         -----------------------
--------------------------------------------------------------------------------
</TABLE>


<TABLE>
<CAPTION>
                                                        AMORTIZED      ESTIMATED
HELD-TO-MATURITY (IN THOUSANDS)                              COST     FAIR VALUE
--------------------------------------------------------------------------------
<S>                                                     <C>           <C>
Due in one year or less ...............................  $  3,958       $  3,981
Due after one year through five years .................     8,404          8,496
Due after five years through ten years ................    18,834         19,698
Due after ten years ...................................    81,357         82,176
                                                         -----------------------
                                                          112,553        114,351
Mortgage-backed securities ............................    67,959         67,984
                                                         -----------------------
Total .................................................  $180,512       $182,335
                                                         -----------------------
                                                         -----------------------
--------------------------------------------------------------------------------
</TABLE>

At December 31, 1997, available-for-sale securities included $340,457,000 in
commitments to purchase specific investment securities at a future date.

    Available-for-sale and held-to-maturity securities carried at $773,218,000
and $452,478,000 at December 31, 1997 and 1996, 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 $61,749,000 and $38,856,000 at December 31, 1997 and 1996,
respectively.

    In October 1995, the FASB approved a one-time opportunity for companies to
reevaluate the classifications of their investment portfolio and transfer
securities from their held-to-maturity account to available-for-sale without
consequences to the classification of securities not transferred. The Company
utilized this opportunity to transfer $187 million of securities, based on
amortized cost from held-to-maturity to available-for-sale. The unrealized
losses on these securities at the time of transfer was $758,000.

                               6. LOANS

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

<TABLE>
<CAPTION>
                                                        1997               1996
-------------------------------------------------------------------------------
<S>                                              <C>                <C>        
Real estate                                      $ 1,158,822        $   871,432
Commercial                                           708,084            624,456
Consumer and other                                   499,924            346,139
Agriculture                                          270,227            222,081
                                                 ------------------------------
                                                   2,637,057          2,064,108
Less allowance for loan losses                       (36,194)           (26,215)
                                                 ------------------------------
Net Loans                                        $ 2,600,863        $ 2,037,893
                                                 ------------------------------
                                                 ------------------------------
-------------------------------------------------------------------------------
</TABLE>

At December 31, 1997, real estate loans totaling $358,000,000 were pledged to
secure borrowings.

                          7. ALLOWANCE FOR LOAN LOSSES

ACTIVITY IN THE ALLOWANCE WAS AS FOLLOWS (IN THOUSANDS):

<TABLE>
<CAPTION>
                                                   1997        1996        1995
-------------------------------------------------------------------------------
<S>                                            <C>         <C>         <C>
Balance at beginning of year ................  $ 26,215    $ 22,712    $ 17,333
Allowance of acquired companies(1) ..........    10,065         784       5,230
Provision charged to operating expense ......     5,352       6,757       2,711
Loans charged off ...........................    (7,857)     (4,971)     (3,463)
Recoveries of loans charged off .............     2,419         933         901
                                               --------------------------------
Balance at end of year ......................  $ 36,194    $ 26,215    $ 22,712
                                               --------------------------------
                                               --------------------------------
-------------------------------------------------------------------------------
</TABLE>
(1) INCLUDES ONLY ACQUISITIONS OF COMPANIES ACCOUNTED FOR AS PURCHASES.

    Nonaccrual loans totaled $12,507,000, $12,796,000, and $3,252,000 at
December 31, 1997, 1996 and 1995, respectively. The Company includes all loans
considered impaired under SFAS No. 114 in nonaccrual loans. The amount of
impaired loans was not material at December 31, 1997. Interest income of
$364,000 on nonaccrual loans would have been recorded during 1997 if the loans
had been current in accordance with their original terms. During 1997, the
Company recorded interest income of $361,000 related to loans that were on
nonaccrual status as of December 31, 1997.

                 8. FAIR VALUE OF FINANCIAL INSTRUMENTS

Due to the nature of its business and the financing needs of its customers, the
Company is involved with 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


                                                                            35
<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS    

Community First Bankshares, Inc.

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

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

FEDERAL FUNDS PURCHASED AND SHORT-TERM BORROWED FUNDS
The carrying amount approximates fair value due to the short maturity of the 
instruments and floating interest rates which are tied to market conditions.

AVAILABLE-FOR-SALE AND HELD-TO-MATURITY SECURITIES
Fair values for these items are based on available market quotes. If market 
quotes are not available, fair values are based on market quotes of 
comparable securities.

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

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

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

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

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

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

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

<TABLE>
<CAPTION>
                                               1997                     1996
------------------------------------------------------------------------------------
                                     CARRYING           FAIR    CARRYING        FAIR
                                       AMOUNT          VALUE      AMOUNT       VALUE
------------------------------------------------------------------------------------
<S>                             <C>            <C>           <C>         <C>
Financial assets:
  Cash and due from banks ....... $   222,088    $   222,088   $ 175,732   $ 175,732
  Federal funds sold and
   resale agreements ............      12,690         12,690       3,600       3,600
  Interest-bearing deposits .....       1,287          1,287       3,598       3,605
  Available-for-sale securities .   1,498,877      1,498,877     506,888     506,888
  Held-to-maturity securities ...     180,512        182,335     222,348     223,200
  Loans .........................   2,637,057      2,632,042   2,064,108   2,054,714
  Allowance for loan losses .....     (36,194)       (36,194)    (26,215)    (26,215)
                                  --------------------------------------------------
  Net loans .....................   2,600,863      2,595,848   2,037,893   2,028,499
Financial liabilities:
  Deposits:
   Noninterest-bearing .......... $   597,333    $   597,333   $ 431,078   $ 431,078
   Interest-bearing:
     Savings and NOW ............   1,371,546      1,371,546     964,829     964,829
     Time accounts over 100,000.. $   398,291        398,523     233,875     234,248
     Other time accounts ........   1,252,164      1,252,191     907,658     907,723
                                  --------------------------------------------------
  Total deposits ................   3,619,334      3,619,593   2,537,440   2,537,878
  Federal funds purchased and
   repurchase agreements ........      43,002         43,002      78,369      78,369
  Other short-term borrowings ...     230,571        230,571     169,265     169,265
  Long-term debt ................     116,476        116,924      46,750      48,003
------------------------------------------------------------------------------------
</TABLE>

                      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, 1997 and 1996, were as follows (in thousands):

<TABLE>
<CAPTION>
                                                               1997         1996
--------------------------------------------------------------------------------
<S>                                                     <C>          <C>
Commitments to extend credit ...........................  $ 449,961    $ 389,604
Standby letters of credit ..............................     16,627       14,683
Commercial letters of credit ...........................      1,816          990
--------------------------------------------------------------------------------

</TABLE>
 

36

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS     

Community First Bankshares, Inc.

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

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

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

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

    The Company's bank subsidiaries grant real estate, agricultural, 
commercial, consumer and other loans and commitments and letters of credit to 
customers throughout Arizona, Colorado, Iowa, Minnesota, Nebraska, North 
Dakota, South Dakota, Wisconsin and Wyoming. Although the Company has a 
diversified loan portfolio, the ability of a significant portion of its 
debtors to honor their contracts is dependent upon the agricultural 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):


<TABLE>
<CAPTION>
                                                               1997         1996
--------------------------------------------------------------------------------
<S>                                                        <C>          <C>
Land ....................................................  $ 15,259     $ 10,031
Buildings ...............................................    93,882       59,359
Furniture, fixtures and equipment .......................    70,264       44,139
Leased property under capital lease obligations .........    10,403        5,932
                                                           ---------------------
                                                            189,808      119,461
Less accumulated depreciation ...........................    87,988       53,756
                                                           ---------------------
                                                           $101,820     $ 65,705
                                                           ---------------------
--------------------------------------------------------------------------------
</TABLE>

                             11. SHORT-TERM BORROWINGS

As of December 31, 1997, the Company's subsidiary banks had $216,300,000 in 
Federal Home Loan Bank ("FHLB") borrowings, which are collateralized by 
various investment securities and real estate loans. The interest rates on 
FHLB borrowings are variable rates based on short-term market conditions and 
the term of the advance, ranging from 5.05% to 6.90% at December 31, 1997. 
The Company's subsidiaries had additional short-term borrowings of $3,104,000 
outstanding at December 31, 1997.

    The Company has a short-term line of credit bearing interest at the 
Federal Funds rate plus 2% that provides for borrowing up to $8,000,000 
through December 31, 1997, with a commitment fee of 0.2% on the unused 
amount. As of December 31, 1997, 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 $25,000,000 in commercial paper 
and has obtained lines of credit to support these borrowings. As of December 
31, 1997, there was a $11,167,000 commercial paper balance outstanding with a 
blended rate of 5.78%. The terms of the lines of credit include certain 
covenants with which the Company must comply. At December 31, 1997, 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 (in thousands):

<TABLE>
<CAPTION>
                                                                                               1997               1996
-----------------------------------------------------------------------------------------------------------------------
<S>                                                                                      <C>                 <C>
Parent Company:
    Subordinated notes payable, interest at 7.30%,
      payable semi-annually, maturing June 30, 2004,
      unsecured.........................................................................   $ 60,000            $23,000
    Exchangeable subordinated notes payable, interest
      at 9.00% payable quarterly, maturing August 15,
      2005, unsecured...................................................................     11,500             11,500
    Term note payable to bank, interest at bank's base rate (8.50% and 8.25% at
      December 31, 1997 and 1996, respectively), payable quarterly, principal
      payments of $100,000 due annually through October 1, 1999, unsecured..............        400                400
    Term note payable to bank, interest at Federal Funds rate plus 2% (7.31% at
      December 31, 1996), payable quarterly, principal payments equal to 6.25%
      of the amortized balance, semi-annually through July 1, 2003......................        --               4,106
Subsidiaries:
    Federal Home Loan Bank advances, interest rates ranging from 5.32% to 8.33%,
      payable quarterly, with maturities ranging from June 16, 1999 to March 10,
      2010..............................................................................    41,600               4,829
    Term Note payable to bank, interest at 5.19% payable monthly, principal
      payments ranging from $35,600 to $54,600, per schedule due
      monthly through March 31, 2003....................................................     2,800               2,850
    Other notes payable.................................................................       176                  65
                                                                                          -----------------------------
                                                                                          $116,476             $46,750
                                                                                          -----------------------------
-----------------------------------------------------------------------------------------------------------------------
</TABLE>

    The 7.30% subordinated notes payable are not redeemable, in whole or in 
part, by the Company. These notes, of which 100% of the balance qualifies as 
Tier 2 capital under the Federal Reserve Board guidelines, are

                                                                             37

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   

Community First Bankshares, Inc.

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, 
1997, the Company was in compliance with all covenants pertaining to the 
subordinated notes payable.

    In July 1995, the Company issued the exchangeable subordinated notes 
("Exchangeable Notes") to retire acquisition related debt, support the 
Company's growth strategy and for general corporate purposes. One hundred 
percent of the balance of Exchangeable Notes qualify as Tier 2 Capital under 
Federal Reserve Board guidelines. On any interest payment date beginning 
August 15, 1996, the Company may require the holder to exchange all, but not 
part, of the Exchangeable Notes for shares of the Company's cumulative 
perpetual preferred stock (the "Exchange Stock"), at the rate of one share of 
Exchange Stock for each $25 in principal amount of Exchangeable Notes. The 
Exchange Stock would accrue cumulative dividends, payable quarterly, at a 
rate equal to the interest rate on the Exchangeable Notes. The Exchangeable 
Notes are, and the Exchange Stock would be, redeemable in whole or in part at 
any time after August 15, 1998 at the option of the Company at the declining 
redemption amounts set forth below plus accrued interest or dividends:

<TABLE>
<CAPTION>
IF REDEEMED DURING THE 12-MONTH                                 PERCENTAGE OF
PERIOD BEGINNING AUGUST 15                                   PRINCIPAL AMOUNT
-----------------------------------------------------------------------------
<S>                                                                   <C> 
1998 ..............................................................   103.0%
1999 ..............................................................   101.5%
2000 and thereafter ...............................................   100.0%
-----------------------------------------------------------------------------
</TABLE>

Maturities of long-term debt outstanding, primarily of the parent company, at
December 31, 1997, were (in thousands):

<TABLE>
<S>                                                       <C>       
1998 .....................................................$      453
1999 .....................................................    20,883
2000 .....................................................       524
2001 .....................................................       569
2002 .....................................................    21,784
Thereafter ...............................................    72,263
                                                          ----------
                                                          $  116,476
                                                          ----------
                                                          ----------
</TABLE>

    During March 1997, the Company redeemed its $23 million in aggregate 
principal amount of 7.75% Subordinated Notes (the "7.75% Notes"). The 7.75% 
Notes were redeemed at par plus accrued interest and resulted in an 
extraordinary loss of $265,000, net of taxes, on the early extinguishment of 
debt.

                    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 Company used 
the net proceeds in part to capitalize its bank subsidiaries in Colorado and 
Arizona, which acquired branches of Bank One, in their respective states. The 
debentures will mature not earlier than December 15, 2002, and not later than 
December 15, 2027.

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

    At December 31, 1997, $111 million of the combined $120 million in 
Capital Securities qualified as Tier 1 capital under capital guidelines of 
the Federal Reserve. The remaining $9 million qualified as Tier 2 capital.

                             14. SHAREHOLDERS' EQUITY

COMMON STOCK
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.

    On December 15, 1997, the Company completed the issuance of 1,000,000 
million shares of common stock. The issuance of these shares occurred at a 
selling price of $49.50 per share with an underwriting discount of $1.73 per 
share paid by the Company. The Company used the proceeds, in combination with 
the $60 million Capital Securities issue to capitalize its bank subsidiaries 
in Colorado and Arizona which acquired branches of Bank One.

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

    In 1995, the Company extended the common stock repurchase program 
established in 1992, which provided for the systematic acquisition of up to 
600,000 shares of the Company's common stock. In addition, the Company 
adopted a new common stock repurchase program providing for a systematic 
repurchase of up to 600,000 additional shares. The shares acquired are used 
primarily for the issuance of common stock upon exercise of stock options, 
issuance of common stock under compensation plans, which might include 
contributions directly to employees or to an employee stock ownership plan, 
for preferred stock conversion, and issuance of common stock for purposes 
that do not include business combinations.

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 $63. The rights become exercisable only upon the 
acquisition of 15% or more of the Company's voting stock, or an announcement 
of a tender offer or exchange offer to acquire an interest of 15% or more by 
a person or group, without the prior consent of the Company. If exercised, or 
if the


38
<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   

Community First Bankshares, Inc.

Company is acquired, each right entitles the holder 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 1 capital to risk-weighted assets, and of Tier 1 capital to average 
assets.

    As of December 31, 1997, 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 1 
risk-based, and Tier 1 leverage ratios as set forth in the following table.

<TABLE>
<CAPTION>
                                                                               AT DECEMBER 31, 1997
------------------------------------------------------------------------------------------------------------------------
                                                            TIER 1          TOTAL RISK-                      TOTAL RISK-
REGULATORY CAPITAL REQUIREMENTS: (Dollars in thousands)    CAPITAL         BASED CAPITAL       LEVERAGE     BASED ASSETS
------------------------------------------------------------------------------------------------------------------------
<S>                                                        <C>             <C>                 <C>          <C>
Minimum                                                     4.00%              8.00%             3.00%          N/A
Well-Capitalized                                            6.00%             10.00%             5.00%          N/A
------------------------------------------------------------------------------------------------------------------------
BANK SUBSIDIARIES:
Community First National Bank, Fergus Falls ..............  9.93%             11.10%             7.75%       $  624,017
Community First National Bank, Fargo ..................... 10.03%             11.28%             7.46%          388,051
Community First State Bank, Vermillion ................... 10.73%             11.90%             7.83%          211,897
Community First State Bank, Decorah ...................... 11.63%             12.89%             7.82%          108,761
Community First State Bank, Alliance ..................... 10.40%             11.65%             8.48%          257,024
Community First State Bank, Spooner ...................... 11.16%             12.32%             8.26%           71,856
Colorado Community First National Bank, Fort Morgan ...... 10.20%             11.39%             7.28%          804,028
Colorado Community First National Bank, Gunnison ......... 11.18%             12.43%             7.20%           59,051
Community First National Bank, Cheyenne .................. 13.75%             14.79%             7.52%          606,471
Community First National Bank, Phoenix ...................  9.37%             10.62%             7.95%           45,712

Community First Bankshares, Inc. ......................... 10.65%             14.24%             7.25%       $3,266,648
-----------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
                                                                                  AT DECEMBER 31, 1996
----------------------------------------------------------------------------------------------------------------------------
                                                               TIER 1          TOTAL RISK-                      TOTAL RISK-
REGULATORY CAPITAL REQUIREMENTS: (Dollars in thousands)       CAPITAL         BASED CAPITAL       LEVERAGE     BASED ASSETS
----------------------------------------------------------------------------------------------------------------------------
<S>                                                           <C>                <C>               <C>          <C>
Minimum .....................................................  4.00%              8.00%             3.00%          N/A
Well-Capitalized ............................................  6.00%             10.00%             5.00%          N/A
----------------------------------------------------------------------------------------------------------------------------
BANK SUBSIDIARIES:
Community First National Bank, Worthington(1) ...............  9.21%             10.31%             6.87%       $  255,997
Community First National Bank, Little Falls(1) ..............  9.74%             10.96%             7.32%          178,583
Community First National Bank, Fergus Falls .................  9.22%             10.42%             6.82%          133,913
Community First National Bank, Fargo ........................  9.76%             10.94%             7.39%          287,776
Community First National Bank, Dickinson(2) .................  9.21%             10.40%             6.86%          109,775
Community First State Bank, Vermillion ......................  9.54%             10.72%             6.98%           96,061
Community First State Bank, Redfield(3) ..................... 10.77%             11.87%             7.56%          120,170
Community First State Bank, Decorah ......................... 12.07%             13.32%             7.45%          101,980
Community First State Bank, Alliance ........................  9.53%             10.73%             7.84%          259,254
Community First State Bank, Spooner ......................... 10.48%             11.56%             7.64%           70,406
Colorado Community First National Bank, Fort Morgan ......... 11.08%             12.27%             7.76%          118,233
Colorado Community First State Bank, Steamboat Springs(4) ...  9.64%             10.81%             7.10%           86,821
Colorado Community First National Bank, Trinidad(4) ......... 20.83%             21.76%            10.45%           36,368
Colorado Community First State Bank of Denver(4) ............ 10.35%             11.33%             7.62%          438,967

Community First Bankshares, Inc. ............................  8.88%             11.10%             6.62%       $2,312,632
----------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1)  MERGED INTO COMMUNITY FIRST NATIONAL BANK, FERGUS FALLS IN JANUARY 1997.
(2)  MERGED INTO COMMUNITY FIRST NATIONAL BANK, FARGO IN JANUARY 1997.
(3)  MERGED INTO COMMUNITY FIRST STATE BANK, VERMILLION IN FEBRUARY 1997.
(4)  MERGED INTO COLORADO COMMUNITY FIRST NATIONAL BANK, FORT MORGAN IN 
     APRIL 1997.

                                                                            39

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   Community First Bankshares, Inc.


                        15. EMPLOYEE BENEFIT PLANS

STOCK OPTION PLAN -- During 1996, the Company approved the 1996 Stock Option 
Plan under which an additional 2,000,000 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 at fair market value on the 
date of the grant, as determined by the Company. The options vest ratably 
over a three-year period and are exercisable over a five-year term starting 
one year after the date of grant. Stock options outstanding under the plans 
are as follows:

<TABLE>
<CAPTION>
                                              1997                    1996
------------------------------------------------------------------------------------
                                                    WEIGHTED                WEIGHTED
                                                     AVERAGE                 AVERAGE
                                       OPTIONS     PRICE PER    OPTIONS    PRICE PER
                                     OUTSTANDING       SHARE  OUTSTANDING      SHARE
------------------------------------------------------------------------------------
<S>                                   <C>            <C>        <C>          <C>
Beginning of Year ...................  563,655       $16.02     499,777      $13.66
  Options Granted ...................  227,000        29.25     165,388       21.42
  Options Exercised ................. (103,676)       13.74     (75,905)      11.68
  Options Forfeited .................  (14,533)       18.21     (25,605)      18.31
                                      ---------------------------------------------
End of Year .........................  672,446       $20.71     563,655      $16.02
                                      ---------------------------------------------
                                      ---------------------------------------------
Exercisable at end of year ..........  337,771       $16.45     281,463      $14.10

Weighted average fair
  value of options granted ..........          $6.40                   $3.94
------------------------------------------------------------------------------------
</TABLE>


    The range of exercise prices and the weighted average  remaining  
contractual  life of the options  outstanding at December 31, 1997 were as 
follows:

<TABLE>
<CAPTION>
                                          OPTIONS        WEIGHTED          WEIGHTED
                                   OUTSTANDING AT         AVERAGE           AVERAGE
RANGE OF EXERCISE                     DECEMBER 31  EXERCISE PRICE         REMAINING
PRICES PER SHARE                            1997        PER SHARE  CONTRACTUAL LIFE
-----------------------------------------------------------------------------------
<S>                                     <C>             <C>            <C> 
$28.50 to $48.34 .....................  217,500         $ 29.41        4.1 years
$21.25 to $23.38 .....................  148,557           21.41        3.1 years
$12.50 to $14.75 .....................  306,389           14.20        1.3 years

-----------------------------------------------------------------------------------
</TABLE>

    At December 31, 1997, a total of 2,473,084  shares of  authorized  common 
stock was reserved for exercise of options  granted under the 1996 and 1987 
Stock Option Plans.

    As described in Note 4, the Company has elected to measure compensation 
costs as prescribed by APB Opinion No. 25, "Accounting for Stock Issued to 
Employees" and, accordingly, does not recognize compensation expense. SFAS 
No. 123 requires the Company to disclose pro forma information reflecting net 
income and earnings per share had the Company elected to record compensation 
expense based on the fair market value method described in SFAS 123. The fair 
value of the options was estimated at the grant date using a Black-Sholes 
option pricing model. Option valuation models require the input of highly 
subjective assumptions. Because the Company's employee stock options have 
characteristics significantly different from traded options, and because 
changes in the subjective input assumptions can materially affect the fair 
value estimate, in management's opinion, the existing models do not 
necessarily provide a reliable single measure of the fair value of its 
employee stock options.

    The following weighted-average assumptions were used in the valuation 
model: risk-free interest rates of 6.15 percent and 5.15 percent in 1997 and 
1996, respectively; dividend yield of 1.30 percent and 2.50 percent in 1997 
and 1996, respectively; stock price volatility factors of .175 and .20 in 
1997 and 1996, respectively; and expected life of options of four years in 
both 1997 and 1996.

    The pro forma disclosures include options granted in 1997 and 1996 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.


<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)          1997              1996
-----------------------------------------------------------------------------
<S>                                                 <C>               <C>
Pro forma net income ............................   $46,018           $30,662
Pro forma net income (diluted) ..................   $46,018           $32,272

Pro forma earnings per share:
    Basic .......................................   $  2.49           $  1.86
    Diluted .....................................   $  2.41           $  1.78
-----------------------------------------------------------------------------
</TABLE>

EMPLOYEE STOCK OWNERSHIP PLAN -- The Company has an employee stock ownership
plan ("ESOP") that is a defined contribution plan covering all employees who are
21 years of age with more than one year of service. Contributions are calculated
using a formula based on the Company's return on average assets on a yearly
basis. The contribution expense was $1,407,000, $859,000 and $444,000 in 1997,
1996 and 1995, respectively.

PROFIT-SHARING PLAN -- The Company offers a contributory profit-sharing and
thrift plan that qualifies under section 401(k) of the Internal Revenue Code.
The plan covers all employees who are 21 years of age with more than one year of
service. The plan provides for an employer-matching contribution of 50% based on
each participant's eligible contribution for each plan year, subject to a
limitation of the lesser of 6% of the participant's annual compensation or the
maximum amount prescribed by the Internal Revenue Code. The Company's
contribution was $1,094,000, $727,000, and $712,000 in 1997, 1996 and 1995,
respectively.

               16. RESTRICTIONS ON CASH AND DUE FROM BANKS

Bank  subsidiaries are required to maintain  average reserve balances with 
the Federal Reserve Bank.  Balances of $40,539,000 and $12,518,000 at 
December 31, 1997 and 1996, respectively, exceeded required amounts.


40
<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   

Community First Bankshares, Inc.

                          17. INCOME TAXES

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

<TABLE>
<CAPTION>
                                             1997           1996           1995
--------------------------------------------------------------------------------
<S>                                      <C>            <C>            <C>
Federal:
    Current ...........................  $ 22,043       $ 18,455       $ 18,008
    Deferred ..........................    (2,540)        (3,444)        (3,546)
                                         --------       --------       --------
                                           19,503         15,011         14,462
State:
    Current ...........................     2,606          3,458          3,209
    Deferred ..........................      (593)          (462)          (463)
                                         --------       --------       --------
                                            2,013          2,996          2,746
                                         --------       --------       --------
Provision for income taxes ............  $ 21,516       $ 18,007       $ 17,208
                                         --------       --------       --------
                                         --------       --------       --------
--------------------------------------------------------------------------------
</TABLE>

   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):

<TABLE>
<CAPTION>
                                                  1997        1996       1995
-------------------------------------------------------------------------------
<S>                                            <C>         <C>         <C> 
Tax at statutory rate (35%) .................. $ 23,578    $ 17,681    $ 16,506
State income tax, net of federal tax benefit .    1,308       1,805       1,812
Minority interest ............................     --          --            61
Tax-exempt interest ..........................   (2,297)     (1,736)     (2,376)
Amortization of goodwill .....................      923         822         531
Other ........................................   (1,996)       (565)        674
                                               --------    --------    --------
Provision for income taxes ................... $ 21,516    $ 18,007    $ 17,208
                                               --------    --------    --------
                                               --------    --------    --------
-------------------------------------------------------------------------------
</TABLE>

    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, 1997 and 1996, are as follows (in 
thousands):

<TABLE>
<CAPTION>
                                                          1997             1996
---------------------------------------------------------------------------------
<S>                                                     <C>              <C> 
Deferred tax assets:
    Loan loss reserves ...............................  $ 7,929          $ 8,737
    Contingency reserve ..............................      246              748
    Deferred compensation ............................      835              863
    Deferred loan fees ...............................      316              316
    Other ............................................      735              566
                                                        -------           ------
                                                         10,061           11,230
Deferred tax liabilities:
    Unrealized gains .................................    3,141              897
    Depreciation .....................................      245               87
    Purchase accounting ..............................      349              151
    Other ............................................       13              297
                                                        -------          -------
                                                          3,748            1,432
                                                        -------          -------
Net deferred tax assets ..............................  $ 6,313          $ 9,798
                                                        -------          -------
                                                        -------          -------
--------------------------------------------------------------------------------
</TABLE>

    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 $5,336,000, $1,318,000, and $1,789,000 in 1997, 1996 
and 1995, 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, 1997:

<TABLE>
<CAPTION>
(IN THOUSANDS)                                   OPERATING   CAPITAL
--------------------------------------------------------------------
<S>                                              <C>        <C> 
1998 .........................................   $1,471     $2,043
1999 .........................................    1,563      1,851
2000 .........................................    1,652      1,529
2001 .........................................    1,327        730
2002 .........................................    3,390        137
                                                 ------     ------
                                                 $9,403     $6,290
Executory costs (taxes) ......................               (234)
                                                            ------
Net minimum lease payments ...................               6,056
Less:
    Amount representing interest .............                (847)
                                                            -------
    Present value of net minimum lease payments             $5,209
                                                            -------
                                                            -------
--------------------------------------------------------------------
</TABLE>

    As a result of certain legal proceedings related to the May 1995 purchase of
Alliance, the Company retained a portion of the purchase price in the form of a
contingency reserve. Upon resolution of various proceedings, associated balances
may be remitted to the former Abbott Bank Group shareholders. At December 31,
1997, the reserve balance was $838,000. All remaining issues subject to the
reserve are expected to be resolved during 1998. It is management's expectation
that resolution of the remaining issues will not exceed the current reserve
balance.
 
   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.

41

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 

Community First Bankshares, Inc.


                        19. COMMUNITY FIRST BANKSHARES, INC.
(PARENT COMPANY ONLY)

<TABLE>
<CAPTION>
CONDENSED STATEMENTS OF FINANCIAL CONDITION
--------------------------------------------------------------------------------
DECEMBER 31 (IN THOUSANDS)                                    1997          1996
--------------------------------------------------------------------------------
<S>                                                       <C>           <C>
ASSETS
Cash and due from subsidiary banks .....................  $  4,944      $  6,548
Interest-bearing deposits ..............................       505            --
Available-for-sale securities ..........................    63,795            --
Investment in subsidiaries .............................   452,731       275,100
Furniture and equipment ................................     6,210         1,657
Receivable from subsidiaries ...........................    10,509         2,336
Other assets ...........................................    15,582        17,389
                                                          ----------------------
Total assets ...........................................  $554,276      $303,030
                                                          ----------------------
                                                          ----------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term borrowings ..................................  $ 11,167      $ 14,164
Long-term debt .........................................   195,611        39,006
Other liabilities ......................................     8,204         5,289
Shareholders' equity ...................................   339,294       244,571
                                                          ----------------------
Total liabilities and shareholders' equity .............  $554,276      $303,030
                                                          ----------------------
                                                          ----------------------
--------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
CONDENSED STATEMENTS OF INCOME
--------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31 (IN THOUSANDS)                1997       1996       1995
--------------------------------------------------------------------------------
<S>                                               <C>         <C>       <C>
Income:
    Dividends from subsidiaries ................  $ 35,727    $29,536   $ 34,453
    Service fees from subsidiaries .............     3,505      2,948      3,147
    Interest income ............................     1,558        106        607
    Other ......................................       641        467       (304)
                                                  ------------------------------
Total income ...................................    41,431     33,057     37,903
Expense:
    Interest expense ...........................    10,479      4,403      3,961
    Other expense ..............................    17,135     17,323     11,862
                                                  ------------------------------
Total expense ..................................    27,614     21,726     15,823
                                                  ------------------------------
Income before income tax benefit, equity
    in undistributed income of subsidiaries
    and extraordinary item .....................    13,817     11,331     22,080
Income tax benefit .............................     9,348      6,799      4,423
                                                  ------------------------------
Income before undistributed income of
    subsidiaries and extraordinary item ........    23,165     18,130     26,503
Equity in undistributed income of
    subsidiaries ...............................    23,652     14,380      3,450
                                                  ------------------------------
Income before cumulative effect of
    extraordinary item .........................    46,817     32,510     29,953
Extraordinary item, net of tax .................      (265)      --         --
                                                  ------------------------------
Net Income .....................................  $ 46,552    $32,510   $ 29,953
                                                  ------------------------------
                                                  ------------------------------
Net income applicable to common equity .........  $ 46,552    $30,900   $ 28,343
                                                  ------------------------------
                                                  ------------------------------
--------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
CONDENSED STATEMENTS OF CASH FLOWS
-----------------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31 (IN THOUSANDS)                  1997           1996          1995
-----------------------------------------------------------------------------------------
<S>                                               <C>            <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income ....................................   $  46,552      $  32,510     $  29,953
Adjustments to reconcile net income to
 net cash used in operating activities:
     Equity in income of subsidiaries .........     (59,322)       (43,916)      (37,903)
     Depreciation .............................         694            488           474
     Increase (decrease) in interest payable ..       1,448            (32)           64
     Other, net ...............................       3,274         (7,650)        1,213
                                                  --------------------------------------
Net cash used in operating activities .........      (7,354)       (18,600)       (6,199)

CASH FLOWS FROM INVESTING ACTIVITIES
Dividends received from subsidiaries ..........      35,727         29,536        34,453
Net increase in interest-bearing deposits .....        (505)            --            --
Purchases of stock in subsidiaries ............    (149,845)       (14,743)      (71,581)
Net loans to subsidiaries .....................      (8,145)        (1,585)       10,197
Purchases of available-for-sale securities ....     (63,795)            --        (4,393)
Sales of available-for-sale securities,
 net of gains .................................          --             --         9,543
Net increase in furniture and equipment .......      (5,247)          (997)         (578)
                                                  --------------------------------------
Net cash (used in) provided by investing
 activities ...................................    (191,810)        12,211       (22,359)

CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in short-term borrowings .........      (2,997)         4,062         7,145
Proceeds from issuance of long-term debt ......     236,466         18,162        44,006
Repayment of long-term debt ...................     (79,861)       (24,058)      (27,302)
Net proceeds from issuance of
 common stock .................................      81,456         15,044        11,577
Net proceeds from conversion of
 convertible perferred stock ..................     (22,988)             --           --
Purchase of common stock held in treasury .....      (2,777)        (1,535)          (56)
Sale of common stock held in treasury .........       1,098          3,829           896
Retirement of common stock ....................          --           (349)           --
Preferred stock dividends paid ................          --         (1,610)       (1,610)
Common stock dividends paid ...................     (12,837)        (6,714)       (5,279)
                                                  --------------------------------------
Net cash provided by financing activities .....     197,560          6,831        29,376
Net increase in cash and cash equivalents .....      (1,604)           442           818
Cash and cash equivalents at
 beginning of year ............................       6,548          6,106         5,288
                                                  --------------------------------------
Cash and cash equivalents at end of year ......   $   4,944      $   6,548     $   6,106
                                                  --------------------------------------
                                                  --------------------------------------
----------------------------------------------------------------------------------------
</TABLE>


                                                                            42

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 

Community First Bankshares, Inc.

    Certain restrictions exist regarding the extent to which bank subsidiaries
may transfer funds to the Company in the form of dividends, loans or advances.
Federal law prevents the Company from borrowing from bank subsidiaries unless
the loans are secured by specified U.S. obligations. Secured loans to the
Company or any individual affiliate are generally limited in amount to 10% of
the banks' equity. Further, loans to the Company and all affiliates in total are
limited to 20% of the banks' equity. As of December 31, 1997 and 1996,
$44,653,000 and $27,066,000, respectively, of individual subsidiary banks'
capital was available for credit extension to the parent company. At December
31, 1997 and 1996, bank subsidiaries had no credit extended to the Company.

    Payment of dividends to the Company by its subsidiary banks is subject to 
various limitations by bank regulatory agencies. Undistributed earnings of 
the bank  subsidiaries  available for  distribution  as dividends  under 
these  limitations  were  $45,662,000 and $26,691,000 as of December 31, 1997 
and 1996, respectively.

                        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
subsidiaries. The aggregate dollar amounts of these loans were $14,814,000 and
$12,700,000 at December 31, 1997 and 1996, respectively. During 1997, 1996 and
1995, $4,729,000, $5,779,000, and $6,115,000 of new loans were made and
repayments totaled $2,615,000, $8,479,000, and $23,878,000, respectively.


                     21. SUPPLEMENTAL DISCLOSURES TO
                   CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31 (IN THOUSANDS)                        1997        1996        1995
------------------------------------------------------------------------------------------
<S>                                                       <S>          <C>        <C>
Noncash transfers of held-to-maturity
  securities to available-for-sale securities........     $ 92,738     $22,659    $187,320
Unrealized (loss) gain on
  available-for-sale securities......................        6,461        (993)     11,545
Income taxes paid....................................       22,784      23,485      20,745
Interest paid........................................      113,438      94,185      76,154
Commitments to purchase investment
  securities.........................................      340,457          --          --
------------------------------------------------------------------------------------------
</TABLE>


                      INDEPENDENT AUDITOR'S LETTER


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

We have audited the accompanying consolidated statements of financial condition
of Community First Bankshares, Inc. and subsidiaries as of December 31, 1997 and
1996, and the related consolidated statements of income, shareholders' equity
and cash flows for each of the three years in the period ended December 31,
1997. 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 did not audit the consolidated financial
statements of Mountain Parks Financial Corporation, which statements reflect
total assets constituting 16% of the related consolidated financial statement
totals and net income constituting 24% of the related consolidated financial
statement totals for the year ended December 31, 1995. Those statements were
audited by other auditors whose report has been furnished to us, and our
opinion, insofar as it relates to data included for Mountain Parks Financial
Corporation, is based solely on the report of the other auditors.

    We conducted our audits in accordance with generally accepted auditing
standards. 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 and the report of other auditors provide a reasonable
basis for our opinion.

    In our opinion, based on our audits and, for 1995, the report of other
auditors, 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, 1997 and 1996 and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles.



Minneapolis, Minnesota
January 22, 1998




                                                                            43

<PAGE>


CONSOLIDATED STATEMENT OF CONDITION -- FIVE YEAR SUMMARY

Community First Bankshares, Inc.

(IN THOUSANDS)

<TABLE>
<CAPTION>
DECEMBER 31 (IN THOUSANDS)                                1997           1996           1995           1994           1993
--------------------------------------------------------------------------------------------------------------------------
<S>                                                <C>            <C>            <C>            <C>            <C>
ASSETS
Cash and due from banks ........................   $   222,088    $   175,732    $   137,551    $    96,232    $    85,468
Federal funds sold and securities purchased
    under agreement to resell ..................        12,690          3,600         25,965          8,135         35,685
Interest-bearing deposits ......................         1,287          3,598          3,213          6,377         10,272
Available-for-sale securities ..................     1,498,877        506,888        486,522        231,364        326,041
Held-to-maturity securities:
    U.S. Treasury ..............................            --             --             --         72,519         44,162
    U.S. Government agencies ...................           228            879          3,318         44,957         34,654
    Mortgage-backed securities .................        67,959         86,506        106,429        185,753        177,381
    Collateralized mortgage obligations ........            --             --             --         22,811         25,151
    State and political securities .............        48,064         56,694         55,267         43,672         34,990
    Other ......................................        64,261         78,269         65,806         12,163         11,343
                                                   -----------------------------------------------------------------------
       Total securities ........................     1,679,389        729,236        717,342        613,239        653,722
Loans ..........................................     2,637,057      2,064,108      1,767,193      1,330,146      1,037,666
    Less: allowance for loan losses ............       (36,194)       (26,215)       (22,712)       (17,333)       (14,332)
                                                   -----------------------------------------------------------------------
    Net loans ..................................     2,600,863      2,037,893      1,744,481      1,312,813      1,023,334
Other assets ...................................       339,209        166,339        141,424         93,823         75,313
                                                   -----------------------------------------------------------------------
    Total assets ...............................   $ 4,855,526    $ 3,116,398    $ 2,769,976    $ 2,130,619    $ 1,883,794
                                                   -----------------------------------------------------------------------
                                                   -----------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
    Noninterest-bearing ........................   $   597,333    $   431,078    $   398,314    $   315,667    $   273,382
    Interest-bearing ...........................     3,022,001      2,106,362      1,961,402      1,478,898      1,354,607
                                                   -----------------------------------------------------------------------
       Total deposits ..........................     3,619,334      2,537,440      2,359,716      1,794,565      1,627,989
Short-term borrowings ..........................       273,573        247,634         90,881        113,469         62,194
Long-term debt .................................       116,476         46,750         81,288         38,092         48,354
Other liabilities ..............................       386,849         40,003         34,087         26,792         20,186
                                                   -----------------------------------------------------------------------
    Total liabilities ..........................     4,396,232      2,871,827      2,565,972      1,972,918      1,758,723
Company-obligated mandatorily redeemable
    preferred securities of CFB Capital I and II       120,000             --             --             --             --
Shareholders' equity ...........................       339,294        244,571        204,004        157,701        125,071
                                                   -----------------------------------------------------------------------
    Total liabilities and shareholders' equity .   $ 4,855,526    $ 3,116,398    $ 2,769,976    $ 2,130,619    $ 1,883,794
                                                   -----------------------------------------------------------------------
                                                   -----------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------
</TABLE>

44

<PAGE>

CONSOLIDATED STATEMENT OF INCOME -- FIVE YEAR SUMMARY

Community First Bankshares, Inc.

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31 (IN THOUSANDS)                    1997           1996           1995           1994           1993
--------------------------------------------------------------------------------------------------------------------------
<S>                                                <C>            <C>            <C>            <C>            <C>
INTEREST INCOME:
    Loans ......................................   $   218,588    $   183,530    $   150,948    $   104,012    $    81,931
    Investment securities ......................        59,103         44,936         40,210         38,032         37,479
    Other ......................................           906            960          1,710          1,193          1,736
                                                   -----------------------------------------------------------------------
       Total interest income ...................       278,597        229,426        192,868        143,237        121,146

INTEREST EXPENSE:
    Deposits ...................................       102,632         81,655         71,780         46,560         42,873
    Short-term and other borrowings ............         8,734          9,247          6,184          4,029          1,994
    Long-term debt .............................         5,887          4,332          4,927          2,879          2,404
                                                   -----------------------------------------------------------------------
       Total interest expense ..................       117,253         95,234         82,891         53,468         47,271
                                                   -----------------------------------------------------------------------
Net interest income ............................       161,344        134,192        109,977         89,769         73,875
Provision for loan losses ......................         5,352          6,757          2,711          1,839          2,149
                                                   -----------------------------------------------------------------------
Net interest income after provision for loan losses    155,992        127,435        107,266         87,930         71,726

NONINTEREST INCOME:
    Service charges on deposit accounts ........        17,023         12,328         10,116          8,467          7,571
    Insurance commissions ......................         5,375          5,213          4,283          3,777          3,442
    Fees from fiduciary activities .............         3,805          3,332          2,718          2,157          2,103
    Net gains on sales of securities ...........           463             93             52             99          1,910
    Other ......................................         9,898          6,404          5,319          4,492          3,132
                                                   -----------------------------------------------------------------------
       Total noninterest income ................        36,564         27,370         22,488         18,992         18,158

NONINTEREST EXPENSE:
    Salaries and employee benefits .............        64,868         54,870         42,796         35,083         29,931
    Net occupancy ..............................        19,139         15,085         10,563          9,353          8,413
    FDIC insurance .............................           357            669          2,532          3,720          3,193
    Professional service fees ..................         4,088          3,881          4,011          3,457          3,776
    Amortization of intangibles ................         5,519          3,362          2,551          1,876          1,340
    Data processing and loan servicing fees ....         1,290          1,506          1,607            856            722
    Company-obligated mandatorily redeemable 
       preferred securities of CFB Capital 
       I & II ..................................         5,108           --             --             --             --
    Other ......................................        24,821         24,915         18,533         15,896         13,479
                                                   -----------------------------------------------------------------------
       Total noninterest expense ...............       125,190        104,288         82,593         70,241         60,854
                                                   -----------------------------------------------------------------------
Income from continuing operations before income 
       taxes, cumulative effect of accounting
       change, and extraordinary item ..........        67,366         50,517         47,161         36,681         29,030
Provision for income taxes .....................        21,516         18,007         17,208         13,952         10,775
                                                   -----------------------------------------------------------------------
Income from continuing operations before
      cumulative effect of accounting change,
      and extraordinary item ...................        45,850         32,510         29,953         22,729         18,255
Cumulative effect of accounting change .........          --             --             --             --              359
Discontinued operations ........................           967           --             --             --             --
Extraordinary item .............................          (265)          --             --             --             --
                                                   -----------------------------------------------------------------------
Net income .....................................        46,552         32,510         29,953         22,729         18,614
Preferred dividend .............................          --            1,610          1,610          1,091           --
                                                   -----------------------------------------------------------------------
Net income applicable to common equity .........   $    46,552    $    30,900    $    28,343    $    21,638    $    18,614
                                                   -----------------------------------------------------------------------
                                                   -----------------------------------------------------------------------
Earnings per common and common equivalent share:
    Basic ......................................   $      2.52    $      1.87    $      1.85    $      1.50    $      1.35
    Diluted ....................................   $      2.44    $      1.79    $      1.75    $      1.43    $      1.30
Average common shares outstanding:
    Basic ......................................    18,474,749     16,509,289     15,361,370     14,378,903     13,838,334
    Diluted ....................................    19,069,078     18,142,377     17,167,650     16,127,250     14,389,256
                                                                                                               -----------
--------------------------------------------------------------------------------------------------------------------------
</TABLE>


                                                                             45

<PAGE>

QUARTERLY REPORTS OF OPERATIONS       

Community First Bankshares, Inc.

(UNAUDITED)

The  following is a summary of the quarterly  results of operations  for the 
years ended  December 31, 1997 and 1996 (in  thousands,  except per share and 
per share data):

<TABLE>
<CAPTION>
                                                                            FIRST        SECOND         THIRD        FOURTH
                                                                           QUARTER       QUARTER       QUARTER       QUARTER
-------------------------------------------------------------------------------------------------------------------------------
<S>                                                                    <C>             <C>           <C>           <C>
YEAR ENDED DECEMBER 31, 1997
Interest income ....................................................   $     58,309    $    60,172   $    77,409   $     82,707
Interest expense ...................................................         23,914         24,514        33,498         35,327
                                                                       --------------------------------------------------------
Net interest income ................................................         34,395         35,658        43,911         47,380
Provision for loan losses ..........................................          1,230          2,486         1,710            (74)
                                                                       --------------------------------------------------------
Net interest income after provision for loan losses ................         33,165         33,172        42,201         47,454
Net gains on sales of securities ...................................             (3)            64            62            340
Noninterest income .................................................          7,041         10,259         9,646          9,155
Noninterest expense ................................................         24,949         27,831        34,448         37,962
                                                                       --------------------------------------------------------
Income before income taxes and extraordinary item ..................         15,254         15,664        17,461         18,987
Provision for income taxes .........................................          5,138          5,140         5,391          5,847
                                                                       --------------------------------------------------------
Income from continuing operations before extraordinary item ........         10,116         10,524        12,070         13,140
                                                                       --------------------------------------------------------
Discontinued Operations:
    Income from operations of discontinued operations
    (Less applicable income taxes of $424) .........................            681            611           229           (554)
                                                                       --------------------------------------------------------
Income before extraordinary item ...................................         10,797         11,135        12,299         12,586
Extraordinary item:
    Loss on extinguishment of debt, net of taxes ...................           (265)          --            --             --
                                                                       --------------------------------------------------------
Net Income .........................................................         10,532         11,135        12,299         12,586

                                                                       --------------------------------------------------------
Net income applicable to common equity .............................         10,532         11,135        12,299         12,586
                                                                       --------------------------------------------------------
Earnings per common and common equivalent share:
Basic income from continuing operations before extraordinary items .   $       0.58    $      0.57   $      0.65   $       0.69
Discontinued operations ............................................           0.04           0.03          0.01          (0.03)
Extraordinary item .................................................          (0.02)          0.00          0.00           0.00
                                                                       --------------------------------------------------------
Basic net income ...................................................   $       0.60    $      0.60   $      0.66   $       0.66
                                                                       --------------------------------------------------------
Diluted income from continuing operations before extraordinary items           0.53           0.55          0.64           0.68
Discontinued operations ............................................           0.04           0.03          0.01          (0.03)
Extra ordinary item ................................................          (0.01)          0.00          0.00           0.00
                                                                       --------------------------------------------------------
Diluted net income .................................................   $       0.56    $      0.58   $      0.65   $       0.65
Average common and common equivalent shares:
    Basic ..........................................................     17,493,078     18,670,606    18,642,672     19,073,429
    Diluted ........................................................     18,863,908     18,945,576    18,992,606     19,470,488
                                                                       --------------------------------------------------------

<CAPTION>
---------------------------------------------------------------------------------------------------------------
                                                         FIRST        SECOND           THIRD          FOURTH
                                                        QUARTER       QUARTER         QUARTER        QUARTER
---------------------------------------------------------------------------------------------------------------
<S>                                                   <C>           <C>             <C>             <C>        
YEAR ENDED DECEMBER 31, 1996
Interest income ...................................   $    53,664   $     55,537    $     58,711    $    61,514
Interest expense ..................................        22,651         22,871          24,002         25,710
                                                      ---------------------------------------------------------
Net interest income ...............................        31,013         32,666          34,709         35,804
Provision for loan losses .........................           915          1,416           2,241          2,185
                                                      ---------------------------------------------------------
Net interest income after provision for loan losses        30,098         31,250          32,468         33,619
Net gains on sales of securities ..................             3             (1)             (8)           100
Noninterest income ................................         5,938          6,701           6,499          8,138
Noninterest expense ...............................        22,868         23,813          25,810         31,797
                                                      ---------------------------------------------------------
Income before income taxes ........................        13,171         14,137          13,149         10,060
Provision for income taxes ........................         4,590          4,849           4,556          4,012
                                                      ---------------------------------------------------------
Net income ........................................         8,581          9,288           8,593          6,048
Preferred stock dividends .........................           402            403             403            402
                                                      ---------------------------------------------------------
Net income applicable to common equity ............   $     8,179   $      8,885    $      8,190    $     5,646
                                                      ---------------------------------------------------------
Earnings per common and common equivalent shares:
    Basic .........................................   $       .50   $        .55    $        .50    $       .33
    Diluted .......................................   $       .48   $        .52    $        .47    $       .32
Average common shares:
    Basic .........................................    16,197,840     16,212,028      16,428,464     16,981,123
    Diluted .......................................    17,876,890     17,913,355      18,138,629     18,638,838

---------------------------------------------------------------------------------------------------------------
</TABLE>


46

<PAGE>

                             CORPORATE INFORMATION

MARKET PRICE RANGE OF COMMON SHARES

THE COMPANY'S COMMON STOCK TRADES ON THE NASDAQ STOCK MARKET UNDER THE SYMBOL 
CFBX. THE FOLLOWING TABLE SETS FORTH THE HIGH AND LOW SALES PRICES FOR THE 
COMPANY'S COMMON STOCK DURING THE PERIODS INDICATED:

<TABLE>
<CAPTION>
                       1997           1996
                  High    Low     High     Low
------------------------------------------------
<S>              <C>     <C>      <C>     <C>
First Quarter... 32 1/4  27 3/8   22 3/4  20
Second Quarter.. 38 3/8  29       24 1/4  22 1/4
Third Quarter... 49 1/8  36 3/4   23 7/8  22 1/2
Fourth Quarter.. 55 1/8  45 1/2   28 3/4  23 1/8
------------------------------------------------
</TABLE>

SHAREHOLDERS

AS OF FEBRUARY 11, 1998, THE COMPANY HAD 1,314 SHAREHOLDERS OF RECORD AND AN 
ESTIMATED 7,000 ADDITIONAL BENEFICIAL HOLDERS WHOSE STOCK WAS HELD IN STREET 
NAME BY BROKERAGE HOUSES.

DIVIDEND POLICY

THE BOARD OF DIRECTORS HAS ADOPTED A POLICY OF DECLARING REGULAR QUARTERLY 
DIVIDENDS. A DIVIDEND OF 14 CENTS PER SHARE WAS PAID FOR EACH OF THE FIRST 
THREE QUARTERS IN 1996 AND INCREASED TO 16 CENTS PER SHARE FOR THE FOURTH 
QUARTER OF 1996. A DIVIDEND OF 16 CENTS PER SHARE WAS PAID FOR THE FIRST TWO 
QUARTERS IN 1997 AND INCREASED TO 19 CENTS PER SHARE FOR EACH OF THE THIRD AND 
FOURTH QUARTERS OF 1997.


56