ORE TRENGTH XCEPTIONAL ERFORMANCE

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Denis Sharp
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1 ORE TRENGTH XCEPTIONAL ERFORMANCE 2016 ANNUAL REPORT COMMUNITY FINANCIAL GROUP, INC.

Dear Fellow Shareholders 's strong financial performance is proof that our vision and strategic plans for being the premier independent community bank in eastern and central Washington are generating

With another year of record earnings, driven by continued robust loan growth, 2016, much like 2015, was a year of enhanced favorable financial results and trends.

2 Dear Fellow Shareholders 's strong financial performance is proof that our vision and strategic plans for being the premier independent community bank in eastern and central Washington are generating significant value and returns for our shareholders, customers, employees and local communities. With another year of record earnings, driven by continued robust loan growth, 2016, much like 2015, was a year of enhanced favorable financial results and trends. CFG and its wholly owned subsidiary, reported consolidated net income of $2.4 million for the year ended December 31, 2016, up 38% over the 2015 net income. This substantial increase in earnings for 2016 follows 2015's improvement in net income of 37% over the prior year. Earnings per share for 2016 rose by 37% to $1.70 over the 2015 level of $1.24, and the consolidated CFG return on average equity was 8.4% for 2016, up 27% from 6.6% for These exceptional increases in earnings contributed to a 22% annualized market value appreciation of CFG stock, as determined by a December 31, 2016 independent stock valuation, and a 61% total appreciation in the market value over the last four year period. The CFG Board of Directors declared a 5% stock dividend payable March 24, 2017 and approved a related cash repurchase program at the new higher market value. Both 2016's and 2015's net income were largely fueled by new customer relationships and outstanding record loan growth from the Bank s 2015 expansion into the Tri-Cities market, as well as continued growth from its other eastern and central Washington markets. finished 2016 with $365 million in total assets, $240 million in total net loans and total deposits of $327 million. Following 2015's year of the highest percentage organic loan growth of any bank in Washington State, Wheatland had another year of solid loan growth of 10%. Wheatland's larger loan portfolio drove the consolidated net interest income up 14% for the year ended December 31, 2016 to $12.9 million from $11.3 million for Loan quality continues to be very good and compares favorably to industry standards with only.25% of Wheatland's loans delinquent, and only.04% of its loans in a nonaccrual status as of December 31, The allowance for loan losses is fully funded to an amount significantly in excess of anticipated future losses and the Bank and CFG are well capitalized by all regulatory standards. Our mission is to help our customers truly succeed, manage risk and build wealth for long-term generational prosperity. With deep roots in agricultural and commercial banking, Wheatland uses its industry expertise, local market knowledge and decentralized lending structure to provide operating capital and finance new business opportunities for its customers, while also working closely with them as trusted advisors to help mitigate risks associated with various business and economic cycles. The loan portfolio has been funded with Wheatland's stable low cost core deposits, which we attribute to a very loyal and growing customer base and our needs based consultative customer service approach to delivering state of the art depository and treasury management services. Now for the future. The Board of Directors updated its master strategic plan recently and we will continue to focus on remaining independent and enhancing shareholder value through a balanced approach to growth and earnings. During the fourth quarter of 2016, we launched a strategic initiative to significantly expand our residential lending division to better serve our growing regional branch footprint and local communities with a wider range of services to finance home purchases, refinances and construction loans. We project that this new division will not only directly enhance the net income of the Bank, but will also indirectly do so by facilitating cross referrals and therefore growth of new customer relationships, loans and core deposits. Meanwhile, the external banking industry around us continues to consolidate. During the last decade alone, Washington State has seen a reduction in the number of FDIC insured banks from 86 to 45, and there are only 14 banks remaining which are headquartered in eastern and central Washington. We believe that is uniquely positioned with its relationship banking model and specialization in agricultural and small business banking, to seize opportunities and thrive as the premier independent community bank in our local markets. The Bank is fortunate to have a very dedicated Board of Directors and 123 of the most talented and hardworking employees, who together, are fully committed to our mission of ensuring our customers receive the highest value of financial services to assist them in achieving their long term goals. As always, thank you for investing in and CFG, for your banking business and your referrals. Please call me if you have any questions or feedback during the year. Sincerely, Susan M. Horton, CPA Chairman, CEO and President

$2,500 CFG CONSOLIDATED NET INCOME $2,441 $2,000 $1,763 $1,500 $1,000 $731 $1,151 $1,286 $500 $0 2012 2013 2014 2015 2016 $ in thousands $2.00 EARNINGS PER SHARE* $1.70 $1.50 $1.24 $1.00 $0.81 $0.

3 $2,500 CFG CONSOLIDATED NET INCOME $2,441 $2,000 $1,763 $1,500 $1,000 $731 $1,151 $1,286 $500 $ $ in thousands $2.00 EARNINGS PER SHARE* $1.70 $1.50 $1.24 $1.00 $0.81 $0.91 $.50 $0.52 $ RETURN ON AVERAGE EQUITY *As adjusted for subsequent stock dividends 10.00% 8.4% 8.00% 6.6% 6.00% 4.9% 5.2% 4.00% 3.2% 2.00% $ MARKET VALUE PER SHARE* $25 $24.05 $20 $15 $14.98 $17.36 $18.27 $19.69 $10 $5 $ *As adjusted for subsequent stock dividends

4 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION December 31, Assets Cash and due from banks $ 12,155,462 $ 5,840,252 Federal funds sold and overnight deposits 10,302,179 20,393,618 Cash and cash equivalents 22,457,641 26,233,870 Interest-bearing deposits in banks 34,271,000 46,769,000 Securities available-for-sale, at fair value 41,154,971 35,969,983 Federal Home Loan Bank stock, at cost 424, ,000 Investment in statutory trust 124, ,000 Loans held for sale 506, ,800 Loans receivable, net of allowance for loan losses; 2016 $2,836,067; 2015 $3,094, ,440, ,180,049 Premises and equipment, net 15,314,853 15,385,573 Bank owned life insurance 7,497,958 7,175,636 Other real estate held-for-sale 136, ,500 Accrued interest receivable and other assets 2,665,782 2,548,937 Total assets $ 364,994,943 $ 354,466,348 Liabilities and stockholders equity Liabilities Deposits: Noninterest-bearing $ 152,289,366 $ 137,654,607 Interest-bearing 175,113, ,576,968 Total deposits 327,402, ,231,575 Deferred tax liability, net 420, ,344 Subordinated debt 4,124,000 4,124,000 Employee Stock Ownership Plan debt 380, ,572 Accrued interest payable and other liabilities 2,625,042 2,010,450 Total liabilities 334,952, ,423,941 Stockholders equity Preferred stock - no par value, 300,000 shares authorized; none issued Common stock - no par value, 2,000,000 shares authorized; Shares issued and outstanding December 31, ,375,262 December 31, ,336,679 26,425,706 25,632,945 Retained earnings 3,843,858 2,504,196 Employee Stock Ownership Plan debt guarantee (380,794) (496,572) Accumulated other comprehensive income 153, ,838 Total stockholders equity 30,041,996 28,042,407 Total liabilities and stockholders equity $ 364,994,943 $ 354,466,348

5 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Year Ended December 31, Interest income Loans receivable, including fees $ 11,969,413 $ 10,335,642 Interest-bearing deposits and federal funds sold 556, ,821 Investment securities Taxable 338, ,862 Non-taxable 358, ,731 Total interest income 13,223,174 11,637,056 Interest expense Deposits 155, ,452 Borrowed funds 175, ,847 Total interest expense 331, ,299 Net interest income 12,891,822 11,302,757 Provision for loan losses Net interest income after provision for loan losses 12,891,822 11,302,757 Noninterest income Service charges on deposit accounts 754, ,990 Third party bankcard interchange income 658, ,142 Residential mortgage origination and sale income 246, ,741 Net gain on sale of available-for-sale securities 94,590 Other noninterest income 665, ,998 Total noninterest income 2,325,019 2,094,461 Noninterest expense Salaries and benefits, net of direct loan origination costs 7,052,985 6,297,255 Occupancy 1,170,312 1,077,192 Information technology 950, ,258 Furniture and equipment depreciation and maintenance 378, ,441 Legal, audit and regulatory examinations 268, ,791 Regulatory insurance and assessments 191, ,655 Supplies and postage 193, ,419 Excise tax 207, ,659 Other operating expenses 1,405,892 1,346,995 Total noninterest expense 11,818,209 10,916,665 Income before income taxes 3,398,632 2,480,553 Federal income tax expense 957, ,645 Net income $ 2,440,794 $ 1,762,908 Other comprehensive income (loss) Unrealized gains (losses) in securities available-for-sale (376,685) 303,707 Reclassification adjustment for (gains) losses realized in net income (94,590) Tax effect 128,073 (71,100) Total other comprehensive income (loss) (248,612) 138,017 Total comprehensive income $ 2,192,182 $ 1,900,925 Basic earnings per share $ 1.70 $ 1.24 Diluted earnings per share $ 1.69 $ 1.24

6 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY Accumulated ESOP Other Common Stock Retained Debt Comprehensive Shares Amount Earnings Guarantee Income (Loss) Total Balance at December 31, ,261,668 $ 24,329,171 $ 1,744,094 $ (607,185) $ 263,821 $ 25,729,901 4% stock dividend on April 6, ,266 1,002,806 (1,002,806) Redemption of fractional shares (4,004) (4,004) Stock options exercised 24, , ,972 Guarantee of ESOP debt 110, ,613 Net income 1,762,908 1,762,908 Change in unrealized holding gain on securities available-for-sale, net of $71,100 income tax effect 138, ,017 Balance at December 31, ,336,679 25,632,945 2,504,196 (496,572) 401,838 28,042,407 4% stock dividend on April 4, ,272 1,101,132 (1,101,132) Redemption of fractional shares (4,034) (4,034) Stock repurchased (14,834) (306,618) (306,618) Stock options exercised 145 2,281 2,281 Guarantee of ESOP debt 115, ,778 Net income 2,440,794 2,440,794 Change in unrealized holding gain on securities available-for-sale, net of $128,073 income tax effect (248,612) (248,612) Balance at December 31, ,375,262 $ 26,425,706 $ 3,843,858 $ (380,794) $ 153,226 $ 30,041,996

7 CONSOLIDATED STATEMENTS OF CASH FLOWS Year Ended December 31, Cash flows from operating activities Net income $ 2,440,794 $ 1,762,908 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 688, ,007 Net amortization of premiums and discounts on securities available-for-sale 536, ,947 Changes in loans held for sale 24,475 (185,800) (Gain) loss on disposal of premises and equipment 1,764 (3,925) Impairment of other real estate held-for-sale 30,241 Realized (gain) loss on securities available-for-sale, net (94,590) Provision (benefit) for deferred income taxes (13,046) (123,729) Increase in cash surrender value of bank owned life insurance (359,476) (169,895) Change in assets and liabilities: Accrued interest receivable and other assets (116,845) (610,631) Accrued interest payable and other liabilities 614,592 (138,717) Net cash provided by operating activities 3,817,420 1,862,816 Cash flows from investing activities Net change in interest-bearing deposits 12,498,000 28,544,000 Securities available-for-sale: Purchases (12,319,299) (3,366,165) Proceeds from sales 17,256,231 Proceeds from maturities, calls or principal reductions 6,221,199 6,619,471 Purchases of FHLB stock (4,091,000) (2,415,600) Proceeds from redemption of FHLB stock 4,075,100 2,918,900 Net (increase) decrease in loans receivable (21,260,590) (57,841,837) Purchase of life insurance policies (4,500,000) Proceeds from surrender of life insurance policies 37,154 Purchases of premises and equipment (619,959) (6,069,819) Proceeds from sale of equipment 180 3,925 Proceeds from sale of other real estate held-for-sale 2,626 Net cash used by investing activities (15,456,589) (18,850,894) Cash flows from financing activities Net increase in deposits 8,171,311 11,115,049 Proceeds from stock options exercised 2, ,972 Cash paid for repurchase of common stock (306,618) Fractional shares paid in cash (4,034) (4,004) Net cash provided by financing activities 7,862,940 11,416,017 Net change in cash and cash equivalents (3,776,229) (5,572,061) Cash and cash equivalents at beginning of year 26,233,870 31,805,931 Cash and cash equivalents at end of year $ 22,457,641 $ 26,233,870 Supplemental disclosure of cash flow information Cash paid during the year for: Interest $ 333,969 $ 350,719 Income taxes $ 894,086 $ 894,316

CORPORATE Directors from left to right: Marlo Merrell, Dennis Bly, Scott Jones, Chuck Cooper, Susan Horton, Chris Bell, Donna Herak Bock, Dick Vandervert and

Christopher D. Bell Director Dennis D. Bly Vice Chairman Community Financial Group, Inc. Donna T. Herak Bock Director Community Financial Group, Inc. Scott K.

8 CORPORATE Directors from left to right: Marlo Merrell, Dennis Bly, Scott Jones, Chuck Cooper, Susan Horton, Chris Bell, Donna Herak Bock, Dick Vandervert and Mike Leffel BOARD OF DIRECTORS Susan M. Horton, CPA Chairman Community Financial Group, Inc. Charles R. Cooper Director Community Financial Group, Inc. Christopher D. Bell Director Dennis D. Bly Vice Chairman Community Financial Group, Inc. Donna T. Herak Bock Director Community Financial Group, Inc. Scott K. Jones Director Howard E. Leffel Secretary Community Financial Group, Inc. Richard A. Vandervert Director Community Financial Group, Inc. Marlo D. Merrell Director

LEADERSHIP SENIOR MANAGEMENT Susan M. Horton, CPA President Chief Executive Officer Joseph W. Druffel Executive Vice President Chief Credit Officer Chief Compliance Officer Michael W.

9 LEADERSHIP SENIOR MANAGEMENT Susan M. Horton, CPA President Chief Executive Officer Joseph W. Druffel Executive Vice President Chief Credit Officer Chief Compliance Officer Michael W. Palmer Executive Vice President Chief Banking Officer Team Leader - Spokane / Lincoln / Adams / Grant Counties Allison R. Yarnell, CPA Executive Vice President Chief Financial Officer Erik W. Hopkins Senior Vice President Team Leader - Chelan / Douglas Counties Stephen J. Lancaster Senior Vice President Team Leader - Benton / Franklin Counties David D. Murray Senior Vice President Team Leader - Yakima / Kittitas Counties Troy W. Sims Senior Vice President Director of Residential Lending Services Mary K. Swanson Senior Vice President Bank Operations Security and Bank Secrecy Act Officer Kitt R. Zimmerman Senior Vice President Chief Information Officer

WHEATLAND DAVENPORT 600 Morgan St Davenport, WA 99122 (509) 725-0211 QUINCY 1015 Central Ave S Quincy, WA

Lake, WA 98837 (509) 764-4602 ODESSA 22 E 1st Ave Odessa, WA 99159 (509) 982-2641 SPOKANE VALLEY 14732 E

659-0330 SPOKANE DOWNTOWN 222 N Wall St, Ste 100 Spokane, WA 99201 (509) 458-2265 COMMUNITY FINANCIAL GROUP,

10 WHEATLAND DAVENPORT 600 Morgan St Davenport, WA (509) QUINCY 1015 Central Ave S Quincy, WA (509) WILBUR 8 SE Main St Wilbur, WA (509) MOSES LAKE 1442 S Pioneer Way Moses Lake, WA (509) ODESSA 22 E 1st Ave Odessa, WA (509) SPOKANE VALLEY E Indiana Ave Spokane Valley, WA (509) RITZVILLE 101 E 1st Ave Ritzville, WA (509) SPOKANE DOWNTOWN 222 N Wall St, Ste 100 Spokane, WA (509) COMMUNITY FINANCIAL GROUP, INC. & WHEATLAND BANK ADMINISTRATIVE HEADQUARTERS 222 N Wall St, Ste 308 Spokane, WA (509) (888)

LOCATIONS SPOKANE NORTHSIDE 10801 N Newport Highway Spokane, WA 99218 (509) 232-4325 CHELAN 134

(509) 663-5100 PASCO 9715 Sandifur Parkway Pasco, WA 99301 (509) 545-5626 YAKIMA 201 E Yakima

100 Spokane, WA 99201 (509) 458-5200 ELLENSBURG 205 S Main St, Ste 1 Ellensburg, WA 98926 (509)

11 LOCATIONS SPOKANE NORTHSIDE N Newport Highway Spokane, WA (509) CHELAN 134 E Woodin Ave Chelan, WA (509) WENATCHEE 1115 N Miller St Wenatchee, WA (509) PASCO 9715 Sandifur Parkway Pasco, WA (509) YAKIMA 201 E Yakima Ave, Ste 100 Yakima, WA (509) WHEATLAND WEALTH MANAGEMENT 222 N Wall Street, Ste 100 Spokane, WA (509) ELLENSBURG 205 S Main St, Ste 1 Ellensburg, WA (509) WHEATLAND BANK HOME LOAN CENTER 222 N Wall Street, Ste 101 Spokane, WA (509)

ALLENDALE BANCORP, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS

ALLENDALE BANCORP, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS CONSOLIDATED BALANCE SHEETS December 31, ASSETS Cash and Cash Equivalents Cash $ 2,063,294 $ 2,247,650 Due from banks, non-interest bearing 1,816,887 1,200,145 Federal funds sold 9,931 1,019,691 Total