10-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

FORM 10-K

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

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2003

OR

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

For the Transition period from          to

COMMISSION FILE NO.  000-19368

COMMUNITY FIRST BANKSHARES, INC.

(Exact name of registrant as specified in its charter)

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

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

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
	COMMON STOCK, $.01 PAR VALUE PREFERRED STOCK PURCHASE RIGHTS
	8.125% CUMULATIVE CAPITAL SECURITIES,
	$25 LIQUIDATION AMOUNT(1)
	7.60% CUMULATIVE CAPITAL SECURITIES,
	$25 LIQUIDATION AMOUNT(2)
	(Title of Class)

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

YES ý NO o

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

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

YES ý NO o

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

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

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

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

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Annual Report to Stockholders for the fiscal year ended December 31, 2003 and the Proxy Statement for the Company’s Annual Meeting of Stockholders to be held April 20, 2004, are incorporated by reference into Parts II and III, respectively, of this Form 10-K, to the extent described in such Parts.

TABLE OF CONTENTS

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

PART I

ITEM 1.  BUSINESS

GENERAL

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

The banking offices are community banks that provide a full range of commercial and consumer banking services primarily to businesses and individuals in small and medium-sized communities and the surrounding market areas.  The Company provides its banking offices with the advantages of affiliation with a bank holding company, such as access to its lines of financial services, including trust products and administration, insurance and investment services, data processing services, credit policy formulation and review and administration, investment management and specialized staff support.  The Company grants autonomy to managers of the banking offices with respect to day-to-day operations, customer service decisions and marketing.  Credit and product offerings are being centralized to increase efficiency.  The banking offices are encouraged to participate in community activities, support local charities and community development, and otherwise enhance their images in their communities.

The Company has built a network of banks and a solid customer base through acquisitions.  The Company’s plan is to increase the revenues and profit derived from that customer base by profitably increasing the number of products and services delivered per household and by expanding the channels through which customers can access those products and services.  An enhanced online banking Web site is supplementing channels of in-person, mail, ATM, and telephone banking.

RECENT STRATEGIES AND INITIATIVES

During 2003, the Company continued to implement a series of strategic initiatives originally announced in 2001, designed to improve customer service and strengthen its position as a provider of diversified financial services.  These initiatives included redefining the Company’s model for delivery of services.

Redefining the Company’s delivery model

To bring product distribution focus to the Company’s extensive banking network, the Company has designated certain of its banking offices as Regional Financial Centers and others as Community Financial Centers.  Regional Financial Centers are located in markets that have shown strong commercial banking potential and offer a full array of financial products and services for both the corporate and retail markets, including banking, trust and investment products.  In some cases, Regional Financial Centers are typically aligned so that one larger banking office directs and supports smaller banking offices in close geographic proximity.  Regional Financial Centers are managed by bank presidents.  As of December 31, 2003, the Company had 92 Regional Financial Centers.

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

During 2003 the Company announced the transition of 16 Regional Financial Centers to Community Financial Centers. Transitioning branches into the Community Financial Center model is consistent with the Company’s long-term strategic plan to specifically address the client needs of its individual markets through highly targeted service offerings. The Company expects to complete these transitions in early 2004.

During 2003 the Company also announced a strategy, which consists of a market extension model, wherein the Company intends to open additional offices in selected areas of the Company’s current geographic footprint, that the Company believes are growth or emerging growth markets.  Additional offices are expected to be within the 12-state area within which the Company currently operates.  Services provided at the new locations will be determined by the opportunities identified in that area, and may include business, retail, investment sales, insurance products, mortgage products and wealth management.  During 2003, the Company announced its initial five market extension locations in the metropolitan Minneapolis/St. Paul market.  The Company expects to open the first office during the first quarter of 2004 and the second office during the second quarter of 2004.  The additional offices, which the Company expects to open in late 2004, are pending regulatory approval.  The addition of these offices is not expected to have a material impact on the Company’s financial condition or results of operation during 2003 and 2004.  The Company has announced that it plans to open 30 new offices by 2007.

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

Centralizing Credit Operations

Under the redesigned delivery structure, the Company is implementing a centralized consumer credit process, which, when fully operational, will offer a complete range of decision, organization, documentation and collection services for consumer lending for all banking offices from a Fargo, North Dakota location.  As of December 31, 2003, all indirect consumer underwriting, administration, documentation and all consumer collection have been centralized.  Centralization of the underwriting, administration and documentation of direct consumer loans, as well as documentation of commercial and agricultural loans, are expected to be completed by the second quarter of 2004, at which time the centralized delivery initiative will be completed.

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Mortgage Loan Joint Venture

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

Stock Repurchase Plan

Since April 2000, the Company has conducted common stock repurchase programs providing for the systematic repurchase of the Company’s common stock. Under these programs, the shares are purchased primarily on the open market, with timing depending upon market conditions. The program provides the Company with an alternative opportunity for capital utilization. In addition, the shares acquired can be used for the issuance of common stock upon exercise of stock options, under the Company’s compensation plans and for other purposes, including business combinations. On April 24, 2003, the Company approved an additional common stock repurchase authorization wherein the Company may repurchase up to an additional 3 million shares of its common stock outstanding.  As of December 31, 2003, the Company had repurchased 14.4 million shares of common stock under these plans, at prices ranging from $15.25 to $29.29. The Company repurchased 1.7 million and 1.9 million shares of common stock during 2003 and 2002, at an average price of $26.93 and $25.62, respectively.  As of December 31, 2003, 2.4 million shares remain available for repurchase.

REVIEW OF ACQUISITION OPPORTUNITIES

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

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Dakota, South Dakota, Utah, Wisconsin and Wyoming.  The Company takes a disciplined approach to acquisitions, requiring a certain return on equity for potential targets.  The Company reviewed several potential targets in 2003, and placed bids on a few opportunities.  In general, bank acquisitions have been, and can be expected to continue to be, difficult to conclude by the Company because of the Company’s parameters of valuation, insistence that any acquired bank be accretive to earnings per share within a short period of time and because other acquirers with different valuation parameters and objectives have been and can be expected in the foreseeable future to be prepared to make higher acquisition bids than the Company.  Therefore, the Company did not complete any bank acquisitions in 2003.  The Company routinely reviews acquisition opportunities and, at any given time, may have bids outstanding or may be involved in negotiations with the owners of financial institutions or other parties relative to a particular financial institution, its branches or its deposit accounts.  The Company currently has no agreements in place to acquire other banks, branches or deposit accounts.

BANKING ACTIVITY

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

COMMUNITIES SERVED

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

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

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

ADMINISTRATION OF BANKING OFFICES

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

CREDIT.  The Company’s lending activities are guided by the general loan policy established by the Board of Directors.  The Board of Directors of the banking subsidiary has established loan approval limits for each banking office of the Company.  The limits established for each bank location range from $5,000 to $500,000 per borrower, which is reduced to not more than $25,000 for any criticized or classified borrower.  Amounts in excess of the individual banking office’s lending authority are presented to the corporate credit officers.  The corporate credit officers have lending authority up to $1,000,000 for pass-rated borrower. Loans above $1,000,000 for pass-rated borrowers, $500,000 for watch-rated borrowers, $250,000 for classified borrowers, and $500,000 for Small Business Administration government guaranteed borrowers are presented to the Senior Credit Committee wherein approval must be unanimous.  The Senior Credit Committee is comprised of the Company’s chief operating officer, two executive vice president — division presidents, the executive vice president - credit administrative officer, and the senior regional credit officer.

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

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

MARKETING.  The Company’s marketing function includes marketing communications, research and information, e-business and web development, product management, sales training and development, and operation of a customer call center.  Its primary role is to provide marketing support to management and sales personnel across the Company’s banking, investment, insurance, mortgage and trust product lines.

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OTHER SERVICES.  The Company provides other services for the benefit of the banking offices, such as outside professional services, central human resources services, benefits administration, marketing guidance and centralized purchasing of supplies.

INSURANCE AGENCIES

The Company currently owns and operates insurance agencies located in 55 communities served by the bank through its bank subsidiary, Community First Insurance, Inc.  These agencies are primarily engaged in the sale of property and casualty insurance and make some sales of other types of insurance, such as life, accident and crop hail insurance.  The Company had commission revenue of $15.2 million in 2003.

OTHER ACTIVITIES

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

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

In February 2001, the Company entered into an agreement with PrimeVest Financial Services, Inc. under which PrimeVest would provide securities brokerage, insurance and investment advisory services to the Company’s customers through PrimeVest centers located within the Company’s banking offices.  The agreement provides for shared sales commissions with the Company pursuant to an agreed upon commission schedule and requires PrimeVest to perform various compliance and administrative functions related to its securities and insurance activities. In addition to full service brokerage, insurance and investment advisory services, the PrimeVest agreement also provides the Company’s customers with online financial services to complement the Company’s focus on technology enhancements to improve product and service delivery.  The PrimeVest agreement had an initial term or three years and is currently subject to 30-day renewal terms.

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

COMPETITION

Commercial banking is highly competitive.  In the conduct of certain aspects of its business, the Company competes with other commercial banks, savings and loan institutions, issuers of fixed income investments, finance corporations, credit unions and money market funds, and securities and insurance firms, among other types of institutions. The Company competes with these institutions in such areas as obtaining new deposits, offering new types of services and setting loan rates and interest rates on various types of deposits, as well as other aspects of the banking business.  Management believes community residents and businesses prefer to deal with local banks and the Company has generally been able to compete successfully in its respective communities because of the Company’s emphasis on local management and the autonomy of management in community relations.  At the same time, the Company

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provides its locations with the advantages of centralized sophisticated administration and the opportunity to make larger loans and diversify their lending activity through group participations.  Further, because most of the Company’s locations have a significant market share in the communities they serve, the Company believes the banking offices can, to a degree, influence deposit and loan pricing in their markets and are subject to less competition based on deposit and loan pricing than would be the case in larger metropolitan markets with more competitors.  However, the Company has experienced increased price competition from credit unions and brokerage firms in certain market areas in recent periods.

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

EMPLOYEES

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

SUPERVISION AND REGULATION

GENERAL.  As a bank holding company, the Company is subject to supervision and examination by the Board of Governors of the Federal Reserve System under the Bank Holding Company Act of 1956, as amended (the “BHC Act”).  The Company’s national banking subsidiary is regulated by the Office of the Comptroller of the Currency (“OCC”).  The deposits of the Company’s banking subsidiary are insured by the Bank Insurance Fund (“BIF”), which subjects the subsidiary to regulation by the Federal Deposit Insurance Corporation (“FDIC”).  This regulatory framework is intended to protect depositors, federal insurance funds and the banking system as a whole, and not to protect security holders.  In addition to the impact of direct regulation, commercial banks are affected significantly by actions taken by the Federal Reserve Board with respect to the money supply and credit availability.

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

FINANCIAL MODERNIZATION.  On November 12, 1999, the GLB Act became law.  The GLB Act repealed provisions of the Glass-Steagall Act of 1933 and extensively revised the BHC Act by significantly expanding the range of permissible activities by banks and bank holding companies and permitting affiliations between banking, insurance and securities organizations.  Under the GLB Act, a bank holding company may become certified as a financial holding company by filing a notice with the Federal Reserve Board, together with a certification that the bank holding company meets certain criteria, including capital, management and Community Reinvestment Act requirements.  Although the Company currently satisfies the criteria for certification, the Company has determined not to become certified as a financial holding company at this time.  The Company continues to review the implications of the GLB Act on its business activities.

The GLB Act and its implementing regulations impose additional requirements on financial institutions with respect to customer privacy by generally prohibiting disclosure of customer information

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to non-affiliated third parties unless the customer has been given the opportunity to object and has not objected to such disclosure.  Financial institutions are further required to disclose their privacy policies to customers annually.  Because the GLB Act does not preempt state privacy laws, there are risks that states will adopt additional, non-uniform requirements, and this has occurred in California, North Dakota and New Mexico.  Other states in the Company’s trade territory are also considering additional legislation.  Restrictions upon the Company’s use of customer information makes it more difficult for the Company to carry out its business plan to provide more products and services to customers throughout a sales-focused delivery system.

HOLDING COMPANY REGULATION.  The Company is a bank holding company within the meaning of the BHC Act.  As a result, the Company’s activities are subject to limitations under the BHC Act, and certain transactions between the Company and its affiliates are subject to restrictions.  Further, the Company is required to file periodic reports with the Federal Reserve Board and is subject to examination. The Federal Reserve Board has the enforcement authority over the Company and its subsidiaries to prevent and remedy actions that it determines are unsafe, unsound or violate the law, including the authority to issue cease and desist orders.  The Federal Reserve has expressed its view that a bank holding company experiencing earnings weaknesses should not pay cash dividends exceeding its net income or which could be funded only in ways that weakened the bank holding company’s financial health, such as borrowing.  Under a longstanding policy of the Federal Reserve, the Company is expected to serve as a source of financial strength to its banking subsidiary and to commit resources to support it.

Under the BHC Act, the Company must obtain prior Federal Reserve Board approval before the Company acquires direct or indirect ownership or control of 5% or more of the voting stock of any bank or bank holding company, or the Company merges or consolidates with another bank holding company.  Further, a bank holding company is generally prohibited from acquiring direct or indirect ownership or control of a company that is not a bank or bank holding company, unless (i) the Federal Reserve Board has, by order or regulation, determined that the proposed non-banking activity is so closely related to banking or managing or controlling banks as to be a proper incident thereto, or (ii) the Company elects to become a “financial holding company” under the GLB Act and the proposed non-banking activity is a “financial activity,” within the terms of the GLB Act, or an “incidental” or “complementary” activity, as determined by order or regulation of the Federal Reserve Board and the Secretary of the Treasury.  In reviewing any application or proposal by a bank holding company, the Federal Reserve Board is required to consider the financial and managerial resources and future prospects of the bank holding company and the banks concerned, the convenience and needs of the community to be served, as well as the probable effect of the transaction upon competition.

BANK REGULATION.  The banking subsidiary is subject to detailed federal and state laws and regulation.  The national banking subsidiary of the Company is primarily supervised by the OCC, a bureau of the United States Department of the Treasury.  The OCC regularly examines national banks in such areas as reserves, loans, investments, trust services, management practices, compliance with the Community Reinvestment Act and other aspects of bank operations and policies.  These examinations are designed for the protection of the deposit insurance system and the enforcement of federal and state laws and regulations and not for the shareholders of the Company.  In addition to undergoing these regular examinations, national banks must furnish quarterly reports to the OCC containing detailed and accurate financial statements and schedules.

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

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

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

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

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

FDIC insurance on deposits may be terminated by the FDIC, after notice and hearing, upon a finding by the FDIC that the insured bank has engaged or is engaging in unsafe or unsound practices, or is in an unsafe or unsound condition to continue operations as an insured bank, or has violated any applicable law, regulation, rule or order of or condition imposed by or written agreement entered into with the FDIC.

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

•Due diligence requirements for financial institutions that administer, maintain, or manage private bank accounts or correspondent accounts for non-US persons;

•Standards for verifying customer identification at account opening; and

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•Rules to promote cooperation among financial institutions, regulators, and law enforcement entities in identifying parties that may be involved in terrorism or money laundering.

The Patriot Act now specifically requires the Federal Reserve Board, when reviewing applications by bank holding companies, to take into consideration the effectiveness of applicants in combating money-laundering activities.  The Patriot Act grants the Secretary of the Treasury broad authority to establish regulations and to impose requirements and restrictions on financial institutions’ operations.  The Company will establish policies and procedures to ensure compliance with the Patriot Act.  The Company has determined that thus far compliance with the Patriot Act has not had and is not expected to have a material impact on its operations.

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

AVAILABLE INFORMATION

The Company maintains a Website at www.CommunityFirst.com.  The Company’s annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, are available via the Company’s website, as soon as reasonably practicable after these documents are filed with the SEC.  To obtain copies of these reports, go to www.CommunityFirst.com and click on “Investor Relations,” then click on “SEC Filings.”  A copy of any report filed by the Company with the SEC will also be furnished without charge to any shareholder who requests it in writing from Mark A. Anderson, President and Chief Executive Officer, Community First Bankshares, Inc., 520 Main Avenue, Fargo, North Dakota 58124-0001.

You may also read and copy any materials that the Company files with the SEC at the SEC’s Public Reference Room at 450 Fifth Street, NW, Washington, DC 20549 or by calling 1-800-SEC-0330.  The SEC maintains an Internet site (http://www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.

FORWARD-LOOKING STATEMENTS

This annual report on Form 10-K and other documents filed by the Company with the SEC contain 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 or results from 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.  Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often include words such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate,” or words of similar meaning, or future or conditional verbs such as “will,” “would,” “should,” “could” or “may.”

Forward-looking statements give the Company’s expectations or predictions of future conditions, events or results. They are not guarantees of future performance. By their nature, forward-looking statements are subject to risks and uncertainties. A number of factors, many of which are beyond the Company’s control, could cause actual conditions, events or results to differ significantly from those described in the forward-looking statements. Factors that could cause actual results to differ from the results discussed in forward-looking statements include, but are not limited the factors described below.

Our Earnings are Significantly Affected by General Business and Economic Conditions.  Our business and financial results are affected by general business and economic conditions in the United States and abroad. These conditions include short-term and long-term interest rates, inflation, monetary supply, fluctuations in both debt and equity capital markets, and the condition of the U.S. economy, in general, and the local economies in which we operate.  Should economic conditions continue to worsen in the United States or abroad, demand for loans and other products and services we offer could decrease

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

Credit Losses are Inherent in Our Business, and Our Allowance for Loan Losses May be Inadequate to Cover Actual Loan Losses.  Every loan carries a risk of non-payment.  We have adopted underwriting and credit monitoring procedures and credit policies, including the establishment and review of the allowance for credit losses, that we believe are appropriate to minimize this risk by assessing the likelihood of nonperformance, tracking loan performance and diversifying our loan portfolio.  We make a number of assumptions and judgments about the collectibility of our loan portfolio when determining the amount of the loan loss allowance.  We determine the amount of the allowance through a periodic review and consideration of several factors, including: the quality, size and diversity of our loan portfolio; an evaluation of non-performing loans; our historical loan loss experience; and the amount and quality of collateral, including guarantees, securing the loans.

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

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

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

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

Maintaining or Increasing our Market Share Depends on Market Acceptance of New Products and Services.  Our success depends, in part, on our ability to develop, and gain customer acceptance of, new products and services.  Financial services companies face increasing pressure to provide products and services at lower prices. This can reduce our net interest margin and revenues from our fee-based products and services.  In addition, the widespread adoption of new technologies, including Internet-based services, could require us to make substantial expenditures to modify or adapt our existing products and services. We may not be able to successfully introduce new products and services, achieve market acceptance of our products and services, or develop and maintain loyal customers.

Changes in the regulatory structure or the statutes or regulations that apply to us could have a material impact on our operations.  We are subject to extensive regulation, supervision and examination by the Federal Reserve Board and the Office of the Comptroller of the Currency. The supervision, regulation and examination of banks and bank holding companies by bank regulatory agencies are intended primarily for the protection of depositors rather than the shareholders of these entities. Our success depends on our continued ability to comply with these regulations. Some of these regulations may increase our costs and thus place non-bank financial institutions in stronger, more competitive positions. Regulatory authorities have extensive discretion in carrying out their supervisory and enforcement responsibilities. They have also implemented regulations that have increased capital requirements, increased insurance premiums, required approval of acquisitions and other changes of control, and resulted in increased administrative and professional expenses. Any change in the existing regulatory structure or the applicable statutes or regulations could have a material impact on our operations. Additional legislation and regulations may be enacted or adopted in the future which could significantly affect our powers, authority and operations, which in turn could have a material effect on our operations.

We are dependent upon key executives who would be difficult to replace.  Our continued profitability is dependent on our senior management team.  We would likely have a difficult transition period if the services of any of our senior executives were lost for any reason.  Recruiting talent in the competitive financial services industry is difficult generally.  There is no assurance that we will be able to retain our current key executives or attract additional qualified key persons as needed.

Other factors, such as credit, market, operational, liquidity, interest rate, governmental regulation and other risks are described elsewhere in this report. Forward-looking statements speak only as of the date they are made. The Company does not undertake to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made.

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EXECUTIVE OFFICERS

The executive officers of the Company are as follows:

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

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

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

Ronald K. Strand was appointed Vice Chairman - Chief Operating Officer of the Company on March 1, 2000.  He had been Vice Chairman - Financial Services Division since October 1998.  Mr. Strand was Executive Vice President - Banking Group from February 1993 to October 1998, and was previously Senior Vice President and Region Manager for South Dakota and North Dakota from January 1991 to February 1993.  Mr. Strand had been Vice President and Regional Manager for the Company and President, Chief Executive Officer and a director of the Company’s affiliate bank in Wahpeton, North Dakota from 1988 to January 1991.  Prior to his affiliation with the Company, he served as President and Chief Executive Officer of Norwest Bank of North Dakota, N.A., Wahpeton, from 1985 until 1988.  He was employed by Norwest for a total of 15 years, having previously worked in Norwest banks in Jamestown, North Dakota, and Moorhead, Minnesota.

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

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

Dan M. Fisher was appointed Chief Information Officer of the Company on March 1, 2000 and Executive Vice President – Chief Information Officer in February 2004.  He has been President and Chief Executive Officer of Community First Technologies, Inc. (formerly known as Community First Service Corporation) since October 1998 and previously served as Executive Vice President - Bank Operations at this subsidiary.  Mr. Fisher was District Manager and Senior Vice President of Fiserv Inc., a financial services data and item processor from October 1996 to September 1998.  Prior to that, he served as Senior Vice President and Operations Manager of Norwest Bank Texas, N.A. from August 1988 to October 1996.

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

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

Charles A. Mausbach has been Executive Vice President-Western Division President since August 2001.  From March 1998 to August 2001 he was Senior Vice President - Southwestern Region President.  He served as President of Community First National Bank, Worthington, Minnesota from October 1992 to February 1998 and President of Community First National Bank, Windom, Minnesota from March 1991 to October 1992.  He began his banking career at the Company’s affiliate bank in Wahpeton, North Dakota and had a total of 18 years of banking experience prior to joining the Company.

Bradley J. Rasmus was appointed Executive Vice President and Division President in February 2003.  He was Senior Vice President – Community Financial Center President from February 2001 to February 2003.  Prior to that time, he was Senior Vice President - Financial Services from February 1999 to January 2001.  He was previously Vice President & Financial Services Sales Manager from 1995 to 1999.  From 1992 until 1995, he was Regional Vice President of Account Development for Richard Leahy Corporation, a financial services company.

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

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

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

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

ITEM 2.  PROPERTIES

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

15

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

ITEM 3.  LEGAL PROCEEDINGS

From time to time, the Company and its subsidiaries are subject to various legal actions and proceedings in the normal course of business, some of which may involve substantial claims for compensatory damages.  In some cases, these actions and proceedings relate in whole or in part to activities of banks prior to their acquisition and may be covered by agreements of former owners of these banks to indemnify the Company.  Although litigation is subject to many uncertainties and the ultimate exposure with respect to current matters cannot be ascertained, management does not believe that the final outcome will have a material adverse effect on the financial condition of the Company.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

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PART II

ITEM 5.MARKET FOR REGISTRANT’S COMMON EQUITY and RELATED STOCKHOLDER MATTERS

MARKET FOR REGISTRANT’S COMMON EQUITY

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

ITEM 6.  SELECTED FINANCIAL DATA

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

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

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

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ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information set forth on pages 11 through 22 of the “Financial Review” section of the 2003 Annual Report under the captions “Management’s Discussion and Analysis - Results of Operations, Financial Condition and Asset and Liability Management” is incorporated herein by reference, and attached hereto as Exhibit 13.1.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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

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

None.

ITEM 9A.  CONTROLS AND PROCEDURES

The Company, with the participation of management, including the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), evaluated the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this report. Disclosure controls and procedures are designed to provide a reasonable level of assurance that information required to be disclosed in the Company’s reports under the Securities and Exchange Act of 1934 is recorded and reported within the appropriate time periods. Based upon that review, the CEO and CFO concluded that the Company’ s disclosure controls and procedures are effective. During the period covered by this report, there have been no changes in internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

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

The information set forth in the Proxy Statement for the Annual Meeting of Stockholders to be held on April 20, 2004, under the caption “Corporate Governance and Board Matters — Code of Ethics and Business Conduct” is incorporated herein by reference, and the Code of Ethics and Business Conduct is attached hereto as Exhibit 14.1.

ITEM 11.  EXECUTIVE COMPENSATION

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

ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

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

EQUITY COMPENSATION PLAN INFORMATION

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

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

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

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ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

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

ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

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

PART IV

ITEM 15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

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

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

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

3.PRO FORMA FINANCIAL INFORMATION.  None.

(b)REPORTS ON FORM 8-K.

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

•On October 16, 2003, the Company furnished a Current Report under Item 12 on Form 8-K related to its press release dated October 16, 2003 announcing the Company’s financial results for the quarter ended September 30, 2003.

•On October 21, 2003, the Company filed a Current Report under Item 11 on Form 8-K related to the Notice of Termination provided to the Company’s employees that the black out period under the Company’s 401(k) Retirement Plan terminated on October 21, 2003.

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

•On December 3, 2003, the Company filed a Current Report under Item 5 on Form 8-K related to a press release dated December 3, 2003 reporting the resignation of Dennis Mathisen from the Board of Directors of the Company.

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(c)EXHIBITS.

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

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

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

22

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

23

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

* Executive compensation plans and arrangements.

24

SIGNATURES

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

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

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

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

25

EX-10.1

Exhibit 10.1

2003

Community First

Corporate

Annual Incentive Plan

2003 Corporate AIP

Table of Contents

Cover

Balanced Scorecard Detail

Attachments:

Internal Award Calculation

Balanced Scorecard Calculation Example

2

TO:


FROM:

RE:

DATE: Senior Management
Corporate Vice Presidents

Mark A. Anderson

2003 Annual Incentive Plan

February 18, 2003

It is a new year; a new opportunity to prove our performance.  As Wayne Gretzky said, ‘You’re only as good as your last shift on the ice.”  We have completed the first 10% of 2003 and if we want to make 2003 as successful as 2002, to achieve and exceed our plan objectives, and continue to prove to the world that we have a truly special company, we must focus on our contributions to the success of the Community First team.

“Improving Lives Through Financial Solutions”

Do you believe it?

Do you support it?

How do you help improve lives?

You are part of the Community First future and that future starts today.  We are determined to be the best Community First we can be and you are a critical part of our success and the success of our strategic initiatives.  We believe that we can be a top financial performer in the industry, an employer of choice, and can improve our client’s lives.  On behalf of the Board of Directors of Community First Bankshares, Inc., I invite you to affirm your commitment to our future, our success, and our Mission/Vision/Values and participate in the 2003 Annual Incentive Plan.

One year ago, as we launched the 2002 plan following very attractive 2001 incentive awards, I took a very bold stand in suggesting the 2002 awards would be the largest to date.  That prophecy was realized.  Today, we have the opportunity to continue that direction.

I challenge you to commit yourself also to understanding the components of the plan, why they are important and how you can contribute.

Best wishes for 2003.  Let’s make it a team win that will make it a success for us all.

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Introduction

As we approach 2003 with new challenges and opportunities by offering our customers quality financial services, it is important that our compensation package rewards outstanding performance in meeting our sales, financial and credit quality goals.

Plan Objectives

The Annual Incentive Plan (AIP), has been designed to motivate superior performance and create additional shareholder value.

Administrative Guidelines

Eligibility Requirements - - All Community First designated Vice Presidents, Senior Vice Presidents, Executive Vice Presidents, COO & CEO are eligible for the Corporate AIP.

Award Potential - There is no cap on the amount of AIP you are eligible to earn.  AIP is determined as a percent of your year-end annual salary.  This award is based on achievement of all designated measures.

Incentive Payment Schedule - The AIP will be calculated and paid at the end of each plan year, and is typically paid with the first full pay period in March of the year following the incentive period.  The AIP plan year is defined as CFB’s fiscal year, which is also the calendar year.

Communication – AIP progress will be tracked and reported quarterly using actual data where available and providing estimates on all others.  You are encouraged to track the measures on an on-going basis.

New Hires - - Employees hired into eligible positions between January 1 and June 30 of the plan year are eligible for the plan and may receive a pro-rata award.  For example: someone hired in May will be paid for seven months of earned incentive.  Employees hired after June 30 may be eligible to participate in the plan and receive a pro-rata award at the discretion of President/CEO and Director of Human Resources.

Promotions - Employees promoted into AIP eligible positions would be covered under the same provisions as a new hire.

Voluntary Resignation, Involuntary Resignation or Termination prior to the end of the plan year – Potential incentive payment is forfeited.

Voluntary Demotion – Payment may be made at the discretion and approval of the President/CEO and Director of Human Resources.

Transfers – If the employee transfers out of an eligible position, an award may be pro-rated.  If an employee transfers to a different size location, the AIP calculation will be pro-rated to reflect the appropriate time worked in each location during the plan year.

Medical or Unpaid Medical Leave of Absence – Will be reviewed on a case by case basis.

Overall Performance Requirements – To emphasize that achievement of the incentive plan goals must not come at the expense of other responsibilities, no incentive awards will be made to participants whose overall performance for the year receives a rating of less than “Meets Expectations”.

Periodic Review – Periodically the effectiveness of the plan will be reviewed to assure the plan supports CFB’s strategic direction.  Each year the plan will be reviewed to determine participant eligibility and whether it will be continued for the next fiscal year.

Reserved Right - - Community First reserves the right to change any and all terms of the Corporate Annual Incentive Plan, up to and including termination of the plan, at any time.

4

2003 Annual Incentive Plan (AIP)

Plan Design

I.  Group	Target Incentive		Maximum
CEO	50	%	100	%
Vice Chairman/COO	40	%	80	%
Division Presidents Chief Financial Officer Chief Investment Officer CIO/Pres. of CFTI Credit Officer SVP/Human Resources	30	%	60	%
All other SVP’s	25	%	50	%
VP’s	15	%	30	%

II.  AIP Split (50% Internal/50% External)	Target Incentive		Internal		External
A.	50	%	25.0	%	25.0	%
B.	40	%	20.0	%	20.0	%
C.	30	%	15.0	%	15.0	%
D.	25	%	12.5	%	12.5	%
E.	15	%	7.5	%	7.5	%

III.  Balanced Scorecard Split	AIP		Balanced Scorecard		Total Incentive
Division Presidents	50	%	50	%	100	%
All Other	75	%	25	%	100	%

For Division and CFC Presidents, the Corporate AIP represents 50% of their Incentive Plan structure.  The other 50% will be determined based upon the Balanced Scorecard approach.  The Balanced Scorecard is the annual incentive plan we use for our Bank Presidents/Branch Managers (our Sales Management Group).   For all other Corporate participants, the AIP represents 75% of their incentive and 25% is driven by the Balanced Scorecard.

Balanced Scorecard – Target Incentive
Group	Target Incentive
1 % 2	100	%
3	75	%
4	60	%
5	50	%

5

EXTERNAL AWARD CALCULATION

Compares CFB performance in 2002 on Return on Equity (ROE) and Total Shareholder Return (TSR) to SNL peer group (30 banks).

Percentile	85th or higher	100	%	150	%	200	%
ROE	50th*	50	%	100	%	150	%
	49th or lower	0	%	50	%	100	%
		49th or lower		50th	*	85th or higher

Percentile TSR

*Award will be prorated from 50^th % to 85^th %.

External award calculation:

			% of Salary at Performance Level
	Target		50%		100%		150%		200%
I	25.00	%	12.50	%	25.00	%	37.50	%	50.00	%
II	20.00	%	10.00	%	20.00	%	30.00	%	40.00	%
III	15.00	%	7.50	%	15.00	%	22.50	%	30.00	%
IV	12.50	%	6.25	%	12.50	%	18.75	%	25.00	%
V	7.50	%	3.75	%	7.50	%	11.25	%	15.00	%

The Selected Peer Group reflects our selection of the 29 other institutions most like the subject institution to be used as a peer group in comparing relative compensation levels. The automated process searches in sequence for:

1.  Banks in the same state within 40% of total assets.

2.  Banks in the same region within 40% of total assets.

3.  Banks in the same state within 80% of total assets.

4.  Banks in the same region within 80% of total assets.

5.  Any bank within 40% of total assets.

6.  Any bank within 80% of total assets.

7.  Banks closest in asset size.

If at any point in the sequence 29 banks are found, the sequence stops and those banks form the Selected Peer Group.  If step six is reached and there are still not 29 other banks, the banks closest in asset size any where in the country are chosen to round out the peer group.

6

A Message from Mark Anderson (Balanced Scorecard)

Greetings Team!!!!!

As we complete 2002, we realize the second complete year utilizing the Balanced Scorecard.  What is the assessment after nearly two years of use?  The Balanced Scorecard continues to have an increasing impact on performance and actions, and we made tremendous progress across the board in the Scorecard components.  During the initial year of usage, we learned a great deal about the scorecard and as a result, we made some very important enhancements to it for 2002.  Our interest in a meaningful scorecard and desire to “listen to you”, led to a few additional modifications during the year in the form of a “retroactive mid-year correction”.  This is a terrific tool and measurement vehicle for all of us and the improvement in our Balanced Scorecard totals have been very impressive.

Not content to stay the same, we assembled all the feedback, questions and concerns from you.  This led to a tremendous series of discussions and debates about every aspect of the scorecard that resulted in:

•A reaffirmation of our support of the scorecard,

•Sweeping modifications for 2003, and

•Groundwork for additional change in 2004.

The attached material will present the 2003 Balanced Scorecard.  Among the highlights:

Removed from Scorecard

•      Investment Income to Plan

•      Loan Fees to Plan

•      Campaign Performance

•      New Customer Cross-Sell

Added to Scorecard

•Penetration (OPB, OBB & Debit Card)

•Net Revenue Growth

Why did we drop these four measures?

•Investment income and loan fees are also critical components of Net Revenues/FTE and Non-Interest Income/FTE.  This levels the playing field across markets and the 90-day plans will still tie to profit plan levels for each category, while we emphasize total fee income growth.

•Campaign performance has been removed since we have elected to change our approach to campaigns.  Our new approach will tie closely to promotion areas, 90-day plans and the new scorecard.

•New customer cross-sell – Frankly, we would like to have retained this measure and believe that we may have this (or a better measure) as a scorecard component in the future with more accurate data and less need to manually test the system.  Keep emphasizing new customer solutions and additional products.

7

Why did we add two new measures?

•Growth/Penetration – Alternative channels are critical relationship builders.  With the explosive growth of OPB (Online Personal Banking), OBB (Online Business Banking) and debit card usage, we have shown the importance of these approaches to transactions by our clients.  As an interesting note, since our debit card information does not provide easily available location by location information, this is a team goal.  All Community First banks will work together, drive penetration and success, and receive the same score.

•Net Revenue Growth – This is a very important change that emphasizes growing our business, whether it is with new or existing clients.  Put simply, we must realize growth, and the earlier scorecard did not have an ideal reward for growth.

The list of enhancements continues.  Our scaling has been changed in a way that provides narrower bank scoring which will result in more accurate scores.  We added a bonus point feature to the credit component.  The weights of the components of the scorecard were reviewed and changed as appropriate given our 2003 focus.

Finally, in conjunction with our analysis of the scorecard, there was a very strong consensus that in the future, the next generation of the Balanced Scorecard will become more balanced.  How do we do that?  The inclusion of an employee component and a client component appear to be appropriate.  For 2003, we will work on developing a “below the line” (that is to say, we will develop a score but it will not factor into the 2003 scorecard) baseline for client and employee.  Our objective is to include those in the Balanced Scorecard in 2004 or 2005.

We are very excited and hope you share the enthusiasm.  There are great opportunities in Community First and the excellent progress over the past few years provides an excellent leverage point.  Thank you for proving the importance of the Scorecard.

All the best,

Mark Anderson, CFA

President and Chief Executive Officer

8

Balanced Scorecard Performance Measures

There are six measurement factors included in the AIP plus two “below the line” measures.   Our six weighted measures are:

1.Number of sales per FTE per week

2.Net Controllable Revenue per FTE

3.Controllable Non-interest Income per FTE

4.Net Controllable Revenue Growth

5.Credit Goal Scoring

6.Growth/Penetration

2003 brings increased focus on two key areas of our success: our people and our customers.  For the first time, we’ll be including measures for each of those areas, providing feedback and building benchmarks for future planning.  Ultimately a determination will be made as to which of these, if any will be integrated in to future scorecard measures.

These two measures have no weighting in 2003 and will not affect scorecard awards.

In addition to these measures, the bank’s performance against profit plan is an important indicator of success and is included in the AIP.  The profit plan is based on historical performance but is designed to drive higher level performance.

If the RFC/CFC’s actual performance is less than 90% of profit plan, unless a ROE of 30% is achieved, no AIP will be awarded.  Where actual performance exceeds the profit plan, a higher AIP will be paid to reward Presidents/Managers.

Those employees who establish aggressive profit plans, with higher levels of performance over the previous year, and exceed those plans, will receive a bonus incentive.

Calculating the Balanced Scorecard AIP Award

•Each of the measures are based on actual performance and multiplied by the weight assigned to each.  These weighted scores are added to obtain the Balanced Scorecard Points.  Bonus points have been added to all of the measures.  This will allow rewards for performance above and beyond expectations.  Also, a special bonus is included on Sales/FTE/Week measure.  Locations that have a 20% increase over their 2002 average will move into the next higher level.  This will reward substantial growth performance.

•The bank’s actual Performance vs. Profit Plan is then computed.  If it is less than 90%, unless the specified ROE is achieved, no AIP will be awarded.

•The Balanced Scorecard Performance Points number is computed by multiplying the Total Performance Points in Part A by the Bank’s Performance vs. Profit Plan from Part B.  This provides for a higher incentive when the bank’s performance exceeds plan.

•The Target Incentive for each bank is based on a grid showing the bank’s Net Controllable Revenue per FTE vs. Annualized Pretax Adjusted Earnings.  This target incentive takes into account bank earnings and efficiency, rewarding banks that achieve higher earnings and greater efficiency.

•The Base Balanced Incentive is computed by multiplying the Target Incentive (D) by the Balance Performance Index (C).  This is the percent of base salary to be paid as the AIP.

•A Bonus Incentive is added to the AIP if the bank’s Balanced Scorecard Points (A) are greater than 50 and the bank’s performance vs. profit plan exceeds 100%.  The bonus incentive is based on a

9

schedule reflecting the percentage increase in the 2003 Profit Plan pre-tax adjusted earnings over the 2002 actual pre-tax adjusted earnings.  This is intended to provide higher rewards for Presidents/Managers who set aggressive plans and exceed them.

•The Total Balance Incentive Percentage equals the Base Balanced Incentive plus the Bonus Incentive, if applicable.  This is the total percentage of the Bank President/Managers salary to be paid out as the AIP.

The following pages illustrate how the Balanced Scorecard AIP scoring and calculations are determined:

1.Performance Measure Definitions

2.2003 Qualifying Products

3.Performance Measure Schedule that shows the assigned goal and scoring tiers

10

2003 CFB Balanced Scorecard

Regional Financial Centers/Community Financial Centers

Performance Measurement Definitions – Presidents/Managers

1.  Number of Sales/FTE/Week
	Sales	= # of qualifying products sold.  A list of qualifying products is included (see page 10).
	FTE	= Full-time equivalents, on an actual hours worked basis, as reported on the Ceridian Payroll System.  The calculation for incentive purposes will use the monthly FTE: •      All Bank and Investment Employees •      .60 Trust •      .30 Insurance
	Week	= # of weeks in the period being reported.  This will be adjusted for the exact number of days in the period.
	The calculation for incentive purposes will be based on Quarterly performance divided by four quarters for the year.
*Special Credit: a 20% increase over same quarter 2002 average will allow a move to the next higher payout level.
2.  Net Controllable Revenue/FTE
	Net Controllable Revenue			= (Net Interest Income + Total Non-interest Income (including loan fees+JV Soft Dollar fees) - Security Gains - BOLI Benefit - Undistributed Income from subsidiaries).
	FTE			= Full-time equivalents, on an actual hours worked basis, as reported on the Ceridian Payroll System.  The calculation for incentive purposes will use the monthly FTE: •      All Bank and Investment Employees •      .60 Trust •      .30 Insurance
	The calculation will be based on year-to-date annualized performance.
3.  Controllable NII/FTE
	NII	= (Total Non-Interest Income (incl. loan fees+JV Soft Dollar fees) - Security Gain - BOLI Benefit - Undistributed Income)
	FTE	= Full-time equivalents, on an actual hours worked basis, as reported on the Ceridian Payroll System.  The calculation for incentive purposes will use the monthly FTE: •      All Bank and Investment Employees •      .60 Trust •      .30 Insurance
	The calculation will be based on year-to-date annualized performance.
4.  Net Controllable Revenue Growth
	Net Controllable Revenue		= (Net Interest Income + Total Non-interest Income (incl. loan fees+JV Soft Dollar fees) - Security Gains - BOLI Benefit - Undistributed Income from subsidiaries).

11

5.  Credit Measurements
	Credit Goal Scoring	= This is the Credit Goal Score as reported in the Credit Goal Report prepared by Loan Accounting.
6.  Growth/Penetration
	On-line Personal Banking		= # of new enrollees
	On-line Business Banking		= # of new enrollees
	Debit Card Penetration		= # increased transactions
STUDY MEASURES
1.  People Index
	Voluntary Turnover
	Employees who choose to leave employment with Community First.  Reasons will typically include:  new job, working conditions, pay or other personal reasons.  This will be reported monthly with an annual roll-up.
	Employee Engagement
	There will be an employee satisfaction survey conducted across the company once during 2003.  An average of all responses will be reported as well as an average for each location and/or department.
2.  2003 Customer Performance Indicators
	Annual Customer Telephone Survey
	Customers across Community first will be surveyed to assess industry-accepted drivers of customer engagement.  Each Branch/Market will receive a benchmark score.  It is anticipated this survey will be conducted in second quarter.
	Percentage of Single Service Households
	Single Service Households represent significant opportunities to grow existing customer relationships.  By Branch, this percentage will be reported with the monthly Scorecard.  This number will be compared to the 2002 year-end benchmark.
	Total Household Cross-Sell
	The number of accounts held by a household directly correlates to customer retention, loyalty, and profitability.  By Branch, this number comprised of both personal and business households will be reported with the monthly Scorecard.
	New Customer Household Cross-Sell
	The number of accounts sold to new customer households directly correlates to the Branch sales process.  By Branch, this number comprised of both personal and business households will be reported with the monthly Scorecard.
Other Definitions
	Pretax Adjusted Earnings = income b/4 tax + corp directed training + corp directed advertising + CFSC data processing + goodwill + intangibles + mgmt fee - undistributed income from subsidiaries - securities gains

12

2003 CFB Balanced Scorecard

Regional Financial Centers/Community Financial Centers

2003 Qualifying Products for Sales Measurements

(Changes from 2002 highlighted in blue)

Number of Sales/FTE/Week

Qualifying New Products	Source
1.     Checking (Retail, Business, and Public)	1.     ITI
2.     Savings (Retail, Business, and Public)	2.     ITI
3.     Certificate of Deposit (Retail, Business, and Public)	3.     ITI
4.     Retirement Accounts (Savings and Certificates)	4.     ITI
5.     Loans/Lines	5.     ITI
•     Consumer loans
•     Ready Credit
•     Mortgage (non-CFM)
•     Home Equity Loans & Lines
•     Agricultural
•     Commercial
•     Tax Exempt Loans
•     Commercial Revolving Credit
•     Letters of Credit
•     Direct Leases
6.     ATM Card	6.     ITI
7.     Debit Card	7.     ITI
8.     Safe Deposit Box	8.     ITI
9.     Payment Protection (CGLI)	9.     ITI
•     Single Life  (1 sale)
•     Joint Life  (2 sales)
•     Disability (1 sale)
•     Single Life/Disability  (2 sales)
•     Joint Life/Disability  (3 sales)
9.     Elan Credit Card*	9.     Elan Report
•     Consumer
•     Merchant
10.   Investments*	10.   Primevest File*
•      Network Trades
11.   Online Banking	11.   Corillian File
12.   Online Bill Pay	12.   Corillian File
13.   Online Business Banking*	13.   H&S File*
14.   Insurance Policies*	14.   Insurance File*
•      New Property & Casualty Policies/Endorsements
15.   Wealth Management *	15.   Wealth Mgmt File*
16.   Community First Mortgage*	16.   Wells Fargo File*
Products NOT Qualifying:
1.     Commercial Floor Plans
2.     Indirect Loans
3.     New non-Property & Casualty Insurance Policies/Endorsements
4.     Renewal Insurance Policies
5.     Investment Direct Trades
6.     Checking and Savings account upgrades
7.     Loan and certificates automatically renewed

*In development

13

2003 CFB Balanced Scorecard

Performance Measurement Schedule

(Changes made from the 2002 scorecard to the 2003 scorecard are highlighted in blue.)

Measure	Weighting		Payout Scale			Score	Bonus Points
Sales/FTE/Week	15.0	%	3.00			10.00	Add 1 point for each .05 increment above 5.25
			3.25			20.00
			3.50			30.00
			3.75			40.00
			4.00			50.00
			4.25			60.00
			4.50			70.00
			4.75			80.00
			5.00			90.00
			5.25			100.00
Net Controllable Revenue/FTE	20.0	%	$	200,000		10.00	Add 1 point for each $1,000 increment over $272,000
			$	208,000		20.00
			$	216,000		30.00
			$	224,000		40.00
			$	232,000		50.00
			$	240,000		60.00
			$	248,000		70.00
			$	256,000		80.00
			$	264,000		90.00
			$	272,000		100.00
Controllable NII/FTE	20.0	%	$	45,000		10.00	Add 1 point for each $1,000 increment over $62,100
			$	46,900		20.00
			$	48,800		30.00
			$	50,700		40.00
			$	52,600		50.00
			$	54,500		60.00
			$	56,400		70.00
			$	58,300		80.00
			$	60,200		90.00
			$	62,100		100.00
Net Controllable Revenue $ Growth	20.0	%	2.0		%	10.00	Add 1 point for each .1% increment above 8.0%
			2.7		%	20.00
			3.3		%	30.00
			4.0		%	40.00
			4.7		%	50.00
			5.4		%	60.00
			6.0		%	70.00
			6.7		%	80.00
			7.4		%	90.00
			8.0		%	100.00

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Credit Goal Score	15.0	%	3.5	10.00	Add 1 point for each .05 increment below 2.0
			3.3	20.00
			3.2	30.00
			3.0	40.00
			2.8	50.00
			2.7	60.00
			2.5	70.00
			2.3	80.00
			2.1	90.00
			2.0	100.00
Online Personal Banking [# new enrollees]	3	%	4,000	10.00	Add 1 point for each 100 increment over 13,000
			5,000	20.00
			6,000	30.00
			7,000	40.00
			8,000	50.00
			9,000	60.00
			10,000	70.00
			11,000	80.00
			12,000	90.00
			13,000	100.00
Online Business Banking [# new enrollees]	3	%	750	10.00	Add 1 point for each 30 increment over 3,000
			1,000	20.00
			1,250	30.00
			1,500	40.00
			1,750	50.00
			2,000	60.00
			2,250	70.00
			2,500	80.00
			2,750	90.00
			3,000	100.00
Debit Card Penetration [# increased transactions]	4	%	1,700,000	10.00	Add 1 point for each 20,000 increment over 2,825,000
			1,825,000	20.00
			1,950,000	30.00
			2,075,000	40.00
			2,200,000	50.00
			2,325,000	60.00
			2,450,000	70.00
			2,575,000	80.00
			2,700,000	90.00
			2,825,000	100.00

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EX-10.10(5)

Exhibit 10.10(5)

Execution Copy

SIXTH AMENDMENT TO CREDIT AGREEMENT

This SIXTH AMENDMENT TO CREDIT AGREEMENT (this “Amendment”), made and entered into as of October 30, 2003, is by and among Community First Bankshares, Inc., a Delaware corporation (the “Borrower”), U.S. Bank National Association, a national banking association, as agent (in such capacity, the “Agent”) for certain banks (the “Banks”) party to the Credit Agreement (as defined below), and the Banks.

RECITALS

1.The Borrower, the Agent and the Banks entered into a Credit Agreement dated as of October 30, 1998 as amended by a First Amendment dated as of October 27, 1999, a Second Amendment dated as of November 21, 2000, a Third Amendment dated as of October 26, 2001, a Fourth Amendment dated as of April 23, 2002 and Fifth Amendment dated as of November 25, 2002 (as amended, the “Credit Agreement”); and

2.The Borrower desires to amend certain provisions of the Credit Agreement, and the Agent and the Banks have agreed to make such amendments, subject to the terms and conditions set forth in this Amendment.

AGREEMENT

NOW, THEREFORE, for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto hereby covenant and agree to be bound as follows:

Section 1.Capitalized Terms.  Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to them in the Credit Agreement, unless the context shall otherwise require.

Section 2.Amendments.

2.1The definition of “Revolving Commitment Ending Date” contained in Section 1.1 of the Credit Agreement is hereby amended in its entirety to read as follows:

“Revolving Commitment Ending Date”:  October 26, 2004.

2.2Schedule 4.19 to the Credit Agreement is hereby amended to read in its entirety as Exhibit A to this Amendment, which is made a part of the Credit Agreement as Schedule 4.19 thereto.

Section 3.Effectiveness of Amendments.  The amendments contained in this Amendment shall become effective as of October 26, 2003 upon delivery by the Borrower of, and compliance by the Borrower with, the following:

3.1This Amendment, duly executed by the Borrower.

3.2A copy of the resolutions of the Board of Directors of the Borrower authorizing the execution, delivery and performance of this Amendment certified as true and accurate by its Secretary or Assistant Secretary, along with a certification by such Secretary or Assistant Secretary (i) certifying that there has been no amendment to the Articles of Incorporation or Bylaws of the Borrower since true and accurate copies of the same were delivered to the Agent with a certificate of the Secretary of the Borrower dated October 30, 1998, and (ii) identifying each officer of the Borrower authorized to execute this Amendment and any other instrument or agreement executed by the Borrower in connection with this Amendment (collectively, the “Amendment Documents”), and certifying as to specimens of such officer’s signature and such officer’s incumbency in such offices as such officer holds.

3.3A consent letter executed by Wells Fargo Bank, N.A., consenting to the delivery and execution of this Amendment.

3.4Certified copies of all documents evidencing any necessary corporate action, consent or governmental or regulatory approval (if any) with respect to this Amendment.

3.5The Borrower shall have satisfied such other conditions as specified by the Agent and the Banks, including payment of all unpaid legal fees and expenses incurred by the Agent through the date of this Amendment in connection with the Credit Agreement and the Amendment Documents.

Section 4.Representations, Warranties. Authority, No Adverse Claim.

4.1Reassertion of Representations and Warranties, No Default.  The Borrower hereby represents that on and as of the date hereof and after giving effect to this Amendment (a) all of the representations and warranties contained in the Credit Agreement are true, correct and complete in all respects as of the date hereof as though made on and as of such date, except for changes permitted by the terms of the Credit Agreement, and (b) there will exist no Default or Event of Default under the Credit Agreement as amended by this Amendment on such date which has not been waived by the Agent and the Banks.

4.2Authority, No Conflict, No Consent Required. The Borrower represents and warrants that the Borrower has the power and legal right and authority to enter into the Amendment Documents and has duly authorized as appropriate the execution and delivery of the Amendment Documents and other agreements and documents executed and delivered by the Borrower in connection herewith or therewith by proper corporate action, and none of the Amendment Documents nor the agreements contained herein or therein contravenes or constitutes a default under any agreement, instrument or indenture to which the Borrower is a party or a signatory or a provision of the Borrower’s Articles of Incorporation, Bylaws or any other agreement or requirement of law, or result in the

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imposition of any Lien on any of its property under any agreement binding on or applicable to the Borrower or any of its property except, if any, in favor of the Agent.  The Borrower represents and warrants that no consent, approval or authorization of or registration or declaration with any Person, including but not limited to any governmental authority, is required in connection with the execution and delivery by the Borrower of the Amendment Documents or other agreements and documents executed and delivered by the Borrower in connection therewith or the performance of obligations of the Borrower therein described, except for those which the Borrower has obtained or provided and as to which the Borrower has delivered certified copies of documents evidencing each such action to the Agent.

4.3No Adverse Claim.  The Borrower warrants, acknowledges and agrees that no events have taken place and no circumstances exist at the date hereof which would give the Borrower a basis to assert a defense, offset or counterclaim to any claim of the Agent or the Banks with respect to the Obligations.

Section 5.Affirmation of Credit Agreement, Further References.  The Agent, the Banks and the Borrower each acknowledge and affirm that the Credit Agreement, as hereby amended, is hereby ratified and confirmed in all respects and all terms, conditions and provisions of the Credit Agreement, except as amended by this Amendment, shall remain unmodified and in full force and effect.  All references in any document or instrument to the Credit Agreement are hereby amended and shall refer to the Credit Agreement as amended by this Amendment.

Section 6.Successors.  The Amendment Documents shall be binding upon the Borrower, the Agent and the Banks and their respective successors and assigns, and shall inure to the benefit of the Borrower, the Agent and the Banks and the successors and assigns of the Agent and the Banks.

Section 7.Legal Expenses.  As provided in Section 9.2 of the Credit Agreement, the Borrower agrees to reimburse the Agent, upon execution of this Amendment, for all reasonable out-of-pocket expenses (including attorney’ fees and legal expenses of Dorsey & Whitney LIP, counsel for the Agent) incurred in connection with the Credit Agreement, including in connection with the negotiation, preparation and execution of the Amendment Documents and all other documents negotiated, prepared and executed in connection with the Amendment Documents, and in enforcing the obligations of the Borrower under the Amendment Documents, and to pay and save the Agent and the Banks harmless from all liability for, any stamp or other taxes which may be payable with respect to the execution or delivery of the Amendment Documents, which obligations of the Borrower shall survive any termination of the Credit Agreement.

Section 8.Counterparts.  The Amendment Documents may be executed in several counterparts as deemed necessary or convenient, each of which, when so executed, shall be deemed an original, provided that all such counterparts shall be regarded as one and the same document, and either party to the Amendment Documents may execute any such agreement by executing a counterpart of such agreement.

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Section 9.Governing Law.  THE AMENDMENT DOCUMENTS SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF MINNESOTA, WITHOUT GIVING EFFECT TO CONFLICT OF LAW PRINCIPLES THEREOF, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS, THEIR HOLDING COMPANIES AND THEIR AFFILIATES.

Section 10.Merger and Integration, Superseding Effect.  This Amendment, from and after the date hereof, embodies the entire agreement and understanding between the parties hereto and supersedes and has merged into this Amendment all prior oral and written agreements on the same subjects by and between the parties hereto with the effect that this Amendment, shall control with respect to the specific subjects hereof and thereof.

Section 11.Headings.  The headings of various sections of this Amendment have been inserted for reference only and shall not be deemed to be a part of this Amendment.

Section 12.Severability.  Whenever possible, each provision of this Amendment and the other Amendment Documents and any other statement, instrument or transaction contemplated hereby or thereby or relating hereto or thereto shall be interpreted in such manner as to be effective, valid and enforceable under the applicable law of any jurisdiction, but, if any provision of this Amendment, the other Amendment Documents or any other statement, instrument or transaction contemplated hereby or thereby or relating hereto or thereto shall be held to be prohibited, invalid or unenforceable under the applicable law, such provision shall be ineffective in such jurisdiction only to the extent of such prohibition, invalidity or unenforceability, without invalidating or rendering unenforceable the remainder of such provision or the remaining provisions of this Amendment, the other Amendment Documents or any other statement, instrument or transaction contemplated hereby or thereby or relating hereto or thereto in such jurisdiction, or affecting the effectiveness, validity or enforceability of such provision in any other jurisdiction.

[THE REMAINDER OF THIS PAGE LEFT BLANK INTENTIONALLY.]

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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed as of the date and year first above written.

COMMUNITY FIRST BANKSHARES, INC.
By:	/s/ Thomas R. Anderson
Title:		Executive Vice President
U.S. BANK NATIONAL ASSOCIATION, as Agent and a Bank
By:
Title:		SVP

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 SCHEDULE 4.19 TO THE CREDIT AGREEMENT

AND EXHIBIT A TO THE SIXTH AMENDMENT TO THE CREDIT AGREEMENT

COMMUNITY FIRST BANKSHARES, INC.
SUBSIDIARIES

Subsidiary Bank:	Location	Ownership Percentage
Community First National Bank	Fargo, N.D.	100.00	%
Nonbank Subsidiaries
Community First Financial, Inc.	Fargo, ND	100.00	%
Community First Technologies, Inc.	Fargo, ND	100.00	%
Community First Properties, Inc.	Fargo, ND	100.00	%
CFB Capital III	Fargo, ND	100.00	%
CFB Capital IV	Fargo, ND	100.00	%
HBC Aviation, LLP	Fargo, ND	37.50	%
Subsidiaries of Subsidiaries (100% Owned):
Community First Insurance, Inc.	Fargo, ND	Subsidiary of Community First National Bank
CFB Community Development Corporation	Fargo, ND	Subsidiary of Community First National Bank
Equity Lending, Inc.	Fargo, ND	Subsidiary of Community First National Bank
Community First Holdings, Inc.	Georgetown, British Cayman Islands	Subsidiary of Community First National Bank
Community First Home Mortgage, Inc.	Fargo, ND	Subsidiary of Community First National Bank
Subsidiaries of Subsidiaries of Subsidiaries
Community First Insurance, Inc. Wyoming	Fargo, ND	100% Subsidiary of Community First Insurance, Inc.
CFIRE, Inc.	Fargo, ND	100% Subsidiary of Community First Holdings, Inc.
Community First Mortgage, LLC	Fargo, ND	50% Subsidiary of Community First Home Mortgage, Inc.

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EX-10.12

Exhibit 10.12

PLATINUM OVERDRAFT

MANAGEMENT AGREEMENT

FOR

COMMUNITY FIRST BANKSHARES

FARGO, NORTH DAKOTA

CERTAIN INFORMATION HAS BEEN DELETED FROM THIS EXHIBIT AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT UNDER RULE 24B-2.

PLATINUM OVERDRAFT^SM MANAGEMENT AGREEMENT

This Agreement dated to be effective as of the last date written below (the “Effective Date”), is between Alex Sheshunoff Management Services, L.P., a Texas limited partnership (“ASM”), whose principal offices are located at 2801 Via Fortuna, Suite 600, Austin, Texas 78746, and the financial institution identified as “Client” on the attached Detail Schedule.

1.BACKGROUND

1.1ASM offers a suite of services and products known generally as the Platinum Overdraft^SM Management Program (the “Program”) to financial institutions that offer deposit accounts.  Program services and products implement a deposit account overdraft coverage program, including financial projections and tracking services, recommendations on organizational structure and staffing, data processing systems and reporting services, operations policies and procedures, compliance guidance, training services, and overdraft collections management, implementing computer programs, and other management services, as more fully described below, and in a paper prepared by ASM relating to OCC Interpretive Letter #914, a copy of which has been previously provided to Client.

1.2Client desires to implement the Program, on the terms and conditions set out in this Agreement.

NOW THEREFORE, in consideration of the premises and the terms and conditions set forth below, ASM and Client hereby agree as follows.

2.DELIVERABLES

ASM will deliver to Client the services and products which comprise the Program, including:

a.Financial and operational projection and planning, including estimates of incremental pre-tax profit from implementing the Program, and calculation of Client’s baseline (pre-Program) expense, revenue and profit figures for purposes of the fee calculations under this Agreement, in accordance with the definitions in Section 5 below.

b.Recommendations and implementation assistance on organizational structure, job descriptions and staffing for use of the Program.

c.Recommendations and implementation assistance on product definitions, account features and set-up for accounts covered by the Program.

d.Implementation assistance on use of the Program’s overdraft collections process, procedures and methods.

e.Computer hardware recommendations and installation of proprietary software for use as part of the Program (the "Program Software").  A separate Platinum Overdraft^SM Management Software Agreement, (the "Program Software License")

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a copy of which is attached as the Program Software License Schedule, governs the relationship of Client and ASM with respect to the Program Software.

f.Recommendations and implementation assistance on customer communication planning, activities, and budget.

g.Recommendations and implementation assistance on compliance standards, analysis and language.

h.Training and training materials on Program Software use and Program operations.

i.Recommendations as appropriate on further activities and “best practice” measures whole implementation enhance non-interest income opportunities.

j.Post-Implementation Period Support.  Post-Implementation Period Support is defined as:

•Daily conference calls during the first week of the implementation period.

•Weekly conference calls thereafter for a month.

•Monthly conference calls for the next 60 days.

•Access by phone, as needed, to the ASM Program Project Manager (defined below) to address questions or issues as they relate to Program.

•On-site assistance as jointly agreed to by both parties.

3.IMPLEMENTATION PERIOD

ASM shall begin the Program Implementation Period within 60 days after the Effective Date.  ASM projects a period of 16 weeks will be necessary to complete implementation of the overdraft management program, provided Client furnish sufficient resources for the implementation effort.  This includes Client’s time commitment to and performance of systems work and coordination of a number of functions, including collections, consumer lending, deposit operations, branch management, finance, compliance, audit, training, marketing, product management, human resources and customer service.  To that end:

a.Client and ASM shall each designate an individual who will have principal responsibility for managing initial Program implementation, including assuring that its respective responsibilities in implementing the Program are timely met (the “Program Project Managers”).

b.Client and ASM shall promptly schedule and hold a cross-functional team planning kickoff meeting, including the Program Project Managers, at Client’s offices.

c.Client and ASM shall promptly approve a detailed project plan and schedule developed by the Program Project Managers for initial Program implementation,

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and shall make all reasonable efforts to complete all implementation tasks within the approved schedule.

d.Client and ASM shall hold regular conference calls during the implementation period to conduct project status reviews, including but not limited to monthly conference calls including appropriate Client and ASM management and the Program Project Managers.

e.Client’s and ASM’s Program Project Managers shall confer at such other times as they may deem appropriate during the implementation period to assure necessary communication and coordination to complete implementation and resolve any issues arising in the implementation process.

f.Client shall promptly furnish, at its own cost, all computer and related equipment (including but not limited to workstations, servers, central processing units and peripherals) necessary for installation and operation of the Program Software for Program purposes.

g.Client and ASM shall prepare a list identifying the recommendations Client will put into effect during the operational phase of the Program.

h.ASM will deliver a written, dated completion notice, signed by the ASM Program Project Manager, to Client’s Program Project Manager when Client makes the Program available to its customers.  The date that Client makes the Program available to its customers shall serve as the “Operational Date.”  The completion notice shall also state the date on which the Start-Up Period (defined below) ends, and the date on which the Compensation Period (defined below) begins.

4.OPERATIONAL PERIOD

4.1Definitions:

•Operational Date:  The first day that Client makes the Program available to its customers.

•Operational Period:  The time from the Operational Date until Client ceases to use the Program to offer services to its customers.

•Start-Up Period:  The period of time between the Operational Date and the first day of the Compensation Period (defined below).  The Start-Up Period will begin on the Operational Date and end on the first day of the next calendar month after Client has operated the Program for a minimum of 120 days.  (For example, if the Operational Date is March 15, then the Start-Up Period will end on July 31).

•Compensation Period:  The period of time beginning on the first day of the first calendar month that begins 120 or more days after the Operational Date, and ending the number of months specified in the Detail Schedule as

4

the number of Compensation Months.  (For example, if the Operational Date is March 15, then the Compensation Period begins on August 1.)

4.2On the 120^th day of the Start-Up Period (or the next regular business day thereafter, if the 120^th day falls on a non-business day), the Program Project Managers and other representatives of Client and ASM, as they deem appropriate, shall conduct a final review meeting by conference telephone call to review Start-Up Period operations.

4.3Within 15 calendar days following the last day of each month during the Start-Up Period and the Compensation Period, Client shall deliver to ASM a complete copy of the monthly performance tracking report for that month (the “Monthly Report”).

4.4ASM shall provide post-implementation support for Client’s Program operations on an as-needed basis, as agreed upon by Client and ASM.

5.FEES AND EXPENSES

5.1Capitalized terms used in this Section 5 and not defined elsewhere in this Agreement shall have the following meanings:

•Actual Expenses:  The total of the following expenses, as applicable, attributed to operation of the Program in Covered Categories and actually incurred during the month in question, as approved by ASM.  No overhead will be included in Actual Expenses.

a.Charge-offs, less recoveries on overdrawn accounts older than 60 days, adjusted for charge-offs of existing overdraft balances over 60 days at Program commencement, but excluding accounts with deficit balances of 60 days or more at the beginning of the Compensation Period.

b.Mailing expenses and expenses for additional staff required for the Program operation which exceed Baseline Expenses.

c.Direct marketing expenses for Program Operation which exceed Baseline Expenses, as approved by Client and ASM.

d.A fraction of the Start-Up Costs and Reimbursables incurred in the Implementation Phase, whose numerator is 1 and whose denominator is the number of Compensation Months specified in the Detail Schedule.

e.Reimbursables invoiced by ASM in the month in question.

f.Other direct miscellaneous expenses ASM and Client agree upon.

•Actual Performance:  Actual Revenues for the month in question minus Actual Expenses for the month in question.

•Actual Revenues:  All Covered Category revenues during the month in question, less any waivers or refunds of fees.

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•Baseline Expenses:  The figure, developed by ASM and agreed to by Client on the basis of Client’s average monthly expenses attributable to Covered Categories preceding the Implementation Period, to serve as the monthly baseline for calculating Actual Expenses for the Covered Categories.  Client’s Chief Financial Officer is the only party authorized to approve the Baseline Expenses for Client.

•Baseline Performance:  Baseline Revenues minus Baseline Expenses.

•Baseline Revenues:  The figure, developed by ASM and agreed to by Client on the basis of Client’s revenues in Covered Categories, less any waivers or refunds of fees, during three years of operations preceding the Implementation Period, to serve as the monthly baseline for calculating Program Performance.  Should Client decide to raise its NSF fee, this figure shall be adjusted to accurately reflect the revenue increase generated by the higher fee.  Client’s Chief Financial Officer is the only party authorized to approve the Baseline Revenues for Client.

•Covered Category:  A category of non-interest income generated by Client’s operations (e.g., NSF and overdraft fee income) on which recommendations delivered by ASM and accepted by Client under this Agreement are applied as part of Program operations.

•Fee Percentage:  The Fee Percentage stated on the Detail Schedule for the month in question.

•Program Performance:  Actual Performance for the month in question minus Baseline Performance.

•Reimbursables:  ASM’s expenses for travel, lodging, meals and other reasonable and customary business expenses incurred in connection with rendering services to Client under this Agreement.  Client shall have the right, at its sole discretion, to refuse to pay any Reimbursables in the event Client believes they are unreasonable.

•Start-Up Costs:  Client’s one-time non-capital costs for operations and system changes made during the Implementation Phase to implement the Program, plus reasonable depreciation of computer equipment, non-Program Software licenses and other capital acquired to operate the Program, as agreed by Client and ASM.

5.2Client shall pay ASM a Program Implementation Period Fee for services rendered during the Program Implementation Period in the amount and according to the payment schedule stated in the Detail Schedule.

5.3No fees shall accrue or be payable with respect to the Start-Up Period.

5.4Client shall pay ASM a monthly fee calculated by multiplying Program Performance for the month in question times the applicable Fee Percentage.  If Program

6

Performance for the month in question is zero or less, then no fee shall accrue or be payable for that month.

5.5Upon execution of this Agreement, Client shall prepay to ASM the Fee Deposit specified in the Detail Schedule.  No interest shall accrue on the Fee Deposit.  Each month, ASM shall apply a portion of the Fee Deposit (“Month’s Deposit”) to the monthly fees as they become payable, until the full deposit amount has been applied.  The amount of each Month’s Deposit shall be equal to the amount of the Fee Deposit multiplied by a fraction whose numerator is 1 and whose denominator is the number of Compensation Months specified in the Detail Schedule.  If a Month’s Deposit exceeds the fee payable for that month, the excess shall be added to the next succeeding Month’s Deposit for application in the next succeeding month.  If aggregate fees accruing during the Compensation Period total less than the total Fee Deposit, ASM shall refund the difference to Client at the end of the Compensation Period.

5.6Fees for each month (net of the Month’s Deposit) shall be due and payable to ASM on or before the 20^th calendar day following the end of the month for which they accrue, together with the applicable Monthly Report Client is required to deliver to ASM under Section 4.3.  ASM will accept payment for fees either by check or wire transfer.

5.7Client shall pay all invoices from ASM for Reimbursables upon receipt.

6.CONFIDENTIALITY AND NONCOMPETITION

6.1ASM acknowledges that information disclosed by Client to enable ASM to implement the Program will include confidential and proprietary information.  All information which Client identifies to ASM as Client’s confidential and proprietary information at the time of disclosure will be deemed “Client’s Confidential Information” (unless the information is or becomes publicly available through no action of ASM).  ASM agrees not to disclose any part of Client’s Confidential Information to any third party, and not to use Client’s Confidential Information for any purpose other than performing ASM’s obligations under this Agreement.  On Client’s request at the termination or expiration of this Agreement, ASM will return all copies of Client’s Confidential Information to Client.  ASM shall not be in breach of its obligations under this Section 6 if it develops modifications to the Program in response to, based on or related to concepts ASM develops as a result of exposure to Client’s Confidential Information.

6.2Client acknowledges that terms extended by ASM to Client under this Agreement are confidential and valuable trade secrets of ASM.  Client agrees not to disclose any provisions of this Agreement to any third party.

6.3Client acknowledges that the Program is proprietary to ASM and its licensors, and includes confidential and proprietary information, including but not limited to the Program Software, methods and materials on promotion, collections, customer service, training, compliance, legal, organizational structure, staffing and peer overdraft financial comparisons, and is protected by copyright, trade secret and trademark law (“ASM’s Confidential Information”).  Client agrees not to disclose any part of ASM’s Confidential Information to any third party, and not to use ASM’s Confidential Information for any purpose other than for Client’s own business operations.  Client further agrees not to duplicate the Program materials

7

except as necessary for its operation of the Program in accordance with this Agreement, and that upon termination or expiration of this Agreement, Client will return all such materials to ASM.

6.4Each party acknowledges and agrees that its failure to comply with the confidentiality requirements and use restrictions set forth in this Section 6 will result in irreparable injury to the other party, and that the injured party shall be entitled to injunctive and other equitable relief without proof of damages.

6.5During the term of this Agreement, and for two years after this Agreement has expired or been terminated, Client shall not offer to another third party financial institution a program of account overdraft management or provide any services in connection with account overdraft management that would be competitive to ASM’s program other than pursuant to a license agreement with ASM.  This Section 6.5 shall not prohibit Client from providing account overdraft management services to its own customers following termination of this Agreement for any reason, except that Client shall continue to be obligated to compensate ASM under the terms of this agreement if Client continues to operate the Program during the Compensation Period.  Client may provide services to its own customers directly, or may enter into a service agreement with an alternative overdraft account management provider.  Client warrants that the term and extent of this Section 6.5 are reasonable.

7.REPRESENTATIONS, WARRANTIES, DISCLAIMERS

7.1ASM represents to Client that (a) it has reviewed compliance of the Program with applicable federal law and regulations, (b) it believes the Program complies with applicable federal law and regulations, and (c) it is not aware of any instance of a financial institution failing to comply with applicable federal law and regulations on account of its implementation of the Program.

7.2Client acknowledges that although ASM provides, as a part of the Program, information, recommendations and other consultation services on matters that may be subject to state and federal laws and regulations, ASM cannot give legal advice.  Client agrees that it will not rely on ASM to assure Client’s compliance with any applicable state or federal laws and regulations or other legal requirements (“Applicable Legal Requirements”).  Client further acknowledges that ASM has advised Client to obtain, and that Client agrees to obtain, its own legal counsel to assure that the Program, and its implementation and operation by Client, complies with all Applicable Legal Requirements.  Client’s adoption and effectuation of any recommendation or other Program element shall constitute Client’s warranty to ASM that Client has determined, with the assistance of necessary and appropriate legal counsel, that adoption and effectuation of the recommendations and other Program elements complies with all Applicable Legal Requirements.

7.3ASM DISCLAIMS ALL REPRESENTATIONS AND WARRANTIES, EXPRESS OR IMPLIED, EXCEPT AS EXPRESSLY STATED IN THIS AGREEMENT, INCLUDING ALL WARRANTIES OF FITNESS FOR A PARTICULAR PURPOSE OR MERCHANTABILITY.

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7.4ASM SHALL NOT BE LIABLE FOR ANY FAILURE OF THE PROGRAM OR OF CLIENT AND ITS IMPLEMENTATION OR OPERATION OF THE PROGRAM TO COMPLY WITH ANY APPLICABLE LEGAL REQUIREMENTS, NOR SHALL ASM BE LIABLE FOR ANY FAILURE OF THE PROGRAM OR ITS IMPLEMENTATION OR OPERATION TO PROVIDE ANY PARTICULAR RESULT.  IN NO EVENT SHALL ASM’s LIABILITY UNDER THIS AGREEMENT EXCEED THE FEES PAID BY CLIENT TO ASM HEREUNDER.  IN NO EVENT SHALL ASM BE LIABLE FOR ANY INDIRECT, CONSEQUENTIAL, INCIDENTAL, SPECIAL OR PUNITIVE DAMAGES.

8.TERM AND TERMINATION

8.1The term of this Agreement shall begin on the Effective Date and shall expire on the last day of the Operation Period, unless earlier terminated as permitted below.

8.2If either party commits a material, uncured breach of any of its obligations under this Agreement, then the other party may terminate this Agreement by written notice, provided that the terminating party has first given the breaching party written notice of the breach and a 30 day period within which to cure the breach.

8.3Except as provided below, on termination or expiration of this Agreement, Client’s license to use and implement the Program shall automatically terminate or expire.  If Client continues the Program Software License in force and effect, then Client may continue to use the Program, subject to the provisions of Sections 6 and 7, which shall survive termination or expiration of this Agreement.  Modifications to this Agreement, if any, specified as such in the Detail Schedule shall be deemed a part of this Agreement for all purposes, and shall supersede the provisions of the main body of this Agreement only to the extent specified in the Detail Schedule.

9.MISCELLANEOUS

9.1Client shall not recruit or hire any ASM employee who is or was assigned to perform services for Client under this Agreement without the prior written consent of the President or CEO of ASM until at least one (1) year after the expiration of the term of this Agreement.  If, with ASM’s written consent, Client hires any ASM employee who is or was assigned to perform services for Client under this Agreement, then client shall pay ASM $250,000 within 30 days of the date of such hiring, as a fee for the additional benefit obtained by Client.

9.2This Agreement shall be binding on the parties and on their respective successors and assigns.  Notwithstanding the foregoing, this Agreement is not assignable by either party, with the exception that ASM may assign it to a related implemented affiliate.  Any attempt to assign this Agreement despite the foregoing prohibition shall be void.

9.3The parties will attempt to settle any claim or controversy arising out of this Agreement through consultation and negotiation in good faith and a spirit of mutual cooperation.  Any arbitration shall take place in Travis County, Texas, if initiated by Client and in Fargo, North Dakota, if initiated by ASM.  Neither party may unreasonably withhold consent to the selection of a mediator.  The parties will share the costs of the mediation equally.  Any dispute which the

9

parties cannot resolve through negotiation or mediation within 45 days of the date of the initial demand for it by one of the parties may then be submitted to the courts for resolution as provided below.  The use of mediation will not be construed under the doctrine of laches, waiver or estoppel or affect adversely the judicial proceedings if (a) good faith efforts to resolve the dispute under these procedures have been unsuccessful or (b) interim relief from a court is necessary to prevent serious and irreparable injury.

9.4This Agreement shall be governed by and construed in accordance with the laws of the State of Texas, excluding its conflicts of laws provisions if any matter is originated by Client.  If any matter is originated by ASM, this agreement shall be governed by and construed in accordance with the laws of the State of North Dakota, excluding its conflicts of laws provisions.  Jurisdiction and venue for any matter shall be in the federal and state courts sitting in Travis County, Texas, if initiated by Client and in Fargo, North Dakota, if initiated by ASM.

9.5The failure of either party to enforce its rights under this Agreement at any time for any period shall not be construed as a waiver of such rights.  If any provision of this Agreement is determined to be illegal or unenforceable, that provision will be limited or eliminated to the minimum extent necessary so that this Agreement shall otherwise remain in full force and effect and enforceable.  Headings herein are for convenience of reference only and shall in no way affect interpretation of the Agreement.

9.6Neither party shall have liability or be deemed in breach of this Agreement because of an act or omission resulting from an event beyond the party’s reasonable control, including but not limited to acts of God, acts or omissions of Internet providers, the Internet, equipment failure of parties or their affiliates, acts or omissions of communication carriers or suppliers, or natural disasters.

9.7Neither party has the right or authority to, and shall not assume or create any obligation of any nature whatsoever on behalf of the other party or bind the other party in any respect whatsoever.

9.8Notices shall be deemed given:  (a) when delivered personally; (b) when sent via facsimile (and confirmed by delivery of the actual document by U.S. mail or commercial express courier); (c) 3 days after deposit in the U.S. Mail, registered or certified mail, return receipt requested, postage prepaid; or (d) 1 business day after deposit with a commercial express courier for next business day delivery, with written verification of receipt.  All communications will be sent to the addresses set forth on the cover sheet of this Agreement or such other address as may be designated by a party by giving written notice to the other party pursuant to this paragraph.

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EXECUTED by the parties to effective as of the last date written below.

ALEX SHESHUNOFF MANAGEMENT SERVICES, L.P.				Client:  COMMUNITY FIRST BANKSHARES FARGO, NORTH DAKOTA
By:	/s/ David W. Furnace			By:	/s/ Dan M. Fisher
	Name:		David W. Furnace		Name:		Dan M. Fisher
	Title:		Managing Director		Title:		CIO
Date:		10/8/03		Date:		9/30/03

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CERTAIN INFORMATION HAS BEEN DELETED FROM THIS EXHIBIT AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT UNDER RULE 24B-2.

PLATINUM OVERDRAFT^SM MANAGEMENT AGREEMENT

Detail Schedule

Client			Community First Bankshares
Type of financial institution and jurisdiction under whose laws formed			National Bank Primary Regulator:  Office of the Comptroller of the Currency
Address of Client’s principal offices			520 Main Avenue Fargo, ND  58124
Agreement Effective Date			September 26, 2003
Compensation Months (§§4.1, 5.1d and 5.5)			24 months
Program Implementation Period Fee (§5.2)		Amount	[***]
		Payment Schedule	N/A
Fee Deposit amount (§5.5)			[***]
Fee Percentage (§§5.1 and 5.5)	Months 1 through 12		[***]
	Months 13 through 24		[***]
	Months 25 through 36		N/A
Modifications to Agreement			N/A

EX-10.13

Exhibit 10.13

COMMUNITY FIRST BANKSHARES, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
(2004 Restatement)

COMMUNITY FIRST BANKSHARES, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
(2004 Restatement)

TABLE OF CONTENTS

SECTION 1.	INTRODUCTION AND DEFINITIONS
	1.1.	Restatement of Plan
	1.2.	Definitions
		1.2.1.	Account
		1.2.2.	Affiliate
		1.2.3.	Annual Valuation Date
		1.2.4.	Base Compensation
		1.2.5.	Beneficiary
		1.2.6.	Board of Directors or Board
		1.2.7.	CEO
		1.2.8.	Change of Control
		1.2.9.	Code
		1.2.10.	Committee
		1.2.11.	Disability
		1.2.12.	Effective Date
		1.2.13.	Employer
		1.2.14.	ERISA
		1.2.15.	Incentive Compensation
		1.2.16.	Measuring Investments
		1.2.17.	Participant
		1.2.18.	Plan
		1.2.19.	Plan Restatement
		1.2.20.	Plan Year
		1.1.21.	Plan Sponsor
		1.2.22.	Qualified Plan
		1.2.23.	Retirement
		1.2.24.	Termination of Employment
		1.2.25.	Valuation Date
		1.2.26.	Year of Service
SECTION 2.	PARTICIPATION

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	2.1.	Participation by Selection
	2.2.	Elections
		2.2.1.	Required Initial Elections
		2.2.2.	Election Changes
		2.2.3.	No Spousal Rights
	2.3.	Commencement of Participation
	2.4.	Loss of Eligibility
	2.5.	Termination of Participation
	2.6.	Leaves of Absence
	2.7.	Specific Exclusion
SECTION 3.	CREDITS TO ACCOUNTS
	3.1.	Base Compensation Deferral Credits
		3.1.1.	Amount of Credits
		3.1.2.	Crediting to Accounts
	3.2.	Incentive Compensation Deferral Credits
		3.2.1.	Amount of Credits
		3.2.2.	Crediting to Accounts
	3.3.	Qualified Plan Restoration Credits
		3.3.1.	Amount of Credits
		3.3.2.	Crediting to Accounts
	3.4.	Employer Matching Credits
		3.4.1.	Amount of Credits
		3.4.2.	Crediting to Accounts
	3.5.	Employer Discretionary Credits
		3.5.1.	Amount of Credits
		3.5.2.	Crediting to Accounts
	3.6.	Required Employer Credits
		3.6.1.	Amount of Credits
		3.6.2.	Crediting to Accounts
	3.7.	Rules Regarding Employee Elections
SECTION 4.	ACCOUNTS
	4.1.	Establishment of Accounts
	4.2.	Vesting
	4.3.	Designation of Measuring Investments
	4.4.	Adjustments of Accounts
	4.5.	Operational Rules for Measuring Investments
SECTION 5.	DISTRIBUTIONS
	5.1.	Form of Distribution
		5.1.1.	Available Forms

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		5.1.2.	Default
		5.1.3.	Installment Amounts
		5.1.4.	Minimum Amount
		5.1.5.	Death
	5.2.	Retirement Distributions
		5.2.1.	Form and Timing
		5.2.2.	Election to Delay Distribution for Five (5) Years
	5.3.	Termination Distribution
	5.4.	Disability Distribution
	5.5.	Hardship Distribution
		5.5.1.	When Available
		5.5.2.	Purposes
		5.5.3.	Limitations
		5.5.4.	Effect on Participation
	5.6.	Change of Control Distribution
		5.6.1.	When Available
		5.6.2.	Payment
		5.6.3.	Forfeiture
	5.7.	Distribution Based on Constructive Receipt
	5.8.	Designation of Beneficiaries
		5.8.1.	Right to Designate
		5.8.2.	Failure of Designation
		5.8.3.	Disclaimers by Beneficiaries
		5.8.4.	Definitions
		5.8.5.	Special Rules
		5.8.6.	No Spousal Rights
	5.9.	Death Prior to Full Distribution
	5.10.	Facility of Payment
	5.11.	Cash Distributions
	5.12.	Code §162(m) Delay
SECTION 6.	FUNDING OF PLAN
	6.1.	Unfunded Obligation
		6.1.1.	Hedging Investments
		6.1.2.	Corporate Obligation
	6.2.	Spendthrift Provision
SECTION 7.	AMENDMENT AND TERMINATION
	7.1.	Amendment
	7.2.	Discontinuance of Contributions and Termination of Plan
	7.3.	Change of Control
	7.4.	No Oral Amendments
	7.5.	Plan Binding on Successors

iii

SECTION 8.	DETERMINATIONS — RULES AND REGULATIONS
	8.1.	Determinations
	8.2.	Rules and Regulations
	8.3.	Method of Executing Instruments
	8.4.	Claims and Review Procedure
		8.4.1.	Initial Claim
		8.4.2.	Notice of Initial Adverse Determination
		8.4.3.	Request for Review
		8.4.4.	Claim on Review
		8.4.5.	Notice of Adverse Determination for Claim on Review
SECTION 9.	PLAN ADMINISTRATION
	9.1.	Plan Sponsor
		9.1.1.	Officers
		9.1.2.	Chief Executive Officer
	9.2.	Conflict of Interest
	9.3.	Administrator
	9.4.	Service of Process
	9.5.	Indemnity
SECTION 10.	DISCLAIMERS
	10.1.	Term of Employment
	10.2.	Source of Payment
	10.3.	Delegation
SECTION 11.	MISCELLANEOUS
	11.1.	ERISA Status
	11.2.	IRC Status
	11.3.	Effect on Other Plans
	11.4.	Disqualification
	11.5.	Rules of Document Construction
	11.6.	References to Laws
	11.7.	Choice of Law
	11.8.	ERISA Administrator
	11.9.	Not an Employment Contract
	11.10.	Tax Withholding
	11.11.	Expenses
	11.12.	Service of Process
	11.13.	Spendthrift Provision
	11.14.	Certifications
	11.15.	Errors in Computations

iv

SCHEDULE I – EMPLOYERS PARTICIPATING IN THE COMMUNITY FIRST BANKSHARES, INC. SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

v

COMMUNITY FIRST BANKSHARES, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
(2004 Restatement)

SECTION 1

INTRODUCTION AND DEFINITIONS

1.1.Restatement of Plan.  Community First Bankshares, Inc., a Delaware corporation, has previously established and maintained a nonqualified deferred compensation plan (“Plan”) for the benefit of a select group of management and highly compensated employees and, effective January 1, 2004, restates the Plan in this document entitled “Community First Bankshares, Inc. Supplemental Executive Retirement Plan (2004 Restatement).”  Effective January 1, 2004, this document supercedes and replaces said original Plan document and amendments and constitutes the entire statement of the Plan, subject to such amendments as may hereafter be adopted.

1.2.Definitions.  When the following terms are used herein with initial capital letters, they shall have the following meanings:

1.2.1.Account — the separate bookkeeping account established for each Participant which represents the separate unfunded and unsecured general obligation of the Employers established with respect to each person who is a Participant in this Plan in accordance with Section 2 and to which are credited the dollar amounts specified in Section 3 and from which are subtracted payments made pursuant to Section 5.

1.2.2.Affiliate — a business entity which is not an Employer but which is part of a “controlled group” with the Employer or under “common control” with an Employer or which is a member of an “affiliated service group” that includes an Employer, as those terms are defined in section 414(b), (c) and (m) of the Code.  A business entity which is a predecessor to an Employer shall be treated as an Affiliate if the Employer maintains a plan of such predecessor business entity or if, and to the extent that, such treatment is otherwise required by regulations under section 414(a) of the Code.  A business entity shall also be treated as an Affiliate if, and to the extent that, such treatment is required by regulations under section 414(o) of the Code.  In addition to said required treatment, the Plan Sponsor may, in its discretion, designate as an Affiliate any business entity which is not such a “controlled group,” “common control,” “affiliated service group” or “predecessor” business entity but which is otherwise affiliated with an Employer, subject to such limitations as the Plan Sponsor may impose.

1.2.3.Annual Valuation Date — each December 31.

1.2.4.Base Compensation — regular base pay paid to Participant for services rendered to an Employer.  Base Compensation does not include non-base pay such as benefits, perquisites, allowances, per diem payments, bonuses, incentive compensation, equity

compensation, fringe benefits, special pay, awards or commissions.  Base Compensation shall be calculated before reductions in compensation due to elective contributions made by the Employer on behalf of the Participant that are not includible in gross income under sections 125, 132(f), 402(e)(3), 402(h), 403(b), 414(h)(2) and 457 of the Code including elective contributions authorized by the Participant under the Qualified Plan, a cafeteria plan or any qualified cash or deferred arrangement but shall not include earnings on those amounts.

1.2.5.Beneficiary — a person designated by a Participant (or automatically by operation of the Plan Restatement) to receive all or a part of the Participant’s Account in the event of the Participant’s death prior to full distribution thereof.  A person so designated shall not be considered a Beneficiary until the death of the Participant.

1.2.6.Board of Directors or Board — the Board of Directors of the Plan Sponsor or its successor.  Board of Directors shall also mean and refer to any properly authorized committee of the Board of Directors.

1.2.7.CEO — the Chief Executive Officer of the Plan Sponsor or his or her delegee for Plan purposes.

1.2.8.Change of Control — the occurrence of one of the following events:

(a)any “person” (as such term is used in Section 13(d) and 4(d) of the Securities Exchange Act of 1934, as amended (“Exchange Act”)), other than a trustee or other fiduciary holding securities under an employee benefit plan of Plan Sponsor is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly of securities representing 25% or more of the combined voting power of Plan Sponsor’s then outstanding securities;

(b)during any period of two consecutive years (not including any period ending prior to the effective date of this Plan), individuals who at the beginning of such period constitute the Board of Directors, and any new director (other than a director designated by a person who has entered into agreement with Plan Sponsor to effect a transaction permitted by Section (a), (c) or (d)) whose election by the Board of Directors or nomination for election by Plan Sponsor’s stockholders was approved by vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved (“Continuing Director”), cease for any reason to constitute at least a majority of the Board of Directors;

(c)the stockholders of Plan Sponsor approve a merger or consolidation of Plan Sponsor with any other corporation, other than (i) a merger or

2

consolidation which would result in the voting securities of Plan Sponsor outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the merged or consolidated entity) 50% or more of the combined voting power of the voting securities of Plan Sponsor or such merged or consolidated entity outstanding immediately after such merger or consolidation, or (ii) a merger or consolidation effected to implement a recapitalization of Plan Sponsor or similar transaction in which no “person” acquires more than 25% of the combined voting power of Plan Sponsor’s then outstanding securities;

(d)the stockholders of Plan Sponsor approve a plan of complete liquidation or a sale or disposition by Plan Sponsor of all or substantially all of Plan Sponsor’s assets.  “The sale or disposition by Plan Sponsor of all or substantially all of Plan Sponsor’s assets” shall mean a sale or other disposition transaction or series of related transactions involving assets of Plan Sponsor or of any direct or indirect subsidiary of Plan Sponsor (including the stock of any direct or indirect subsidiary of Plan Sponsor) in which the value of the assets or stock being sold or otherwise disposed of (as measured by the purchase price being paid therefor or by such other method as the Board of Directors determines is appropriate in a case where there is no readily ascertainable purchase price) constitutes more than 50% of the fair market value of Plan Sponsor.  For purposes of the preceding sentence, the “fair market value of Plan Sponsor” shall be the aggregate market value of Plan Sponsor’s outstanding common stock (on a fully diluted basis) plus the aggregate market value of Plan Sponsor’s other outstanding equity securities.  The aggregate market value of Plan Sponsor’s common stock shall be determined by multiplying the number of shares of Plan Sponsor common stock (on a fully diluted basis) outstanding on the date of the execution and delivery of a definitive agreement (“Transaction Date”) with respect to the sale or disposition by Plan Sponsor of all or substantially all of Plan Sponsor’s assets by the average closing price for Plan Sponsor’s common stock for the ten trading days immediately preceding the Transaction Date.  The aggregate market value of any other equity securities of Plan Sponsor shall be determined in a manner similar to that prescribed in the immediately preceding sentence for determining the aggregate market value of Plan Sponsor’s common stock or by such other method as the Board of Directors shall determine is appropriate; or

(e)the Board of Directors determines, by a vote of a majority of its entire membership, that a tender offer statement by any person (as defined

3

above) indicates an intention on the part of such person to acquire control of Plan Sponsor.

1.2.9.Code — the Internal Revenue Code of 1986, as amended.

1.2.10.Committee — the Administrative Committee consisting of one or more members appointed by and serving at the pleasure of the CEO.

1.2.11.Disability — a medically determinable physical or mental impairment that renders the individual disabled and eligible for long term disability benefits as determined under the terms of the long-term disability plan sponsored by the Plan Sponsor.  The Committee shall determine the date on which the Disability shall have occurred if such determination is necessary.

1.2.12.Effective Date — January 1, 2004.

1.2.13.Employer — the Plan Sponsor, each business entity listed as an Employer in the Schedule I to this Plan Restatement, any other business entity that employs persons who are selected for participation under Section 2 of this Plan and any successor thereof.

1.2.14.ERISA — the Employee Retirement Income Security Act of 1974, as amended.

1.2.15.Incentive Compensation — a cash award or cash bonus payable to the Participant under an incentive plan, program or arrangement sponsored by the Plan Sponsor, excluding the value of any equity or stock compensation awarded or paid to Participant or any compensation resulting from the sale of stock of the Plan Sponsor or exercise of stock options of the Plan Sponsor.

1.2.16.Measuring Investments — a hypothetical investment used for the purpose of measuring income, gains and losses to the Accounts of Participants (as if the Accounts had in fact been so invested).  The Plan Sponsor shall determine the number and type of Measuring Investments available to the Participants.

1.2.17.Participant — an employee of an Employer who is selected for participation in this Plan in accordance with the provisions of Section 2.

1.2.18.Plan — the nonqualified, unfunded, deferred compensation program maintained by the Plan Sponsor for the benefit of Participants eligible to participate therein as set forth in this Plan Restatement.  (As used herein, “Plan” does not refer to the document pursuant to which the Plan is maintained.  That document is referred to herein as the “Plan Restatement.”)

1.2.19.Plan Restatement — this document entitled “Community First Bankshares, Inc. Supplemental Executive Retirement Plans (2004 Restatement)” as adopted by

4

the Committee and generally effective as of January 1, 2004 as the same may be amended from time to time thereafter.

1.2.20.Plan Year — the twelve (12) consecutive month period ending on any Annual Valuation Date.

1.2.21.Plan Sponsor — Community First Bankshares, Inc., a Delaware corporation, or any successor thereto.

1.2.22.Qualified Plan— the tax-qualified profit sharing plan of the Plan Sponsor entitled “Community First Bankshares, Inc. 401(k) Retirement Plan.”

1.2.23.Retirement — a Participant’s Termination of Employment which occurs on or after the date (i) the Participant has attained age 65; or (ii) the Participant has both attained age 55 and completed at least 10 Years of Service.

1.2.24.Termination of Employment — a complete severance of an employee’s employment relationship with the Employer and all Affiliates for any reason other than the employee’s death or Disability.  A transfer from employment with an Employer to employment with another Employer or an Affiliate of an Employer shall not constitute a Termination of Employment. If an Employer who is an Affiliate ceases to be an Affiliate because of a sale of substantially all the stock or assets of the Employer, then Participants who are employed by that Employer and who cease to be employed by an Employer on account of such sale shall be deemed to have thereby had a Termination of Employment for the purpose of commencing distributions from this Plan.

1.2.25.Valuation Date — any day that the U.S. securities markets are open and conducting business.

1.2.26.Year of Service — a consecutive twelve-month period during which the Participant was employed by an Employer.  A year in which the Participant did not work the entire twelve-month period shall be counted as a Year of Service.

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SECTION 2

PARTICIPATION

2.1.Participation by Selection.  An employee becomes a Participant in the Plan only upon being selected for participation by the Committee.  An employee selected for participation will be notified in writing.  Employment in an executive capacity does not entitle an employee to selection for participation in the Plan.  The Committee shall not select an employee for participation unless it determines that such individual is a member of a select group of management or highly compensated employees (as that expression is used in ERISA).  The Committee’s selection of an individual for participation shall be made solely in its discretion and shall be conclusive and binding.  The Committee shall select such employees for participation in this Plan on a Plan Year-by-Plan Year basis.  Selection for one Plan Year does not entitle the employee to be selected the next Plan Year.

2.2.Elections.

2.2.1.Required Initial Elections.  Prior to the date that an employee selected for participation first becomes a Participant, such employee shall as a condition of participation in this Plan complete such forms and make such elections as the Plan Sponsor may require for the effective administration of this Plan.  At a minimum, the initial enrollment shall designate:

(a)The form of the distribution of the Participant’s Account upon Retirement.

(b)The Measuring Investments to be used to measure income, gains and losses on the Account.

The initial enrollment shall be made in writing upon forms furnished by the Plan Sponsor, shall be made at such time as the Plan Sponsor shall determine and shall conform to such other procedural and substantive rules as the Plan Sponsor shall establish. With respect to any employee who is a Participant on the effective date of the Plan Restatement, the election of the form of distribution in effect immediately prior to that date shall continue in effect and shall thereafter be governed by the terms of the Plan Restatement.

2.2.2.Election Changes.  After the initial election, a Participant may, from time to time, as determined by the Committee, elect to change prospectively the Measuring Investments used to measure income, gains and losses on the Participant’s Account.  Any such election change shall be filed in accordance with such rules as the Plan Sponsor shall establish.

2.2.3.No Spousal Rights.  No spouse, former spouse, Beneficiary or other person shall have any right to participate in the Participant’s designation of a form of payment.

2.3.Commencement of Participation.  An employee selected to participate in the Plan who has satisfied all enrollment requirements, including returning all required documents to the

6

Plan Sponsor within the specified time period, shall become a Participant in the Plan on the first day of the Plan Year for which the Participant has been selected to participate.  If an employee is selected to participate in the Plan on or after the first day of a Plan Year, the employee shall become a Participant in the Plan on the first day of the month following satisfaction of all enrollment requirements provided that such requirements are completed within 30 days after the employee is selected for participation.

2.4.Loss of Eligibility.  If a Participant’s employment status is changed such that Participant no longer is a member of a select group of management or highly compensated employees or the Committee, in its sole discretion, determines that a Participant is no longer eligible to participate in the Plan, the Participant shall cease to be eligible to make deferrals to, or receive employer contributions under, the Plan but shall continue to be eligible to elect a change in Measuring Investments in accordance with Section 4.3.  The individual’s Account balance shall remain in the Plan until distributed in accordance with Section 5.

2.5.Termination of Participation.An employee shall cease to be a Participant in the Plan as of the first to occur of the following events:

(a)the date the Participant no longer has any Account under the Plan (that is, the Participant has received a distribution of all of the Participant’s Account, if any); or

(b)the date of the Participant’s death.

2.6.Leaves of Absence.  Upon the commencement of a leave of absence, a Participant shall cease to be eligible to make deferrals to, or receive employer contributions under the Plan but shall continue to be eligible to elect a change in Measuring Investments in accordance with Section 4.3.  During the Participant’s leave of absence, the Participant’s Account balance shall remain in the Plan unless otherwise distributable in accordance with Section 5.  Upon return from the leave of absence, the Participant’s elections under Sections 3.1, 3.2 and 3.3 in effect at the time the Participant went on leave shall be reactivated and the Participant shall not be allowed to change those elections for the Plan Year in which the Participant returned from the leave.

2.7.Specific Exclusion.  Notwithstanding anything apparently to the contrary in the Plan Restatement or in any written communication, summary, resolution or document or oral communication, no individual shall be a Participant in this Plan, develop benefits under this Plan or be entitled to receive benefits under this Plan (either for himself or herself or his or her survivors) unless such individual is a member of a select group of management or highly compensated employees (as that expression is used in ERISA).  If a court of competent jurisdiction, any representative of the U.S. Department of Labor or any other governmental, regulatory or similar body makes any direct or indirect, formal or informal, determination that an individual who is an active Participant is not a member of a select group of management or highly compensated employees (as that expression is used in ERISA), such individual shall not

7

be (and shall not have ever been) a Participant in this Plan at any time. If any person not so defined has been erroneously treated as a Participant in this Plan, upon discovery of such error such person’s erroneous participation shall immediately terminate effective as of the date the individual initially became a Participant, with the intended result being that the individual be treated as if the individual never became a Participant.

8

SECTION 3

CREDITS TO ACCOUNTS

3.1.Base Compensation Deferral Credits.

3.1.1.Amount of Credits.  Prior to the first day of any Plan Year, the Participant may elect to defer a percentage of the Participant’s annual Base Compensation for that Plan Year.  An election made by a Participant for a Plan Year shall remain in effect for subsequent Plan Years unless, prior to a subsequent Plan Year, the election is changed or terminated by the Participant or the Participant is not selected for participation for that subsequent Plan Year.  The election shall designate a percentage of the Participant’s annual Base Compensation which is earned during that Plan Year (without regard to whether it would be paid during that or a subsequent Plan Year) which shall not be paid to the Participant but instead shall be credited under this Plan under Section 3 and distributed from this Plan under Section 5.  The percentage that can be designated shall not exceed fifty percent (50%) of the Participant’s annual Base Compensation.

3.1.2.Crediting to Accounts.  The Plan Sponsor shall credit to the Account of each Participant the amount, if any, of Base Compensation that the Participant elected to defer.  Such amount shall be credited in cash.  Such amount shall be credited as nearly as practicable as of the time or times when the compensation would have been paid to the Participant but for the election to defer.

3.2.Incentive Compensation Deferral Credits.

3.2.1.Amount of Credits.  Prior to the first day of any Plan Year, the Participant may elect to defer a percentage or dollar amount of the Participant’s annual Incentive Compensation for that Plan Year.  An election made by a Participant for a Plan Year shall remain in effect for subsequent Plan Years unless, prior to a subsequent Plan Year, the election is changed or terminated by the Participant or the Participant is not selected for participation for that subsequent Plan Year.  The election shall designate the dollar amount or percentage of the Participant’s annual Incentive Compensation which is earned during that Plan Year (without regard to whether it would be paid during that or a subsequent Plan Year) which shall not be paid to the Participant but instead shall be credited under this Plan under Section 3 and distributed from this Plan under Section 5.  The dollar amount or percentage that can be designated shall not exceed one hundred percent (100%) of the Participant’s Incentive Compensation.

3.2.2.Crediting to Accounts.  The Plan Sponsor shall credit to the Account of each Participant the amount, if any, of Incentive Compensation that the Participant elected to defer.  Such amount shall be credited in cash.  Such amount shall be credited as nearly as practicable as of the time or times when the compensation would have been paid to the Participant but for the election to defer.

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3.3.Qualified Plan Restoration Credits.

3.3.1.Amount of Credits.  Prior to the first day of any Plan Year, the Participant will be deemed to have elected to contribute all of the following amounts to the Participant’s Account:

(a)the amount by which the Participant’s elective contributions to the Qualified Plan are reduced to cause the Qualified Plan to comply with the limitations set forth in Code sections 401(k)(3);

(b)the amount by which the Participant’s elective contributions to the qualified plan are limited by the restriction under Code section 401(a)(17);

(c)the amount by which the Participant’s elective contributions to the Qualified Plan are limited by the restrictions imposed by the anti-discrimination standards under Code sections 401(a)(5)(B) and 414(s);

(d)the amount by which such Participant’s elective contributions to the Qualified Plan exceed the limitation imposed by Code section 402(g); and

(e)the amount by which the Participant’s elective contributions to the Qualified Plan are reduced to cause the Qualified Plan to comply with the limitation imposed by Code section 415.

A Participant may affirmatively elect not to contribute the amounts specified above, but such election must be made prior to the Plan Year for which the election will be effective, and such election must be not to contribute all (as opposed to some) of the amounts specified above.  An election made by a Participant for a Plan Year shall remain in effect for subsequent Plan Years unless, prior to a subsequent Plan Year, the election is changed or terminated by the Participant or the Participant is not selected for participation for that subsequent Plan Year.

3.3.2.Crediting to Accounts.  The Plan Sponsor shall credit to the Account of each Participant the amount, if any, determined under Section 3.3.1.  Such amount shall be credited in cash.  Insofar as is practicable, the amount described in this Section 3.3 shall be credited to the Account as of the time or times when such amount (or comparable amount) would actually have been contributed (not accrued) to the Qualified Plan but for limitations or restrictions imposed by the Code.

3.4.Employer Matching Credits.

3.4.1.Amount of Credits.  Each Plan Year the Plan Sponsor may, but is not required to, contribute to a Participant’s Account the amount by which the Participant’s matching contributions to the Qualified Plan are reduced to cause the Qualified Plan to comply with the limitations set forth in Section 3.3.1. of this Plan Restatement and the limitation set forth in Code

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section 401(m)(2).  Each Plan Year the Plan Sponsor may, but is not required to, contribute to a Participant’s Account a match contribution based on the amounts contributed by the Participant under Sections 3.1 and 3.2.

3.4.2.Crediting to Accounts.  The Plan Sponsor shall credit to the Account of each Participant the amount, if any, determined under Section 3.4.1.  Such amount shall be credited in cash.  Insofar as is practicable, the amount described in this Section 3.4 shall be credited to the Account as of the time or times when such amount (or comparable amount) would actually have been contributed (not accrued) to the Qualified Plan but for limitations or restrictions imposed by the Code.

3.5.Employer Discretionary Credits.

3.5.1.Amount of Credits.  Each Plan Year the Plan Sponsor may, but is not required to, determine, in its sole discretion, that additional amounts, if any, shall be credited to the Accounts of the Participants based on the performance of the Employer in the previous Plan Year. Such amount shall be credited in cash.  The Plan Sponsor shall have the right to credit one Participant’s Account and not another and to credit different amounts to different Participants.

3.5.2.Crediting to Accounts.  The Plan Sponsor shall credit to the Account of each Participant the amount, if any, determined under Section 3.5.1.  Such amount shall be credited in cash.  Such amount shall be credited as of the last day of the Plan Year for which the contribution is being made.  If a Participant is not employed by the Employer as of the last day of a Plan Year for which the contribution is being made other than by reason of Retirement, death or Disability, that Participant shall not be entitled to a contribution.

3.6.Required Employer Credits.

3.6.1.Amount of Credits.  Each Plan Year the Plan Sponsor shall contribute an amount equal to a percentage of the Participant’s Base Compensation to the Account of the Participant.  The percentage shall be determined by the Plan Sponsor’s return on equity (as determined by generally accepted accounting principals and the Committee) in accordance with the following schedule:

Return on Equity		Percent of Participant’s Base Compensation
22%	and Greater	7%
21%		6%
20%		5%
19%		4%
18%		3%
Less than 18%		0%

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3.6.2.Crediting to Accounts.  The Plan Sponsor shall credit to the Account of each Participant the amount, if any, determined under Section 3.6.1.  Such amount shall be credited in cash.  Such amount shall be credited as of the last day of the Plan Year for which the contribution is being made.  If a Participant is not employed by the Employer as of the last day of a Plan Year for which the contribution is being made other than by reason of Retirement, death or Disability, that Participant shall not be entitled to a contribution.

3.7.Rules Regarding Employee Elections.  Each election (or deemed election) by a Participant to defer or contribute an amount to the Participant’s Account under Sections 3.1, 3.2 and 3.3 shall:

(a)be irrevocable for the Plan Year with respect to which it is made once it has been accepted by the Plan Sponsor;

(b)be made in writing upon forms furnished by the Plan Sponsor, shall be made at such time as the Plan Sponsor shall determine and shall conform to such other procedural and substantive rules as the Plan Sponsor shall establish; and

(c)be received by the Plan Sponsor prior to the first day of the Plan Year for which the deferral election is made.

For a newly eligible Participant, however, the deferral election must be received by the Plan Sponsor within 30 days after the first day of such eligibility, and, if so received, deferral shall be effective as of the first day of the month following such receipt and shall only apply to compensation and amounts earned following the effective date of the election.

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SECTION 4

ACCOUNTS

4.1.Establishment of Accounts.  There shall be established for each Participant unfunded, bookkeeping Accounts which shall be adjusted each Valuation Date. The Accounts and Measuring Investments are specified solely as a device for computing the amounts of benefits to be paid to Participants under the Plan, and the Plan Sponsor is not required to purchase such investments.

4.2.Vesting.  The Account of each Participant shall be fully (100%) vested and nonforfeitable at all times.

4.3.Designation of Measuring Investments. In accordance with procedures to be established by the Plan Sponsor, each Participant shall elect, as part of the initial enrollment process, and from time to time thereafter, one or more Measuring Investments which shall be used to determine the value of such Participant’s Account.  A Participant’s change in Measuring Investments shall designate:

(a)one or more Measuring Investments for the current Account balance, and

(b)one or more Measuring Investments for amounts that are credited to the Account in the future.

An effective change in Measuring Investments shall be effective as of the day after the Valuation Date coincident with or immediately following the date the election change is filed. A Participant’s change in Measuring Investments shall not be effective unless such election change complies with the procedures established by the Plan Sponsor.  The Plan Sponsor may, in its sole discretion, add, discontinue or substitute a Measuring Investments.

4.4.Adjustments of Accounts.  As of each Valuation Date, the value of each Account shall be adjusted for credits, distributions and withholding subtractions under Section 10.6 during the valuation period and the value of each Account shall be adjusted for income, gains and losses during the valuation period as if the Account had in fact been invested in the Measuring Investments selected by the Participant during such period.  The Committee shall establish additional rules for the adjustment of Accounts as the Committee may deem necessary and appropriate. The Committee shall provide to the Participant at least annually a written statement setting for current value of each Account and any changes to the Account.

4.5.Operational Rules for Measuring Investments.  The Committee shall adopt rules specifying the Measuring Investments, the circumstances under which a particular Measuring Investment may be elected or shall be automatically utilized, the minimum or maximum amount or percentage of an Account which may be allocated to a Measuring Investment, the procedures for making or changing Measuring Investment elections, the extent (if any) to which

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Beneficiaries of deceased Participants may make Measuring Investment elections and the effect of a Participant’s or Beneficiary’s failure to make an effective Measuring Investment election with respect to all or any portion of an Account.

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SECTION 5

DISTRIBUTIONS

5.1.Form of Distribution.

5.1.1.Available Forms.  At the time of initial enrollment, a Participant shall elect one of the following forms of distribution:

(a)a single lump sum; or

(b)a series of annual installments payable over five (5), ten (10), fifteen (15), or twenty (20) years.

5.1.2.Default.  If for any reason a Participant shall have failed to make a timely written designation of form for distribution (including reasons entirely beyond the control of the Participant), the distribution shall be made in a single lump sum as of the Valuation Date coincident with or immediately following the Participant’s Termination of Employment and shall be made as soon as practicable after such Valuation Date.

5.1.3.Installment Amounts.  The amount of the annual installments shall be determined by dividing the amount of the Account as of the Annual Valuation Date as of which the installment is being paid by the number of remaining installment payments to be made (including the payment being determined).

5.1.4.Minimum Amount.  Regardless of the election filed by the Participant with respect to the time and form of distribution of the Participant’s Account:

(a)if the Participant’s Account is less than twenty-five thousand dollars ($25,000) (as determined at the time of Participant’s Retirement), then distribution of the Participant’s Account shall be made in a single lump sum payment as of the Valuation Date coincident with or immediately following the Participant’s Termination of Employment and shall be made as soon as practicable after such Valuation Date; or

(b)if the projected annual installments of the Participant’s Account under the form of distribution elected is less than five thousand dollars ($5,000) per annum (as determined at the time of Participant’s Retirement), then the installments shall be accelerated to the next lower installment period until the amount of each installment is greater than five thousand dollars ($5,000).

5.1.5.Death.  If the Participant dies prior to the date of Participant’s Retirement, payment of the Participant’s Account shall be made to the Participant’s Beneficiary in a single

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lump sum payment as of the Valuation Date coincident with or immediately following the Participant’s Termination of Employment and shall be made as soon as practicable after such Valuation Date.  If the Participant elected payment in the form of a series of annual installments and dies after distribution has commenced, payment shall continue to Participant’s Beneficiary in the series of annual installments elected by the deceased Participant payable over the remainder of the applicable period.  In any event, distribution of Participant’s Account shall payable to Participant’s Beneficiary in accordance with Section 6.7.

5.2.Retirement Distributions.

5.2.1.Form and Timing.  Upon a Participant’s Retirement, unless distributed earlier in accordance with the Plan, distribution of the Participant’s Account shall be made in the form designated in writing at the time of the Participant’s initial enrollment (to the extent that such designation is consistent with the rules of the Plan Restatement).  If the Participant elected payment in the form of installments, the amount of the first installment will be determined as soon as administratively feasible following the Plan Year in which the Participant retires and shall be actually paid as soon as practicable after such determination.

5.2.2.Election to Delay Distribution for Five (5) Years.  A Participant may elect to delay distribution of all or a portion of the Participant’s Account for five (5) years.  Notwithstanding the foregoing, any election to delay distribution of all or a portion of the Participant’s Account for five (5) years shall be disregarded as if it had never been filed unless the election to delay distribution:

(a)is filed by the Participant while employed by the Employer,

(b)is filed with the Committee at least twelve (12) months before the Participant’s scheduled distribution date following the Participant’s Retirement, and

(c)such Participant has not previously elected to delay distribution of such portion of the Participant’s Account.

No spouse, former spouse, Beneficiary or other person shall have any right to participate in the Participant’s decision to delay distribution of all or a portion of the Participant’s Account.

5.3.Termination Distribution.  Upon a Participant’s Termination of Employment, unless distributed earlier in accordance with the Plan, distribution of the Participant’s Account shall be made in a single lump sum payment as of the Valuation Date coincident with or immediately following the Participant’s Termination of Employment and shall be made as soon as practicable after such Valuation Date.

5.4.Disability Distribution.  If the Committee determines that a Participant has a Disability, the Participant shall cease to be eligible to make deferrals to, or receive employer

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contributions under, the Plan and distribution of the Participant’s Account as of the Valuation Date coincident with or immediately following the date of Participant’s Disability shall be made in form of distribution elected by the Participant in the event of Retirement and shall be made or begin as soon as practicable after such Valuation Date.

5.5.Hardship Distribution.

5.5.1.When Available.  A Participant may receive a hardship distribution from the Participant’s Account if the Plan Sponsor determines that such hardship distribution is for a purpose described in Section 5.5.2 and the conditions in Section 5.5.3 have been fulfilled.  To receive such a distribution, the Participant must file a written hardship distribution application with the Plan Sponsor and furnish such supporting documentation as the Plan Sponsor may require.  In the application, the Participant shall specify the basis for the distribution and the dollar amount to be distributed.  If such hardship distribution is approved by the Plan Sponsor, distribution shall be made as of the Valuation Date coincident with or next following the approval of a completed application by the Plan Sponsor and such hardship distribution shall be made in a lump sum payment as soon as administratively feasible after such Valuation Date.

5.5.2.Purposes.  Hardship distributions shall be allowed only if the Participant establishes that the hardship distribution is to be made on account of an immediate and heavy financial need of the Participant for which the Participant does not have other available resources.

5.5.3.Limitations.  The amount of the hardship distribution shall not exceed the amount of the Participant’s proven immediate and heavy financial need.  A hardship distribution shall not be made after the death of the Participant or after the occurrence of any distribution event.  The amount of approved hardship distribution shall not exceed the value of the Account.

5.5.4.Effect on Participation.  Upon the approval of a hardship distribution, all elective contributions to the Participant’s Account shall cease for six (6) months after receipt of the hardship distribution and shall be automatically reinstated after the expiration of the six (6) month period.

5.6.Change of Control Distribution.

5.6.1.When Available.  A Participant or Beneficiary may receive a distribution of his or her entire Account (after reduction for the forfeiture described in Section 5.6.3) if a Change of Control has occurred.  To receive such a Change of Control distribution, the Participant or Beneficiary must file a written distribution application with the Plan Sponsor.  The Plan Sponsor shall approve the Change of Control distribution if such application has been filed and a Change of Control has occurred.

5.6.2.Payment.  Distribution of the entire Account (after reduction for the forfeiture described in Section 5.6.3) shall be made as of the Valuation Date coincident with or

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next following the approval of a completed application by the Plan Sponsor.  Such Change of Control distribution shall be made in a lump sum payment as soon as administratively feasible after such Valuation Date. The amount of the Change of Control distribution shall be equal to the value of the Account as of such Valuation Date (after reduction for the forfeiture described below).

5.6.3.Forfeiture.  Upon the approval of a Change of Control distribution, there shall be irrevocably forfeited from the Account of the Participant or Beneficiary an amount equal to ten percent (10%) of the Account.

5.7.Distribution Based on Constructive Receipt.  Any amounts in a Participant’s Account which have been determined by the Committee or a governmental agency to be taxable income to the Participant based on the constructive receipt doctrine shall be distributed to the Participant in a lump sum payment as soon as administratively feasible.

5.8.Designation of Beneficiaries.

5.8.1.Right to Designate.  Each Participant may designate, upon forms to be furnished by and filed with the Plan Sponsor, one or more primary Beneficiaries or alternate Beneficiaries to receive all or a specified part of such Participant’s Account in the event of such Participant’s death.  The Participant may change or revoke any such designation from time to time without notice to or consent from any Beneficiary.  No such designation, change or revocation shall be effective unless executed by the Participant and received by the Plan Sponsor during the Participant’s lifetime.

5.8.2.Failure of Designation.  If a Participant:

(a)fails to designate a Beneficiary,

(b)designates a Beneficiary and thereafter revokes such designation without naming another Beneficiary, or

(c)designates one or more Beneficiaries and all such Beneficiaries so designated fail to survive the Participant,

such Participant’s Account, or the part thereof as to which such Participant’s designation fails, as the case may be, shall be payable to the first class of the following classes of automatic Beneficiaries with a member surviving the Participant and (except in the case of surviving issue) in equal shares if there is more than one member in such class surviving the Participant:

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Participant’s surviving spouse
Participant’s surviving issue per stirpes and not per capita
Participant’s surviving parents
Participant’s surviving brothers and sisters
Representative of Participant’s estate.

5.8.3.Disclaimers by Beneficiaries.  A Beneficiary entitled to a distribution of all or a portion of a deceased Participant’s Account may disclaim an interest therein subject to the following requirements.  To be eligible to disclaim, a Beneficiary must be a natural person, must not have received a distribution of all or any portion of the Account at the time such disclaimer is executed and delivered, and must have attained at least age twenty-one (21) years as of the date of the Participant’s death.  Any disclaimer must be in writing and must be executed personally by the Beneficiary before a notary public.  A disclaimer shall state that the Beneficiary’s entire interest in the undistributed Account is disclaimed or shall specify what portion thereof is disclaimed.  To be effective, duplicate original executed copies of the disclaimer must be both executed and actually delivered to the Plan Sponsor after the date of the Participant’s death but not later than one hundred eighty (180) days after the date of the Participant’s death.  A disclaimer shall be irrevocable when delivered to the Plan Sponsor.  A disclaimer shall be considered to be delivered to the Plan Sponsor only when actually received by the Plan Sponsor.  The Plan Sponsor shall be the sole judge of the content, interpretation and validity of a purported disclaimer.  Upon the filing of a valid disclaimer, the Beneficiary shall be considered not to have survived the Participant as to the interest disclaimed.  A disclaimer by a Beneficiary shall not be considered to be a transfer of an interest in violation of the provisions of Section 6 and shall not be considered to be an assignment or alienation of benefits in violation of federal law prohibiting the assignment or alienation of benefits under this Plan.  No other form of attempted disclaimer shall be recognized by the Plan Sponsor.

5.8.4.Definitions.  When used herein and, unless the Participant has otherwise specified in the Participant’s Beneficiary designation, when used in a Beneficiary designation, “issue” means all persons who are lineal descendants of the person whose issue are referred to, including legally adopted descendants and their descendants but not including illegitimate descendants and their descendants; “child” means an issue of the first generation; “per stirpes” means in equal shares among living children of the person whose issue are referred to and the issue (taken collectively) of each deceased child of such person, with such issue taking by right of representation of such deceased child; and “survive” and “surviving” mean living after the death of the Participant.

5.8.5.Special Rules.  Unless the Participant has otherwise specified in the Participant’s Beneficiary designation, the following rules shall apply:

(a)If there is not sufficient evidence that a Beneficiary was living at the time of the death of the Participant, it shall be deemed that the Beneficiary was not living at the time of the death of the Participant.

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(b)The automatic Beneficiaries specified in Section 5.7.2 and the Beneficiaries designated by the Participant shall become fixed at the time of the Participant’s death so that, if a Beneficiary survives the Participant but dies before the receipt of all payments due such Beneficiary hereunder, such remaining payments shall be payable to the representative of such Beneficiary’s estate.

(c)If the Participant designates as a Beneficiary the person who is the Participant’s spouse on the date of the designation, either by name or by relationship, or both, the dissolution, annulment or other legal termination of the marriage between the Participant and such person shall automatically revoke such designation.  (The foregoing shall not prevent the Participant from designating a former spouse as a Beneficiary on a form executed by the Participant and received by the Plan Sponsor after the date of the legal termination of the marriage between the Participant and such former spouse, and during the Participant’s lifetime.)

(d)Any designation of a nonspouse Beneficiary by name that is accompanied by a description of relationship to the Participant shall be given effect without regard to whether the relationship to the Participant exists either then or at the Participant’s death.

(e)Any designation of a Beneficiary only by statement of relationship to the Participant shall be effective only to designate the person or persons standing in such relationship to the Participant at the Participant’s death.

A Beneficiary designation is permanently void if it either is executed or is filed by a Participant who, at the time of such execution or filing, is then a minor under the law of the state of the Participant’s legal residence.  The Plan Sponsor shall be the sole judge of the content, interpretation and validity of a purported Beneficiary designation.

5.8.6.No Spousal Rights.  Prior to the death of the Participant, no spouse or surviving spouse of a Participant and no person designated to be a Beneficiary shall have any rights or interest in the benefits credited under this Plan including, but not limited to, the right to be the sole Beneficiary or to consent to the designation of Beneficiaries (or the changing of designated Beneficiaries) by the Participant.

5.9.Death Prior to Full Distribution.  If, at the death of the Participant, any payment to the Participant was due or otherwise pending but not actually paid, the amount of such payment shall be included in the Account which are payable to the Beneficiary (and shall not be paid to the Participant’s estate).

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5.10.Facility of Payment.  In case of the legal Disability, including minority, of a Participant or Beneficiary entitled to receive any distribution under this Plan, payment shall be made, if the Plan Sponsor shall be advised of the existence of such condition:

(a)to the duly appointed guardian, conservator or other legal representative of such Participant or Beneficiary, or

(b)to a person or institution entrusted with the care or maintenance of the incompetent or disabled Participant or Beneficiary, provided such person or institution has satisfied the Plan Sponsor that the payment will be used for the best interest and assist in the care of such Participant or Beneficiary, and provided further, that no prior claim for said payment has been made by a duly appointed guardian, conservator or other legal representative of such Participant or Beneficiary.

Any payment made in accordance with the foregoing provisions of this section shall constitute a complete discharge of any liability or obligation of the Plan Sponsor therefor.

5.11.Cash Distributions.  Distributions from this Plan shall be made in cash.

5.12.Code §162(m) Delay.  If the Plan Sponsor determines that delaying the time of any payment made or commenced would increase the probability that such payment would be fully deductible for federal or state income tax purposes, the Plan Sponsor may unilaterally delay the time of the making or commencement of such payment for up to twelve (12) months after the date such payment would otherwise be payable.

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SECTION 6

FUNDING OF PLAN

6.1.Unfunded Obligation.  The obligation of the Employers to make payments under this Plan constitutes only the unsecured (but legally enforceable) promise of the Employers to make such payments.  No Participant shall have any lien, prior claim or other security interest in any property of the Employers.  The Employers shall have no obligation to establish or maintain any fund, trust or account (other than a bookkeeping account or reserve) for the purpose of funding or paying the benefits promised under this Plan.  If such a fund, trust or account is established, the property therein shall remain the sole and exclusive property of the Employers.  The Employers shall be obligated to pay the cost of this Plan out of its general assets.

6.1.1.Hedging Investments.  If the Plan Sponsor elects to finance all or a portion of the Employers’ costs in connection with this Plan through the purchase of life insurance or other investments, the Participant agrees, as a condition of participation in this Plan, to cooperate with the Plan Sponsor in the purchase of such investment to any extent reasonably required by the Plan Sponsor and relinquishes any claim the Participant or a Beneficiary might have to the proceeds of any such investment or any other rights or interests in such investment.  If a Participant fails or refuses to cooperate, then notwithstanding any other provision of this Plan the Plan Sponsor shall immediately and irrevocably terminate and forfeit the Participant’s entitlement to benefits under this Plan.

6.1.2.Corporate Obligation.  Neither the Plan Sponsor’s officers nor any member of its Committee in any way secures or guarantees the payment of any benefit or amount which may become due and payable hereunder to or with respect to any Participant.  Each Participant and other person entitled at any time to payments hereunder shall look solely to the assets of the Employers for such payments as an unsecured, general creditor.  After benefits shall have been paid to or with respect to a Participant and such payment purports to cover in full the benefit hereunder, such former Participant or other person or persons, as the case may be, shall have no further right or interest in the other assets of the Employers in connection with this Plan.  No person shall be under any liability or responsibility for failure to effect any of the objectives or purposes of this Plan by reason of the insolvency of the Employers.

6.2.Spendthrift Provision.  No Participant or Beneficiary shall have any interest in any Account which can be transferred nor shall any Participant or Beneficiary have any power to anticipate, alienate, dispose of, pledge or encumber the same while in the possession or control of the Employers, nor shall the Employers recognize any assignment thereof, either in whole or in part, nor shall any Account be subject to attachment, garnishment, execution following judgment or other legal process while in the possession or control of the Employers.

The power to designate Beneficiaries to receive the Account of a Participant in the event of such Participant’s death shall not permit or be construed to permit such power or right to be exercised

22

by the Participant so as thereby to anticipate, pledge, mortgage or encumber such Participant’s Account or any part thereof, and any attempt of a Participant so to exercise said power in violation of this provision shall be of no force and effect and shall be disregarded by the Employers.

This section shall not prevent the Plan Sponsor from exercising, in its discretion, any of the applicable powers and options granted to it upon the occurrence of an distribution event, as such powers may be conferred upon it by any applicable provision hereof.

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SECTION 7

AMENDMENT AND TERMINATION

7.1.Amendment.  The Plan Sponsor reserves the power to amend this Plan Restatement either prospectively or retroactively or both:

(a)in any respect by resolution of the Compensation Committee of its Board of Directors; and

(b)in any respect that does not materially increase the cost of the Plan by action of the Committee;

provided that no amendment shall be effective to reduce or divest the Account of any Participant or Beneficiary without the consent of such Participant or Beneficiary.

7.2.Discontinuance of Contributions and Termination of Plan.  The Plan Sponsor reserves the right to reduce, suspend or discontinue its contributions to the Plan and to terminate the Plan herein embodied in its entirety by resolution of the Compensation Committee of its Board of Directors.  If the Plan is terminated, each Participant and Beneficiary with an Account in the Plan shall receive a lump sum payment of the Account or remaining Account, as applicable, as soon as administratively feasible after such Plan termination.

7.3.Change of Control.  Notwithstanding Section 7.1 and 7.2, for a period that begins on the date of a Change of Control and ends on the last day of the twelfth (12^th) month that begins after the month in which the Change of Control occurs, the Plan may not be terminated or amended in any manner whatsoever that would adversely affect the amount and form of benefits payable under this Plan unless eighty percent (80%) of all the Participants determined as of the date of the Change of Control give knowing and voluntary written consent to such amendment or termination.

7.4.No Oral Amendments.  No modification of the terms of the Plan Restatement or termination of this Plan shall be effective unless it is in writing and signed on behalf of the Plan Sponsor by a person authorized to execute such writing.  No oral representation concerning the interpretation or effect of the Plan Restatement shall be effective to amend the Plan Restatement.

7.5.Plan Binding on Successors.  The Plan Sponsor will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise to all or substantially all of the business and/or assets of the Plan Sponsor), by agreement, to expressly assume and agree to perform this Plan in the same manner and to the same extent that the Plan Sponsor would be required to perform it if no such succession had taken place.

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SECTION 8

DETERMINATIONS – RULES AND REGULATIONS

8.1.Determinations.  The Plan Sponsor shall make such determinations as may be required from time to time in the administration of this Plan.  The Plan Sponsor shall have the discretionary authority and responsibility to interpret and construe the Plan Restatement and to determine all factual and legal questions under this Plan, including, but not limited to, the entitlement of Participants and Beneficiaries, and the amounts of their respective interests.  Each interested party may act and rely upon all information reported to them hereunder and need not inquire into the accuracy thereof, nor be charged with any notice to the contrary.

8.2.Rules and Regulations.  Any rule not in conflict or at variance with the provisions hereof may be adopted by the Plan Sponsor.

8.3.Method of Executing Instruments.  Information to be supplied or written notices to be made or consents to be given by the Plan Sponsor pursuant to any provision of the Plan Restatement may be signed in the name of the Plan Sponsor by any officer who has been authorized to make such certification or to give such notices or consents.

8.4.Claims and Review Procedure.  Until modified by the Committee, the claims and review procedure set forth in this Section shall be the mandatory claims and review procedure for the resolution of disputes and disposition of claims filed under the Plan.  An application for a distribution shall be considered as a claim for the purposes of this Section.

8.4.1.Initial Claim.  An individual may, subject to any applicable deadline, file with the Committee a written claim for benefits under the Plan in a form and manner prescribed by the Committee.

(a)If the claim is denied in whole or in part, the Committee shall notify the claimant of the adverse benefit determination within ninety (90) days after receipt of the claim.

(b)The ninety (90) day period for making the claim determination may be extended for ninety (90) days if the Committee determines that special circumstances require an extension of time for determination of the claim, provided that the Committee notifies the claimant, prior to the expiration of the initial ninety (90) day period, of the special circumstances requiring an extension and the date by which a claim determination is expected to be made.

8.4.2.Notice of Initial Adverse Determination.A notice of an adverse determination shall set forth in a manner calculated to be understood by the claimant:

25

(a)the specific reasons for the adverse determination;

(b)references to the specific provisions of the Plan Restatement (or other applicable Plan document) on which the adverse determination is based;

(c)a description of any additional material or information necessary to perfect the claim and an explanation of why such material or information is necessary; and

(d)a description of the claims review procedure, including the time limits applicable to such procedure, and a statement of the claimant’s right to bring a civil action under ERISA section 502(a) following an adverse determination on review.

8.4.3.Request for Review.  Within sixty (60) days after receipt of an initial adverse benefit determination notice, the claimant may file with the Committee a written request for a review of the adverse determination and may, in connection therewith submit written comments, documents, records and other information relating to the claim benefits.  Any request for review of the initial adverse determination not filed within sixty (60) days after receipt of the initial adverse determination notice shall be untimely.

8.4.4.Claim on Review.If the claim, upon review, is denied in whole or in part, the Committee shall notify the claimant of the adverse benefit determination within sixty (60) days after receipt of such a request for review.

(a)The sixty (60) day period for deciding the claim on review may be extended for sixty (60) days if the Committee determines that special circumstances require an extension of time for determination of the claim, provided that the Committee notifies the claimant, prior to the expiration of the initial sixty (60) day period, of the special circumstances requiring an extension and the date by which a claim determination is expected to be made.

(b)In the event that the time period is extended due to a claimant’s failure to submit information necessary to decide a claim on review, the claimant shall have sixty (60) days within which to provide the necessary information and the period for making the claim determination on review shall be tolled from the date on which the notification of the extension is sent to the claimant until the date on which the claimant responds to the request for additional information or, if earlier, the expiration of sixty (60) days.

(c)The Committee’s review of a denied claim shall take into account all comments, documents, records, and other information submitted by the

26

claimant relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination.

8.4.5.Notice of Adverse Determination for Claim on Review.A notice of an adverse determination for a claim on review shall set forth in a manner calculated to be understood by the claimant:

(a)the specific reasons for the denial;

(b)references to the specific provisions of the Plan Restatement (or other applicable Plan document) on which the adverse determination is based;

(c)a statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the claimant’s claim for benefits;

(d)a statement describing any voluntary appeal procedures offered by the Plan and the claimant’s right to obtain information about such procedures; and

(e)a statement of the claimant’s right to bring an action under ERISA section 502(a).

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SECTION 9

PLAN ADMINISTRATION

9.1.Plan Sponsor.

9.1.1.Officers.  Except as hereinafter provided, functions generally assigned to the Plan Sponsor shall be discharged by its officers or delegated and allocated as provided herein.

9.1.2.Chief Executive Officer.  Except as hereinafter provided, the Chief Executive Officer of the Plan Sponsor may delegate or redelegate and allocate and reallocate to one or more persons or to a committee of persons jointly or severally, and whether or not such persons are directors, officers or employees, such functions assigned to the Plan Sponsor generally hereunder as the Chief Executive Officer may from time to time deem advisable.

9.2.Conflict of Interest.  If any individual to whom authority has been delegated or redelegated hereunder shall also be a Participant in this Plan, such Participant shall have no authority with respect to any matter specially affecting such Participant’s individual interest hereunder or the interest of a person superior to him or her in the organization (as distinguished from the interests of all Participants and Beneficiaries or a broad class of Participants and Beneficiaries), all such authority being reserved exclusively to other individuals as the case may be, to the exclusion of such Participant, and such Participant shall act only in such Participant’s individual capacity in connection with any such matter.

9.3.Administrator.  The Plan Sponsor shall be the administrator for purposes of section 3(16)(A) of the Employee Retirement Income Security Act of 1974.

9.4.Service of Process.  In the absence of any designation to the contrary by the Plan Sponsor, the Secretary of the Plan Sponsor is designated as the appropriate and exclusive agent for the receipt of service of process directed to this Plan in any legal proceeding, including arbitration, involving this Plan.

9.5.Indemnity.  Each member of the Committee or officer, director or employee of the Employer shall, except as prohibited by law, be indemnified and held harmless by the Employer from any and all liabilities, costs and expenses (including legal fees), to the extent not covered by liability insurance, arising out of any action taken by such individual with respect to the Plan, whether imposed under ERISA or otherwise.  No such indemnification, however, shall be required or provided if such liability arises (i) from the individual’s claim for his own benefit, or (ii) from the proven gross negligence or the bad faith of the individual, or (iii) from the criminal misconduct of such individual if the individual had reason to believe the conduct was unlawful.  This indemnification shall continue as to an individual who has ceased to be a trustee of the Plan or officer, director or employee of the Employer and shall inure to the benefit of the heirs, executors and administrators of such an individual.

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SECTION 10

DISCLAIMERS

10.1.Term of Employment.  Neither the terms of the Plan Restatement nor the benefits hereunder nor the continuance thereof shall be a term of the employment of any employee.  The Plan Sponsor shall not be obliged to continue this Plan.  The terms of the Plan Restatement shall not give any employee the right to be retained in the employment of the Plan Sponsor.

10.2.Source of Payment.  Neither the Plan Sponsor nor any of its officers nor any member of its Committee in any way secure or guarantee the payment of any benefit or amount which may become due and payable hereunder to any Participant or to any Beneficiary or to any creditor of a Participant or a Beneficiary.  Each Participant, Beneficiary or other person entitled at any time to payments hereunder shall look solely to the assets of the Plan Sponsor for such payments or to the Accounts distributed to any Participant or Beneficiary, as the case may be, for such payments.  In each case where Accounts shall have been distributed to a former Participant or a Beneficiary or to the person or any one of a group of persons entitled jointly to the receipt thereof and which purports to cover in full the benefit hereunder, such former Participant or Beneficiary, or such person or persons, as the case may be, shall have no further right or interest in the other assets of the Plan Sponsor.  Neither the Plan Sponsor nor any of its officers nor any member of its Committee shall be under any liability or responsibility for failure to effect any of the objectives or purposes of this Plan by reason of the insolvency of the Plan Sponsor.

10.3.Delegation.  The Plan Sponsor and its officers and the members of its Committee shall not be liable for an act or omission of another person with regard to a responsibility that has been allocated to or delegated to such other person pursuant to the terms of the Plan Restatement or pursuant to procedures set forth in the Plan Restatement.

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SECTION 11

MISCELLANEOUS

11.1.ERISA Status.  This Plan is adopted with the understanding that it is an unfunded plan maintained primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees as provided in section 201(2), section 301(3) and section 401(a)(1) of ERISA.  Each provision shall be interpreted and administered accordingly.

11.2.IRC Status.  This Plan is intended to be a nonqualified deferred compensation arrangement.  The rules of section 401(a) et. seq. of the Code shall not apply to this Plan.  The rules of section 3121(v) and section 3306(r)(2) of the Code shall apply to this Plan.

11.3.Effect on Other Plans.  This Plan shall not alter, enlarge or diminish any person’s rights, benefits or obligations under any plan or program sponsored by the Plan Sponsor including without limitation the Qualified Plan.  It is specifically contemplated that such plans or programs will, from time to time, be amended and possibly terminated.  All such amendments and termination shall be given effect under this Plan (it being expressly intended that this Plan shall not lock in the benefit structures of any other plan or program as it exists at the adoption of this Plan or upon the commencement of participation, or commencement of benefits by any Participant).  The Plan shall supplement and not supercede, modify or amend any other plan or program sponsored by the Plan Sponsor, and the Participant’s right to benefits, if any, under such plan or program shall be determined in accordance the terms of such plan or program.

11.4.Disqualification.  Notwithstanding any other provision of the Plan Restatement or any election or designation made under this Plan, any individual who feloniously and intentionally kills a Participant shall be deemed for all purposes of this Plan and all elections and designations made under this Plan to have died before such Participant.  A final judgment of conviction of felonious and intentional killing is conclusive for this purpose.  In the absence of a conviction of felonious and intentional killing, the Plan Sponsor shall determine whether the killing was felonious and intentional for this purpose.

11.5.Rules of Document Construction.

(a)An individual shall be considered to have attained a given age on such individual’s birthday for that age (and not on the day before).  Individuals born on February 29 in a leap year shall be considered to have their birthdays on February 28 in each year that is not a leap year.

(b)Whenever appropriate, words used herein in the singular may be read in the plural, or words used herein in the plural may be read in the singular; the masculine may include the feminine; and the words “hereof,” “herein” or “hereunder” or other similar compounds of the word “here” shall mean and refer to the entire Plan Restatement and not to any particular

30

paragraph or Section of the Plan Restatement unless the context clearly indicates to the contrary.

(c)The titles given to the various Sections of the Plan Restatement are inserted for convenience of reference only and are not part of the Plan Restatement, and they shall not be considered in determining the purpose, meaning or intent of any provision hereof.

(d)Notwithstanding any thing apparently to the contrary contained in the Plan Restatement, the Plan Restatement shall be construed and administered to prevent the duplication of benefits provided under this Plan and any other qualified or nonqualified plan maintained in whole or in part by the Employers.

11.6.References to Laws.  Any reference in the Plan Restatement to a statute or regulation shall be considered also to mean and refer to any subsequent amendment or replacement of that statute or regulation.

11.7.Choice of Law.  This instrument has been executed and delivered in the State of North Dakota and shall, except to the extent that federal law is controlling, be construed and enforced in accordance with the laws of the State of North Dakota.

11.8.ERISA Administrator.  The Plan Sponsor shall be the plan administrator of this Plan.

11.9.Not an Employment Contract.  This Plan is not and shall not be deemed to constitute a contract of employment between the Employer and any employee or other person, nor shall anything herein contained be deemed to give any employee or other person any right to be retained in the Employer’s employ or in any way limit or restrict the Employer’s right or power to discharge any employee or other person at any time and to treat him without regard to the effect which such treatment might have upon him as a Participant in this Plan.

11.10.Tax Withholding.  The Plan Sponsor shall withhold the amount of any federal, state or local income tax or other tax required to be withheld by the Plan Sponsor under applicable law with respect to any amount payable under this Plan.  The amount of the withholding shall reduce the credit otherwise made to the Participant’s Account and the reduction shall be made at the time such withholding is required to be made by the Plan Sponsor or such other time as the Plan Sponsor, in its sole discretion, deems appropriate.

11.11.Expenses.  All expenses of administering this Plan shall be borne by the Plan Sponsor.

11.12.Service of Process.  In the absence of any designation to the contrary by the Plan Sponsor, the Secretary of the Plan Sponsor is designated as the appropriate and exclusive agent for the receipt of service of process directed to this Plan in any legal proceeding, including arbitration, involving this Plan.

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11.13.Spendthrift Provision.  No Participant, surviving spouse, joint or contingent annuitant or Beneficiary shall have the power to transmit, assign, alienate, dispose of, pledge or encumber any benefit payable under this Plan before its actual payment to such person.  The Plan Sponsor shall not recognize any such effort to convey any interest under this Plan.  No benefit payable under this Plan shall be subject to attachment, garnishment, execution following judgment or other legal process before actual payment to such person.  This Section shall not prevent the Employer or Committee from observing the terms of an approved qualified domestic relations order.

11.14.Certifications.  Information to be supplied or written notices to be made or consents to be given by the Plan Sponsor pursuant to any provision of this Plan may be signed in the name of the Plan Sponsor by any officer who has been authorized to make such certification or to give such notices or consents.

11.15.Errors in Computations.  The Plan Sponsor shall not be liable or responsible for any error in the computation of any benefit payable to or with respect to any Participant resulting from any misstatement of fact made by the Participant or by or on behalf of any Beneficiary to whom such benefit shall be payable, directly or indirectly, to the Plan Sponsor, and used by the Plan Sponsor in determining the benefit.  The Plan Sponsor shall not be obligated or required to increase the benefit payable to or with respect to such Participant which, on discovery of the misstatement, is found to be understated as a result of such misstatement of the Participant.  However, the benefit of any Participant which is overstated by reason of any such misstatement or any other reason shall be reduced to the amount appropriate in view of the truth (and to recover any prior overpayment).

March 5, 2004	COMMUNITY FIRST BANKSHARES, INC.
	By	/s/ Douglas G.Vang
		Its	Executive Vice President–Human Resources

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SCHEDULE I

EMPLOYERS PARTICIPATING IN THE COMMUNITY FIRST BANKSHARES, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

None

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EX-10.21

Exhibit 10.21

SEPARATION AGREEMENT

August 27, 2003
Revised September 5, 2003

Dean D. Kling
89 29^th Ave. N.
Fargo, ND  58102

Dear Dean:

This letter describes our agreement regarding the resignation of your position from Community First Bankshares, Inc. (“CFB”) effective September 30, 2003.  If after reading this letter you feel there is any discrepancy between our conversations and the contents of this letter, please contact me.

Although not obligated to do so, we have offered to provide you with the following benefits in conjunction with your departure from CFB:

1.We will pay you your regular salary, which the annualized amount is $170,000, through September 30, 2003.  Please coordinate your schedule with your supervisor during this time.  It is agreed that you will vacate Community First Bankshares premises and return your Community First Bankshares property by the close of business on August 29, 2003.

2.We will pay you separation pay at your regular salary, at regular payroll dates from October 1, 2003 through September 30, 2004.  If you enter into “regular full-time employment”(1), you must notify us promptly.  All separation pay payments will cease following your first full month of employment.  At that time, you will be entitled to a lump sum payment of 50 percent of the amount of any remaining payments.  If you enter into regular full-time employment, as a Senior Management level position with a financial services organization that is considered to be a major and direct competitor of Community First, all payments hereunder shall cease.

(1)The term “regular full-time employment” shall not mean temporary, casual or “hobby” type employment with a duration of less than one (1) month.

3.We will pay you for any unused accrued PTO as of September 30, 2003.  This amount is shown on your pay stub and will accrue per Community First Bankshares policies until September 30, 2003.

4.We will pay you any bonus/incentive amount according to the terms of the Corporate Annual Incentive Plan (AIP) pro-rated for your 2003 employment dates.  Such amounts, if any, would not be expected to be determined until February 2004 with payout, if any, made in March 2004.

5.We will pay up to $5,000 for our placement services to Drake Beam Morin Company.  For use of the program please contact Michelle Kommer at 701/298-5652.

•After your termination of employment, you and/or your covered dependents may be eligible to continue your health, dental, vision, medical reimbursement flexible spending account coverage under COBRA.  COBRA information will be sent under separate cover.

•Basic life coverage will cease on the last day of the month during which you were last actively at work.  You may convert this insurance by applying and paying the first premium for an individual policy within 31 days after any part of your insurance stops.  Contact Human Resources or ReliaStar within 31 days, if you are interested.

•Optional life coverage will cease on the last day of the month during which you were last actively at work.

•Long term disability coverage stops when you are no longer actively at work.  You may convert this insurance if your employment ends for a reason other than retirement or if you are no longer in an eligible status.  You must apply and pay the first premium for a LTD policy within 31 days after your insurance stops.  Contact Human Resources or ReliaStar, if you are interested.

•If you are a 401(k) Retirement Plan participant, distribution papers will be sent to you under separate cover upon your termination.  You must receive a distribution of your vested plan account balance if this amount is $5,000 or less.  If your vested plan account balance exceeds $5,000, you may request a distribution now or leave the balance in the plan until you later request distribution.  Please allow four to six weeks processing time after the paperwork is received in the Trust Department.  Please refer to your 401(k) Retirement Plan information regarding possible tax consequences associated with a distribution.  The plan indicates that you must be an active employee on the last day of the plan year (12/31) to receive a matching contribution.

6.We will pay you sixty five percent (65%) of any Community First Bankshares Health/Dental/Vision COBRA premium you incur according to the terms of those benefit plans for the period you are receiving separation pay delineated in paragraph #2 above.

7.We will pay you a specific separation payment as additional consideration for entering into this agreement in the amount of $5,737.50.

8.You will be allowed to exercise any vested, unexercised stock options under the CFB Incentive Stock Option plan within 30 days of the date of your position resignation.  No further vesting of any unexercised stock options will occur after the date of your position resignation.  Please contact Gale Skarpohl at 701/298-5625 with any questions you may have.

9.We are providing you with the opportunity to voluntarily resign your employment.  I will discuss with you mutually agreeable language to be communicated publicly regarding your resignation.  If any prospective employer of yours wishes to contact CFB for employment information, you agree to direct all such prospective employers to make a written request only to CFB’s Human Resources Manager, who will provide the prospective employer only with your dates of employment, the nature of the position you held with CFB and the fact that you voluntarily resigned your employment with CFB.  No reference will be made to the circumstances surrounding your resignation.

10.We have discussed and agreed on mutually agreeable language to be communicated publicly regarding your position resignation.

11.We will not dispute or contest any claim which you might make for unemployment benefits unless we disagree with the reasons for which said claim is being made or you are unavailable for employment.  Additionally, we will cooperate with you if necessary, in informing the unemployment compensation benefits office that your position resignation was based on your employer’s decision.

In consideration for the benefits outlined above, you agree to the following things:

1.You agree to resign your position with CFB.

2.You hereby release Community First Bankshares, Inc., its affiliates, its and their past and present officers, directors, agents, shareholders, employees, attorneys, insurers and indemnitors (collectively, the “Releasees”) from any and all claims and causes of action, known and unknown, which you may have against any and all of them.  Through this Release, you extinguish all causes of action, known and unknown, against the Releasees occurring up to the date of this agreement, including but not limited to any contract, wage or benefit claims; intentional infliction of emotional distress, defamation or any other tort claims; and all claims arising from any federal, state or municipal law or ordinance.  This release extinguishes any potential claims, including employment discrimination claims, arising from your employment with and position resignation from CFB, including specifically any claims under the North Dakota Human Rights Act, the Americans With Disabilities Act, Title VII of the Civil Rights Act of 1964, Age Discrimination in Employment Act, and the Fair Labor Standards Act.  This release does not extinguish any

claims or causes of action arising from breach of this Separation Agreement.  You may review this Agreement with an attorney of your choosing.  You have 45 days from the date you receive this Separation Agreement and Release to consider whether you wish to sign it.  You acknowledge that if you sign this agreement before the end of this period, it is your voluntary decision to do so, and you waive the remainder of the period.

3.In addition, Mark Anderson and Ron Strand have agreed to be named and contacted as references.  They would affirm that your separation was due to position elimination and note the accomplishments in our group f/k/a Financial Services Group during your tenure with Community First Bankshares.

4.You are hereby notified of your right to rescind the release of claims contained in the above paragraph with regard to claims arising under the Age Discrimination in Employment Act (ADEA) within seven (7) calendar days.  In order to be effective, the rescission must

a.Be in writing; and

b.Delivered to the undersigned designated official by hand or mail within the required period; and

c.If delivered by mail, the rescission must be postmarked within the required period, properly addressed to the undersigned official and sent by certified mail, return receipt requested.

This Agreement will be effective upon the expiration of the 7 day period without rescission.  You understand that if you rescind this Agreement in accordance with this paragraph, you will not receive the payments described herein and you will be obligated to return any and all payments already received.

If you violate any term of this agreement while you are still receiving benefits hereunder, payments and provision of all remaining benefits to you hereunder will immediately cease and your obligations hereunder shall remain in effect in consideration of all the benefits which you will have received prior to said violation by you.

5.You certify that you have returned all CFB property in your possession and all copies thereof, including but not limited to all keys, equipment, proprietary technology, all company documents or computerized transactions thereof, including any CFB confidential information as defined in paragraph 4 below, and any other property in your possession belonging to CFB.

6.Effective upon the execution of this Agreement by both parties, you agree that you will not divulge, communicate or use for your benefit or the benefit of any person outside CFB any of CFB’s confidential information.  Confidential information includes but is not

limited to CFB’s trade secrets, records, data, customer and prospective customer lists and information, short term and long range plans, all financial information, including sales, specific customer account sales, gross margin information, operating expense and information, competitive strategies and pricing information, procurement resources information concerning CFB’s business or its manner of operation, personnel information, sales and marketing strategies and information, and any other confidential or technical information which you have obtained during your employment with CFB.  Confidential information shall mean information not generally known in the business community that has been disclosed to you and is known to you as a consequence of your employment by CFB.  You will not disclose any such information to any person, firm, corporation, association or other entity for any reason whatsoever.  Confidential information also includes the terms and existence of this agreement, which may be disclosed by you only to your immediate family, attorney or tax advisor, except as otherwise required by court order.  This agreement and this agreement only (not any trade secret et al information) can be disclosed to your banker.

7.Effective upon execution of this agreement by both parties, you agree not to make, either directly or indirectly, any derogatory or negative comments of any kind, either oral or written, to any person or organization about CFB or any officer, director, shareholder, employee or any other person affiliated with CFB which would in any way interfere with any of CFB’s business relationships.

8.At CFB’s request, you agree to cooperate with CFB in any current or future claims or lawsuits involving CFB where you have knowledge of the underlying facts.  In addition, you agree that you will not voluntarily aid, assist, or cooperate with any claimants or plaintiffs or their attorneys or agents in any claims or lawsuits commenced in the future against CFB, provided, however, that nothing in this agreement will be construed to prevent you from testifying truthfully pursuant to a court order.

9.You agree to make yourself available to me, at my reasonable request, to assist with any transitional consulting duties associated with your current responsibilities.

This Agreement shall not in any way be construed as an admission of liability by CFB or as an admission that CFB has acted wrongfully with respect to you.  CFB specifically denies and disclaims any such liability or wrongful acts.

This agreement sets forth our entire agreement and fully supersedes any prior agreements or understandings between you and CFB.  CFB asks that our records reflect that you conclude your employment on terms you understand and accept.  Therefore, we ask you to declare that you have entered into this agreement voluntarily, without coercion or duress, and with the opportunity to review its contents with legal counsel should you desire.

If this letter accurately reflects our understanding and agreement, please sign the original and copy and return the original to me.  The copy is for your file.

Sincerely,

/s/ Thomas R. Anderson

COMMUNITY FIRST BANKSHARES, Inc.

Thomas R. Anderson

EVP – Chief Investment Officer

Read and agreed to, with declarations

confirmed, this 5^th day of September, 2003.

  /s/ Dean D. Kling

Dean D. Kling

EX-10.22

Exhibit 10.22

COMMUNITY FIRST BANKSHARES
EXECUTIVE SEVERANCE PLAN

Effective August 5, 2003

As Amended December 12, 2003

Introduction

Community First Bankshares, Inc. (“CFB”) established a severance pay plan entitled “Community First Bankshares Executive Severance Plan” (“Plan”) effective August 5, 2003 for the benefit of certain eligible executives of CFB and its subsidiaries.

This document (“Summary”) is intended to give participants an easily understood explanation of the Plan.  This Summary, in conjunction with any future amendments, constitutes the official plan document for the Plan.  You may request an additional copy of this Summary by sending a written request to the address below.

Neither the receipt of this Summary nor the use of the term “you” indicates that you are eligible for a severance benefit under the Plan.  Only those executives who are selected for participation and satisfy the requirements for a severance payment contained in the Plan are eligible for a benefit.

Capitalized terms have specialized meanings.  Terms that are not defined in the context of a particular section are defined at the end of this document.

If you have questions regarding the Plan, you may contact the Executive Vice-President, Human Resources at:

Community First Bankshares

520 Main Avenue

Fargo, North Dakota 58124

Telephone:  (701) 298-5600

Purpose

The purpose of this Plan is to:

•enhance the ability of CFB to retain existing executive management and, if needed, attract new executives;

•provide reasonable severance benefits for eligible executives in the event of termination of employment; and

•enhance executive morale.

Eligibility to Participate

You become a participant in the Plan if you are employed by CFB within the rank, position or salary grade (or similar category) selected by the Compensation Committee of the Board of Directors (“Committee”) to participate in the Plan.  If you are among the executive employees whose rank, position, salary grade or similar category is selected for participation, you will be notified in writing.  Employment in an executive capacity does not entitle you to selection for participation in the Plan.  The Committee shall not select any category of employees for participation unless it determines that each person in that category is a member of a select group of management or highly compensated employees (as that expression is used in ERISA).  The Committee’s selection of a category of executive employees for participation shall be made solely in its discretion and shall be conclusive and binding.

When Participation Ends

You will cease to be a participant in the Plan as of the first to occur of the following events:

•the date you receive all of the severance payments due under the Plan in the event you are eligible for severance;

•the date of your death;

•the date the Committee notifies you that as a result of a change in your employment status you are no longer included in a category selected to be participants in the Plan;

•the date the Plan is amended to exclude as participants the category of executive employees that includes or the Plan is terminated; or

•the date your employment ends for any reason, which does not result in your eligibility for severance.

Eligibility for Severance

You are eligible to receive severance only if:

•your employment is terminated by CFB other than for Cause or your Disability, or you terminate your employment for Good Reason;

•you are a participant in the Plan at the time of your termination of employment; and

•you have signed and returned a general release of claims in the form of a Waiver and Release Agreement that will be provided to you by CFB in compliance with its terms no sooner than the last day on which you perform services for CFB.

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Notice of Termination

Any termination of employment by either CFB or you must be communicated by a notice of termination to the other party.  The notice must specify the basis for the termination (including any basis for Cause or Good Reason) and the effective date of the termination.

Exclusions

You are not eligible for severance pay, if any of the following apply:

•you fail to report to work or resign from employment prior to the effective date of your termination of employment set forth in the notice of termination;

•you announced in writing your intention to terminate employment or retire prior to the date CFB announces that your employment will terminate;

•your termination of employment is due to Cause;

•your employment ends due to your Retirement, Disability or Death;

•you voluntary resign or terminate your employment other than for Good Reason; or

•your employment ends in connection with the sale of assets or a change in ownership of any part of CFB’s operations and you are offered a comparable position with comparable pay.

Amount of Severance Payment

The amount of severance for which you are eligible is based on your position at the time of your termination of employment and your Base Pay according to the following schedule:

Position	Severance Amount
Chief Executive Officer	36 months of Base Pay
Chief Operating Officer	24 months of Base Pay
EVP Level Officer	18 months of Base Pay
SVP Level Officer	12 months of Base Pay

Time and Form of Severance Payment

Severance payments will be paid on a salary continuation basis at regular payroll intervals.  Payment will begin as soon as administratively feasible after the expiration of any revocation or rescission period specified in the release of claims.  An individual receiving a severance payment is ineligible to make contributions to, or earn credit under, any CFB retirement plan.  In the event of your death, any severance payments not completed shall be payable to your spouse or, if you

3

do not have a spouse, to the personal representative of your estate.  All severance payments are subject to required withholding.

Other Pay/Benefits

Other Company provided pay and benefits will be addressed as follows:

•The Company will pay you for any unused accrued PTO at your last day of employment in accordance with Company Policy.

•The Company will pay you any bonus/incentive amount according to the terms of the Corporate Annual Incentive Plan (AIP) pro-rated for your actual employment dates.

•The Company will cease paying any other pay or perquisites such as auto allowances, club memberships, etc. at the end of the month of your last day of employment.

•The Company will continue your participation in Company Health/Dental/Vision (H/D/V) plans according to your elections and the terms/conditions of those plans for the period during which you are receiving monthly severance payments, or until such coverage would otherwise terminate under the same principles as applied to federal continuation coverage (COBRA).  Alternatively, Company may select at its sole discretion to provide alternative coverage of comparable H/D/V benefits or reimburse you for the cost of same on a cost-sharing basis comparable to Company’s H/D/V plans. If you continue your participation in the H/D/V plans during the entire severance period, your rights under federal continuation coverage (COBRA) will begin immediately thereafter.

•The Company will cease paying for or contributing to all other welfare, fringe, retirement, or perquisite benefits at the end of your employment as those plans delineate.  Certain of these benefits may have continuation rights for which you will receive notice.

•You will be eligible for payment of fees for outplacement services according to CFB arrangements for your position.

•You will be allowed to exercise any vested, unexercised stock options under the CFB Incentive Stock Option plan within 30 days of the day of your position resignation.  No further vesting of any unexercised stock options will occur after the date of your position resignation.

Forfeiture Events

You shall not be entitled to any severance payments under the Plan if CFB determines in its sole discretion that any of the following events have occurred:

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•you engaged in conduct prior to your termination of employment that constitutes Cause; or

•you attempted to rescind or revoke the release of claims, or violated the terms of the release of claims.

If payments have already commenced, all remaining severance payments shall be suspended, notwithstanding your entitlement to such payments.

If, after a severance payment is made, CFB determines that any of the foregoing forfeiture provisions apply, CFB shall have the right, using any method allowed by law, to recover from you the amount of severance paid.

Effect of Reemployment

If you are eligible for severance, you must promptly notify CFB if you enter into regular full-time employment following your separation from CFB and during a period equal to the number of months of Base Pay that you are eligible to receive under the Plan.

If you enter into such employment, all severance payments and benefits under the Plan will cease following your first full month of employment, and you will be eligible to receive a lump sum payment equal to 50% of the amount of any remaining severance payments.

However, you will not be eligible for a lump sum payment if: you take a senior level position with a financial services organization that is considered to be a major competitor of CFB.

Exclusive Severance

The severance benefits provided under this Plan are the only severance payments available to you in connection with your termination of employment.  A participant who becomes eligible for severance under this Plan shall not be eligible for severance under any other plan, policy, procedure, practice, agreement or arrangement.

280G Limit

In the event that any payment or benefit received or to be received by you in connection with a change in control of CFB or termination of your employment, whether payable pursuant to the terms of this Plan or any other plan, contract, agreement or arrangement (collectively, “Total Payments”), would not be deductible in whole or in part by CFB solely as a result of Section 280G of the Internal Revenue Code (“Code”), the amount payable to you under the Plan shall be reduced until no portion of the Total Payments is not deductible solely as a result of Section 280G of the Code or such amount payable to you is reduced to zero.

For purposes of this limitation:

•no portion of the Total Payments shall be taken into account which in the opinion of tax counsel selected by CFB does not constitute a “parachute payment” within the meaning of Section 280G(b)(2) of the Code;

5

•the payment pursuant to the Plan shall be reduced only to the extent necessary so that the Total Payments in their entirety constitute reasonable compensation within the meaning of Section 280G(b)(4)(B) of the Code, in the opinion of the tax counsel; and

•the value of any other non-cash benefit or any deferred cash payment included in the Total Payments shall be determined by CFB’s independent auditors in accordance with the principles of Sections 280G(d)(3) and (4) of the Code.

In case of uncertainty as to whether all or some portion of a payment is or is not payable to participant under this Plan, CFB shall initially make the payment to the participant, and the participant agrees to refund to CFB any amounts ultimately determined not to have been payable based upon the terms above.

Administration of Plan

CFB is the plan administrator and sponsor of the Plan and is responsible for the general operation and administration of the Plan and for the expenses related to such operation and administration.  CFB shall have the duty and responsibility of maintaining records, making determinations that it believes are necessary or advisable for the operation and administration of the Plan, making the requisite calculations and disbursing payments under the Plan.  CFB may delegate authority with respect to the administration of the Plan to such other committee, person or persons as it deems necessary or appropriate for the administration and operation of the Plan.

CFB has the sole discretion, authority, power and responsibility to decide all factual and legal questions under the Plan, including:

•interpreting and construing the provisions of the Plan and any ambiguous or unclear terms within the Plan document;

•adopting, establishing and revising rules, procedures and regulations relating to the Plan;

•determining the conditions subject to which any benefit may be payable, resolving all questions concerning the status and rights of a participant, and whether a claimant is eligible for benefits under the Plan and the amount of the benefits, if any, a claimant is entitled to receive; and

•making any other determinations, which it believes necessary or advisable for the administration and operation of the Plan.

In making any benefits determinations under the Plan, CFB may rely conclusively upon all tables, valuations, certificates, opinions and reports furnished by any actuary, accountant, controller, counsel or other person employed or engaged by CFB with respect to the Plan.  The decisions, interpretations and calculations of CFB are conclusive and binding on all parties.  CFB reserves the right to correct any errors that may occur in the administration of the Plan, including reducing or eliminating benefits to you under the Plan.

6

Claims Procedure

If you believe you may be entitled to severance benefits that you have not received or you disagree with any determination made by CFB with respect to the Plan, you should file a written claim for benefits with CFB at the following address:  Community First Bankshares, 520 Main Avenue, Fargo, North Dakota 58124.  All claims for benefits under this Plan must be received by CFB within one year of your termination of employment.  Claims that are received more than one year from the date of your termination of employment will be denied as untimely.

Within 90 days after you deliver your claim, CFB will notify you of the decision or request additional time (up to another 90 days) to reach a decision based upon the existence of special circumstances. If CFB notifies you that it needs additional time, the notice will describe the special circumstances requiring the extension and the date by which it expects to reach a decision.  If CFB denies your claim, in whole or in part, you will receive a notice specifying the reasons, the Plan provisions on which it is based, a description of additional material (if any) needed to perfect the claim, your right to file a civil action under section 502(a) of ERISA if your claim is denied upon review and an explanation of your right to request a review.

If your claim is denied, in whole or in part, and you disagree with the decision, within 60 days of the date you receive written notice of the denial, you must deliver to CFB a written request for review at the address listed above.  Your request for review must include issues and comments you want considered in the review.  At any time during the claim and review procedure, you may examine relevant Plan documents.

Within 60 days after you deliver your request for review, CFB will notify you of the decision or request additional time (up to another 60 days) to reach a decision based upon the existence of special circumstances.  If CFB notifies you that it needs additional time, the notice will describe the special circumstances requiring the extension and the date by which it expects to reach a decision.  If CFB affirms the denial of your claim, in whole or in part, you will receive a notice specifying the reasons, the Plan provisions on which it is based, notice that upon request you are entitled to receive free of charge reasonable access to and copies of the relevant documents, records and information used in the claims process and your right to file a civil action under section 502(a) of ERISA.

If you file your claim within the required time period and complete the entire claim and review procedure and your claim is still denied, any lawsuit must be commenced within 6 months after the claim and review procedure is complete.  In any event, you must commence a lawsuit within 30 months after you knew or should have known the principal facts on which your claim is based.  CFB may rely on any applicable statute of limitations as a basis to deny a claim.

Amendment and Termination

CFB, by written action of its Board, has the right to, at any time, amend the provisions of the Plan or terminate the Plan for any reason and in any respect at its sole discretion.  However, in the event of a change in control of CFB this Plan cannot be amended or terminated for a 12-month period following the change in control.  CFB’s right to amend the Plan includes, but is not limited to, changes in the eligibility requirements and benefit amounts provided under the Plan.  If the Plan is amended or terminated, you will be subject to all the changes effective as a result of

7

such amendment or termination, and your rights will be reduced, terminated or altered accordingly, as of the effective date of the amendment or termination.  You do not have ongoing rights to any benefits, other than payment of benefits to which you became entitled prior to the Plan amendment or termination.  CFB may delegate authority to amend or terminate the Plan to one or more individuals it deems advisable.

Plan Funding

Any severance payments will be paid out of the general assets of CFB, and you will not have any secured or preferred interest by way of trust, escrow, lien or otherwise in any specific assets of CFB.  Your rights shall be solely those of an unsecured general creditor of CFB.

Governing Law

To the extent not preempted by the laws of the United States, the laws of the State of North Dakota shall apply with respect to the Plan.

Severability

If a provision of the Plan shall be held to be illegal, invalid or unenforceable, the illegal, invalid or unenforceable provision shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included.

Assignment Prohibited

You cannot assign, encumber or otherwise anticipate the payments to be made under this Plan, and the benefits provided under this Plan will not be subject to seizure for payment of any order or judgment against you.

No Employment Rights

Becoming a participant in this Plan does not assure your continued employment or right to benefits except as outlined by the Plan, nor does it interfere with the rights of CFB to discharge you at any time as an at-will employee.  This Plan shall not be deemed an employment contract.

ERISA Status

This Plan is adopted with the understanding that it is an unfunded welfare plan maintained primarily for the benefit of a select group of management or highly compensated employees within the meaning of ERISA.  The Plan is not an employee benefit plan.  Each provision shall be interpreted and administered accordingly.

Definitions

Disability — shall have the same meaning as that term is defined in CFB’s long-term disability plan.

Base Pay — the highest regular monthly rate of pay for a participant over the prior 24 months.  Base Pay shall be determined before deductions for taxes and other items withheld, but

8

excluding all types of incentive pay, all forms of stock or equity based compensation, fringe benefits, special pay or awards, commissions, bonuses and overtime.  Base Pay shall include regular basic cash remuneration that is contributed by an employee to a qualified retirement plan, nonqualified deferred compensation plan or similar plan by CFB but it shall not include earnings on those amounts.

Cause — termination of the participant’s employment by CFB based upon:  (i) the continued failure by a participant to substantially perform the participant’s duties (unless such failure is due to participant’s Disability) after a written demand specifying the participant’s performance failures is delivered to the participant and a period of at least 14 business days is given to such participant to cure such failures; (ii) any act of fraud by the participant; (iii) any conviction for a felony or commission of a criminal or other act that will probably cause substantial economic damage to CFB or substantial injury to its business reputation; or (iv) the order of a regulatory agency.

Good Reason — the occurrence of any of the following events, without the participant’s express written consent:  (i) the assignment to the participant of duties that are inconsistent with the Participant’s position and salary; and (ii) a reduction of 10% or more in the participant’s Base Pay.

Retirement — termination of the participant’s employment which occurs on or after the date (i) the Participant has attained age 65; or (ii) the Participant has both attained age 55 and completed at least 10 years of service, and the Participant indicates he/she is “retiring”.

9

EX-12.1

Exhibit 12.1

COMMUNITY FIRST BANKSHARES, INC.	COMMUNITY FIRST BANKSHARES
HISTORICAL CONSOLIDATED FINANCIAL DATA

		Year Ended December 31,
		2003			2002			2001			2000			1999
Historical Operating Data:
Interest income		$	309,242		$	354,701		$	430,473		$	474,205		$	461,883
Interest expense		70,538			100,655			172,811			220,843			196,380
Net interest income		238,704			254,046			257,662			253,362			265,503
Provision for loan losses		12,602			13,262			17,520			15,781			20,184
Net interest income after provision for loan losses		226,102			240,784			240,142			237,581			245,319
Noninterest income		92,693			85,123			83,436			81,530			78,382
Noninterest expense		206,859			207,150			225,043			211,729			210,215
Income before income taxes		111,936			118,757			98,535			107,382			113,486
Provision for income taxes		36,915			39,549			33,476			35,748			38,573
Net income applicable to common equity		$	75,021		$	79,208		$	65,059		$	71,634		$	74,913
Earnings per common and common equivalent share:
Basic net income		$	1.97		$	2.00		$	1.59		$	1.55		$	1.50
Diluted net income		$	1.95		$	1.97		$	1.57		$	1.54		$	1.48
Dividends paid		0.90			0.80			0.68			0.60			0.56
Average common shares outstanding
Basic		38,107,796			39,564,912			40,905,545			46,219,120			50,061,972
Diluted		38,553,806			40,243,135			41,471,404			46,578,750			50,670,559
Historical Operating Ratios and Other Data:
Return on average assets		1.34		%	1.40		%	1.11		%	1.16		%	1.20		%
Return on average common shareholders’ equity		20.50		%	21.76		%	18.66		%	19.90		%	18.07		%
Net interest margin		4.84		%	5.09		%	4.99		%	4.67		%	4.85		%
Dividend payout ratio		46.15		%	40.61		%	43.31		%	38.96		%	37.84		%
Net charge-offs to average loans		0.48		%	0.33		%	0.39		%	0.34		%	0.66		%
Ratio of earnings to fixed charges (2):
Excluding interest on deposits		6.09			5.73			3.88			3.08			3.51
Including interest on deposits		2.59			2.18			1.57			1.49			1.58
Historical Financial Condition Data:
Assets		$	5,465,107		$	5,830,850		$	5,775,778		$	6,093,219		$	6,305,871
Loans		3,323,572			3,577,893			3,736,692			3,738,202			3,690,353
Investment securities (3)		1,563,419			1,672,445			1,437,066			1,714,510			1,937,517
Deposits		4,389,210			4,669,746			4,750,813			5,019,891			4,909,863
Short-term borrowings		442,266			453,490			342,639			409,710			724,425
Long-term debt		222,211			251,211			260,552			247,668			199,333
Common shareholders’ equity		361,800			378,449			356,705			345,431			407,269
Book value per common share		9.68			9.78			8.86			8.25			8.12
Tangible book value per common share		7.17			7.32			6.44			5.50			5.60
Historical Financial Condition Ratios:
Nonperforming assets to total loans and OREO		0.79		%	0.81		%	0.64		%	0.70		%	0.88		%
Allowance for loan losses to total loans		1.57		%	1.57		%	1.47		%	1.40		%	1.32		%
Allowance for loan losses to nonperforming loans		251		%	245		%	261		%	221		%	188		%
Average shareholders’ equity to average loans		6.56		%	6.45		%	5.95		%	5.82		%	6.64		%
Regulatory capital ratios:
Tier 1 capital		9.76		%	8.98		%	8.67		%	8.13		%	10.01		%
Total capital		11.42		%	11.04		%	11.11		%	10.73		%	12.45		%
Leverage ratio		6.99		%	6.52		%	6.51		%	5.94		%	7.15		%
Efficiency ratio		62.24		%	60.12		%	62.64		%	62.14		%	59.22		%
Income before taxes		$	111,936		$	118,757		$	98,535		$	107,382		$	113,486
Add:  fixed charges		70,538			100,655			172,811			220,843			196,380
Earnings including interest exp-deposits	(a)	182,474			219,412			271,346			328,225			309,866
Less: interest expense - deposits		(48,559		)	(75,572		)	(138,542		)	(169,281		)	(151,138		)
Earnings excluding interest exp-deposits	(b)	$	133,915		$	143,840		$	132,804		$	158,944		$	158,728
Fixed charges:
Interest expense - deposits		$	48,559		$	75,572		$	138,542		$	169,281		$	151,138
Interest expense - borrowings		21,979			25,083			34,269			51,562			45,242
Fixed charges incl interest exp-deposits	(c)	70,538			100,655			172,811			220,843			196,380
Less: interest expense - deposits		(48,559		)	(75,572		)	(138,542		)	(169,281		)	(151,138		)
Fixed charges excl interest exp-deposits	(d)	$	21,979		$	25,083		$	34,269		$	51,562		$	45,242
Earnings to combined fixed charges and preferred stock dividends:
Excluding interest on deposits (b) / (d)		6.09			5.73			3.88			3.08			3.51
Including interest on deposits  (a) / (c)		2.59			2.18			1.57			1.49			1.58

1

EX-13.1

Exhibit 13

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, 2003 and 2002, and its results of operations for the years ended December 31, 2003, 2002 and 2001. This discussion should be read in conjunction with the consolidated financial statements and related footnotes and the five year summary of selected financial data.  Certain amounts in prior periods have been reclassified to conform to the current presentation.

The Company is a bank holding company which at the end of 2003, conducted banking operations in 136 communities located throughout the Midwest, Inter-mountain and Southwest regions.  The Company’s community banks provide a full range of financial services through 92 Regional Financial Centers and branches, and 44 Community Financial Centers.  In addition to its primary emphasis on commercial and consumer banking services, the Company offers trust, mortgage, insurance and non-deposit investment products and services.  The Company’s principal source of income is interest income from loans and investment securities.  Additional sources of income include fees on deposit accounts and other non-interest income including commissions from the sale of insurance and non-deposit investment products and services.  Among the key drivers of the Company’s profitability has been the interest rate environment, from both a deposit pricing and a loan pricing perspective.  Profitability is also impacted by the Company’s ability to find risk appropriate investment and lending opportunities; the Company’s ability to maintain and grow its deposit base in the face of historically low interest rates; increasing competition from other providers of financial services and the Company’s ability to control its non-interest expense, while at the same time keeping pace with necessary technological improvements.  Other key factors affecting the Company include national, regional and local economic conditions that affect demand for loans and impact the rate of loan defaults.

OVERVIEW

GENERAL

For the year ended December 31, 2003, the Company reported net income of $75.0 million, a decrease of $4.2 million, or 5.3%, from the $79.2 million earned during 2002.  Diluted earnings per share were $1.95, compared to $1.97 in 2002.  Return on average assets was 1.34% for 2003, compared with 1.40% for 2002.  Return on average common shareholders’ equity for 2003 and 2002 was 20.50% and 21.76%, respectively.  The decrease in return on assets and return on equity is principally due to a 5.3% decline in net income, as average assets declined 1.1% while average common equity increased 0.5% from 2002 to 2003.

For the year ended December 31, 2002, the Company reported net income of $79.2 million, an increase of $14.1 million, or 21.7%, from the $65.1 million earned during 2001.  Diluted earnings per share were $1.97, compared to $1.57 in 2001.  Return on average assets was 1.40% for 2002, compared with 1.11% for 2001.  Return on average common shareholders’ equity for 2002 and 2001 was 21.76% and 18.66%, respectively.  The increase in return on assets is principally due to the combination of an increase in net income and a $218 million decrease in average assets, while the increase in return on equity is principally due to an increase in net income.  Earnings per share for 2002 included a positive full-year cumulative impact of 12 cents per share, due to the accounting standards change ending the amortization of goodwill.

Total assets were $5.5 billion at December 31, 2003 and $5.8 billion at December 31, 2002, a reduction of $366 million or 6.3%. This reduction was principally due to the Company’s balance sheet management strategy in the current economic environment. Management was reluctant to pursue asset growth at the risk of compromising asset quality, but rather focused on improving profitability through the pursuit of increased non-interest income, including commissions on the sale of insurance and non-deposit investment products.

STRATEGIC INITIATIVES

During 2002 and 2003, the Company has continued to implement a series of strategic initiatives that are designed to improve customer service and strengthen its position as a provider of diversified financial services.  These initiatives included a redefinition of the Company’s delivery model, the sale or closure of selected banking offices and a market extension strategy.

Under the redesigned delivery structure, the Company is implementing a centralized credit process, which, when fully operational, will offer a complete range of decision, origination, documentation and collection services to all Company offices through a Fargo, North Dakota, location.  As of December 31, 2003, all indirect consumer underwriting, administration, documentation and all consumer collection have been centralized.  Centralization of the underwriting, administration, and documentation of direct consumer loans, as well as documentation of commercial and agricultural loans, are expected to be completed by the second quarter of 2004, at which time the centralized delivery initiative will be completed.

During 2003 the Company also initiated a strategy, which consists of a market extension model, wherein the Company intends to open additional offices in selected areas of the Company’s current geographic footprint, that the Company believes are growth or emerging growth markets.  Additional offices are expected to be within the 12-state area within which the Company currently operates.  Services provided at the new locations will be determined by the opportunities identified in that area, and may include business, retail, investment sales, insurance products, mortgage products and wealth management.  During 2003, the Company announced its initial five market extension locations in the metropolitan Minneapolis/St. Paul market.  The Company expects to open the first office during the first quarter of 2004 and the second office during the second quarter of 2004.  The additional offices, which the Company expects to open in late 2004, are pending regulatory approval.  The addition of these offices is not expected to have a material impact on the Company’s financial condition or results of operations during 2004.  The Company has announced that it plans to open 30 new offices by 2007.

During 2003 the Company announced the transition of 16 additional Regional Financial Centers to Community Financial Centers.  Regional Financial Centers offer a broad mix of business and retail activity, while Community Financial Centers maintain a retail focus.  Transitioning branches into the Community Financial Center model is consistent with the Company’s long-term strategic plan to specifically address the client needs of its individual markets through highly targeted service offerings.  The Company expects to complete these transitions in early 2004.

        The Company continues to focus on insurance agency acquisitions and is committed to providing insurance in each of its markets.  During 2003, through its insurance subsidiary, the Company completed the purchase of five insurance agencies, which at the time of acquisition, had a combined annual commission revenue of approximately $1.3 million.  Acquisitions included the November 4, 2003 purchase of a limited services agency in Englewood, Colorado; the October 1, 2003 purchase of an insurance agency in Frisco, Colorado, with offices in Frisco, Leadville and Vail, Colorado; the June 2, 2003 purchase of an agency located in Rock Springs, Wyoming; the May 1, 2003 purchase of an agency in Grand Junction, Colorado; and the April 1, 2003 purchase of a Thornton, Colorado agency.  The Company recognized $1.7 million of intangible assets, including $526, 000 of unamortized goodwill relative to these transactions.

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MORTGAGE LOAN JOINT VENTURE

In June 2001, the Company, through its subsidiary bank, and Wells Fargo & Company formed a joint venture mortgage company named Community First Mortgage, LLC.  This joint venture mortgage company provides mortgage origination, documentation and support for substantially all of the residential mortgage business of the Company.  The joint venture provides the Company access to competitive technology and the benefits of future technological developments, as well as expertise in the processing and loan servicing of mortgage products.  The alliance allows the Company to expand its residential mortgage origination business through access to a broader range of mortgage products, while improving efficiency and reducing operating, credit and capital market risks. The Company has 50% ownership and 50% voting rights over the affairs of the joint venture and records its investment and its continuing share of the income or loss of the joint venture under the equity method.  As a result of the formation of the joint venture, substantially all residential mortgage originations are effected through the joint venture rather than through the Company.

STOCK REPURCHASE PLAN

Since April 2000, the Company has conducted common stock repurchase programs providing for the systematic repurchase of the Company’s common stock.  Under these programs, the shares are purchased primarily on the open market, with timing depending upon market conditions.  The program provides the Company with an alternative opportunity for capital utilization.  In addition, the shares acquired can be used for the issuance of common stock upon exercise of stock options, under the Company’s compensation plans and for other purposes, including business combinations.  On April 24, 2003, the Company approved an additional common stock repurchase authorization wherein the Company may repurchase up to an additional 3 million shares of common stock.  As of December 31, 2003, the Company had repurchased 14.4 million shares of common stock under these plans, at prices ranging from $15.25 to $29.29.  The Company repurchased 1.7 million and 1.9 million shares of common stock during 2003 and 2002 at an average price of $26.93 and $25.62, respectively.  As of December 31, 2003, 2.4 million shares remain available for repurchase.  The Company believes the program provides liquidity to investors.  The effect of the repurchase program is to increase reported earnings per share and reduce tangible book value through the reduction of common shares outstanding.

CRITICAL ACCOUNTING ESTIMATES

The Company has established various accounting policies which govern the application of accounting principles generally accepted in the United States in the preparation of the Company’s financial statements.  The significant accounting policies of the Company are described in the footnotes to the consolidated financial statements. Certain accounting policies involve significant judgments and assumptions by management that have a material impact on the carrying value of certain assets and liabilities; management considers such accounting policies to be critical accounting policies.  The judgments and assumptions used by management are based on historical experience and other factors, which are believed to be reasonable under the circumstances.  Because of the nature of the judgments and assumptions made by management, actual results could differ from these judgments and estimates which could have a material impact on the carrying values of assets and liabilities and the results of operations of the Company.  The Company believes that its critical accounting policies include the allowance for loan losses, goodwill impairment and income taxes.

The Company believes the allowance for loan losses is a critical accounting policy that requires the most significant judgment and estimates used in preparation of its consolidated financial statements.  Refer to the section entitled Allowance for Loan Losses, in this Management Discussion and Analysis of Financial Condition and Results of Operations, and Note 1, Significant Accounting Polices and Note 9, Financial Instruments with Off-Balance Sheet Risk and Concentrations of Credit Risk in the audited financial statements for a detailed description of the Company’s estimation process and methodology related to the allowance for loan losses and for the Company’s exposure to concentrations of credit.  The Company’s recorded allowance for loan losses and related provisions for loan losses could be materially different than the amounts recorded under different conditions or using different assumptions. Changes in the estimate related to the allowance for loan losses can materially affect net income.  The process of determining the allowance requires an estimate of losses on loans which can be highly uncertain and require a high degree of judgment; and is impacted by regional, national and global economic trends, and different assumptions regarding economic conditions could have been used and would have had a material impact on the provision for loan losses and on the consolidated results of operations.

The Company believes the annual testing for impairment of goodwill is a critical accounting policy that requires significant judgment and estimates.  The Company performed its initial impairment test during the first quarter of 2002 and annual impairment tests during the fourth quarter of 2003 and 2002.  All tests indicated no impairment existed, thus no adjustment to the carrying cost of goodwill was recorded.  The Company uses a multi-period discounted earnings model to determine if the equity fair value of the underlying reporting unit is equal to or greater than the current book value.  The model is based on management’s estimate of the Company’s projected earnings stream over the following five years.  The 2003 and 2002 impairment tests indicated the equity fair value exceeded the current book value, thus eliminating the need to perform the second step, measuring impairment, as no impairment was noted.  The valuation model includes various management estimates and assumptions and thus, to the extent these estimates and assumptions vary from actual future results, are subject to error and may not be indicative of future impairment tests.

The Company accounts for income tax expense by applying an estimated effective tax rate to its pre-tax income.  The effective tax rate is based on management’s judgments and estimates regarding permanent differences in the treatment of specific items of income and expense for financial statement and income tax purposes. The Company makes its estimates based on its interpretation of existing tax laws as they relate to the Company’s activity.  Such interpretation could differ from those of the taxing authorities. Periodically, the Company is examined by various federal and state tax authorities.  In the event management’s estimates and assumptions vary from the views of the taxing authority, adjustments to the periodic tax accrual may be necessary.  In addition, the Company recognizes deferred tax assets and liabilities, recorded in the Consolidated Statements of Financial Condition, based on management’s judgments and estimates regarding temporary differences in the recognition of income and expenses for financial statement and income tax purposes.

The Company must also assess the likelihood that any deferred tax assets will be realized through the reduction or refund of taxes in future periods and establish a valuation allowance for those assets for which recovery is unlikely.  In making this assessment, Management must make judgments and estimates regarding the ability to realize the asset through carryback to taxable income in prior years, the future reversal of existing taxable temporary differences, future taxable income, and the possible application of future tax planning strategies.  Although the Company has determined a valuation allowance is not required for all deferred tax assets, there is no guarantee that these assets are recognizable.  For additional discussion of income taxes, see Notes 1 and 17 in the audited financial statements.

2

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 an approximately equal amount of rate sensitive assets and rate sensitive 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:

	2003						2002						2001
Years Ended December 31 (Dollars in thousands)	Average Balance		Interest		Yield/ Rate		Average Balance		Interest		Yield/ Rate		Average Balance		Interest		Yield/ Rate
ASSETS
Loans (1) (2)	$	3,446,507	$	245,693	7.13	%	$	3,689,015	$	281,768	7.64	%	$	3,785,553	$	341,287	9.02	%
Investment securities (2)	1,584,564		68,770		4.34	%	1,403,276		78,512		5.59	%	1,487,044		94,792		6.37	%
Other earning assets	7,117		53		0.74	%	12,424		201		1.62	%	11,923		391		3.28	%
Total earning assets	5,038,188		314,516		6.24	%	5,104,715		360,481		7.06	%	5,284,520		436,470		8.26	%
Noninterest-earning assets	544,583						540,002						578,549
Total assets	$	5,582,771					$	5,644,717					$	5,863,069
LIABILITIES AND SHAREHOLDERS’ EQUITY
Interest-bearing checking	973,038		3,653		0.38	%	924,102		5,869		0.64	%	872,642		9,943		1.14	%
Savings deposits	948,020		4,436		0.47	%	923,098		8,331		0.90	%	971,915		19,428		2.00	%
Time deposits	1,559,911		40,470		2.59	%	1,818,771		61,372		3.37	%	2,053,548		109,171		5.32	%
Short-term borrowings	441,823		4,940		1.12	%	339,193		6,340		1.87	%	361,563		15,001		4.15	%
Long-term borrowings	246,324		17,039		6.92	%	264,663		18,743		7.08	%	256,745		19,268		7.50	%
Total interest-bearing liabilities	4,169,116		70,538		1.69	%	4,269,827		100,655		2.36	%	4,516,413		172,811		3.83	%
Demand deposits	986,584						948,353						921,855
Noninterest-bearing liabilities	61,036						62,451						76,125
Common shareholders’ equity	366,035						364,086						348,676
	1,413,655						1,374,890						1,346,656
Total liabilities and shareholders’ equity	$	5,582,771					$	5,644,717					$	5,863,069
Net interest income			$	243,978					$	259,826					$	263,659
Net interest spread					4.55	%					4.70	%					4.43	%
Net interest margin					4.84	%					5.09	%					4.99	%

(1) Includes nonaccrual loans and loan fees.

(2) Interest yields on loans and investments are presented on a tax-equivalent basis to reflect the tax-exempt nature of certain assets. The incremental tax rate applied was 35%.

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

	2003 COMPARED TO 2002									2002 COMPARED TO 2001
(In thousands)	Volume			Rate			Total			Volume			Rate			Total
Interest income:
Loans (1)	$	(18,523	)	$	(17,552	)	$	(36,075	)	$	(8,703	)	$	(50,816	)	$	(59,519	)
Investment securities (1)	10,143			(19,885		)	(9,742		)	(5,340		)	(10,940		)	(16,280		)
Other earning assets	(86		)	(62		)	(148		)	16			(206		)	(190		)
Total interest income	$	(8,466	)	$	(37,499	)	$	(45,965	)	$	(14,027	)	$	(61,962	)	$	(75,989	)
Interest expense:
Savings deposits and interest-bearing checking	536			(6,647		)	(6,111		)	$	(389	)	$	(14,782	)	$	(15,171	)
Time deposits	(8,735		)	(12,167		)	(20,902		)	(12,481		)	(35,318		)	(47,799		)
Short-term borrowings	1,918			(3,318		)	(1,400		)	(928		)	(7,733		)	(8,661		)
Long-term borrowings	(1,299		)	(405		)	(1,704		)	594			(1,119		)	(525		)
Total interest expense	$	(7,580	)	$	(22,537	)	$	(30,117	)	$	(13,204	)	$	(58,952	)	$	(72,156	)
Decrease in net interest income	$	(886	)	$	(14,962	)	$	(15,848	)	$	(823	)	$	(3,010	)	$	(3,833	)

(1) Fees on loans have been included in interest on loans. Interest income is reported on a tax-equivalent basis. The incremental tax rate applied was 35%.

3

Net interest income on a tax-equivalent basis in 2003 was $244.0 million, a $15.8 million decrease from 2002.  The decrease was primarily due to a 1.3% decrease in earning assets which contributed to a 25 basis point decrease in the net interest margin. The decrease in earning assets reflect management’s reluctance to compromise its loan quality standards in the current economic environment which presents fewer quality loan growth opportunities. Due to the weak loan demand, the Company’s level of investment securities increased $181 million or 12.9%.  The Company was able to acquire core deposits at lower rates due to the relatively unattractive investment alternatives for depositors.

Net interest income on a tax-equivalent basis in 2002 was $259.8 million, a $3.8 million decrease from 2001.  The decrease was primarily due to a 3.4% reduction in earning assets partially offset by a 10 basis point increase in the net interest margin.  Average investment securities in 2002 were $84 million less than in 2001. Average loans in 2002 decreased $97 million from the 2001 average.

The net interest margin was 4.84%, 5.09%, and 4.99% in 2003, 2002 and 2001, respectively.  This decrease in margin was due to a change in the mix of earning assets, including a 82 basis point decrease in rates on earning assets and a 67 basis point decrease in interest bearing liabilities.  However, average earning assets decreased $67 million, from 2002 to 2003.  Average loans to average earning assets was 68.4% in 2003 compared to 72.3% in 2002 and to 71.6% in 2001.  While management anticipates continued pressure on the Company’s net interest margin as a result of the current interest rate environment, they expect the net interest margin to remain stable during 2004.  The sluggish economy makes growth of the loan portfolio challenging, while maintaining credit quality. Record low interest rates, mortgage-backed security prepayments and fewer high-yielding reinvestment opportunities will contribute to margin pressure.

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 2003 was $12.6 million, a decrease of $660,000, or 5.0% from the 2002 provision of $13.3 million.  The decrease was primarily due to management’s assessment of the required loan loss reserve level and the impact of the $243 million, or 6.6% decline in average loans outstanding during 2003.  The allowance as a percentage of total loans was 1.57% at December 31, 2003 and 2002.  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 2002 was $13.3 million, a decrease of $4.2 million or 24.3%, from $17.5 million during 2001.  The decrease in the loan loss provision was principally due to the Company’s credit experience as reflected in a decrease in net charge-offs.  Charge-offs in 2001 included a $2.4 million charge-off of the Company’s largest non-performing asset, an Arizona-based loan of which $1.2 million was recovered in 2002.

NONINTEREST INCOME

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

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

Years Ended December 31 (In thousands)	2003		2002		2001
Service charges on deposit accounts	$	40,239	$	40,121	$	41,850
Insurance commissions	15,223		13,822		12,535
Security sales commissions	9,057		9,526		6,644
Fees from fiduciary activities	5,264		5,405		5,661
Bank owned life insurance income	4,433		3,632		3,543
Net gains on sales of securities	4,334		373		804
Gain on sales of loans	4,104		2,784		1,557
Other	10,039		9,460		10,842
Total noninterest income	$	92,693	$	85,123	$	83,436

Noninterest income for 2003 was $92.7 million, an increase of $7.6 million, or 8.9%, from the 85.1 million earned in 2002.  The increase was principally due to an increase of $1.4 million or 10.1% in insurance commissions to $15.2 million, from $13.8 million in 2002, and an increase of $4.0 million in net gains on sales of investment securities, to $4.3 million in 2003 from $373,000 in 2002.  The increase in insurance commissions is principally due to the acquisition of four insurance agencies in 2002 and five agencies in 2003.  The increase in net gains on investment securities is due principally to the Company’s decision to sell selected security issues in an effort to limit potential prepayment risk and in part as a result of realizing gains sufficient to offset approximately $1.3 million in prepayment penalties associated with the Company’s decision to retire early, selected high rate long term borrowings.  Bank owned life insurance income increased $801,000, or 22.1% from $3.6 million in 2002 to $4.4 million in 2003, due principally to an increase in the payout of specific individual contracts.  Service charges on deposit accounts increased only $118,000, or 0.3%, from $40.1 million in 2002 to $40.2 million in 2003.  Lower than anticipated service charges are due principally to the decline in deposit levels.  Commissions from the sale of investment securities decreased to $9.1 million in 2003 from $9.5 million in 2002, a decrease of $469,000 or 4.9%, due principally to record levels recorded in 2002, driven by a second quarter 2002 sales campaign.  Gain on sales of loans increased $1.3 million or 47.4% from $2.8 million in 2002 to $4.1 million in 2003, due principally to the increased volume of Small Business Administration guaranteed loans originated and sold in 2003. Trust revenue decreased $141,000, or 2.6%, to $5.3 million in 2003 from $5.4 million in 2002.

Noninterest income for 2002 was $85.1 million, an increase of $1.7 million, or 2.0%, from the $83.4 million earned in 2001.  The increase was principally due to an increase in commissions from the sale of investment securities in 2002 to $9.5 million from $6.6 million in 2001, an increase of $2.9 million, or 43.9%, and resulted in part from the Company’s sales campaigns during 2002, which focused on providing non-deposit investment alternatives to meet customer needs.  Insurance commissions increased to $13.8 million in 2002, from $12.5 million in 2001, an increase of $1.3 million, or 10.4%.  Service charges on deposit accounts decreased to $40.1 million in 2002, from $41.9 million in 2001, a decrease of $1.8 million, or 4.3%.  Trust revenue decreased to $5.4 million in 2002, from $5.7 million in 2001, a decrease of $256,000 or 4.5%.  Net gains on the sale of investment securities were $431,000 less in 2002 than in 2001.

NONINTEREST EXPENSE

Noninterest expenses consist of salaries and benefits, occupancy, equipment and other expenses such as legal and postage necessary for the operation of the Company.  Management is committed to improving the quality of service while controlling such costs through improved efficiency and consolidation of certain activities to achieve economies of scale.

The following table presents the components of noninterest

4

expense for the periods indicated:

Years Ended December 31 (In thousands)	2003		2002		2001
Salaries and employee benefits	$	112,886	$	113,994	$	115,743
Net occupancy	33,490		32,832		31,593
FDIC insurance	720		800		915
Legal and accounting	2,691		3,138		3,764
Other professional services	4,503		4,340		4,634
Advertising	3,881		3,983		5,037
Telephone	5,780		5,575		5,633
Restructuring charge	—		—		7,656
Data processing	7,036		7,210		6,940
Amortization of intangibles	3,374		3,318		9,928
Other	32,498		31,960		33,200
Total noninterest expense	$	206,859	$	207,150	$	225,043

Noninterest expense decreased $291,000 to $206.9 million in 2003.  The decrease was principally due to a decrease in salary and employee benefits.  Salaries and employee benefits decreased to $112.9 million in 2003, from $114.0 million in 2002, a decrease of $1.1 million, or 1.0%.  The decrease in salary and benefit expense from 2002 to 2003 is due principally to a reduction in staff levels during 2003 as a result of the efficiencies realized from the implementation of strategic initiatives, including the centralized credit process and the transition of branches into the Community Financial Center delivery model.  The Company’s ability to maintain the 2003 level of non-interest expense slightly less than the 2002 level is a reflection of the continued success of the internal cost control initiatives which the Company continues to implement.

Noninterest expense decreased $17.8 million to $207.2 million in 2002.  The decrease was principally due to a $6.6 million, or 66.7% decrease in the amortization of intangibles from $9.9 million in 2001 to $3.3 million in 2002, due to the accounting standards change ending the amortization of goodwill.  During 2001, a $7.7 million restructuring charge was recorded as a result of strategic initiatives implemented in 2001.  Salary and employee benefits decreased to $114.0 million in 2002, from $115.7 million in 2001, a decrease of $1.7 million or 1.5%.  The decrease was attributed to a reduction in the number of employees during 2002, in response partially to the strategic initiatives announced in 2001.

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 2003 effective tax rate is similar to the Company’s anticipated effective tax rates in future periods.  The effective tax rate was 33.0%, 33.3%, and 34.0% for 2003, 2002 and 2001, respectively.

FINANCIAL CONDITION

INVESTMENT OF FUNDS

Loans

At December 31, 2003, total loans were $3.3 billion as compared to $3.6 billion at December 31, 2002, a decrease of $254 million, or 7.1%.  The decrease is due principally to soft loan demand and the Company’s desire to generate lending opportunities consistent with its credit quality standards.  In addition, residential real estate loans are originated through Community First Mortgage, LLC and primarily sold on the secondary market.

General.  The Company’s loan mix remained relatively constant from 2002 to 2003.  Real estate loans continued to be the largest category of loans, representing 56.7% of the total loan portfolio.

Real Estate and Real Estate Construction Loans.A significant portion of the Company’s real estate loan portfolio consists of residential real estate first mortgages that have been underwritten and documented to meet secondary mortgage requirements.  Substantially all of the Company’s real estate loans are based in the Company’s primary market area.  As of December 31, 2003, $552 million, or 29.3%, of the Company’s real estate loan portfolio consisted of residential real estate loans, including home equity loans, $137 million, or 7.3%, were secured by farmland, $874 million, or 46.4%, represented commercial and other real estate loans and $321 million, or 17.0%, represented construction loans.  Residential real estate loans decreased $128 million from 2002 to 2003, due partially to the impact of the Company’s strategic initiative wherein residential mortgages are now originated principally through Community First Mortgage, LLC.

Commercial Loans.Loans in this category include loans to retail, wholesale, manufacturing and service businesses, including agricultural service businesses.  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, which, as a result of the Company’s strategic initiative to implement a centralized consumer credit process, were originated and processed through a centralized process.

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

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

	2003					2002					2001					2000					1999
As of December 31, (Dollars in thousands)	Amount			Percent of Total Loans		Amount			Percent of Total Loans		Amount			Percent of Total Loans		Amount			Percent of Total Loans		Amount			Percent of Total Loans
Loan category:
Real estate	$	1,562,443		47.0	%	$	1,568,710		43.8	%	$	1,515,118		40.5	%	$	1,458,494		39.0	%	$	1,319,678		35.8	%
Real estate construction	321,323			9.7	%	439,536			12.3	%	519,031			13.9	%	466,616			12.5	%	434,924			11.8	%
Commercial	582,861			17.5	%	723,530			20.2	%	824,318			22.1	%	872,824			23.4	%	994,624			26.9	%
Consumer and other	678,457			20.4	%	625,429			17.5	%	627,034			16.8	%	686,064			18.3	%	681,423			18.5	%
Agricultural	178,488			5.4	%	220,688			6.2	%	251,191			6.7	%	254,204			6.8	%	259,704			7.0	%
Total loans	$	3,323,572		100.00	%	$	3,577,893		100.0	%	$	3,736,692		100.0	%	$	3,738,202		100.0	%	$	3,690,353		100.0	%
Less allowance for loan losses	(52,231		)			(56,156		)			(54,991		)			(52,168		)			(48,878		)
Net loans	$	3,271,341				$	3,521,737				$	3,681,701				$	3,686,034				$	3,641,475

5

Investments

The Company supplements the quality of its loan portfolio by maintaining what it considers to be a high quality investment portfolio oriented toward U.S. Treasury, U.S. Government agency debt and 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.  Mortgage-backed securities, which are fixed and adjustable rate pools, are used as tools in managing the Company’s interest rate exposure and enhancing its net interest margin.

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:

	Estimated Fair Value at December 31,
(In thousands)	2003		2002		2001
U.S. Treasury	$	42,048	$	53,468	$	69,297
U.S. Government agencies	318,767		293,227		231,380
Mortgage-backed securities	1,062,940		1,038,044		887,148
Collateralized mortgage obligations	1,864		3,512		4,377
State and political securities	61,584		71,095		97,603
Other securities	76,216		213,099		147,261
Total	$	1,563,419	$	1,672,445	$	1,437,066

The Company did not have any held-to-maturity securities at December 31, 2003, 2002 or 2001.

The following tables set forth the composition by contractual maturity of the Company’s available-for-sale securities portfolio:

	At December 31, 2003, Maturing in
	One Year or Less				Over One Year Through 5 Years				Over 5 Years Through 10 Years				Over 10 Years				Total
(Dollars in thousands)	Amount		Weighted Yield(1)		Amount		Weighted Yield(1)		Amount		Weighted Yield(1)		Amount		Weighted Yield(1)		Amount		Weighted Yield(1)
U.S. Treasury	$	13,205	3.96	%	$	28,843	2.10	%	$	—	—		$	—	—		$	42,048	2.68	%
U.S. Government agencies	20,780		3.79	%	184,520		2.83	%	113,467		3.25	%	—		—		318,767		3.04	%
Mortgage-backed securities	57		6.56	%	6,663		5.43	%	40,635		5.43	%	1,015,585		4.20	%	1,062,940		4.26	%
Collateralized mortgage obligations	—		—		1,282		2.27	%	504		2.26	%	78		4.26	%	1,864		2.35	%
State and political securities	656		8.03	%	7,489		7.28	%	21,206		7.53	%	32,233		7.81	%	61,584		7.65	%
Other securities	—		—		266		1.93	%	595		2.62	%	75,355		5.51	%	76,216		5.47	%
Total	$	34,698	3.94	%	$	229,063	2.96	%	$	176,407	4.26	%	$	1,123,251	4.39	%	$	1,563,419	4.16	%

(1) Interest yields on investments are presented on a tax-equivalent basis to reflect the tax-exempt nature of certain assets. Yields are based on a 35%  incremental tax rate and a 0.88%  cost of funds.

The Company’s investments, all of which are recorded as available-for-sale, decreased $109 million, or 6.5%, to $1.6 billion at December 31, 2003, from $1.7 billion at December 31, 2002, due primarily to a reduction in cash flows derived from deposit generation, which as a result of the current sluggish economy, presents fewer opportunities to attract deposits at favorable interest rates.  At December 31, 2003, the Company’s investments represented 28.6% of total assets, compared to 28.7% at December 31, 2002.

The majority of the investment portfolio is comprised of government and government sponsored enterprise securities (“GSE”).  The credit risk associated with these issuers is within tolerances set by management.  A significant portion of the GSE debt includes mortgage-backed securities.  Because of their embedded prepayment options, these securities are subject to prepayment and extension risk in volatile rate environments.

BANK OWNED LIFE INSURANCE

As part of the Company’s strategy to manage employee health care and benefit costs, it has purchased a series of insurance contracts with the intent of matching in part future increases in benefit costs with earnings from the insurance contracts.  The appreciation of cash value of the contracts as well as periodic redemption of individual contracts is recorded as non-interest income.

CREDIT POLICY

The Company’s lending activities are guided by the general loan policy established by the Board of Directors.  The Board of Directors of the bank subsidiary has established loan approval limits for each banking office of the Company.  The limits established for each office range from $5,000 to $500,000 per borrower, which is reduced to not more than $25,000 for any criticized or classified borrower.  Amounts in excess of the individual bank lending authority are presented to corporate credit officers.  The corporate credit officers have lending authority up to $1,000,000 for pass-rated borrower.  Loans above $1,000,000 for pass-rated borrowers, $500,000 for watch-rated borrowers, $250,000 for classified borrowers, and $500,000 for Small Business Administration government guaranteed borrowers are presented to the Senior Credit Committee wherein approval must be unanimous.  The Senior Credit Committee is comprised of the Company’s chief operating officer, two executive vice president – division presidents, the executive vice president – credit administrative officer and the senior regional credit officer.

An integral part of the Company’s initiative to redesign its delivery structure is the implementation of a centralized loan processing function.  Begun in 2001, the Company continued its credit centralization process during 2003, with the expectation that it will be fully implemented during the second quarter of 2004.  This process centralizes the underwriting, documentation, administration and collection of all consumer loans and document preparation for commercial and agricultural credit.  As of December 31, 2003, consumer loan collections and indirect consumer underwriting, administration and documentation have been centralized.  The centralization of direct consumer loans, as well as documentation of commercial and agricultural loans is progressing on schedule.  The Company has augmented its servicing and collection of commercial and agricultural distressed credits through implementation of a special assets group, which was organized to provide greater support for the Company’s larger, more complex credit facilities. The centralization process and special assets group will afford the Company additional control and oversight of the entire credit process.  The Company administers all aspects of its small business administration credit function through a centralized location.

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

6

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, unless well secured and in the process of collection, or when the collection of interest or principal is considered unlikely.  The Company does not return a loan to accrual status until the doubt of full collectibility is removed and the borrower has re-established loan payments for a reasonable period.  When a loan is placed on nonaccrual status, any previously accrued and uncollected interest is reversed.  Interest income of $2,846,000, $3,615, 000, and $2,722,000, on nonaccrual loans would have been recorded during 2003, 2002, and 2001, respectively, if the loans had been current in accordance with their original terms. The Company recorded interest income of $540,000, $679,000, and $1,113,000 related to loans that were on nonaccrual status as of December 31, 2003, 2002, and 2001, respectively.

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

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

December 31 (Dollars in thousands)	2003			2002			2001			2000			1999
Loans:
Nonaccrual loans	$	20,630		$	22,728		$	20,818		$	23,426		$	25,764
Restructured loans	188			220			252			224			284
Nonperforming loans	20,818			22,948			21,070			23,650			26,048
OREO	5,461			5,990			2,869			2,437			6,525
Nonperforming assets	$	26,279		$	28,938		$	23,939		$	26,087		$	32,573
Loans 90 days or more past due but still accruing	$	3,220		$	4,258		$	6,270		$	2,482		$	1,949
Nonperforming loans as a percentage of total loans	0.63		%	0.64		%	0.56		%	0.63		%	0.71		%
Nonperforming assets as a percentage of total assets	0.48		%	0.50		%	0.41		%	0.43		%	0.52		%
Nonperforming assets as a percentage of total loans and OREO	0.79		%	0.81		%	0.64		%	0.70		%	0.88		%
Total loans	$	3,323,572		$	3,577,893		$	3,736,692		$	3,738,202		$	3,690,353
Total assets	$	5,465,107		$	5,830,850		$	5,775,778		$	6,093,219		$	6,305,871

Nonperforming assets were $26.3 million at December 31, 2003, a decrease of $2.6 million, or 9.0%, from $28.9 million at December 31, 2002.  Nonperforming loans decreased by $2.1 million during the same period.  The reduction in nonperforming assets from 2002 to 2003 was due in part to the partial charge-off of two specific credits, an agri-business loan and a construction contractor credit, both of which were included in nonperforming assets at December 31, 2002.  OREO decreased $529,000, or 8.8%, from $6.0 million at December 31, 2002 to $5.5 million at December 31, 2003.  The ratio of nonperforming assets to total assets at December 31, 2003, was .48%, compared to .50% at December 31, 2002.

Nonperforming assets were $28.9 million at December 31, 2002, an increase of $5.0 million, or 20.9%, from $23.9 million at December 31, 2001.  Nonperforming loans increased by $1.9 million during the same period.  OREO increased $3.1 million, or 106.9%, from $2.9 million at December 31, 2001 to $6.0 million at December 31, 2002.  The increase in OREO was principally due to the addition of two properties, one in Colorado and one in Arizona, which previously had been classified as nonaccrual loans. The ratio of nonperforming assets to total assets at December 31, 2002, was .50%, compared to .41% at December 31, 2001.

ALLOWANCE FOR LOAN LOSSES

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

The allowance is allocated to individual loan categories based upon the relative risk characteristics of the loan portfolios and actual loss experience.  Additional reserves are provided to recognize the Company’s exposure to inherent, but undetected losses within the overall loan portfolio.  Risk is assessed and reserves are allocated to the individual loan portfolios through the periodic application of risk assessment processes including migration analysis, specific credit analysis and analysis of portfolio sectors possessing common traits.

For commercial and agricultural loans, including commercial and agricultural real estate, real estate construction and purchased assets, portfolio risk is determined using migration analysis wherein the actual loan loss experience is tracked, on a loan-by-loan basis, over the previous 36 months to determine a weighted-average loss rate inherent in the respective portfolios.  In addition, individual loans, which have been identified in the periodic portfolio review as problem loans, are allocated reserves based on management’s assessment of loss probability.  Also, on a quarterly basis, management identifies sectors of each loan portfolio, which, in their judgment, demonstrate more or less risk than that risk identified in the allocated reserve calculated in the portfolio migration analysis.  The basis of these allocation adjustments includes historical and expected delinquency and charge-off statistics, changes in underwriting criteria, assessment of lender management expertise and changes in loan volume.  Portfolio sectors are identified based on a combination of common characteristics, which may include collateral type, term, purpose, geographic concentration of borrowers or other common characteristics encountered in management’s assessment of the portfolio.

Consumer and residential real estate loan portfolio risk is determined through the application of separate migration analyses designed to identify estimated inherent losses, wherein the actual portfolio losses are aggregated to determine the loss ratio applicable to the respective period.  The resulting loss ratio calculated in the analysis is applied to the entire consumer and real estate portfolios respectively, based on the average term of all portfolio loans.  Also, on a quarterly basis, management identifies sectors of the loan portfolio, which in their judgment demonstrate more or less risk than that risk identified in the portfolio migration analysis.  The basis of these allocation adjustments includes historical delinquency and

7

charge-off statistics, changes in underwriting criteria, assessment of lender management expertise and changes in loan volume.  Portfolio sectors are identified based on a combination of common characteristics, which may include collateral type, term, purpose, geographic concentration of borrowers or other common characteristics encountered in management’s assessment of the portfolio.

The Company also maintains an additional allowance amount to recognize its exposure to inherent, but undetected losses.  This exposure is caused by inherent delays in obtaining information regarding an individual borrower’s financial condition or change in their specific business condition; the judgmental nature of individual loan evaluations, collateral assessments and the interpretation of economic trends; the volatility of general economic or specific customer conditions affecting the identification and quantification of losses for large individual credits; and the sensitivity of assumptions used in establishing allocated allowances for general categories of loans.

The 2003, 2002, and 2001 allocation reflects the Company’s methodology utilized to allocate the allowance within individual loan portfolios.  The methodology was modified in 2001 due to the Company’s desire to more specifically identify credit risk within each individual loan portfolio.  As a result, a greater portion of the allowance for loan losses was allocated to specific loan portfolios, which resulted in a smaller percentage of additional allowance. While designed to more specifically identify risk inherent in a specific loan portfolio, the methodology did not result in a need for additional allowance, but rather permitted the Company to better assign its allowance balance to the risk associated with specific loan portfolios.  The resulting increase in allocated allowance and decrease in additional allowance in 2003, 2002, and 2001 is primarily a result of the modified methodology.

The allocated portion of the allowance increased to $46.2 million at December 31, 2003, an increase of $3.4 million, or 7.9% from $42.8 million at December 31, 2002.  The increase was principally due to changes in the Company’s assessment of the underlying loan portfolios.  The allocated allowance as a percentage of loans outstanding was 1.39% at December 31, 2003 and 1.20% at December 31, 2002.  While the allowance as a percentage of loans outstanding remained constant at 1.57% at December 31, 2003 and 2002, the allocated reserve percentage increased and conversely, the unallocated reserve declined.  The shift in allocated and unallocated is attributed to management’s application of its reserve analysis methodology wherein management focuses primarily on specific loan categories and sub-categories within the various portfolios.  In this manner management believes it is able to identify the majority of the risk elements at the category level, thus reducing the unallocated reserve that is necessary.  The additional allowance decreased to $6.0 million at December 31, 2003, a decrease of $7.3 million, or 54.9% from $13.3 million at December 31, 2002.  The additional allowance as a percentage of loans outstanding was .18% at December 31, 2003 and .37% at December 31, 2002.  The level of the additional allowance reflects the Company’s assessment of inherent, but undetected losses. The accompanying table shows the allocated and additional allowance for the various loan classifications.

The allocated portion of the allowance at December 31, 2003 increased to $18.7 million in the consumer and other portfolio, from $15.1 million at December 31, 2002, a $3.6 million, or 23.8%, increase.  The increase is principally due to the increase in the level of delinquencies and charge-offs in the portfolio and reflects management’s expectation of portfolio performance in the current economic environment.  As a percentage of the portfolio, the allowance allocated to consumer and other loans increased from 2.41% of the 2002 portfolio to 2.76% of the 2003 portfolio.  The December 31, 2003 allowance allocated to the agricultural portfolio increased to $3.7 million, a 23.3% increase from December 31, 2002.  As a percentage of the portfolio, the allowance allocated to agricultural loans increased from 1.37% of the 2002 portfolio to 2.09% of the 2003 portfolio.  The commercial portfolio allowance decreased $455,000, or 4.9% to $8.7 million at December 31, 2003, from $9.2 million at December 31, 2002.  As a percentage of the portfolio, the allowance allocated to commercial loans increased from 1.27% of the 2002 portfolio to 1.50% of the 2003 portfolio.  The allowance allocated for the real estate construction portfolio decreased to $2.5 million at December 31, 2003, from $4.1 million at December 31, 2002.  As a percentage of the portfolio, the allowance allocated to real estate construction loans decreased from 0.94% of the 2002 portfolio to 0.79% of the 2003 portfolio. The real estate portfolio allowance allocation of $12.4 million at December 31, 2003, increased $1.0 million or 8.8% from $11.4 million at December 31, 2002.  As a percentage of the portfolio, the allowance allocated to real estate loans increased from 0.73% of the portfolio in 2002 to 0.80% of the portfolio in 2003.  For all portfolios, the change in the allocated allowance was principally due to the Company’s delinquency and charge-off experience within the respective portfolios and reflects management’s estimate of probable losses in the portfolio at period-end.

The allocated portion of the allowance at December 31, 2002 increased to $15.1 million in the consumer and other portfolio, from $11.3 million at December 31, 2001, a $3.8 million, or 33.6%, increase.  The increase was principally due to the increase in the level of delinquencies and charge-offs in the portfolio and reflected management’s expectation of portfolio performance.  As a percentage of the portfolio, the allowance allocated to consumer and other loans increased from 1.80% of the 2001 portfolio to 2.41% of the 2002 portfolio.  The December 31, 2002 allowance allocated to the agricultural portfolio increased slightly to $3.0 million, a 1.1% increase from December 31, 2001.  As a percentage of the portfolio, the allowance allocated to agricultural loans increased from 1.19% of the 2001 portfolio to 1.37% of the 2002 portfolio.  The commercial portfolio allowance decreased $1.1 million, or 10.7%, to $9.2 million at December 31, 2002, from $10.3 million at December 31, 2001.  As a percentage of the portfolio, the allowance allocated to commercial loans increased slightly from 1.25% of the 2001 portfolio to 1.27% of the 2002 portfolio. The allowance allocated for the real estate construction portfolio decreased slightly to $4.1 million at December 31, 2002, from $4.3 million at December 31, 2001.  As a percentage of the portfolio, the allowance allocated to real estate construction loans increased from 0.82% of the 2001 portfolio to 0.94% of the 2002 portfolio.  The real estate portfolio allowance allocation of $11.4 million at December 31, 2002, decreased $1.1 million or 8.8% from $12.5 million at December 31, 2001.  As a percentage of the portfolio, the allowance allocated to real estate loans decreased from 0.83% of the portfolio in 2001 to 0.73% of the portfolio in 2002.  For all portfolios, the change in the allocated allowance was principally due to the Company’s delinquency and charge-off experience within the respective portfolios and reflects management’s estimate of probable losses in the portfolio at period-end.

8

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

	Allowance for Loan Losses at December 31,										Allowance as a Percent of Loans Outstanding by Category at December 31,
(Dollars in thousands)	2003		2002		2001		2000		1999		2003		2002		2001		2000		1999
Real estate	$	12,425	$	11,413	$	12,519	$	12,234	$	10,329	0.80	%	0.73	%	0.83	%	0.84	%	0.78	%
Real estate construction	2,535		4,116		4,256		515		218		0.79	%	0.94	%	0.82	%	0.11	%	0.05	%
Commercial	8,743		9,198		10,293		7,117		8,673		1.50	%	1.27	%	1.25	%	0.82	%	0.87	%
Consumer and other	18,744		15,069		11,272		4,147		4,657		2.76	%	2.41	%	1.80	%	0.60	%	0.68	%
Agricultural	3,738		3,029		2,996		3,016		2,643		2.09	%	1.37	%	1.19	%	1.19	%	1.02	%
Total allocated allowance	46,185		42,825		41,336		27,029		26,520		1.39	%	1.20	%	1.11	%	0.72	%	0.72	%
Total additional allowance	6,046		13,331		13,655		25,139		22,358		0.18	%	0.37	%	0.36	%	0.68	%	0.60	%
Total allowance	$	52,231	$	56,156	$	54,991	$	52,168	$	48,878	1.57	%	1.57	%	1.47	%	1.40	%	1.32	%

The actual amount of losses incurred can vary significantly from the estimated amount.  To the extent that actual losses might exceed the estimates, additional provision expense may be required in future periods.  Conversely, if actual losses are substantially less than estimated, future periods may reflect a lower provision expense.  The Company’s methodology includes general factors intended to minimize the differences in estimated and actual losses.  These factors allow the Company to adjust its estimates of losses based on the most recent information available.  Although the Company determines the amount of each element of the allowance for loan losses separately, and this process is an important credit management tool, the entire allowance for loan losses is available for the entire loan portfolio.

At December 31, 2003, the allowance for loan losses was $52.2 million, a decrease of $4.0 million from the December 31, 2002 level of $56.2 million.  At December 31, 2003 and December 31, 2002, the allowance for loan losses as a percentage of total loans was 1.57%.  The decrease in the allowance for loan losses is the result of management’s assessment of credit risk associated with the current loan portfolio and as a percentage of total loans, remains constant with the prior years, due in part to a $254 million reduction in loans outstanding.

At December 31, 2002, the allowance for loan losses was $56.2 million, an increase of $1.2 million from the December 31, 2001, level of $55.0 million.  At December 31, 2002, the allowance for loan losses as a percentage of total loans was 1.57%, as compared to 1.47% at December 31, 2001.  This increase is due to the combined effect of the Company’s analysis of the loan portfolio credit quality at the Company’s bank subsidiary and a decrease in the volume of loans outstanding.

During 2003, net charge-offs were $16.5 million, an increase of $4.4 million from net charge-offs of the $12.1 million during 2002.  The increase in net charge-offs is principally due to the partial charge-off in 2003 of two specific credits, an agri-business loan and a construction contractor credit.  Management believes the two credits are isolated transactions and not indicative of systemic asset quality deterioration.  The Company’s provision for loan losses decreased from $13.3 million in 2002 to $12.6 million in 2003.  The decrease is attributed in part to the $254 million reduction in the Company loan portfolio from December 31, 2002 to December 31, 2003.

During 2002, net charge-offs were $12.1 million, a decrease of $2.6 million from the $14.7 million during 2001.  The decrease is principally due to the 2001 charge-off of an Arizona-based loan and the $1.2 million recovery recorded on the loan in 2002.  The Company’s provision for loan losses decreased from $17.5 million in 2001 to $13.3 million in 2002.

The provision for loan losses is recorded to bring the allowance for loan losses to the level deemed appropriate by management.  The provision is the result of estimates based on management’s analysis, and as such, future earnings could be adversely affected if the provision is not sufficient to cover future losses.

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

December 31 (Dollars in thousands)	2003			2002			2001			2000			1999
Balance at beginning of year	$	56,156		$	54,991		$	52,168		$	48,878		$	51,860
Allowance of acquired companies and other	—			—			—			—			270
Charge-offs:
Real estate	2,083			2,468			1,588			1,176			2,181
Real estate construction	340			50			2,538			408			2,965
Commercial	6,538			6,191			5,374			6,644			8,349
Consumer and other	10,214			11,040			10,033			7,893			13,802
Agricultural	3,435			300			336			996			553
Total charge-offs	22,610			20,049			19,869			17,117			27,850
Recoveries:
Real estate	330			243			498			155			928
Real estate construction	21			1,309			70			4			—
Commercial	1,142			893			839			1,565			468
Consumer and other	4,525			5,332			3,438			2,648			2,537
Agricultural	65			175			327			254			481
Total recoveries	6,083			7,952			5,172			4,626			4,414
Net charge-offs	16,527			12,097			14,697			12,491			23,436
Provision charged to operations	12,602			13,262			17,520			15,781			20,184
Balance at end of year	$	52,231		$	56,156		$	54,991		$	52,168		$	48,878
Allowance as a percentage of total loans	1.57		%	1.57		%	1.47		%	1.40		%	1.32		%
Net charge-offs to average loans outstanding	0.48		%	0.33		%	0.39		%	0.34		%	0.66		%
Total loans	$	3,323,572		$	3,577,893		$	3,736,692		$	3,738,202		$	3,690,353
Average loans	$	3,446,507		$	3,689,015		$	3,785,553		$	3,706,144		$	3,573,060

9

SOURCE OF FUNDS

Deposits

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

The following table sets forth a summary of the deposits of the Company at the dates indicated, (in thousands):

December 31	2003		2002		2001
Noninterest-bearing	$	447,648	$	470,900	$	487,864
Interest-bearing:
Savings and checking accounts	2,552,056		2,424,943		2,367,255
Time accounts less than $100,000	888,066		1,103,716		1,203,379
Time accounts greater than $100,000	501,440		670,187		692,315
Total deposits	$	4,389,210	$	4,669,746	$	4,750,813

Total deposits at December 31, 2003, were $4.4 billion, a decrease of $281 million, or 6.0%, from $4.7 billion at December 31, 2002. The decrease is principally the result of the Company’s strategy to manage the rate of interest paid on deposit accounts in relationship to the availability of lending and investment opportunities. To the extent attractive lending or investment opportunities are identified, the Company may, at its discretion, adjust rates in an effort to attract additional deposits. The Company’s core deposits as a percentage of total deposits were 88.6% and 85.6% as of December 31, 2003 and December 31, 2002, respectively.

At December 31, 2003, $501 million, or 11.4% of total deposits were in time accounts greater than $100,000, a decrease of $169 million, or 25.2%, from $670 million at December 31, 2001. Management believes virtually all the deposits in excess of $100,000 are with persons or entities that hold other deposit relationships with the bank. Maturities of deposits in excess of $100,000 at December 31, 2003 were (in thousands):

Maturing in less than three months	$	172,506
Maturing in three to six months	98,072
Maturing in six to twelve months	114,310
Maturing in over twelve months	116,552
Total deposits in excess of $100,000	$	501,440

At December 31, 2003, the Company had $18 million in deposits obtained through a brokered deposit relationship. In addition to the availability of core deposits, management has determined it may continue to employ a brokered deposit program in an effort to attract lower cost sources of funds.

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 interest rate sensitivity risk. They are subject to short-term interest rate changes as the Company’s needs change or the overall market rates for short-term investment funds change.

The Company’s subsidiary bank has an arrangement with the Federal Home Loan Bank that provides for borrowing up to $364 million. As of December 31, 2003, $30 million in advances were outstanding of which $6 million are short-term borrowings. The Company also had $20 million outstanding on its $50 million short-term commercial paper arrangement at December 31, 2003. The $11 million decrease in short-term borrowings from December 31, 2002 is due to a reduction in the level of short-term borrowings necessary to fund lending opportunities that meet the Company’s credit quality criteria. The Company has a $35 million short-term line of credit with a nonaffiliated commercial bank for purposes of funding operating expenses. As of December 31, 2003, there was no balance outstanding on this line.

The following table sets forth a summary of the short-term borrowings of the Company during 2003, 2002 and 2001, and as of the end of each such period:

(Dollars in thousands)	Outstanding at Year-End		Average Daily Amount Outstanding		Maximum Outstanding at any Month-End		Weighted Average Interest Rate		Average Interest Rate at Year-End
2003
Federal funds purchased and securities sold under agreements to repurchase	$	416,689	$	394,297	$	507,426	1.03	%	0.90	%
Commercial paper	19,577		28,978		47,329		1.51	%	1.36	%
FHLB advances	6,000		10,072		29,000		2.64	%	3.84	%
Other	—		8,476		30,000		1.92	%	—
Total	$	442,266	$	441,823	$	590,339	1.12	%	0.96	%
2002
Federal funds purchased and securities sold under agreements to repurchase	$	377,230	$	296,791	$	387,810	1.76	%	1.34	%
Commercial paper	32,260		31,567		45,558		2.30	%	1.93	%
FHLB advances	44,000		10,835		58,000		3.69	%	1.70	%
Other	—		—		—		—		—
Total	$	453,490	$	339,193	$	462,881	1.87	%	1.42	%
2001
Federal funds purchased and securities sold under agreements to repurchase	$	318,859	$	263,252	$	363,638	3.47	%	2.46	%
Commercial paper	19,780		22,285		34,051		4.98	%	2.78	%
FHLB advances	4,000		72,513		210,000		6.27	%	4.39	%
Other	—		3,513		5,000		6.40	%	—
Total	$	342,639	$	361,563	$	496,856	4.15	%	2.51	%

10

LONG-TERM DEBT

Long-term debt of the Company was $222 million as of December 31, 2003, and $251 million as of December 31, 2002. The decrease is principally due to the repurchase of $10 million of its 7.30% Subordinated Notes due June 30, 2004 and a $19 million reduction in the level of subsidiary bank borrowings at the Federal Home Loan Bank.

JUNIOR SUBORDINATED DEBENTURES

Junior subordinated debentures of the Company were $120 million as of December 31, 2003 and 2002. At December 31, 2003, the total consisted of $60 million of 8.125% junior subordinated debentures issued March 27, 2002 to CFB Capital III and $60 million of 7.60% junior subordinated debentures issued March 4, 2003 to CFB Capital IV. CFB Capital III and CFB Capital IV, respectively, issued Cumulative Capital Securities to the public which bear interest at the same rate as the junior subordinated debentures and mature not later than March 15,2033. The Company has unconditionally guaranteed the obligation of CFB Capital III under the 8.125% junior subordinated debentures and the obligation of CFB Capital IV under the 7.60% junior subordinated debentures. At December 31, 2002, the Company had outstanding the 8.125% junior subordinated debentures issued March 27, 2003 and $60 million of 8.20% junior subordinated debentures issued December 10, 1997. The 8.20% junior subordinated debentures were redeemed on April 4, 2003.

SHAREHOLDERS’ EQUITY

Total shareholders’ equity decreased $16.6 million, or 4.4%, to $361.8 million at December 31, 2003, from $378.4 million at December 31, 2002. The decrease is due principally to a $16.8 million decrease in unrealized gains on available-for-sale securities, net of tax and an increase of $39.9 million in treasury stock as a result of the Company’s common stock repurchase program. These were offset in part by the retention of $40.7 million of 2003 earnings, net of $34.3 million in dividends paid on common stock.

On June 16, 2003, the Company filed a shelf registration statement with the Securities and Exchange Commission for the purpose of issuing up to $120 million of debt securities, common stock, preferred stock, and other securities. The Company expects to use the proceeds from the shelf offering to redeem or repurchase outstanding securities, repay debt, acquisitions and for general working capital.

On February 22, 2002, the Company filed a shelf registration statement with the Securities and Exchange Commission for the purpose of issuing $180 million of various debt and equity securities. At December 31, 2003, $60 million remains available for issuance of debt and equity securities.

On April 10, 2000, the Company announced its intention to repurchase up to 5 million shares of the Company’s common stock. On August 9, 2000, the Company announced its intention to repurchase up to an additional 5 million shares of the Company’s common stock. On August 7, 2001, the Company announced its intention to repurchase up to 3 million shares of the Company’s common stock. On April 24, 2003, the Company announced its intention to repurchase up to an additional 3 million shares of the Company’s common stock. In aggregate, these four announced repurchase programs and repurchases previously authorized, totaled 16.8 million shares since the Company initiated its repurchase initiative. At December 31, 2003,2.4 million shares remained available for repurchase. As of December 31, 2003, the Company had repurchased 14,400,000 shares of common stock at prices ranging from $15.25 to $29.29. The Company repurchased 1.7 million shares during 2003 at an average price of $26.93 per share and 1.9 million shares during 2002 at an average price of $25.62 per share.

In April 1998, in conjunction with the Company’s shareholder approval of a charter amendment that facilitated a two-for-one split of the Company’s common stock in the form of a 100 percent dividend paid to holders of record as of May 1,1998, the Company increased the number of authorized common shares from 30,000,000 to 80,000,000. The number of authorized preferred shares remained at 2,000,000.

ASSET AND LIABILITY MANAGEMENT

LIQUIDITY MANAGEMENT

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

In the normal course of business, the Company is party to financial instruments with off-balance-sheet risk. Because many of the commitments are expected to expire without being drawn upon, total commitment amounts do not necessarily represent the Company’s future liquidity requirements. These instruments are further described in Note 9, Financial Instruments With Off Balance-Sheet Risk and Concentrations of Credit Risk.

The liquidity ratio is one measure of a bank’s ability to meet its current obligations and is defined as the percentage of liquid assets to deposits. Liquid assets include cash and due from banks, unpledged investment securities with maturities of less than one year and federal funds sold. At year-end 2003, 2002 and 2001, the liquidity ratio was 5.53%, 8.32%, and 6.72%, respectively. The level of loans maturing within one year greatly add to the Company’s liquidity position. Including loans maturing within one year, the liquidity ratio was 21.87%, 27.94%, and 29.86%, respectively, for the same periods.

The Company has revolving lines of credit with its primary lenders, which provide for borrowing up to $85 million. These lines are utilized to finance stock repurchase activity, underwrite commercial paper, and fund other operating expenses. At December 31, 2003, the Company had $20 million in commercial paper outstanding, underwritten by the Company’s revolving line of credit. At December 31, 2002, the Company had $32 million in commercial paper outstanding, underwritten by the Company’s revolving line of credit.

The Company maintains available lines of federal funds borrowings at various non-affiliated financial institutions. The Company’s subsidiary bank has the ability to borrow an aggregate of $132 million in federal funds from five nonaffiliated financial institutions. At December 31, 2003, the Company had no balance outstanding on these lines. At December 31, 2003, the Company had $124 million outstanding balance on an aggregate of $335 million in federal funds lines on a funds available basis with seven non-affiliated institutions, four of which are administered through a third party broker-dealer. At December 31, 2002, the Company’s subsidiary bank had the ability to borrow an aggregate of $185 million in Federal Funds from eight nonaffiliated financial institutions, with an outstanding balance of $87 million.

The Company also has a $192 million line of credit from the Federal Reserve under its Primary Credit Program, which permits financial institutions with collateralized lines of credit at the

11

Federal Reserve to borrow funds on a short term basis. Funds are priced at a spread above the Federal Funds target rate and are available on an as needed basis. At December 31, 2003, the Company had no balance outstanding on its line.

Additionally, the Company’s subsidiary bank is a member of the Federal Home Loan Bank (“FHLB”) System. As part of membership, the Company’s subsidiary bank purchased a modest amount of stock of FHLB and obtained advance lines of credit which represent an aggregate of $364 million in additional funding capacity. At December 31, 2003, the Company had $20 million outstanding on this line. At December 31, 2002, the Company had $44 million outstanding on an aggregate of $458 million of additional funding capacity with the FHLB.

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.

Management 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. Management uses three methods for measuring and managing interest rate risk: Balance Sheet Simulation Modeling, Repricing Mismatch Analysis, and Equity Fair Value Modeling.

BALANCE SHEET SIMULATION MODELING

Balance Sheet Simulation Modeling allows management to analyze the short-term (12 months or less) impact of interest rate fluctuations on projected earnings. Using financial simulation computer software, management has built a model that projects a number of interest rate scenarios. Each scenario captures the impact of contractual obligations embedded in the Company’s assets and liabilities. These contractual obligations include maturities, loan and security payments, repricing dates, interest rate caps, and interest rate floors. The projection results also measure the impact of various management assumptions including loan and deposit volume targets, security and loan prepayments, pricing spreads and implied repricing caps and floors on variable rate non-maturity deposits. Management completes an earnings simulation quarterly. The simulation process is the Company’s primary interest rate risk management tool.

While management strives to use the best assumptions possible in the simulation process, all assumptions are uncertain by definition. Due to numerous market factors, and the potential for changes in management strategy over time, actual results may deviate from model projections.

Based on the results of the simulation model as of December 31, 2003, management would expect net interest income to decline 2.00%, assuming a 100 basis point rate increase in market rates. This expected result exceeds management established guidelines of 1.40%. Assuming rates dropped 100 basis points, management would expect net interest income to decline 3.09%. This decline exceeds management guidelines of 1.40%. At December 31, 2002, the impact of a 100 basis point drop would be a decrease of approximately 2.41% and a 100 basis point increase would be a decrease of approximately 0.85%, respectively, of net income.

Several factors mitigate the Company’s projected exposure to changing interest rates. First, management-established risk guidelines are measured against instantaneous rate shocks. Gradual rate shifts over several months reduce the level of projected risk, assuming rising rates. Also, the current model assumes that there is no room to downprice non-maturity transaction deposits. As an abundance of caution, management believes this is an appropriate assumption for risk management purposes, but management believes there would be the potential for some downpricing on this sizeable volume of accounts if rates were to decline further. Given the current interest rate environment, the Board has discussed and accepted operating outside the appoved guidelines.

In addition to earnings at risk, the simulation process is also used as a tool in liquidity and capital management. Management models the impact of interest rate fluctuation on the anticipated cash flows from various financial instruments. Management also reviews the implications of strategies that impact asset mix and capital levels from an interest rate risk and capital management perspective in one integrated model.

REPRICING MISMATCH ANALYSIS

Management performs a Repricing Mismatch Analysis (“Gap Analysis”) which represents a point in time net position of assets, liabilities and off-balance sheet instruments subject to repricing in specified time periods. Gap Analysis is performed quarterly. However, management believes Gap Analysis alone does not accurately measure the magnitude of changes in net interest income since changes in interest rate do not impact all categories of assets, liabilities and off-balance sheet instruments equally or simultaneously. A summary of the Gap Analysis is presented at the end of this section.

EQUITY FAIR VALUE MODELING

Because Balance Sheet Simulation Modeling is dependent on accurate volume forecasts, its usefulness as a risk management tool is limited to relatively short time frames. As a complement to the simulation process, management uses Equity Fair Value Modeling to measure long-term interest rate risk exposure. This method estimates the impact of interest rate changes on the discounted future cash flows of the Company’s current assets, liabilities and off-balance sheet instruments. This risk model does not incorporate projected volume assumptions.

Similar to the simulation process, fair value results are heavily driven by management assumptions. While management strives to use the best assumptions possible, due to numerous market factors, actual results may deviate from model projections.

Based on the model results from December 31, 2003, management would expect equity fair value to decline 5.40% assuming a 100 basis point increase in rates. This exposure is within management’s established guidelines of 10.00%. Assuming rates declined 100 basis points, the model projects a decline in equity fair value of 0.76%. This exposure is also within management’s established policy guidelines of 10.00%.

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

Based on traditional GAP methods of measuring interest rate risk, management believes the Company was liability sensitive as

12

of December 31, 2003. The following table sets forth the Company’s interest rate sensitivity analysis by contractual repricing or maturity at December 31, 2003:

	Repricing or Maturing in
(In thousands)	1 Year or Less			Over 1 to 5 Years			Over 5 Years		Total
Rate sensitive assets:
Loans	$	1,456,229		$	1,488,386		$	378,957	$	3,323,572
Available-for-sale securities	261,319			684,930			617,170		1,563,419
Bank owned life insurance	—			—			82,591		82,591
Other interest-bearing assets	3,319			—			—		3,319
Total rate sensitive assets	$	1,720,867		$	2,173,316		$	1,078,718	$	4,972,901
Rate sensitive liabilities:
Savings deposits and interest-bearing checking	$	2,552,056		$	—		$	—	$	2,552,056
Time deposits	1,038,959			350,192			355		1,389,506
Short-term borrowings	442,266			—			—		442,266
Long-term borrowings	50,000			46,500			125,711		222,211
Total rate sensitive liabilities	$	4,083,281		$	396,692		$	126,066	$	4,606,039
Rate sensitive gap	$	(2,362,414	)	$	1,776,624		$	952,652	$	366,862
Cumulative rate sensitive gap	(2,362,414		)	(585,790		)	366,862		366,862

The following sets forth the Company’s interest rate sensitivity analysis at December 31, 2003, with respect to the individual categories of loans and provides separate analyses with respect to fixed interest rate loans and floating interest rate loans:

	Repricing or Maturing in
(In thousands)	1 Year or Less		Over 1 to 5 Years		Over 5 Years		Total
Loan category:
Real estate	$	471,288	$	811,255	$	279,900	$	1,562,443
Real estate construction	321,323		—		—		321,323
Agriculture	141,595		35,693		1,200		178,488
Commercial	307,860		209,970		65,031		582,861
Consumer and other	214,163		431,468		32,826		678,457
Total loans	$	1,456,229	$	1,488,386	$	378,957	$	3,323,572
Floating interest rate loans	$	740,461	$	239,768	$	19,795	$	1,000,024
Fixed interest rate loans	715,768		1,248,618		359,162		2,323,548
Total loans	$	1,456,229	$	1,488,386	$	378,957	$	3,323,572

CAPITAL MANAGEMENT

Risk-based capital 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, 2003, 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 table.

	Regulatory Capital Requirements
(Dollars in thousands)	Tier 1 Capital		Total Risk- Based Capital		Leverage		Total Risk- Based Assets
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, 2003	9.76	%	11.42	%	6.99	%	$	3,884,282
December 31, 2002	8.98	%	11.04	%	6.52	%	$	4,202,131

Due to the Company’s level of Tier 1 capital and substantial level of earning assets invested in low risk government agency and mortgage-backed securities, the Company’s risk-based capital ratios significantly exceed the regulatory minimums. The Company conducts an ongoing assessment of its capital needs in order to maintain an adequate level of capital to support business growth, to ensure depositor protection and to facilitate corporate expansion. Portions of the subordinated debt financing referred to in Note 13, Long-Term Debt, are treated as Tier 2 capital.

OFF-BALANCE SHEET ARRANGEMENTS, CONTRACTUAL OBLIGATIONS AND OTHER COMMERCIAL COMMITMENTS

Off-Balance Sheet Arrangements:

In the normal course of business, the Company enters into various business arrangements wherein it may be required by the terms of the arrangement to guarantee or invest additional capital as a result of investment opportunities and financial performance.

Mortgage Loan Joint Venture: The Company, through its subsidiary bank, and Wells Fargo & Company formed a joint venture mortgage company for the purpose of providing mortgage origination, documentation, servicing process and support for substantially all the residential mortgage business of the Company. The Company has 50% ownership and 50% voting rights over the affairs of the joint venture and accordingly records its investment and its continuing share of the income or loss of the joint venture under the equity method of accounting. As a 50% holder of the joint venture, the Company may be required to increase its investment in the joint venture in the event additional investment capital were required. As of December 31, 2003, the Company’s investment in the joint venture totaled $253,000.

Federal Reserve Stock: The Company’s affiliate bank is required by Federal banking regulations to be a member of the Federal Reserve System. As a member of the Federal Reserve System, the Company must maintain stock ownership in the Federal Reserve System in an amount equal to six percent of the affiliate bank’s paid-in capital and surplus. The affiliate bank is required and currently has purchased an amount of common stock equal to three percent, or one-half the bank’s subscription amount. At the discretion of the Federal Reserve System, the bank may be required to increase its investment to an amount equal to the full six percent of its total paid-in capital and surplus. At December 31, 2003, the Company’s investment in the Federal Reserve System totaled $9.6 million, which is included in available-for-sale securities.

CONTRACTUAL OBLIGATIONS AND OTHER COMMERCIAL COMMITMENTS:

In the normal course of business, the Company arranges financing through entering into debt arrangements with various creditors for the purpose of financing specific assets or providing a funding source. Also, 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. Other commercial commitments are further discussed in Note 9, Financial Instruments with Off- Balance-Sheet Risk and Concentrations of Credit. The contractual

13

amounts of the Company’s contractual obligations at December 31, 2003, as well as the maturity of these commitments are:

	Payments Due by Period
(In thousands)	Total		Less Than 1 Year		1-3 Years		4-5 Years		After 5 Years
Capital lease obligations	$	6,114	$	1,356	$	3,081	$	1,578	$	99
Operating leases	6,378		1,736		1,636		1,068		1,938
Demand deposits	447,648		447,648		—		—		—
Savings deposits and interest-bearing checking	2,552,056		2,552,056		—		—		—
Time deposits	1,389,506		1,038,959		261,767		88,425		355
Federal funds purchased	124,000		124,000		—		—		—
Securities sold under agreement to repurchase	292,689		292,689		—		—		—
Long-term debt	222,211		50,000		17,000		29,500		125,711
Lines of credit	665,151		471,801		62,187		18,973		112,190
Standby letters of credit	21,474		15,245		5,183		223		823
Commercial letters of credit	7,255		7,063		89		5		98
Total	$	5,734,482	$	5,002,553	$	350,943	$	139,772	$	241,214

Capital Lease Obligations: The Company frequently acquires the rights to equipment used in the operation of the Company by entering into long-term capital leases. At December 31, 2003, the Company was liable for the payment of lease schedules associated with the acquisition of equipment and premises totaling $5,230,000, exclusive of finance charges. The effect of capital leases recorded at December 31, 2003 is summarized in the table above. Capital lease obligations are also discussed in Note 18, Commitments and Contingent Liabilities.

Operating Leases: In the normal course of business the Company enters into operating lease arrangements for the use of premises and equipment. Operating leases include rental agreements with tenants providing facilities through which the Company delivers its products and services. Operating leases are also discussed in Note 18, Commitments and Contingent Liabilities.

Long-Term Debt: At December 31, 2003, the Company had long term debt outstanding of $222.2 million. Long-term debt includes $50 million of unsecured subordinated notes payable, bearing interest at a rate of 7.30%, payable semi-annually, that mature June 30, 2004. The subordinated notes, whose terms include certain covenants pertaining to regulatory compliance, financial performance timely reporting, failure to pay principal at maturity, failure to make scheduled payments, and bankruptcy, insolvency or reorganization of the Company, may not be paid early. Management is currently evaluating the available funding alternatives with regard to the June 30, 2004 maturity of the 7.30% subordinated notes, including the impact of various alternatives on the Company’s risk-based capital ratios. Long-term debt includes $61,855,000 of 8.125% Junior Subordinated Debentures payable to CFB Capital III, an unconsolidated affiliate of the Company, bearing quarterly interest payments and maturing April 15,2032 and $61,856,000 of 7.60% Junior Subordinated Debenture payable to CFB Capital IV, an unconsolidated affiliate of the Company, bearing quarterly interest payments and maturing March 15,2033. The subsidiary bank had Federal Home Loan Bank advances totaling $23.5 million outstanding at December 31, 2003, bearing interest rates ranging from 3.83% to 6.55%, interest is payable monthly, with maturities ranging from January 25, 2005 to May 8, 2009. Also at December 31, 2003, the subsidiary bank had a $25 million unsecured subordinated term note payable to a non-affiliated bank, at an interest rate of LIBOR plus 140 basis points, payable quarterly, with a maturity date of December 22, 2007. The subsidiary bank note payable is subject to covenants including remaining in compliance with all regulatory agency requirements, providing timely financial information and providing access to certain Company records. The debt facilities are described in Note 13, Long-term Debt. At December 31, 2003, the Company was in compliance with all debt covenants.

Junior subordinated debentures:The Company has unconditionally guaranteed the obligation of CFB Capital III, under the $60 million, 8.125% junior subordinated debentures issued March 27, 2002 and the obligation of CFB Capital IV, under the $60 million 7.60% junior subordinated debentures issued March 4, 2003. The $60 million Capital III securities, which mature April 15,2032 may be redeemed any time on or after April 15, 2007. The $60 million Capital IV securities, which mature March 15,2033, may be redeemed at any time on or after March 15, 2008. See Note 13, Long-Term Debt for additional information.

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

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

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

FORWARD-LOOKING STATEMENTS

This Annual Report contains forward-looking statements under the Private Securities Litigation Reform Act of 1995 that are subject to certain risks and uncertainties that could cause actual results to differ materially from historical earnings and those presently anticipated or projected. The Company wishes to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. Factors that could cause actual results to differ from the results discussed in the forward-looking statements include, but are not limited to: risks of loans and investments, including dependence on local economic conditions; competition for the Company’s customers from other providers of financial services; possible adverse effects of changes in interest rates; execution and implementation of a series of previously announced strategic initiatives; balance sheet and critical ratio risks related to the share repurchase program; risks related to the Company’s acquisition and market extension strategy, including risks of adversely changing results of operations and possible factors affecting the Company’s ability to consummate further acquisitions; or extend its markets and other risks detailed in the Company’s Form 10-K filed with the Securities and Exchange Commission, all of which are difficult to predict and many of which are beyond the control of the Company.

14

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION COMMUNITY FIRST BANKSHARES, INC.

December 31 (Dollars in thousands, except share data)	2003			2002
ASSETS
Cash and due from banks	$	234,076		$	242,887
Interest-bearing deposits	3,319			4,613
Available-for-sale securities	1,563,419			1,672,445
Loans	3,323,572			3,577,893
Less: Allowance for loan losses	(52,231		)	(56,156		)
Net loans	3,271,341			3,521,737
Bank premises and equipment, net	131,008			132,122
Accrued interest receivable	28,696			34,863
Bank owned life insurance	82,591			80,165
Goodwill	63,448			62,903
Other intangibles	30,402			32,577
Other assets	56,807			46,538
Total assets	$	5,465,107		$	5,830,850
LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits:
Noninterest-bearing	$	447,648		$	470,900
Interest-bearing:
Savings and NOW accounts	2,552,056			2,424,943
Time accounts over $100,000	501,440			670,187
Other time accounts	888,066			1,103,716
Total deposits	4,389,210			4,669,746
Federal funds purchased and securities sold under agreements to repurchase	416,689			377,230
Other short-term borrowings	25,577			76,260
Long-term debt	222,211			251,211
Accrued interest payable	13,081			20,274
Other liabilities	36,539			57,680
Total liabilities	5,103,307			5,452,401
Shareholders’ equity:
Common stock, par value $.01 per share:
Authorized Shares – 80,000,000
Shares – 51,021,896	510			510
Capital surplus	194,911			193,887
Retained earnings	432,574			393,550
Accumulated other comprehensive income, net of tax	7,053			23,826
Less cost of common stock in treasury – 2003 – 13,664,482 shares; 2002 – 12,343,096 shares	(273,248		)	(233,324		)
Total shareholders’ equity	361,800			378,449
Total liabilities and shareholders’ equity	$	5,465,107		$	5,830,850

See accompanying notes.

15

CONSOLIDATED STATEMENTS OF INCOME COMMUNITY FIRST BANKSHARES, INC.

Years ended December 31 (Dollars in thousands, except per share data)	2003		2002		2001
INTEREST INCOME:
Loans	$	241,442	$	276,846	$	336,937
Investment securities	67,748		77,654		93,145
Interest-bearing deposits	49		41		192
Federal funds sold and resale agreements	3		160		199
Total interest income	309,242		354,701		430,473
INTEREST EXPENSE:
Deposits	48,559		75,572		138,542
Short-term and other borrowings	4,940		6,340		15,001
Long-term debt	17,039		18,743		19,268
Total interest expense	70,538		100,655		172,811
Net interest income	238,704		254,046		257,662
Provision for loan losses	12,602		13,262		17,520
Net interest income after provision for loan losses	226,102		240,784		240,142
NONINTEREST INCOME:
Service charges on deposit accounts	40,239		40,121		41,850
Insurance commissions	15,223		13,822		12,535
Security sales commissions	9,057		9,526		6,644
Fees from fiduciary activities	5,264		5,405		5,661
Bank owned life insurance income	4,433		3,632		3,543
Net gains on sales of securities	4,334		373		804
Gain on sales of loans	4,104		2,784		1,557
Other	10,039		9,460		10,842
Total noninterest income	92,693		85,123		83,436
NONINTEREST EXPENSE:
Salaries and employee benefits	112,886		113,994		115,743
Net occupancy	33,490		32,832		31,593
FDIC insurance	720		800		915
Legal and accounting	2,691		3,138		3,764
Other professional services	4,503		4,340		4,634
Advertising	3,881		3,983		5,037
Telephone	5,780		5,575		5,633
Restructuring charge	—		—		7,656
Data processing	7,036		7,210		6,940
Amortization of intangibles	3,374		3,318		9,928
Other	32,498		31,960		33,200
Total noninterest expense	206,859		207,150		225,043
Income before income taxes	111,936		118,757		98,535
Provision for income taxes	36,915		39,549		33,476
Net income	$	75,021	$	79,208	$	65,059
Earnings per common and common equivalent share:
Basic net income	$	1.97	$	2.00	$	1.59
Diluted net income	$	1.95	$	1.97	$	1.57
Average common and common equivalent shares outstanding:
Basic	38,107,796		39,564,912		40,905,545
Diluted	38,553,806		40,243,135		41,471,404

See accompanying notes.

16

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME COMMUNITY FIRST BANKSHARES, INC.

Years ended December 31 (Dollars in thousands, except per share data)	2003			2002			2001
Net income	$	75,021		$	79,208		$	65,059
Other comprehensive income:
Unrealized (losses) gains on securities:
Unrealized holding (losses) gains arising during period	(23,435		)	33,450			22,885
Related taxes	9,262			(13,247		)	(9,070		)
Less: Reclassification adjustment for gains included in net income	(4,334		)	(373		)	(804		)
Related taxes	1,734			149			322
Other comprehensive (loss) income	(16,773		)	19,979			13,333
Comprehensive income	$	58,248		$	99,187		$	78,392

See accompanying notes.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY COMMUNITY FIRST BANKSHARES, INC.

										Accumulated Other
Years ended December 31, 2003, 2002, 2001	Common Stock			Capital			Retained			Comprehensive			Treasury Stock
(Dollars in thousands, except per share data)	Shares	Amount		Surplus			Earnings			Income			Shares		Amount			Total
Balance at December 31, 2000	51,021,896	$	510	$	192,368		$	315,091		$	(9,486	)	9,155,144		$	(153,052	)	$	345,431
Net income	—	—		—			65,059			—			—		—			65,059
Common stock dividends ($0.68 per share)	—	—		—			(27,793		)	—			—		—			(27,793		)
Purchases of common stock for treasury, at cost	—	—		—			—			—			2,010,172		(43,020		)	(43,020		)
Exercise of options, net of stock tendered in payment	—	—		735			(4,256		)	—			(389,459	)	7,216			3,695
Change in unrealized gain on available-for-sale securities, net of income taxes of $8,748	—	—		—			—			13,333			—		—			13,333
Balance at December 31, 2001	51,021,896	$	510	$	193,103		$	348,101		$	3,847		10,775,857		$	(188,856	)	$	356,705
Net income	—	—		—			79,208			—			—		—			79,208
Common stock dividends ($0.80 per share)	—	—		—			(31,664		)	—			—		—			(31,664		)
Common stock dividends
Purchases of common stock for treasury, at cost	—	—		—			—			—			1,958,641		(50,187		)	(50,187		)
Exercise of options, net of stock tendered in payment	—	—		1,902			(2,073		)	—			(425,929	)	6,489			6,318
Purchase of treasury stock for employee benefit plans	—	—		—			(22		)	—			34,527		(770		)	(792		)
Net cost of redemption of company-obligated mandatorily redeemable preferred securities	—	—		(1,118		)	—			—			—		—			(1,118		)
Change in unrealized gain on available-for-sale securities, net of income taxes of $13,098	—	—		—			—			19,979			—		—			19,979
Balance at December 31, 2002	51,021,896	$	510	$	193,887		$	393,550		$	23,826		12,343,096		$	(233,324	)	$	378,449
Net income	—	—		—			75,021			—			—		—			75,021
Common stock dividends ($0.90 per share)	—	—		—			(34,250		)	—			—		—			(34,250		)
Purchases of common stock for treasury, at cost	—	—		—			—			—			1,746,923		(47,051		)	(47,051		)
Exercise of options, net of stock tendered in payment	—	—		2,031			(1,747		)	—			(425,537	)	7,127			7,411
Net cost of redemption of company-obligated mandatorily redeemable preferred securities	—	—		(1,007		)	—			—			—		—			(1,007		)
Change in unrealized gain on available-for-sale securities, net of income tax credits of $10,996	—	—		—			—			(16,773		)	—		—			$	(16,773	)
Balance at December 31, 2003	51,021,896	$	510	$	194,911		$	432,574		$	7,053		13,664,482		$	(273,248	)	$	361,800

See accompanying notes.

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CONSOLIDATED STATEMENTS OF CASH FLOWS COMMUNITY FIRST BANKSHARES, INC.

Years ended December 31 (In thousands)	2003			2002			2001
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	75,021		$	79,208		$	65,059
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses	12,602			13,262			17,520
Depreciation	17,397			14,841			13,553
Amortization of intangibles	3,374			3,318			9,928
Net amortization (accretion) of premiums and discounts on securities	8,806			1,740			(582		)
Net (gain) on sale of available-for-sale securities	(4,334		)	(373		)	(804		)
Deferred income tax benefit (expense)	3,289			5,237			(2,223		)
Tax benefit from employee exercise of non-qualified stock options	1,197			1,092			467
Decrease in interest receivable	6,167			4,628			13,003
Decrease in interest payable	(7,193		)	(11,076		)	(15,494		)
Other, net	(28,880		)	21,979			11,879
Net cash provided by operating activities	87,446			133,856			112,306
CASH FLOWS FROM INVESTING ACTIVITIES
Net decrease (increase) in interest-bearing deposits	1,294			(4,272		)	769
Purchases of available-for-sale securities	(1,314,637		)	(1,487,117		)	(724,534		)
Maturities of available-for-sale securities	1,125,647			1,210,824			985,009
Proceeds from sales of available-for-sale securities	265,775			72,624			40,436
Net decrease (increase) in loans	237,794			146,702			(13,187		)
Net increase in bank premises and equipment	(16,283		)	(21,016		)	(17,825		)
Net cash provided by (used in) investing activities	299,590			(82,255		)	270,668
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in demand deposits, NOW accounts and savings accounts	103,861			40,724			4,679
Net decrease in time accounts	(384,397		)	(121,791		)	(273,757		)
Net (decrease) increase in short-term and other borrowings	(11,224		)	110,851			(67,071		)
Proceeds from issuance of long term debt	63,856			81,856			25,000
Repayment of long term debt	(92,856		)	(91,197		)	(12,116		)
Net purchase of common stock held in treasury	(47,051		)	(50,979		)	(43,020		)
Net sale of common stock held in treasury	6,214			5,226			3,228
Cash dividends	(34,250		)	(31,664		)	(27,793		)
Net cash used in financing activities	(395,847		)	(56,974		)	(390,850		)
Net decrease in cash and cash equivalents	(8,811		)	(5,373		)	(7,876		)
Cash and cash equivalents at beginning of year	242,887			248,260			256,136
Cash and cash equivalents at end of year	$	234,076		$	242,887		$	248,260

See accompanying notes.

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  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS COMMUNITY FIRST BANKSHARES, INC.

1. SIGNIFICANT ACCOUNTING POLICIES

Community First Bankshares, Inc. (the “Company”) is a bank holding company which, at the end of 2003, served 136 communities in Arizona, California, Colorado, Iowa, Minnesota, Nebraska, New Mexico, North Dakota, South Dakota, Utah, Wisconsin and Wyoming. The Company’s community banks provide a full range of financial services through its 92 Regional Financial Centers and branches, and 44 Community Financial Centers, primarily in small and medium-sized communities and the surrounding areas. In addition to its primary emphasis on commercial and consumer banking services, the Company offers trust, mortgage, insurance and nondeposit investment products and services.

BASIS OF PRESENTATION

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

SEGMENT DISCLOSURES

Operating segments are components of a business about which separate financial information is available and that are evaluated regularly by the chief operating decision maker in deciding how to allocate resources and assessing performance. Public companies are required to report certain financial information about operating segments in interim and annual financial statements. The Company’s chief operating decision maker evaluates the operations of the Company as one operating segment, commercial banking, due to the materiality of the commercial banking operation to the Company’s financial condition and results of operations, taken as a whole, and as a result, separate segment disclosures are not required. The Company offers the following products and services to external customers: deposits, loans, insurance, securities and trust services. Revenues for each of these products and services are disclosed separately in the Consolidated Statements of Income.

USE OF ESTIMATES

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

HELD-TO-MATURITY AND AVAILABLE-FOR-SALE SECURITIES

Management determines the classification of debt securities at the time of purchase and re-evaluates such designation as of each balance sheet date. Debt securities are classified as held-to-maturity when the Company has the positive intent and ability to hold the securities to maturity. Held-to-maturity securities are stated at amortized cost.

Debt securities not classified as held-to-maturity and equity securities are classified as available-for-sale. Available-for-sale securities are stated at fair value, with the unrealized gains and losses, net of tax, reported within other comprehensive income in shareholders’ equity.

The amortized cost of debt securities classified as held-to-maturity or available-for-sale is adjusted for amortization of premiums and accretion of discounts to maturity or, in the case of mortgage-backed securities, over the estimated life of the security. Such amortization and accretion is included as an adjustment to interest income from investment securities. 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, unless well secured and in the process of collection, 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. Consumer loans are generally charged off when they become 90 days contractually past due. All other loans are charged off when considered uncollectible based on both quantitative and qualitative factors determined on an individual loan basis.

Loans held for sale are carried at the lower of aggregate cost or fair value.

LOAN FEE INCOME

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

OTHER REAL ESTATE OWNED

Other real estate owned includes properties acquired in partial or total satisfaction of certain loans and is included in other assets. Properties are recorded at the lower of the recorded investment in the loans for which the properties previously served as collateral or the fair value, which represents the estimated sales price of the properties on the date acquired less estimated selling costs. Any write-downs in the carrying value of a property at the time of acquisition are charged against the allowance for loan losses. Management periodically reviews the carrying value of foreclosed real estate properties. Any write-downs of the properties subsequent to acquisition, as well as gains or losses on disposition and income or expense from the operations of other real estate owned, are recognized in operating results in the period they are realized. At December 31, 2003 and 2002, other real estate owned totaled $5.5 million and $6.0 million, respectively.

ALLOWANCE FOR LOAN LOSSES

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

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

BANK PREMISES AND EQUIPMENT

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

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depreciation methods are used for income tax reporting purposes.

BANK OWNED LIFE INSURANCE

Bank owned life insurance (“BOLI”) is recorded as an asset at the amount that would be realized under the insurance contract as of the date of the Consolidated Statement of Financial Condition. The change in cash surrender value during the period is an adjustment of premiums paid in determining the expense or income to be recognized under the contract for the period. This change, as well as periodic redemption of individual contracts, is recorded as BOLI income in noninterest income on the Consolidated Statement of Income.

INTANGIBLE ASSETS

Goodwill, the excess cost over the fair value of net assets acquired, was amortized over a period of fifteen years, until December 31, 2001. As described in Note 3, Accounting Changes, goodwill is no longer amortized, but is reviewed for impairment. At December 31, 2003, goodwill totaled $63,448,000, net of accumulated amortization of $36,292,000. Other intangible assets, principally deposit based intangibles, unexpired premium lists and noncompetition agreements, totaled $30,402,000, net of accumulated amortization of $20,461,000, and are amortized over their estimated useful lives ranging from three to fifteen years. The Company assesses the recoverability of goodwill and other intangibles on an annual basis, or more frequently if certain impairment indicators arise, to determine whether any impairment exists. This ongoing assessment includes understanding and evaluating qualitative factors that would indicate the potential for impairment. If the Company believes a potential impairment exists, the Company estimates the relative market value of the corresponding business activity to determine whether a permanent impairment exists.

ADVERTISING COSTS

All advertising costs incurred by the Company are expensed in the period in which they are incurred.

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 amounts at each year-end. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

COMPREHENSIVE INCOME

Comprehensive income is the total of reported net income and all other revenues, expenses, gains and losses that under accounting principles generally accepted in the United States are not included in the determination of reported net income. The Company includes changes in unrealized gains or losses, net of tax, on available for sale securities in other comprehensive income and is presented in the Consolidated Statements of Comprehensive Income.

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 for the period.

Diluted earnings per common share is calculated by adjusting the weighted-average number of shares of common stock outstanding for shares that would be issued assuming the exercise of stock options during each period. Such adjustments to the weighted-average number of shares of common stock outstanding are made only when such adjustments dilute earnings per share, and are computed based on the treasury stock method using the average market price for the period.

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

At December 31, 2003, the Company had one stock-based employee compensation plan, which is described more fully in Note 15, Employee Benefit Plans. The Company accounts for this plan under the recognition and measurement principles of APB Opinion No. 25, Accounting for Stock Issued to Employees, and Related Interpretations. No stock-based employee compensation cost is reflected in net income, as all options granted under this plan have an exercise price equal to the market value of the underlying common stock on the date of grant. The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of FASB Statement No. 123, Accounting for Stock-Based Compensation, to stock-based employee compensation:

	Year Ended December 31
(Dollars in thousands, except per share data)	2003			2002			2001
Net income, as reported	$	75,021		$	79,208		$	65,059
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effect	(2,714		)	(2,836		)	(2,289		)
Pro forma net income	$	72,307		$	76,372		$	62,770
Earnings per share:
Basic – as reported	$	1.97		$	2.00		$	1.59
Basic – pro forma	$	1.90		$	1.93		$	1.53
Diluted – as reported	$	1.95		$	1.97		$	1.57
Diluted – pro forma	$	1.88		$	1.90		$	1.51

The fair value of the options was estimated at the grant date using a Black-Scholes option pricing model. Option valuation models require the input of highly subjective assumptions. Because the Company’s employee stock options have characteristics significantly different from traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options.

The following weighted-average assumptions were used in the valuation model for the years ended December 31:

	2003		2002		2001
Risk free interest rate	3.57	%	3.61	%	4.88	%
Dividend yield	3.43	%	3.17	%	2.65	%
Price volatility	.256		.265		.329
Expected life (years)	7.1		7.5		7.5

2. BUSINESS COMBINATIONS

Through its insurance subsidiary, the Company completed the purchase of five insurance agencies during 2003. These included the November 4, 2003 purchase of Colorado Benefits Services, a limited services agency in Englewood, Colorado; the October 1, 2003 purchase of Summit Insurance Group, an insurance agency in Frisco, Colorado, with offices in Frisco, Vail and Leadville, Colorado; the June 2, 2003 purchase of the Larry Levitt Insurance Agency, in Rock Springs, Wyoming; the May 1, 2003 purchase of Kraft Insurance Services, Inc., an insurance agency in Grand Junction, Colorado and the April 1, 2003 purchase of Carr Agency, an insurance agency in Thornton, Colorado;. At the time of the transactions, the five agencies combined, had approximately $1.3 million in annual commission revenue. The Company recorded $1.7 million of intangible assets, including $526,000 of unamortizing goodwill, related to these acquisitions.

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3. ACCOUNTING CHANGES

Statement of Financial Accounting Standards (“SFAS”) Nos. 141 and 142 – Business Combinations and Goodwill and Other Intangible Assets – In June 2001, the Financial Accounting Standards Board (“FASB”) issued SFAS Nos. 141 and 142. Statement 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001. Statement 142 prohibits the amortization of goodwill and intangible assets with indefinite useful lives. Statement 142 requires that these assets be reviewed for impairment at least annually. Intangible assets with finite lives will continue to be amortized over their estimated useful lives.

Effective January 1, 2002, the Company adopted Statement 142. During the first quarter of 2002, the Company performed the first of the required impairment tests of goodwill as of January 1, 2002. The Company tested for impairment using the two-step process described in Statement 142. The first step was a review for potential impairment, while the second step measures the amount of the impairment, if any. The Company found no impairment of goodwill; therefore, the Company did not record any transitional impairment as a cumulative effect of a change in accounting principle.

The following table sets forth the computation of net income and basic and diluted earnings per share as though goodwill amortization had not been recorded as an expense during 2002 and 2001.

	For the Years Ended
(Dollars in thousands, except per share data)	2003		2002		2001
Reported net income	$	75,021	$	79,208	$	65,059
Effect of SFAS 142
After-tax goodwill amortization included in net income	—		—		4,984
Adjusted net income	$	75,021	$	79,208	$	70,043
Adjusted basic earnings per share	$	1.97	$	2.00	$	1.71
Adjusted diluted earnings per share	$	1.95	$	1.97	$	1.69

The aggregate amortization expense of intangible assets other than goodwill for the years ended December 31, 2003 and 2002 was $3,374,000 and $3,318,000, respectively. The following table sets forth estimated amortization expense for intangible assets other than goodwill for each of the five years subsequent to December 31, 2003 (in thousands):

2004	$	3,424
2005	3,379
2006	3,282
2007	3,233
2008	3,213

All of the Company’s intangible assets other than goodwill are subject to amortization. The following table sets forth the gross carrying amount and accumulated amortization, in total and by major class of intangible assets, as of December 31, 2003 (dollars in thousands):

	Gross Carrying Amount		Accumulated Amortization
Amortized intangible assets:
Deposit-based intangibles	$	39,620	$	16,798
Insurance list premiums	10,323		3,045
Non-compete agreements	920		618
Total	$	50,863	$	20,461

In November 2002, the FASB issued Interpretation No. 45, (“FIN 45”) Guarantor’s Accounting and Disclosure for Guarantees, Including Indirect Guarantees of Indebtedness of Others. FIN 45 requires certain guarantees to be recorded at fair value and applies to contracts or indemnification agreements that contingently require the guarantor to make payments to the guaranteed party based on changes in an underlying condition that is related to an asset, liability or equity security of the guaranteed party. Examples of contracts meeting these characteristics include standby and performance letters of credit. The recognition requirements of FIN 45 were applied prospectively to guarantees issued or modified subsequent to December 31, 2002. FIN 45 also expands the disclosures to be made by guarantors, effective as of December 31, 2002, to include the nature of the guarantee, the maximum potential amount of future payments that the guarantor could be required to make under the guarantee, and the current amount of the liability, if any, for the guarantor’s obligation under the guarantee. Significant guarantees that have been entered into by the Company are disclosed in Note 9, Financial Instruments with Off-Balance-Sheet Risk. The adoption of FIN 45 did not have a material impact on the Company’s results of operations, financial position or liquidity.

In January 2003, the FASB issued FIN 46, Consolidation of Variable Interest Entities. FIN 46 clarifies the application of Accounting Research Bulletin No. 51, Consolidated Financial Statement, to certain entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. The recognition and measurement provisions of this Interpretation are effective for newly created variable interest entities formed after January 31, 2003, and for existing variable interest entities, until the end of the first interim or annual reporting period beginning after December 15, 2003. Previously, the FASB had announced the effective date for existing variable interest entities as being on the first interim or annual reporting period beginning after June 15, 2003, but delayed the effective date to provide further guidance. The Company adopted the disclosure provisions of FIN 46 effective December 31, 2002. The Company adopted the accounting provisions of FIN 46 for existing variable interest entities on October 1, 2003 and elected to apply the provisions by restating prior periods financial statements. Upon adoption of FIN 46, the Company de-consolidated its subsidiary trusts, which issued Company-obligated mandatorily redeemable preferred securities (“Trust Preferred Securities”). Prior to the adoption of FIN 46, the Company consolidated the trusts and the balance sheet included the Trust Preferred Securities of the trusts in the mezzanine section of the Statement of Financial Condition. Upon adoption of the accounting provisions of FIN 46, the trusts were de-consolidated and the junior subordinated debentures of the Company owned by the trusts are reflected in the Statements of Financial Condition as long term debt. The Trust Preferred Securities currently qualify as Tier 1 capital of the Company for regulatory capital purposes. The banking regulatory agencies have not issued any guidance that would change the capital treatment for Trust Preferred Securities based on the impact of the adoption of FIN 46. As provided by FIN 46, the Company restated its financial statements to reflect the adoption for all periods presented.

In December 2002, the FASB issued Statement No. 148 (“SFAS 148”), Accounting for Stock-Based Compensation-Transition and Disclosure, an amendment to FASB Statement No. 123 (“SFAS 123”), Accounting for Stock-Based Compensation. In addition, SFAS 148 amends the disclosure requirements of SFAS 123, to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The Company adopted the disclosure provisions of SFAS 148 effective December 31, 2002.

In May 2003, the FASB issued Statement No. 150 (“SFAS 150”), Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity, which establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equities. SFAS 150 was effective immediately for financial instruments entered into or modified after May 31, 2003, and otherwise was effective at the beginning of the first interim period beginning after June 15, 2003. However, in

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November 2003, the FASB announced that the provisions as they relate to certain mandatorily redeemable securities (including the Company’s Trust Preferred Securities), were delayed indefinitely. The banking regulatory agencies have not issued any guidance that would change the capital treatment of the Trust Preferred Securities based on the impact, if any, of the adoption of SFAS 150. As a result of the Company’s adoption of FIN 46 and the resulting reporting of the junior subordinated debentures as long term debt, the adoption of SFAS 150 is not expected to impact the Company.

4. RESTRUCTURING CHARGE

During the first quarter of 2001, the Company recorded a $5.1 million after-tax, non-recurring charge as a result of a series of strategic initiatives designed to reduce costs, improve customer service and strengthen the Company’s position as a provider of diversified financial services. As part of this strategy, the Company designated each of its offices as either a Regional Financial Center or a Community Financial Center. Regional Financial Centers are those locations exhibiting strong commercial banking potential, while Community Financial Centers offer greater retail opportunities. As a consequence of the new delivery structure, the Company sold 13 offices and closed eight additional offices. A further consequence was to achieve a reduction in work force through implementation of an early-out program, which was accepted by 21 eligible management personnel. The restructuring charge included approximately $3.1 million related to asset write-down, data processing, and legal and accounting fees. Additionally, the Company recorded an after-tax expense of approximately $2.0 million to provide for severance-related costs associated with the early-out and reduction-in-force programs.

5. SECURITIES

The following is a summary of available-for-sale securities at December 31, 2003 (in thousands):

	AVAILABLE-FOR-SALE SECURITIES
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
United States Treasury	$	41,764	$	322	$	38	$	42,048
United States Government agencies	321,018		1,554		3,805		318,767
Mortgage-backed securities	1,054,655		12,518		4,233		1,062,940
Collateralized mortgage obligations	1,860		12		8		1,864
State and political securities	58,877		2,707		—		61,584
Other securities	73,568		3,001		353		76,216
Total	$	1,551,742	$	20,114	$	8,437	$	1,563,419

The following is a summary of available-for-sale securities at December 31, 2002 (in thousands):

	AVAILABLE-FOR-SALE SECURITIES
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
United States Treasury	$	52,474	$	994	$	—	$	53,468
United States Government agencies	286,706		6,521		—		293,227
Mortgage-backed securities	1,007,049		31,071		76		1,038,044
Collateralized mortgage obligations	3,476		36		—		3,512
State and political securities	68,665		2,463		33		71,095
Other securities	214,629		684		2,214		213,099
Total	$	1,632,999	$	41,769	$	2,323	$	1,672,445

The Company had no held-to-maturity securities at December 31, 2003 and 2002.

Proceeds from the sale of available-for-sale securities during the years ended December 31, 2003, 2002 and 2001, were $265,775,000, $72,624,000, and $40,436,000, respectively. Gross gains of $4,431,000, $2,606,000, and $1,088,000 and gross losses of $97,000, $2,233,000, and $284,000 were realized on those sales during 2003, 2002 and 2001, respectively. The tax effect on the net gains during 2003, 2002 and 2001 was approximately $1,517,000, $131,000, and $281,000, respectively. There were no sales or transfers of held-to-maturity securities during 2003, 2002 or 2001.

The amortized cost and estimated fair value of debt securities at December 31, 2003, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

Available-for-Sale (In thousands)	Amortized Cost		Estimated Fair Value
Due in one year or less	$	34,259	$	34,641
Due after one year through five years	220,001		221,118
Due after five years through ten years	137,270		135,268
Due after ten years	103,697		107,588
	495,227		498,615
Mortgage-backed securities	1,054,655		1,062,940
Collateralized mortgage obligations	1,860		1,864
Total	$	1,551,742	$	1,563,419

Available-for-sale securities carried at $1,174,551,000 and  $1,262,239,000 at December 31, 2003 and 2002, 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 securities with an aggregate carrying value of $292,689,000 and $260,730,000  at December 31, 2003 and 2002, respectively.

Provided below is a summary of available-for-sale securities which were in an unrealized loss position at December 31, 2003. Approximately 3.7% of the unrealized loss was comprised of securities in a continuous loss position for twelve months or more which consisted primarily of other corporate securities. The Company has the ability and intent to hold these securities until such time as the value recovers or the securities mature. Further, the Company believes the deterioration in value is attributable to changes in market interest rates and not credit quality of the issuer.

	At December 31, 2003
	Less than 12 Months					12 Months or More					Total
(In thousands)	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
United States Treasury	$	6,631	$	(38	)	$	—	$	—		$	6,631	$	(38	)
United States Government agencies	141,487		(3,805		)	—		—			141,487		(3,805		)
Mortgage-backed securities	437,826		(4,220		)	986		(13		)	438,812		(4,233		)
Collateralized mortgage obligations	567		(8		)	—		—			567		(8		)
State and political securities	—		—			—		—			—		—
Other securities	3,617		(53		)	11,368		(300		)	14,985		(353		)
Total	$	590,128	$	(8,124	)	$	12,354	$	(313	)	$	602,482	$	(8,437	)

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6. LOANS

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

	2003			2002
Real estate	$	1,562,443		$	1,568,710
Real estate construction	321,323			439,536
Commercial	582,861			723,530
Consumer and other	678,457			625,429
Agriculture	178,488			220,688
	$	3,323,572		$	3,577,893
Less : Allowance for loan losses	(52,231		)	(56,156		)
Net loans	$	3,271,341		$	3,521,737

Real estate loans totaling $533,770,000 and $261,627,000 at December 31, 2003 and 2002, respectively, were pledged to secure borrowings. Loans held for sale totaled $1,671,000 and $2,669,000 at December 31, 2003 and 2002, respectively, and consisted of real estate loans at the Company’s affiliate bank.

7. ALLOWANCE FOR LOAN LOSSES

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

	2003			2002			2001
Balance at beginning of year	$	56,156		$	54,991		$	52,168
Provision charged to operating expense	12,602			13,262			17,520
Loans charged off	(22,610		)	(20,049		)	(19,869		)
Recoveries of loans charged off	6,083			7,952			5,172
Balance at end of year	$	52,231		$	56,156		$	54,991

Other real estate owned totaled $5,461,000, $5,990,000, and  $2,869,000 at December 31, 2003, 2002, and 2001, respectively.

Nonaccrual loans totaled $20,630,000, $22,728,000, and $20,818,000  at December 31, 2003, 2002 and 2001, respectively. Interest income of $2,846,000, $3,615,000, and $2,722,000 on nonaccrual loans would have been recorded during 2003, 2002 and 2001, respectively, if the loans had been current in accordance with their original terms.  The Company recorded interest income of $540,000, $679,000, and $1,113,000 related to loans that were on nonaccrual status as of December 31, 2003, 2002 and 2001, respectively.

The Company considers all non-accrual loans impaired under SFAS No. 114, Accounting by Creditors for the Impairment of Loans. A portion of the allowance for loan losses is allocated to loans deemed impaired. A summary of these loans and their related allowance for loan losses is as follows:

	2003				2002				2001
(In thousands)	Recorded Investment		Valuation Allowance		Recorded Investment		Valuation Allowance		Recorded Investment		Valuation Allowance
Impaired loans	$	28,285	$	7,095	$	35,468	$	6,448	$	32,056	$	7,204
Average balance of impaired loans during the year	31,877				33,762				32,557
Interest income recognized on impaired loans during the year	62				40				140

8. FAIR VALUE OF FINANCIAL INSTRUMENTS

Due to the nature of its business and the financing needs of its customers, the Company has a financial interest in a large number of financial instruments, the majority for which an active market does not exist. Accordingly, the Company has used various valuation techniques to estimate the fair value of its financial instruments. These techniques are significantly affected by the assumptions used, including the discount rate, the estimated timing and amount of cash flows and the aggregation methods used to value similar instruments. In this regard, the resulting fair value estimates cannot be substantiated by comparison to independent markets and, in a majority of cases, could not be realized by the immediate sale or settlement of the instrument. Also, the estimates reflect a point-in-time valuation that could change significantly based on changes in outside economic factors, such as the general level of interest rates. The required disclosures exclude the estimated values of nonfinancial instrument cash flows and are not intended to provide or estimate a market value of the Company. The following assumptions were used by the Company in estimating the fair value of the specific financial instruments.

CASH AND DUE FROM BANKS

The carrying amounts reported in the Statements of Financial Condition approximate fair values for these items that have no interest rate or credit risk.

INTEREST-BEARING DEPOSITS

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

AVAILABLE-FOR-SALE SECURITIES

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

LOANS

The loan portfolio consists of both variable and fixed rate loans. The fair value of variable rate loans, a majority of which reprice within the next three months and for which there has been no significant change in credit risk, are assumed to approximate their carrying amounts. The fair values for fixed rate loans are estimated using discounted cash flow analyses. The discount rates applied are based on the current interest rates for loans with similar terms to borrowers of similar credit quality. The impact of credit risk on the present value of the loan portfolio was accomplished through use of the allowance for loan losses, which is believed to represent the current fair value of all probable losses for purposes of the fair value calculation.

ACCRUED INTEREST RECEIVABLE

The fair value of accrued interest receivable is estimated to be equal to the carrying value. Substantially all accrued interest receivable is scheduled and expected to be received within one year.

BANK OWNED LIFE INSURANCE

Bank owned life insurance is recorded at the amount that would be realized under the insurance contract at the date of the financial statements, thus the recorded and fair value are equal.

DEPOSIT LIABILITIES

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

SHORT-TERM BORROWINGS

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

LONG-TERM DEBT

The fair value of long-term debt is estimated using a discounted

23

cash flow analysis using current market rates of debt with similar maturities to discount the future cash flows.

ACCRUED INTEREST PAYABLE

The fair value of accrued interest payable is estimated to be equal to the carrying value. Substantially all accrued interest payable is scheduled to be paid within one year.

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):

	2003						2002
	Carrying Amount			Fair Value			Carrying Amount			Fair Value
Financial assets:
Cash and due from banks	$	234,076		$	234,076		$	242,887		$	242,887
Interest-bearing deposits	3,319			3,319			4,613			4,613
Available-for-sale securities	1,563,419			1,563,419			1,672,445			1,672,445
Loans	3,323,572			3,378,282			3,577,893			3,629,191
Allowance for loan losses	(52,231		)	(52,231		)	(56,156		)	(56,156		)
Net loans	3,271,341			3,326,051			3,521,737			3,573,035
Accrued interest receivable	28,696			28,696			34,863			34,863
Bank owned life insurance	82,591			82,591			80,165			80,165
Financial liabilities:
Deposits:
Noninterest-bearing	$	447,648		$	447,648		$	470,900		$	470,900
Interest-bearing:
Savings and NOW	2,552,056			2,552,056			2,424,943			2,424,943
Time accounts over $100,000	501,440			507,467			670,187			680,086
Other time accounts	888,066			897,273			1,103,716			1,121,184
Total deposits	4,389,210			4,404,444			4,669,746			4,697,113
Federal funds purchased and repurchase agreements	416,689			416,689			377,230			377,230
Other short-term borrowings	25,577			25,577			76,260			76,260
Long-term debt	222,211			228,995			251,211			257,373
Accrued interest payable	13,081			13,081			20,274			20,274

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, 2003 and 2002 were as follows (in thousands):

	2003						2002
	Fixed Rate		Variable Rate		Total		Fixed Rate		Variable Rate		Total
Commitments to extend credit	$	325,924	$	339,227	$	665,151	$	168,275	$	491,334	$	659,609
Standby letters of credit	21,474		—		21,474		19,716		—		19,716
Commercial letters of credit	7,221		34		7,255		4,405		6,257		10,662
Total	$	354,619	$	339,261	$	693,880	$	192,396	$	497,591	$	689,987

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

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

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

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

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

10. BANK PREMISES AND EQUIPMENT

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

	2003		2002
Land	$	22,054	$	22,100
Buildings	140,477		134,675
Furniture, fixtures and equipment	96,575		95,018
Leased property under capital lease obligations	13,041		12,561
	272,147		264,354
Less accumulated depreciation	141,139		132,232
	$	131,008	$	132,122

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11. DEPOSITS

The following table sets forth a summary of deposits of the Company at December 31 (in thousands):

	2003		2002
Deposits
Noninterest-bearing	$	447,648	$	470,900
Interest-bearing:
Savings and NOW accounts	2,552,056		2,424,943
Time accounts less than $100,000	888,066		1,103,716
Time accounts greater than $100,000	501,440		670,187
Total deposits	$	4,389,210	$	4,669,746

At December 31, 2003, the Company had $1.4 billion in time deposits with maturities ranging from less than one year to over five years. Although time deposits have a stated maturity, a substantial number of time deposits have an automatic renewal feature wherein the deposit will be renewed for a similar time period at the rate of interest offered by the Company at the time of maturity. The following schedule identifies the Company’s time deposits at December 31, 2003 by expected year of maturity (in thousands):

Maturing in 2004	$	1,038,959
Maturing in 2005	198,689
Maturing in 2006	63,078
Maturing in 2007	60,142
Maturing in 2008	28,283
Maturing in 2009 and later	355
Total	$	1,389,506

12. SHORT-TERM BORROWINGS

As of December 31, 2003, the Company’s subsidiary bank had $6 million in Federal Home Loan Bank (“FHLB”) borrowings, which are collateralized by various investment securities and real estate loans. The interest rates on FHLB borrowings are variable rates based on short-term market conditions and the term of the advance, and range from 3.64% to 4.12% at December 31, 2003.  The Company’s subsidiaries had no additional short-term borrowings outstanding at December 31, 2003.

The Company has a short-term line of credit bearing interest at a variable rate of LIBOR plus .75% that provides for borrowing up to $35 million through October 26, 2004, with a commitment fee of .25% of the revolving commitment amount. As of December 31, 2003, the Company had no balance outstanding under this line of credit. The Company has a short term line of credit bearing interest at a variable rate of 1.25% above the LIBOR rate that provides for borrowing up to $50 million, with a commitment fee of .25% of the revolving commitment amount. This line may be accessed to fund the repurchase of the Company’s common stock, fund operating expenses and secure the Company’s outstanding commercial paper obligations. As of December 31, 2003, there was a $20 million commercial paper balance outstanding with a blended rate of 1.36%. The terms of the lines of credit include certain covenants with which the Company must comply. At December 31, 2003, the Company was in compliance with all covenants pertaining to the lines of credit.

The Company’s subsidiary bank enters into sales of securities under agreements to repurchase (repurchase agreements). Fixed-coupon repurchase agreements are treated as financings, and the obligations to repurchase securities sold are reflected as borrowed funds in the consolidated statements of condition. The dollar amount of securities underlying the agreements remain in the asset accounts. The balance of securities sold under agreement to repurchase at December 31, 2003 and December 31, 2002 were $292,689,000 and $210,730,000, respectively.

13. LONG-TERM DEBT

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

	2003		2002
Parent Company:
Subordinated notes payable, interest at 7.30%, payable semi-annually, maturing June 30, 2004, unsecured.	$	50,000	$	60,000
Junior subordinated debentures, interest at 8.125%, payable quarterly, maturing April 15, 2032.	61,855		61,855
Junior subordinated debentures, interest at 7.60%, payable quarterly, maturing March 15, 2033.	61,856
Junior subordinated debentures, interest at 8.20%, payable quarterly, maturing December 15, 2027.	—		61,856
Subsidiaries:
Federal Home Loan Bank advances, interest rates ranging from 3.83% to 6.55%, payable monthly, with maturities ranging from January 25, 2005 to May 8, 2009.	23,500		42,500
Subordinated term note payable to bank, interest of LIBOR plus 140 basis points, payable quarterly, maturing December 22, 2007, unsecured.	25,000		25,000
Total	$	222,211	$	251,211

The 7.30% subordinated notes payable are not redeemable, in whole or in part, by the Company. These notes are direct obligations of the Company and are subordinated to all other indebtedness of the Company. The terms of the subordinated notes payable include certain covenants with which the Company must comply. At December 31, 2003, the Company was in compliance with all covenants pertaining to the subordinated notes payable.

Long-term debt includes $61,855,000 of 8.125% junior subordinated debentures payable to CFB Capital III, an unconsolidated affiliate of the Company, bearing quarterly interest payments and maturing April 15, 2032 and $61,856,000 of 7.60% junior subordinated debenture payable to CFB Capital IV, an unconsolidated affiliate of the Company, bearing quarterly interest payments and maturing March 15, 2033.

Maturities of long-term debt outstanding, at December 31, 2003, were (in thousands):

2004	$	50,000
2005	13,000
2006	4,000
2007	27,000
2008	2,500
Thereafter	125,711
Total	$	222,211

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On March 4, 2003, the Company issued $60 million of 7.60% Cumulative Capital Securities, through CFB Capital IV, a Delaware statutory trust subsidiary organized in February 2003. The proceeds of the offering were invested by CFB Capital IV in junior subordinated debentures of the Company. The Company used the net proceeds to redeem on April 4, 2003, all of the 8.20% junior subordinated debentures that it issued in 1997, thereby triggering the redemption of all 2,400,000 of the 8.20% Cumulative Capital Securities issued by CFB II, a Delaware statutory trust. With regulatory approval, the new debentures may be redeemed no earlier than March 15, 2008, and mature March 15, 2033. The capital securities qualified as Tier 1 Capital under capital guidelines of the Federal Reserve.

On March 27, 2002, the Company issued $60 million of 8.125% Cumulative Capital Securities, through CFB Capital III, a Delaware statutory trust subsidiary organized in February 2002. The proceeds of the offering were invested by CFB Capital III in junior subordinated debentures of the Company. With regulatory approval, the debentures can be redeemed no earlier than April 15, 2007, and mature April 15, 2032. The capital securities qualified as Tier 1 capital under capital guidelines of the Federal Reserve. On May 1, 2002, the Company used the net proceeds to redeem all of the 8 7/8% junior subordinated debentures that it issued in 1997, thereby triggering the redemption of all 2,400,000 of the 8 7/8% Cumulative Capital Securities issued by CFB Capital I, a Delaware business trust.

On December 10, 1997, the Company issued $60 million of 8.20% Cumulative Capital Securities, through CFB Capital II, a statutory trust subsidiary organized in December 1997. The proceeds of the offering were invested by CFB Capital II in junior subordinated debentures of the Company.

At December 31, 2003, $118 million of the Company’s $120 million in capital securities qualified as Tier 1 capital under capital guidelines of the Federal Reserve. Refer to Note 3 – Accounting Changes for a discussion of FIN 46 and their impact on the recording and reporting of these securities on the Company’s financial statements.

CFB Capital III and IV are 100% owned finance subsidiaries of the Company and the Company has fully and unconditionally guaranteed the Cumulative Capital Securities of CFB Capital III and IV. The ability of CFB Capital III and CFB Capital IV to pay timely distributions on its Cumulative Capital Securities depends upon the Company making the related payments on the junior subordinated debentures when due.

14.  SHAREHOLDER’S EQUITY

On June 16, 2003, the Company filed a shelf registration statement with the Securities and Exchange Commission for the purpose of issuing up to $120 million of debt securities, common stock, preferred stock, and other securities. The Company expects to use the proceeds from the shelf offering to redeem or repurchase outstanding securities, repay debt, acquisitions and for general working capital. At December 31, 2003, $120 million remains available for issuance of debt and equity securities.

On February 22, 2002, the Company filed a shelf registration statement with the Securities and Exchange Commission for the purpose of issuing $180 million of various debt and equity securities.  At December 31, 2003, $60 million remains available for issuance of debt and equity securities.

PREFERRED STOCK SHAREHOLDERS’ RIGHTS PLAN

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

CAPITAL REQUIREMENTS

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

Quantitative measures established by regulation to ensure capital adequacy require the Company to maintain minimum amounts and ratios of total and Tier 1 capital to risk-weighted assets, and of Tier 1 capital to average assets.

As of December 31, 2003, 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.

	At December 31, 2003
Regulatory Capital Requirements: (Dollars in thousands)	Tier 1 Capital		Total Risk- Based Capital		Leverage		Total Risk- Weighted Assets
Minimum	4.00	%	8.00	%	3.00	%	N/A
Well Capitalized	6.00	%	10.00	%	5.00	%	N/A
Bank Subsidiary:
Community First National Bank, Fargo	10.73	%	12.36	%	7.75	%	$	3,867,010
Community First Bankshares, Inc.	9.76	%	11.42	%	6.99	%	$	3,884,282

	At December 31, 2002
Regulatory Capital Requirements: (Dollars in thousands)	Tier 1 Capital		Total Risk- Based Capital		Leverage		Total Risk- Weighted Assets
Minimum	4.00	%	8.00	%	3.00	%	N/A
Well Capitalized	6.00	%	10.00	%	5.00	%	N/A
Bank Subsidiary:
Community First National Bank, Fargo	10.35	%	12.08	%	7.72	%	$	4,159,134
Community First Bankshares, Inc.	8.98		11.04		6.52	%	$	4,202,131

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15.  EMPLOYEE BENEFIT PLANS

STOCK OPTION PLAN

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

On April 22, 2003, the Company’s 1996 Stock Option Plan was amended to increase the number of shares of common stock eligible for option grants from 4 million to 5.9 million shares and permit shares of common stock tendered for payment of the exercise price of an option to be available for subsequent issuance.

Stock options outstanding under the plans are as follows:

	Year Ended December 31,
	2003				2002				2001
	Options Outstanding		Weighted Average Price Per Share		Options Outstanding		Weighted Average Price Per Share		Options Outstanding		Weighted Average Price Per Share
Beginning of year	2,464,297		$	20.26	2,437,234		$	17.98	2,441,862		$	16.32
Options granted	905,337		26.48		835,453		24.60		682,800		19.45
Options exercised	(646,177	)	18.86		(666,319	)	17.44		(507,061	)	11.16
Options forfeited	(189,508	)	24.32		(142,071	)	19.93		(180,367	)	20.25
End of year	2,533,949		22.52		2,464,297		$	20.26	2,437,234		17.98
Exercisable at end of year	1,344,703		$	20.54	1,300,277		$	19.34	1,212,469		$	18.55

	2003		2002		2001
Weighted-average fair value of options granted	$	5.51	$	5.64	$	6.34

The range of exercise prices and the weighted-average remaining contractual life of the options outstanding at December 31, 2003 were as follows:

Range of Exercise Prices Per Share	Options Outstanding at December 31, 2003	Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Life
$24.25 – $28.85	1,590,793	$	25.63	8.29 Years
$19.3125 – $21.49	600,647	$	19.51	6.75 Years
$12.82 – $15.875	313,724	$	14.05	6.04 Years
$5.87 – $6.160	28,785	$	6.03	2.73 Years

At December 31, 2003, a total of 3,225,887 shares of authorized common stock was reserved for exercise of options granted under the 1996 Stock Option Plan.

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 and scheduled to work 1,000 hours or more per year.  The plan provides for an employer-matching contribution of 100% of the first 3% and 50% of the next 3% of each participant’s eligible contribution, subject to a limitation of the lesser of the participant’s contribution or the maximum amount prescribed by the Internal Revenue Code.  The Company’s contribution was $2,448,000, $2,172,000, and $2,743,000 in 2003, 2002 and 2001, respectively.

16.  RESTRICTIONS ON CASH AND DUE FROM BANKS

Bank subsidiaries are required to maintain average reserve balances with the Federal Reserve Bank.  Balances were $36,025,000 and $46,845,000 at December 31, 2003 and 2002, respectively.

17.  INCOME TAXES

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

	Year ended December 31,
	2003		2002		2001
Federal:
Current	$	30,189	$	31,592	$	32,587
Deferred	3,127		5,141		(1,961		)
	33,316		36,733		30,626
State:
Current	3,437		2,720		3,112
Deferred	162		96		(262		)
	3,599		2,816		2,850
Provision for income taxes	$	36,915	$	39,549	$	33,476

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):

	2003			2002			2001
Tax at statutory rate (35%)	$	39,177		$	41,565		$	34,487
State income tax, net of federal tax benefit	2,340			1,830			1,853
Tax-exempt interest	(3,566		)	(3,944		)	(4,094		)
Amortization of goodwill	—			—			919
Other	(1,036		)	98			311
Provision for income taxes	$	36,195		$	39,549		$	33,476

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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, 2003 and 2002, are as follows (in thousands):

	2003		2002
Deferred tax assets:
Loan loss reserves	$	19,978	$	21,480
Other reserves	101		478
Deferred compensation	1,861		1,857
Other	1,744		2,175
	23,684		25,990
Deferred tax liabilities:
Unrealized net gains on available-for-sale securities	4,624		15,693
Depreciation	3,891		3,739
Deductible goodwill	3,003		1,502
Purchase accounting	122		135
Other	78		121
	11,718		21,190
Net deferred tax asset	$	11,966	$	4,800

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 $4,710,000, $4,852,000, $5,273,000 in 2003, 2002 and 2001, 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, 2003 (in thousands):

	Operating		Capital
2004	$	1,736	1,479
2005	901		1,479
2006	735		1,479
2007	586		1,479
2008	482		108
Thereafter	1,938		90
	$	6,378
Net minimum lease payments			$	6,114
Less:
Amount representing interest			(884		)
Present value of net minimum lease payments			$	5,230

The net present value of net minimum lease payments at December 31, 2002 was $5,461,000, net of $1,214,000 representing interest.

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.

19.  COMMUNITY FIRST BANKSHARES, INC.

(Parent Company Only)

CONDENSED STATEMENTS OF FINANCIAL CONDITION

December 31 (In thousands)	2003		2002
ASSETS
Cash and due from subsidiary bank	$	4,692	$	681
Interest-bearing deposits	392		4,150
Available-for-sale securities	189		114
Investment in subsidiaries	525,067		560,319
Furniture and equipment	11,817		11,951
Receivable from subsidiaries	4,747		7,188
Other assets	13,859		13,333
Total assets	$	560,763	$	597,736
LIABILITIES AND SHAREHOLDERS’ EQUITY
Short-term borrowings	$	13,484	$	24,720
Long-term debt	173,711		183,711
Other liabilities	11,768		10,856
Shareholders’ equity	361,800		378,449
Total liabilities and shareholders’ equity	$	560,763	$	597,736

CONDENSED STATEMENTS OF INCOME

Years ended December 31(In thousands)	2003		2002			2001
Income:
Dividends from subsidiaries	$	65,295	$	87,125		$	126,117
Service fees from subsidiaries	—		—			329
Interest income	211		739			614
Other	660		(801		)	1,552
Total income	66,166		87,063			128,612
Expense:
Interest expense	14,505		15,806			16,471
Other expense	27,311		28,023			29,839
Total expense	41,816		43,829			46,310
Income before income tax benefit and equity in undistributed income of subsidiaries	24,350		43,234			82,302
Income tax benefit	14,394		14,587			14,849
Income before undistributed income of subsidiaries	38,744		57,821			97,151
Equity in undistributed (overdistributed) income of subsidiaries	36,277		21,387			(32,092		)
Net income	$	75,021	$	79,208		$	65,059

28

CONDENSED STATEMENTS OF CASH FLOWS

Years ended December 31(In thousands)	2003			2002			2001
Cash flows from operating activities:
Net income	$	75,021		$	79,208		$	65,059
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in (undistributed) overdistributed income of subsidiaries	(36,277		)	(21,387		)	32,092
Depreciation	1,175			1,029			730
Increase (decrease) in interest payable	371			(161		)	(2,450		)
Other, net	1,114			591			9,485
Net cash provided by operating activities	41,404			59,280			104,916
Cash flows from investing activities:
Equity distribution from (to) subsidiaries	54,743			2,819			(1,763		)
Net loans to subsidiaries	2,441			5,821			(90		)
Purchases of available-for-sale securities	(114,161		)	(255,903		)	(355,456		)
Sales of available-for-sale securities, net of gains	—			21,132			3,767
Maturities of investment securities	113,000			247,112			348,779
Net increase in furniture and equipment	(1,041		)	(5,096		)	(1,917		)
Net decrease (increase) in interest-bearing deposits	3,758			(4,119		)	(29		)
Net cash provided by (used in) investing activities	58,740			11,766			(6,709		)
Cash flows from financing activities:
Net (decrease) increase in short-term borrowings	(11,236		)	4,940			(29,172		)
Common stock dividends paid	(34,250		)	(31,664		)	(27,793		)
Repayment of long-term debt	(10,000		)	(2,560		)	(213		)
Net proceeds from issuance of junior subordinated debentures	61,856			61,856
Repayment of junior subordinated debentures	(62,863		)	(62,974		)	—
Net sales of common stock held in treasury	7,411			6,318			3,695
Net purchases of common stock held in treasury	(47,051		)	(50,979		)	(43,020		)
Net cash used in financing activities	(96,133		)	(75,063		)	(96,503		)
Net increase (decrease) in cash and cash equivalents	4,011			(4,017		)	1,704
Cash and cash equivalents at beginning of year	681			4,698			2,994
Cash and cash equivalents at end of year	$	4,692		$	681		$	4,698

Certain restrictions exist regarding the extent to which the bank subsidiary may transfer funds to the Company in the form of dividends, loans or advances.  Federal law prevents the Company from borrowing from its bank subsidiary unless the loans are secured by specified U.S.  obligations.  Secured loans to the Company or any individual affiliate are generally limited in amount to 10% of the bank’s equity. Further, loans to the Company and all affiliates in total are limited to 20% of the bank’s equity.  As of December 31, 2003 and 2002, $51,417,000 and $54,960,000, respectively, of individual subsidiary bank’s capital was available for credit extension to the parent company.  At December 31, 2003 and 2002, the bank subsidiary had no credit extended to the Company.

Payment of dividends to the Company by its subsidiary bank is subject to various limitations by bank regulatory agencies. Undistributed earnings of the bank subsidiary available for distribution as dividends under these limitations were $25,296,000 and $0 as of December 31, 2003 and 2002, 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 subsidiary.  The aggregate dollar amounts of these loans did not exceed five percent of stockholders’ equity at December 31, 2003, 2002 and 2001.

21.  EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted earnings per share (dollars in thousands, except per share data):

Years ended December 31	2003		2002		2001
Numerator:
Net income	$	75,021	$	79,208	$	65,059
Numerator for basic and diluted earnings per share	75,021		79,208		65,059
Denominator:
Denominator for basic earnings per share:
Weighted-average shares outstanding	38,107,796		39,564,912		40,905,545
Effect of dilutive securities:
Employee stock options	429,940		640,937		565,859
Employee benefit plan shares	16,070		37,286		—
Dilutive potential common shares	446,010		678,223		565,859
Denominator for diluted earnings per share	38,553,806		40,243,135		41,471,404
Basic earnings per share	$	1.97	$	2.00	$	1.59
Diluted earnings per share	$	1.95	$	1.97	$	1.57

22.  SUPPLEMENTAL DISCLOSURES TO CONSOLIDATED STATEMENTS OF CASH FLOWS

Years ended December 31 (in thousands)	2003			2002		2001
Change in unrealized gain on available-for-sale securities	$	(27,769	)	$	33,076	$	22,081
Income taxes paid	31,832			35,058		36,514
Interest paid	77,731			111,731		188,305

23.  SUBSEQUENT EVENT

On January 2, 2004, the Company, through its insurance subsidiary, acquired Arnold & Arnold, Inc., an insurance agency located in Littleton, Colorado.  At the time of acquisition, the agency had approximately $250,000 in annual commission revenue.

29

REPORT OF INDEPENDENT AUDITORS COMMUNITY FIRST BANKSHARES, INC.

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, 2003 and 2002, and the related consolidated statements of income, comprehensive income, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2003.  These financial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Community First Bankshares, Inc., and subsidiaries at December 31, 2003 and 2002 and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2003, in conformity with accounting principles generally accepted in the United States.

As discussed in Note 3, in 2003, the Company changed its method of accounting for variable interest entities, and in 2002, the Company changed its method of accounting for goodwill.

Minneapolis, Minnesota

January 15, 2004

CONSOLIDATED STATEMENT OF CONDITION – FIVE YEAR SUMMARY COMMUNITY FIRST BANKSHARES, INC.

December 31 (In thousands)	2003		2002		2001		2000		1999
ASSETS
Cash and due from banks	$	234,076	$	242,887	$	248,260	$	256,136	$	247,051
Federal funds sold and securities purchased under agreement to resell	—		—		—		—		4,775
Interest-bearing deposits	3,319		4,613		341		1,110		4,648
Available-for-sale securities	1,563,419		1,672,445		1,437,066		1,714,510		1,937,517
Held-to-maturity securities	—		—		—		—		4,339
Total securities	1,563,419		1,672,445		1,437,066		1,714,510		1,941,856
Loans	3,323,572		3,577,893		3,736,692		3,738,202		3,690,353
Less: Allowance for loan losses	52,231		56,156		54,991		52,168		48,878
Net loans	3,271,341		3,521,737		3,681,701		3,686,034		3,641,475
Other assets	392,952		389,168		408,410		435,429		466,066
Total assets	$	5,465,107	$	5,830,850	$	5,775,778	$	6,093,219	$	6,305,871
LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits:
Noninterest-bearing	$	447,648	$	470,900	$	487,864	$	500,834	$	616,861
Interest-bearing	3,941,562		4,198,846		4,262,949		4,519,057		4,293,002
Total deposits	4,389,210		4,669,746		4,750,813		5,019,891		4,909,863
Short-term borrowings	442,266		453,490		342,639		409,710		724,425
Long-term debt	222,211		251,211		260,552		247,668		199,333
Other liabilities	49,620		77,954		65,069		70,519		64,981
Total liabilities	5,103,307		5,452,401		5,419,073		5,747,788		5,898,602
Shareholders’ equity	361,800		378,449		356,705		345,431		407,269
Total liabilities and shareholders’ equity	$	5,465,107	$	5,830,850	$	5,775,778	$	6,093,219	$	6,305,871

30

CONSOLIDATED STATEMENT OF INCOME – FIVE YEAR SUMMARY COMMUNITY FIRST BANKSHARES, INC.

December 31 (In thousands)	2003		2002		2001		2000		1999
INTEREST INCOME:
Loans	$	241,442	$	276,846	$	336,937	$	353,405	$	332,974
Investment securities	67,748		77,654		93,145		120,172		127,632
Other	52		201		391		628		1,277
Total interest income	309,242		354,701		430,473		474,205		461,883
INTEREST EXPENSE:
Deposits	48,559		75,572		138,542		169,281		151,138
Short-term and other borrowings	4,940		6,340		15,001		34,303		28,052
Long-term debt	17,039		18,743		19,268		17,259		17,190
Total interest expense	70,538		100,655		172,811		220,843		196,380
Net interest income	238,704		254,046		257,662		253,362		265,503
Provision for loan losses	12,602		13,262		17,520		15,781		20,184
Net interest income after provision for loan losses	226,102		240,784		240,142		237,581		245,319
NONINTEREST INCOME:
Service charges on deposit accounts	40,239		40,121		41,850		42,192		39,246
Insurance commissions	15,223		13,822		12,535		10,550		8,791
Securities sales commissions	9,057		9,526		6,644		6,805		5,258
Fees from fiduciary activities	5,264		5,405		5,661		5,811		5,148
Bank owned life insurance income	4,433		3,632		3,543		3,457		3,442
Net gains on sales of securities	4,334		373		804		65		2,175
Gain on sales of loans	4,104		2,784		1,557		1,031		1,226
Other	10,039		9,460		10,842		11,619		13,096
Total noninterest income	92,693		85,123		83,436		81,530		78,382
NONINTEREST EXPENSE:
Salaries and employee benefits	112,886		113,994		115,743		110,024		106,542
Net occupancy	33,490		32,832		31,593		31,941		32,726
FDIC insurance	720		800		915		1,039		625
Professional service fees	7,194		7,478		8,398		8,289		8,819
Advertising	3,881		3,983		5,037		4,545		4,065
Telephone	5,780		5,575		5,633		5,203		4,807
Amortization of intangibles	3,374		3,318		9,928		10,481		10,500
Acquisition, integration and conforming	—		—		—		—		3,053
Restructuring charge	—		—		7,656		—		—
Data processing	7,036		7,210		6,940		7,200		6,349
Other	32,498		31,960		33,200		33,007		32,729
Total noninterest expense	206,859		207,150		225,043		211,729		210,215
Income from operations	111,936		118,757		98,535		107,382		113,486
Provision for income taxes	36,915		39,549		33,476		35,748		38,573
Net income	$	75,021	$	79,208	$	65,059	$	71,634	$	74,913
Earnings per common and common equivalent share:
Basic	$	1.97	$	2.00	$	1.59	$	1.55	$	1.50
Diluted	$	1.95	$	1.97	$	1.57	$	1.54	$	1.48
Average common and common equivalent shares outstanding:
Basic	38,107,796		39,564,912		40,905,545		46,219,120		50,061,972
Diluted	38,553,806		40,243,135		41,471,404		46,578,750		50,670,559

31

QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) COMMUNITY FIRST BANKSHARES, INC.

The following is a summary of the quarterly results of operations for the years ended December 31, 2003 and 2002 (in thousands, except per share data):

	First Quarter		Second Quarter			Third Quarter		Fourth Quarter
Year ended December 31, 2003
Interest income	$	82,005	$	79,078		$	74,923	$	73,236
Interest expense	20,841		18,362			16,228		15,107
Net interest income	61,164		60,716			58,695		58,129
Provision for loan losses	3,487		3,487			3,403		2,225
Net interest income after provision for loan losses	57,677		57,229			55,292		55,904
Net gains on sales of securities	464		1,795			444		1,631
Noninterest income	21,402		21,289			24,077		21,591
Noninterest expense	50,689		51,997			52,564		51,609
Income before income taxes	28,854		28,316			27,249		27,517
Provision for income taxes	9,453		9,230			8,908		9,324
Net income	$	19,401	$	19,086		$	18,341	$	18,193
Earnings per common and common equivalent shares:
Basic net income	$	0.50	$	0.50		$	0.48	$	0.48
Diluted net income	$	0.50	$	0.49		$	0.48	$	0.48
Average common and common equivalent shares:
Basic	38,601,216		38,371,159			37,936,390		37,536,006
Diluted	39,111,903		38,928,709			38,462,034		38,020,515
	First Quarter		Second Quarter			Third Quarter		Fourth Quarter
Year ended December 31, 2002
Interest income	$	90,890	$	89,664		$	88,380	$	85,767
Interest expense	27,850		25,369			24,207		23,229
Net interest income	63,040		64,295			64,173		62,538
Provision for loan losses	3,315		3,297			3,352		3,298
Net interest income after provision for loan losses	59,725		60,998			60,821		59,240
Net gains (losses) on sales of securities	17		(188		)	56		488
Noninterest income	19,914		21,928			21,634		21,274
Noninterest expense	50,494		52,809			51,921		51,926
Income before income taxes	29,162		29,929			30,590		29,076
Provision for income taxes	9,901		10,072			10,221		9,355
Net income	$	19,261	$	19,857		$	20,369	$	19,721
Earnings per common and common equivalent shares:
Basic net income	$	0.48	$	0.50		$	0.52	$	0.50
Diluted net income	$	0.47	$	0.49		$	0.51	$	0.50
Average common and common equivalent shares:
Basic	39,984,092		39,772,344			39,424,624		39,080,638
Diluted	40,644,637		40,515,906			40,073,077		39,740,426

32

SHAREHOLDERS

As of February 17, 2004, the Company had 2,116 shareholders of record and an estimated 9,000 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 16 cents was paid for the first and second quarters of 2001. A dividend of 18 cents per share was paid for the third and fourth quarters of 2001.  A dividend of 19 cents per share was paid for the first and second quarters of 2002.  A dividend of 21 cents per share was paid for the third and fourth quarters of 2002.  A dividend of 22 cents was paid for the first and second quarters of 2003.  A dividend of 23 cents was paid for the third and fourth quarters of 2003.

MARKET PRICE RANGE OF COMMON SHARES

The Company’s common stock trades on the Nasdaq Stock Market^(R) under the symbol CFBX.  The following table sets forth the high, low and closing sales prices for the Company’s common stock during the periods indicated.

	2003			2002
	High	Low	Close	High	Low	Close
First Quarter	27.23	24.35	25.55	26.37	24.14	25.86
Second Quarter	28.60	25.87	27.23	28.45	24.99	26.09
Third Quarter	29.01	26.04	26.62	28.15	22.36	27.88
Fourth Quarter	29.26	26.20	28.94	28.13	24.41	26.46

33

EX-14.1

Exhibit 14.1

Community First Bankshares

Code of Ethics and Business Conduct

I.GENERAL STATEMENT OF BUSINESS PHILOSOPHY

The commitment to excellence is fundamental to the philosophy of Community First Bankshares. This commitment to excellence means that employees share a common set of objectives and benefit from the achievement of those objectives.

One essential objective is our conviction to uphold ethical standards in all our corporate activities. These standards apply to all the company’s activities in every market that it serves. The purpose of this Code of Conduct is to strengthen the Company’s ethical climate and to provide basic guidelines for situations in which ethical issues arise.

We strive to do business with customers and suppliers of sound business character and reputation. We do not knowingly support any public or private organization which espouses discriminatory policies or practices. We expect all our employees to perform their work with honesty, truthfulness and integrity.

It is the policy of the Company to comply with all applicable laws, including, without limitation, employment, discrimination, health, safety, antitrust, securities and environmental laws. No director, officer, executive or manager of the Company has authority to violate any law or to direct another employee or any other person to violate any law on behalf of the Company.

Each employee and non-employee director of the Company is, and will be held, responsible for the observance of this Code of Conduct. If any employee has questions about any section of this Code of Conduct, he or she should direct all questions to his or her immediate supervisor, Human Resources, or the Legal Department. If an employee becomes aware that another employee has violated this Code of Conduct, he or she is obligated to report it in accordance with procedures set forth below. No one has the authority to retaliate against an employee who reports a possible violation. Failure to comply with any of the provisions of this Code of Conduct subjects the employee to disciplinary measures up to and including termination.

II.    POLICIES AND PRACTICES

A. Conflicts of Interest

A conflict of interest may arise in any situation in which an employee’s loyalties are divided between business interests that, to some degree, are incompatible with the interests of the Company. All such conflicts should be avoided. The Company demands absolute integrity from all its employees and will not tolerate any conduct that falls short of that standard. The Company expects that no employee will knowingly place himself or herself in a position that would have the appearance of being, or could be construed to be, in conflict with the interests of the Company. Some of the more sensitive areas of conflicts of interest and the Company’s related guidelines are as follows:

1. Accepting Gifts and Entertainment

The Company’s aim is to deter givers of gifts from seeking or receiving special favors from Company employees. (For guidelines concerning the giving of gifts to, or entertainment of, customers and others by Company employees, employees are referred to paragraph E., below) Accepting any gift of more than nominal value or entertainment that is more than a routine social amenity can appear to be an attempt to

influence the recipient into favoring a particular customer, vendor, consultant or the like. To avoid the reality and the appearance of improper relations with current or prospective customers, vendors and consultants, employees should observe the following guidelines when deciding whether or not to accept gifts or entertainment:

a.     Gifts

Gifts such as merchandise or products, as well as personal services or favors may not be accepted unless they have a value of less than $50. This dollar limit is intended to serve as a guideline, and employees are urged to consult with the General Counsel before accepting any gifts of more than nominal value. Gifts of any amount may never be solicited. A gift of cash or securities may never be accepted.

b.     Entertainment

Normal business entertainment such as lunch, dinner, theater, a sporting event, and the like, is appropriate if of a reasonable nature and in the course of a meeting or another occasion, the purpose of which is to hold bona fide business discussions or to foster better business relations. All such entertainment should be reported (in advance, if practical) by the employee to his or her supervisor. No employee may accept tickets or invitations to entertainment when the prospective host will not be present at the event with the employee.

2.     Outside Activities

It is the policy of the Company that no employee is to have a “free-lancer or “moonlighting” activity that will materially encroach on the time or attention which should be devoted to the employee’s duties; adversely affect the quality of work performed; compete with the Company’s activities; imply sponsorship or support by the Company of the outside employment or organization; or adversely affect the good name of the Company. Employees who free-lance or moonlight may not use Company time, facilities, resources, or supplies for such work.

3. Interests in Other Businesses

Unless approved in advance by an employee’s supervisor, neither an employee nor his or her spouse, domestic partner, or any other member of the employee’s immediate family may directly or indirectly have a financial interest (whether as an investor, lender, employee or other service provider) in a competitor, or in a customer or supplier if that employee or his or her subordinates deal directly or indirectly with that customer or supplier in the course of his or her job with the Company. An investment or ownership of a nominal interest in a company which securities are listed on a national securities exchange is not considered improper.

4. Use of Company Property and Information

All employees are responsible for the proper use of the Company’s physical resources and property, as well as its proprietary and other confidential information. Unless otherwise prohibited by an employee’s supervisor, reasonable incidental use of a Company telephone, computer or other equipment is permitted.

a.Company Property and Facilities

Company property, facilities or physical resources may not be used for solicitation or distribution activities which are not related to an employee’s services to the Company, except for charitable activities that have been approved in writing in advance by the Company. Employees may not solicit any other employee during working time, nor may employees distribute literature in work areas at any time. Under

2

no circumstances may an employee disturb the work of others to solicit or distribute literature to them during their working time. Persons not employed by the Company may not solicit Company employees for any purposes on Company premises.

Any employee found to be engaging in, or attempting, theft of any property of the Company, including documents, equipment, intellectual property, personal property of other employees, cash or any other items of value will be liable to immediate summary dismissal and possible criminal proceedings against them. All employees have a responsibility to report any theft or attempted theft to the Company’s management.

b.Company Proprietary and Other Confidential Information

The Company operates in many different and extremely competitive markets. Every employee should be aware that in any competitive environment, proprietary information and trade secrets must be safeguarded in the same way that all other important Company assets are protected. Information concerning pricing, products and services that are being developed, and other such trade secrets, including information pertaining to any prospective Company acquisition or divestiture, must be held in the strictest confidence, and reasonable prudence and care should be exercised in dealing with such information in order to avoid inadvertent inappropriate disclosure. This information must not be used in any way other than as required in performing employment duties. All files, records and reports acquired or created in the course of employment are the property of the Company. Originals or copies of such documents may be removed from the Company’s offices for the sole purpose of performing the employee’s duties to the Company and must be returned at any time upon request. Employees must also abide by the provisions of the Company’s Privacy and Information Security Policies.

c.Trademarks, Service Marks and Copyrights

Trademarks and service marks - - words, slogans, symbols, logos or other devices used to identify a particular source of goods or services - are important business tools and valuable assets which require care in their use and treatment. No employee may negotiate or enter into any agreement respecting the Company’s trademarks, service marks or logos without first consulting the Legal Department. The Company also respects the trademark rights of others and any proposed name of a new product, financial instrument or service intended to be sold or rendered to customers must be submitted to the Legal Department for clearance prior to its adoption and use. Similarly, using the trademark or service mark of another company, even one with whom our Company has a business relationship, always requires clearance or approval by our Legal Department, to ensure that the use of that other Company’s mark is proper.

Employees must avoid the unauthorized use of copyrighted materials of others and should confer with the Legal Department if they have any questions regarding the permissibility of photocopying, excerpting, electronically copying or otherwise using copyrighted materials. In addition, simply because material is available for copying, such as matter downloaded from the Internet, does not mean that it is automatically permissible to copy or recirculate (by, for example, email or posting to an intranet facility). All copies of work that is authorized to be made available for ultimate distribution to the public, including all machine readable works such as computer software, must bear the prescribed form of copyright notice.

The Company is legally entitled to all rights in ideas, inventions and works of authorship relating to its business that are made by employees during the scope of their employment with the Company or using the resources of the Company (“Employee Developments”). As a condition of employment, employees are required to promptly disclose all Employee Ideas to their supervisor, and to execute the necessary

3

documentation to transfer all Employee Developments to Community First Bankshares to evidence their ownership, or to obtain legal protection for them.

5. Company Political Involvement

Employees are free to exercise the right to make political contributions within legal limits, unless such a contribution is otherwise prohibited by other policies of the Company. The Company will not reimburse any employee for political contributions, and employees should not attempt to receive or facilitate such reimbursements. Generally, no contribution may be made with the expectation of favorable government treatment in return. In any event, all contributions, by whomever made, are subject to a series of complex and sometimes inconsistent sets of rules governing, among other things, the amount of, and manner in which, contributions may be made. Any questions about compliance should be directed to the Legal Department. In addition, any political activity or contribution by an employee which might appear to constitute an endorsement or contribution by the Company must be approved in advance by the Legal Department.

B.    Securities Laws

Employees may not trade in (or even recommend) Company stock based on inside information. “Insider trading” is the purchase or sale of a publicly traded security while in possession of important non-public information about the issuer of the security. Such information includes, for example, non-public information on Company earnings, significant gains or losses of business, or the hiring, firing or resignation of a Director or Officer of the Company. Insider trading, as well as “tipping”, which is communicating such information tQ anyone who might use it to purchase or sell securities, are prohibited by the securities laws .~hen in doubt, information obtained as an employee of the Company should be presumed to be important and not public.

Officers and directors of the Company are also prohibited from trading in Company stock during any period in which participants in the Company’s retirement plans could not engage in a similar type of transaction.

Employees who have questions pertaining to the sale or purchase of a security under circumstances that might involve confidential information or securities laws should consult with the Chief Financial Officer or General Counsel. The General Counsel may refer individuals to their personal attorneys.

C.    Antitrust Laws

The federal government and most state governments have enacted antitrust or “competition” laws. These laws prohibit “restraints of trade”, which is certain conduct involving competitors, customers or suppliers in the marketplace. Their purpose is to ensure that markets for goods and services operate competitively and efficiently, so that customers enjoy the benefit of open competition among their suppliers and sellers similarly benefit from competition among their purchasers. In the United States and some other jurisdictions, violations of the antitrust laws can lead to substantial civil liability - triple the actual economic damages to a plaintiff. Moreover, violations of the antitrust laws are often treated as criminal acts that can result in felony convictions of both corporations and individuals.

Strict compliance with antitrust and competition laws is essential. These laws are very complex. Some types of conduct are always illegal under the antitrust laws of the Untied States and many states. Employees and other representatives of the Company must be alert to avoid even the appearance of such conduct. These are:

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1.     Agreements with competitors:

•to set prices or any other economic terms of the sale, purchase or license of goods or services, to

use a common method of setting prices, or to set any conditions of sale or purchase;

•on any terms of a bid or whether or not to bid;

•to allocate or limit customers, geographic territories, products or services, or not to solicit business from each other in one or more ways;

•not to do business with (to “boycott”) one or more customers, suppliers, licensors or licensees; and

•to limit production volume or research and development, to refrain from certain types of selling or marketing of goods or services, or to limit or standardize the features of products or services.

2.     Agreements with customers or licensees on the minimum resale price or price levels of the Company’s goods or services.

Other activities are not absolutely illegal, but will be legal in some market situations and illegal in others. Some of these types of conduct involve agreements with third parties such as competitors, customers, suppliers, licensees or licensors. Others involve unilateral actions that may result in claims that the Company has monopolized or attempted to monopolize a market. These types of conduct are described below:

•‘Predatory” pricing, or pricing below some level of cost, with the effect of driving at least some competition from the market;

•Exclusive dealing arrangements that require customers or licensees not to deal in the goods or services of the Company’s competitor;

•Reciprocal purchase agreements that condition the purchase of a product on the seller’s agreement to buy products from the other party;

•‘Tying” arrangements, in which a seller conditions its agreement to sell a product or service that the buyer wants on the buyer’s agreement to purchase a second product that the buyer would prefer not to buy or to buy elsewhere on better terms;

•Bundling” or market share discounts in which the final price depends on the customer’s purchase of multiple products or on allocating a specified percentage of its total purchases to the Company’s products;

•“Price discrimination,” or selling to different purchasers of the Company’s products at different prices or on other different economic terms of the purchase, or offering different promotional allowances or services in connection with the customer’s resale of the products, without complying with the specific exceptions permitted under the law; and

•Agreements with customers or licensees on the maximum resale price or price levels of the Company’s goods or services.

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This Code of Conduct is not intended as a comprehensive review of the antitrust laws, and is not a substitute for expert advice. If any employee has questions concerning a specific situation, he or she should contact the Legal Department before taking action.

D. Relationships with Public Officials

Some employees do business with federal, state or local government agencies. All employees engaged in business with a governmental body or agency must know and abide by the specific rules and regulations covering relations with public agencies. Such employees must also conduct themselves in a manner that avoids any dealings which might be perceived as attempts to influence public officials in the performance of their official duties.

E. Bribery, Kickback and Fraud

No funds or assets of the Company shall be paid, loaned or otherwise disbursed as bribes, “kickbacks”, or other payments designed to influence or compromise the conduct of the recipient; and no employee of the Company shall accept any funds or other assets (including those provided as preferential treatment to the employee for fulfilling their responsibilities), for assisting in obtaining business or for securing special concessions from the Company.

Company employees should conduct their business affairs in such a manner that the Company’s reputation will not be impugned if the details of their dealings should become a matter of public discussion. Employees must not engage in any activity, which degrades the reputation or integrity of the Company.

To illustrate the strict ethical standard the Company expects every employee to maintain, the following conduct is expressly prohibited:

•Payment or receipt of money, gifts, loans or other favors which may tend to influence business decisions or compromise independent judgment;

•Payment or receipt of rebates or “kickbacks” for obtaining business for or from the Company;

•Payment of bribes to government officials to obtain favorable rulings; and

•Any other activity that would similarly degrade the reputation or integrity of the Company.

Any employee found to be receiving, accepting or condoning a bribe, kickback, or other unlawful payment, or attempting to initiate such activities, will be liable to termination and possible criminal proceedings against them. Any employee found to be attempting fraud or engaging in fraud will be liable to termination and possible criminal proceedings against them. All employees have a responsibility to report any actual or attempted bribery, kickback or fraud to the Company.

F. USA Patriot Act

The United States government implemented the USA Patriot Act and other regulations to further various foreign policy and national security objectives. Employees must abide by all regulations that the United States has adopted in handling accounts and transactions, whether they apply to foreign countries, political organizations or particular foreign individuals and entities. Inquires regarding whether a

6

transaction on behalf of the Company complies with applicable regulation should be referred to the Compliance Department or the Legal Department.

G. Books and Records

All employees with supervisory duties should establish and implement appropriate internal accounting controls over all areas of their responsibility to ensure the safeguarding of the assets of the Company and the accuracy of its financial records and reports. The Company has adopted controls in accordance with internal needs and the requirements of applicable laws and regulations. These established accounting practices and procedures must be followed to assure the complete and accurate recording of all transactions. All staff, within their areas of responsibility, are expected to adhere to these procedures, as directed by appropriate Company officers.

Any accounting adjustments that materially depart from GAAP must be approved by the audit committee and reported to the Company’s independent auditors. In addition, all material off-balance-sheet transactions, arrangements and obligations, contingent or otherwise, and other relationships of the Company with unconsolidated entities or other persons that may have material current or future effects on the financial condition, changes in financial condition, results of operations, liquidity, capital expenditures, capital resources or significant components of revenues or expenses must be disclosed to the audit committee and the Company’s independent auditors.

No employee or non-employee director may interfere with or seek to improperly influence, directly or indirectly, the auditing of the Company’s financial records. Violation of these provisions shall result in disciplinary action, up to and including termination, and may also subject the violator to substantial civil and criminal liability.

If an employee becomes aware of any improper transaction or accounting practice concerning the resources of the Company, he or she should report the matter immediately to his or her supervisor or to a member of the audit committee. Employees may also file a confidential, anonymous complaint with Ethics • point (www.ethicspoint.com) if they have information regarding questionable accounting or auditing matters. There will be no retaliation against employees who disclose questionable accounting or auditing matters.

H. Employment Policies

The Company is committed to fostering a work environment in which all individuals are treated with respect and dignity. Each individual should be permitted to work in a business-like atmosphere that promotes equal employment opportunities and prohibits discriminatory practices, including harassment. Therefore, the Company expects that all relationships among persons in the workplace will be business-like and free of unlawful bias, prejudice and harassment. It is the Company’s policy to ensure equal employment opportunity without discrimination or harassment on the basis of race, color, national origin, religion, sex, age, disability, or any other status protected by law. The Company’s Sexual and Other Harassment Policy is contained in the employee handbook.

It is the Company’s policy to comply with all applicable wage and hour laws and other statutes regulating the employer-employee relationship and the workplace environment. To the extent the Company deals with labor unions, it is illegal under federal and state law for the Company or any of its employees or agents to pay to or receive anything of value from any labor organization.

No Company employee may interfere with or retaliate against another employee who seeks to invoke his or her rights under the laws governing labor and employee relations. If any employee has any questions

7

about the laws or Company policies governing labor and employee relations matters, he or she should consult the divisional intranet or employee handbook or contact the Human Resources Department, or the Legal Department.

The Company is committed to providing a safe workplace for all employees. In addition, several laws and regulations impose responsibility on the Company to safeguard against safety and health hazards. For that reason, and to protect the safety of themselves and others, employees and other persons who are present at Company facilities are required to follow carefully all safety instructions and procedures that the Company adopts. Questions about possible health and safety hazards at any Company facility should be directed immediately to the employee’s supervisor.

I.Employee Financial Matters

All employees are expected to conduct their own personal financial affairs in a responsible manner. Overdrafts on personal or family business checking accounts are considered unauthorized loans by bank examiners and may result in disciplinary action, up to including termination. The Company’s Employee Overdraft Policy is included in the employee handbook.

Employees must not accept bequests or legacies from customers of the Company under a will or trust, other than a relative or person who has never dealt with the employee as a Company representative. Employees may not accept any appointment as an executor, administrator, guardian, trustee or any similar fiduciary capacity without the prior written approval of their supervisor. This restriction does not apply to appointments resulting from close family or other personal relationships provided the duties required will not interfere with the proper performance of duties on behalf of the Company.

J. Computer, E-mail and Internet Policies

Every employee is responsible for using the Company’s information systems, including, without limitation, its electronic mail (E-mail) system, voice mail system and the Internet (collectively, the “Information Systems”), properly and in accordance with Company policies. The Company’s Information Security Policy is contained on the Company intranet. Any questions about these policies should be addressed to the employee’s immediate supervisor or the Chief Information Officer. Employees should be aware of, among other matters, the following:

1. The Computer System 15 Company Property

The computers that employees are provided or have access to for work and the E- mail system are the property of the Company and have been provided for use in conducting Company business. All communications and information transmitted by, received from, created or stored in its Information Systems (whether through word processing programs, E-Mail, voice mail the Internet or otherwise) are Company records and property of the Company.

2.     No Expectation of Privacy

The Company has the right, but not the duty, for any reason and without the permission of any employee, to monitor any and all of the aspects of its Information Systems, including, without limitation, reviewing documents created and stored on its Information Systems, deleting any matter stored in its system, monitoring sites visited by employees on the Internet, monitoring chat and news groups, reviewing material downloaded or uploaded by users from the Internet, and reviewing E-Mail and voice mail sent and received by users. Employees should not have an expectation of privacy in anything they create, store, send or receive on any Information Systems.

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3. Professional Use of Information Systems Required; Other Policies Apply

Employees are reminded to be courteous to other users of the system and always to conduct

themselves in a professional manner. The Company’s policies against discrimination and harassment (sexual or otherwise) apply fully to the Company’s Information Systems, and any violation of those policies is grounds for discipline up to and including discharge.

4. Offensive and Inappropriate Material; Illegal Activities

Company policies prohibit using the Company’s Information Systems to send or receive messages or files that are illegal, sexually explicit, abusive, offensive or profane.

5. Solicitations

The Company’s Information Systems may not be used to solicit for religious or political causes, commercial enterprises, outside organizations, or other activities not related to an employee’s services to the Company.

6. Copyrights and Trademarks

The Company’s Information Systems may not be used to send (upload) or receive (download) copyrighted materials, trade secrets, proprietary financial information, or similar materials.

K. Document Retention

The space available for the storage of Company documents, both on paper and electronic, is limited and expensive. Therefore, periodic discarding of documents is necessary. On the other hand, there are legal requirements that certain records be retained for specific periods of time. Before disposing of documents, employees should consult the Company Records Retention Policy. Employees who are unsure about the need to keep particular documents should consult with their supervisor, so that a judgment can be made as to the likelihood that the documents will be needed.

Whenever it becomes apparent that documents of any type will be required in connection with a lawsuit or government investigation, all possibly relevant documents should be preserved, and ordinary disposal or alteration of documents pertaining to the subjects of the litigation or investigation should be immediately suspended. If an employee is uncertain whether documents under his or her control should be preserved because they might relate to a lawsuit or investigation, he or she should contact the Legal Department.

III. COMPLIANCE WITH THE CODE OF ETHICS AND BUSINESS CONDUCT

All employees have a responsibility to understand and follow the Code of Conduct. In addition, all employees are expected to perform their work with honesty and integrity in any areas not specifically addressed by the Code of Conduct. A violation of this Code of Conduct may result in appropriate disciplinary action including the possible termination from employment with the Company, without additional warning.

The Company strongly encourages dialogue among employees and their supervisors to make everyone aware of situations that give rise to ethical questions and to articulate acceptable ways of handling those situations. In addition, each officer and supervisory employee of the Company has an obligation to

9

annually certify that he or she has read and reviewed this Code of Conduct with his or her subordinates, and every employee must certify that he or she has read this Code of Conduct and to the best of his or her knowledge is in compliance with all its provisions.

The Code of Conduct reflects general principles to guide employees in making ethical decisions and cannot and is not intended to address every specific situation. As such, nothing in this Code of Conduct prohibits or restricts the Company from taking any disciplinary action on any matters pertaining to employee conduct, whether or not they are expressly discussed in this document. The Code of Conduct is not intended to create any expressed or implied contract with any employee or third party. In particular, nothing in this document creates any employment contract between the Company and any of its employees.

The Board of Directors of Community First Bankshares has the exclusive responsibility for the final interpretation of the Code of Conduct. The Code of Conduct may be revised, changed or amended at any time by the Board of Directors of Community First Bankshares.

IV.   REPORTING SUSPECTED NON-COMPLIANCE

A. General Policy

To assist in the administration of the Code of Conduct, the Company has designated the position of General Counsel to oversee compliance. As part of its commitment to ethical and legal conduct, the Company expects its employees to bring to the attention of the General Counsel, or any of the people he or she designates, information about suspected violations of this Code of Conduct or of law by any Company employee or agent. Employees who have information about suspected improper accounting or auditing matters should bring it to the attention of their supervisors and/or a member of the audit committee, or submit an anonymous complaint. Employees are required to come forward with any such information, without regard to the identity or position of the suspected offender. The Company will treat the information in a confidential manner (consistent with appropriate evaluation and investigation) and will seek to ensure that no acts of retribution or retaliation will be taken against anyone for making a report.

Because failure to report criminal activity can itself be understood to condone the crime, we emphasize the importance of reporting. Failure to report knowledge of wrongdoing may result in disciplinary action against those who fail to report.

B. Complaint Procedure

Notification of Complaint - Information about known or suspected violations by any employee or agent should be reported promptly. Whenever practical an employee should do so in writing.

Investigation - Reports of violations will be investigated under the General Counsel’s supervision, as he or she finds appropriate. Employees are expected to cooperate in the investigation of reported violations.

Confidentiality - The General Counsel will not, to the extent practical and appropriate under the circumstances to protect the privacy of the persons involved, disclose the identity of anyone who reports a suspected violation or who participates in the investigation. Employees should be aware that the General Counsel, and those assisting him or her are obligated to act in the best interests of the Company, and do not act as personal representatives or lawyers for employees.

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Protection Against Retaliation - Retaliation in any form against an individual who reports a violation of this Code of Conduct or of law, even if the report is mistaken, or who assists in the investigation of a reported violation, is itself a serious violation of this policy. Acts of retaliation should be reported immediately and will be disciplined appropriately.

V. WAIVER OF THE CODE OF ETHICS AND BUSINESS CONDUCT

It is expected that waivers of this Code rarely, if ever, would be acceptable. Any waiver of this Code for executive officers or directors may only be granted by the Board of Directors, or appropriate Board committee, and will be promptly disclosed as required by law or stock exchange regulation. Waivers for any other individuals covered by the Code must be approved by the Company’s Audit Committee in consultation with the General Counsel.

VI. GENERAL PROVISIONS

This Code of Conduct replaces all previous similar policies developed by Community First Bankshares concerning the subject matters outlined above. It is intended to supplement and not replace other specific policies, guidelines and procedures governing your employment relationship that may be adopted from time to time by the Company. It is not intended to create an express or implied contract of employment. Employment by the Company is employment at will unless your employment is covered by a specific written employment agreement.

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Addendum to Code of Ethics and Business Conduct

For Senior Financial Officers

Preface

Senior Financial Officers hold an important and elevated role in corporate governance. As part of the Corporate Leadership Team, Senior Financial Officers are vested with both the responsibility and authority to protect, balance and preserve the interests of all of the Company stakeholders, including shareholders, clients, employees, vendors and citizens of the communities in which business is conducted. Senior Financial officers fulfill this responsibility by prescribing and enforcing the policies and procedures employed in the operation of the Company’s financial organization, and by demonstrating the following:

I. Honest and Ethical Conduct

Senior Financial Officers will exhibit and promote the highest standards of honest and ethical conduct through the establishment and operation of policies and procedures that:

•Encourage and reward professional integrity in all aspects of the financial organization, by eliminating inhibitions and barriers to responsible behavior, such as coercion, fear of reprisal, or alienation from the financial organization or the Company itself.

•Prohibit and eliminate the appearance or occurrence of conflicts between what is in the best interest of the Company and what could result in material personal gain for a member of the financial organization, including Senior Financial Officers.

•Provide a mechanism for members of the finance organization to inform senior management of deviations in practice from policies and procedures governing honest and ethical behavior.

•Demonstrate their personal support for such policies and procedures through periodic communication reinforcing these ethical standards throughout the finance organization.

II. Financial Records and Periodic Reports

Senior Financial Officers will establish and manage the Company transaction and reporting systems and procedures to ensure that:

•Business transactions are properly authorized and completely and accurately recorded on the Company’s books and records in accordance with Generally Accepted Accounting Principals (GAAP) and established Company financial policy.

•The retention or proper disposal of Company records shall be in accordance with established Company financial policies and applicable legal and regulatory requirements.

•Periodic financial communications and reports will be delivered in a manner that facilitates the highest degree of clarity of content and meaning so that readers and users will quickly and accurately determine their significance and consequence.

III. Compliance with Applicable Laws, Rules and Regulations

Senior Financial Officers will establish and maintain mechanisms to:

•Educate members of the finance organization about any federal, state or local statute, regulation or administrative procedure that affects the operation of the finance organization and the Company generally.

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•Monitor the compliance of the finance organization with any applicable federal, state or local statute, regulation or administrative rule.

•Identify, report and correct in a swift and certain manner, any detected deviations from applicable federal, state or local statute or regulation.

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EX-21.1

EXHIBIT 21.1

COMMUNITY FIRST BANKSHARES, INC.

SUBSIDIARIES

Subsidiary Bank:	Location	Ownership Percentage
Community First National Bank	Fargo, ND	100.00	%
Nonbank Subsidiaries:
Community First Financial, Inc.	Fargo, ND	100.00	%
Community First Technologies, Inc.	Fargo, ND	100.00	%
CFB Capital III	Fargo, ND	100.00	%
CFB Capital IV	Fargo, ND	100.00	%
HBC Aviation, LLP	Fargo, ND	37.50	%
Subsidiaries of Subsidiaries (100% Owned):
Community First Insurance, Inc.	Fargo, ND	Subsidiary of Community First National Bank
CFB Community Development Corporation	Fargo, ND	Subsidiary of Community First National Bank
Equity Lending, Inc.	Fargo, ND	Subsidiary of Community First National Bank
Community First Holdings, Inc.	Georgetown, British Cayman Islands	Subsidiary of Community First National Bank
Community First Home Mortgage, Inc.	Fargo, ND	Subsidiary of Community First National Bank
Subsidiaries of Subsidiaries of Subsidiaries
Community First Insurance, Inc. Wyoming	Cheyenne, WY	100% Subsidiary of Community First Insurance, Inc.
CFIRE, Inc.	Fargo, ND	100% Subsidiary of Community First Holdings, Inc.
Community First Mortgage, LLC	Fargo, ND	50% Subsidiary of Community First Home Mortgage, Inc.

EX-23.1

EXHIBIT 23.1

CONSENT OF INDEPENDENT AUDITORS

We consent to the incorporation by reference in this Annual Report (Form 10-K) of Community First Bankshares, Inc. of our report dated January 15, 2004 included in the 2003 Annual Report to Shareholders of Community First Bankshares, Inc.

We also consent to the incorporation by reference in the following Registration Statements and related Prospectuses of Community First Bankshares, Inc. of our report dated January 15, 2004, with respect to the consolidated financial statements of Community First Bankshares, Inc. incorporated by reference in this Annual Report (Form 10-K) for the year ended December 31, 2003.

Form	Registration Statement No.	Purpose
S-8	33-44921	1987 Stock Option Plan
S-8	33-48160	401(k) Retirement Plan
S-8	333-52071	1996 Stock Option Plan and 401(k) Plan
S-8	333-74909	Board of Directors Deferred Compensation Plan and Supplemental Executive Retirement Plan
S-8	333-108880	1996 Stock Option Plan and 401(k) Retirement Plan
S-3	333-37537	Registration of $150,000,000 of Common Stock, Preferred Stock and Debt Securities
S-3	333-83240	Shelf registration of $180,000,000 of Common Stock, Preferred Stock and Debt Securities
S-3	333-106164	Shelf registration of $120,000,000 of Common Stock, Preferred Stock and Debt Securities
S-4	333-40071	Shelf registration of 4,438,207 shares of Common Stock
S-4	333-49367	Shelf registration of 7,000,000 shares of Common Stock

	Ernst & Young LLP
Minneapolis, Minnesota
March 12, 2004

EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, Mark A. Anderson, certify that:

1. I have reviewed this annual report on Form 10-K of Community First Bankshares, Inc.;

2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 11, 2004

/s/ Mark A. Anderson

Mark A. Anderson
President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATIONS

I, Craig A. Weiss, certify that:

1.     I have reviewed this annual report on Form 10-K of Community First Bankshares, Inc.;

2.     Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.     Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.     The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.     The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 11, 2004

/s/ Craig A. Weiss

Craig A. Weiss
Executive Vice President and Chief Financial Officer

EX-32

Exhibit 32

Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Pursuant to 18 U.S.C. §1350, we, the undersigned Chief Executive Officer and Chief Financial Officer, respectively, of Community First Bankshares, Inc. (the “Company”), hereby certify:

1)     That the Annual Report on Form 10-K of the Company for the year ended December 31, 2003 (the “Report”) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and

2)     That information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:  March 11, 2004	/s/ Mark A. Anderson
	Mark A. Anderson
	President and Chief Executive Officer

Date:  March 11, 2004	/s/ Craig A. Weiss
	Craig A. Weiss
	Executive Vice President and Chief Financial Officer