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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-Q



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|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------

For the quarterly period ended September 30, 2006

OR



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

For the transition period from  to

Commission File Number: 000-51556



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CENTENNIAL
BANK HOLDINGS, INC.

(Exact name of registrant as specified in its charter)



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|                                                               |  |                                        
|-------------------------------------------------------------- |  | ---------------------------------------
|DELAWARE                                                       |  | 41-2150446                             
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification Number)
|                                                               | 
|1331 Seventeenth St., Suite 300 Denver, CO                     |  | 80202                                  
|(Address of principal executive offices)                       |  | (Zip Code)                             

303-296-9600

(Registrants telephone number, including area code)



---

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, as amended 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  x    No ̈

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of
Accelerated Filer and Large Accelerated Filer in Rule 12B-2 of the Exchange Act. (check one): Large Accelerated Filer ̈Accelerated Filer ̈Non-accelerated Filer  x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act.):    Yes ̈No  x

As of November 2, 2006 there were 58,167,715 shares of the registrants common stock outstanding, including 1,764,025 shares of unvested stock
grants.



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##### Table of Contents

TABLE OF CONTENTS



|                             |  |          |  |                                                                                       |  |     
|---------------------------- |  | -------- |  | ------------------------------------------------------------------------------------- |  | ----
|                             |  |          |  |                                                                                       |  | Page
|                             |  |          |  | Forward-Looking Statements and Factors that Could Affect Future Results               |  | 3   
|                             | 
|PART IFINANCIAL INFORMATION |  | 4       
|                             |  |          | 
|                             |  | ITEM 1.  |  | Unaudited Consolidated Financial Statements                                           |  | 4   
|                             |  |          | 
|                             |  |          |  | Unaudited Consolidated Balance Sheets                                                 |  | 4   
|                             |  |          | 
|                             |  |          |  | Unaudited Consolidated Statements of Income                                           |  | 5   
|                             |  |          | 
|                             |  |          |  | Unaudited Consolidated Statements of Comprehensive Income                             |  | 6   
|                             |  |          | 
|                             |  |          |  | Consolidated Statement of Changes in Stockholders Equity                             |  | 7   
|                             |  |          | 
|                             |  |          |  | Unaudited Consolidated Statements of Cash Flows                                       |  | 8   
|                             |  |          | 
|                             |  |          |  | Notes to Unaudited Condensed Consolidated Financial Statements                        |  | 9   
|                             |  |          | 
|                             |  | ITEM 2.  |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 19  
|                             |  |          | 
|                             |  | ITEM 3.  |  | Quantitative and Qualitative Disclosures About Market Risk                            |  | 33  
|                             |  |          | 
|                             |  | ITEM 4.  |  | Controls and Procedures                                                               |  | 34  
|                             | 
|PART IIOTHER INFORMATION    |  | 35      
|                             |  |          | 
|                             |  | ITEM 1.  |  | Legal Proceedings                                                                     |  | 35  
|                             |  |          | 
|                             |  | ITEM 1A. |  | Risk Factors                                                                          |  | 36  
|                             |  |          | 
|                             |  | ITEM 2.  |  | Unregistered Sale of Equity Securities and Use of Proceeds                            |  | 36  
|                             |  |          | 
|                             |  | ITEM 3.  |  | Defaults Upon Senior Securities                                                       |  | 36  
|                             |  |          | 
|                             |  | ITEM 4.  |  | Submission of Matters to a Vote of Security Holders                                   |  | 36  
|                             |  |          | 
|                             |  | ITEM 5.  |  | Other Information                                                                     |  | 37  
|                             |  |          | 
|                             |  | ITEM 6.  |  | Exhibits                                                                              |  | 38  



2



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##### Table of Contents

Forward-Looking Statements and Factors that Could Affect Future Results

Certain statements contained in this Quarterly Report
on Form 10-Q that are not statements of historical fact constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the Act), notwithstanding that such statements are not specifically
identified. In addition, certain statements may be contained in our future filings with the SEC, in press releases, and in oral and written statements made by or with our approval that are not statements of historical fact and constitute
forward-looking statements within the meaning of the Act. Examples of forward-looking statements include, but are not limited to: (i) projections of revenues, expenses, income or loss, earnings or loss per share, the payment or nonpayment of
dividends, capital structure and other financial items; (ii) statements of plans, objectives and expectations of the Company or its management or board of directors, including those relating to products or services; (iii) statements of
future economic performance; and (iv) statements of assumptions underlying such statements. Words such as believes, anticipates, expects, intends, targeted, continue,
remain, will, should, may and other similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements.

Forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from those in such statements. Factors that could cause
actual results to differ from those discussed in the forward-looking statements include, but are not limited to:



| |  |  | Local, regional, national and international economic conditions and the impact they may have on us and our customers, and our assessment of that impact.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Changes in the level of nonperforming assets and charge-offs.
| | - |  | -------------------------------------------------------------



| |  |  | The effects of and changes in trade and monetary and fiscal policies and laws, including the interest rate policies of the Federal Reserve Board.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Inflation and interest rate, securities market and monetary fluctuations.
| | - |  | -------------------------------------------------------------------------



| |  |  | Political instability, acts of war or terrorism and natural disasters.
| | - |  | ----------------------------------------------------------------------



| |  |  | The timely development and acceptance of new products and services and perceived overall value of these products and services by customers.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Changes in consumer spending, borrowings and savings habits.
| | - |  | ------------------------------------------------------------



| |  |  | Changes in the financial performance and/or condition of our borrowers.
| | - |  | -----------------------------------------------------------------------



| |  |  | Technological changes.
| | - |  | ----------------------



| |  |  | Acquisitions of acquired businesses and greater than expected costs or difficulties related to the integration of acquired businesses.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The ability to increase market share and control expenses.
| | - |  | ----------------------------------------------------------



| |  |  | Changes in the competitive environment among financial or bank holding companies and other financial service providers.
| | - |  | -----------------------------------------------------------------------------------------------------------------------



| |  |  | The effect of changes in laws and regulations with which we and our subsidiaries must comply.
| | - |  | ---------------------------------------------------------------------------------------------



| |  |  | The effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies, as well as the Public Company Accounting Oversight Board, the Financial
Accounting Standards Board and other accounting standard setters.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Changes in our organization, compensation and benefit plans.
| | - |  | ------------------------------------------------------------



| |  |  | The costs and effects of legal and regulatory developments including the resolution of legal proceedings or regulatory or other governmental inquiries and the results of regulatory
examinations or reviews.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Our success at managing the risks involved in the foregoing items.
| | - |  | ------------------------------------------------------------------

Forward-looking statements speak only as of the date on which such statements are made. We do not intend to update any forward-looking statement to reflect events or circumstances after the date on which such
statement is made, or to reflect the occurrence of unanticipated events.



3



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##### Table of Contents

PART IFINANCIAL INFORMATION

ITEM 1. Unaudited Consolidated Financial Statements

CENTENNIAL BANK HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Balance Sheets (Unaudited)



|                                                                                                                                                                                                                                                                                                                      |  |                                       |           |   |                   |   |           |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------- | --------- | - | ----------------- | - | --------- | -
|                                                                                                                                                                                                                                                                                                                      |  | September 30,2006                     |           |   | December 31, 2005 |  
|                                                                                                                                                                                                                                                                                                                      |  | (In thousands, except for share data) |          
|Assets                                                                                                                                                                                                                                                                                                                |  |                                       |           |   |                   |   |           |  
|Cash and due from banks                                                                                                                                                                                                                                                                                               |  | $                                     | 63,782    |   |                   | $ | 88,852    |  
|Federal funds sold                                                                                                                                                                                                                                                                                                    |  |                                       | 7,800     |   |                   |   | 10,090    |  
|                                                                                                                                                                                                                                                                                                                      |  |                                       |           |   |                   |   |           |  
|Total cash and cash equivalents                                                                                                                                                                                                                                                                                       |  |                                       | 71,582    |   |                   |   | 98,942    |  
|                                                                                                                                                                                                                                                                                                                      |  |                                       |           |   |                   |   |           |  
|Securities available for sale, at fair value                                                                                                                                                                                                                                                                          |  |                                       | 164,284   |   |                   |   | 143,081   |  
|Securities held to maturity (fair value of $10,042 and $5,686 at September 30, 2006 and December 31, 2005)                                                                                                                                                                                                            |  |                                       | 10,133    |   |                   |   | 5,798     |  
|Bank stocks, at cost                                                                                                                                                                                                                                                                                                  |  |                                       | 31,683    |   |                   |   | 26,874    |  
|                                                                                                                                                                                                                                                                                                                      |  |                                       |           |   |                   |   |           |  
|Total investments                                                                                                                                                                                                                                                                                                     |  |                                       | 206,100   |   |                   |   | 175,753   |  
|                                                                                                                                                                                                                                                                                                                      |  |                                       |           |   |                   |   |           |  
|Loans held for sale                                                                                                                                                                                                                                                                                                   |  |                                       | 2,100     |   |                   |   | 6,820     |  
|Loans, net of unearned discount                                                                                                                                                                                                                                                                                       |  |                                       | 1,979,406 |   |                   |   | 2,067,593 |  
|Less allowance for loan losses                                                                                                                                                                                                                                                                                        |  |                                       | (25,977   | ) |                   |   | (27,475   | )
|                                                                                                                                                                                                                                                                                                                      |  |                                       |           |   |                   |   |           |  
|Net loans                                                                                                                                                                                                                                                                                                             |  |                                       | 1,955,529 |   |                   |   | 2,046,938 |  
|                                                                                                                                                                                                                                                                                                                      |  |                                       |           |   |                   |   |           |  
|Premises and equipment, net                                                                                                                                                                                                                                                                                           |  |                                       | 76,575    |   |                   |   | 73,429    |  
|Goodwill                                                                                                                                                                                                                                                                                                              |  |                                       | 391,346   |   |                   |   | 392,507   |  
|Other intangible assets, net                                                                                                                                                                                                                                                                                          |  |                                       | 44,558    |   |                   |   | 54,922    |  
|Other assets                                                                                                                                                                                                                                                                                                          |  |                                       | 43,549    |   |                   |   | 39,996    |  
|Assets held for sale                                                                                                                                                                                                                                                                                                  |  |                                       | 97,408    |   |                   |   | 98,270    |  
|                                                                                                                                                                                                                                                                                                                      |  |                                       |           |   |                   |   |           |  
|Total assets                                                                                                                                                                                                                                                                                                          |  | $                                     | 2,886,647 |   |                   | $ | 2,980,757 |  
|                                                                                                                                                                                                                                                                                                                      |  |                                       |           |   |                   |   |           |  
|Liabilities and Stockholders Equity                                                                                                                                                                                                                                                                                  |  |                                       |           |   |                   |   |           |  
|Liabilities:                                                                                                                                                                                                                                                                                                          |  |                                       |           |   |                   |   |           |  
|Deposits:                                                                                                                                                                                                                                                                                                             |  |                                       |           |   |                   |   |           |  
|Noninterest-bearing demand                                                                                                                                                                                                                                                                                            |  | $                                     | 524,808   |   |                   | $ | 593,811   |  
|Interest-bearing demand                                                                                                                                                                                                                                                                                               |  |                                       | 793,852   |   |                   |   | 722,030   |  
|Savings                                                                                                                                                                                                                                                                                                               |  |                                       | 88,695    |   |                   |   | 99,496    |  
|Time                                                                                                                                                                                                                                                                                                                  |  |                                       | 560,909   |   |                   |   | 633,015   |  
|                                                                                                                                                                                                                                                                                                                      |  |                                       |           |   |                   |   |           |  
|Total deposits                                                                                                                                                                                                                                                                                                        |  |                                       | 1,968,264 |   |                   |   | 2,048,352 |  
|                                                                                                                                                                                                                                                                                                                      |  |                                      
|Securities sold under agreements to repurchase and federal fund purchases                                                                                                                                                                                                                                             |  |                                       | 36,635    |   |                   |   | 44,399    |  
|Borrowings                                                                                                                                                                                                                                                                                                            |  |                                       | 136,965   |   |                   |   | 130,198   |  
|Subordinated debentures                                                                                                                                                                                                                                                                                               |  |                                       | 41,239    |   |                   |   | 41,275    |  
|Interest payable and other liabilities                                                                                                                                                                                                                                                                                |  |                                       | 28,270    |   |                   |   | 37,368    |  
|Liabilities associated with assets held for sale                                                                                                                                                                                                                                                                      |  |                                       | 80,059    |   |                   |   | 80,417    |  
|                                                                                                                                                                                                                                                                                                                      |  |                                       |           |   |                   |   |           |  
|Total liabilities                                                                                                                                                                                                                                                                                                     |  |                                       | 2,291,432 |   |                   |   | 2,382,009 |  
|                                                                                                                                                                                                                                                                                                                      |  |                                       |           |   |                   |   |           |  
|Stockholders equity:                                                                                                                                                                                                                                                                                                 |  |                                       |           |   |                   |   |           |  
|Common stock$0.001 par value; 100,000,000 shares authorized, 63,961,010 shares issued, 58,483,606 shares outstanding at
September 30, 2006 (includes 1,719,275 shares of unvested stock); 63,159,692 shares issued, 60,403,764 shares outstanding at December 31, 2005 (includes 1,278,631 shares of unvested stock) |  |                                       | 64        |   |                   |   | 63        |  
|Additional paid-in capital                                                                                                                                                                                                                                                                                            |  |                                       | 613,972   |   |                   |   | 612,089   |  
|Shares to be issued for deferred compensation obligations                                                                                                                                                                                                                                                             |  |                                       | 751       |   |                   |   |          |  
|Retained earnings                                                                                                                                                                                                                                                                                                     |  |                                       | 37,453    |   |                   |   | 18,478    |  
|Accumulated other comprehensive income                                                                                                                                                                                                                                                                                |  |                                       | 22        |   |                   |   | 93        |  
|Treasury stock, at cost, 5,477,404 and 2,725,928 shares, respectively                                                                                                                                                                                                                                                 |  |                                       | (57,047   | ) |                   |   | (31,975   | )
|                                                                                                                                                                                                                                                                                                                      |  |                                       |           |   |                   |   |           |  
|Total stockholders equity                                                                                                                                                                                                                                                                                            |  |                                       | 595,215   |   |                   |   | 598,748   |  
|                                                                                                                                                                                                                                                                                                                      |  |                                       |           |   |                   |   |           |  
|Total liabilities and stockholders equity                                                                                                                                                                                                                                                                            |  | $                                     | 2,886,647 |   |                   | $ | 2,980,757 |  
|                                                                                                                                                                                                                                                                                                                      |  |                                       |           |   |                   |   |           |  

See Notes to Unaudited Condensed Consolidated Financial Statements.



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##### Table of Contents

CENTENNIAL BANK HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Statements of Income (Unaudited)



|                                                       |  |                                   |            |                                |   |            |  |      |            |  |   |            |  
|------------------------------------------------------ |  | --------------------------------- | ---------- | ------------------------------ | - | ---------- |  | ---- | ---------- |  | - | ---------- | -
|                                                       |  | Three Months EndedSeptember 30,   |            | Nine Months EndedSeptember 30, |  
|                                                       |  | 2006                              |            | 2005                           |   | 2006       |  | 2005 |           
|                                                       |  | (In thousands, except share data) |           
|Interest income:                                       |  |                                   |            |                                |   |            |  |      |            |  |   |            |  
|Loans, including fees                                  |  | $                                 | 41,427     |                                | $ | 32,909     |  | $    | 122,592    |  | $ | 91,989     |  
|Investment securities:                                 |  |                                   |            |                                |   |            |  |      |            |  |   |            |  
|Taxable                                                |  |                                   | 713        |                                |   | 49         |  |      | 2,207      |  |   | 697        |  
|Tax-exempt                                             |  |                                   | 1,454      |                                |   | 714        |  |      | 3,420      |  |   | 1,797      |  
|Dividends                                              |  |                                   | 485        |                                |   | 300        |  |      | 1,345      |  |   | 669        |  
|Federal funds sold and other                           |  |                                   | 145        |                                |   | 542        |  |      | 336        |  |   | 1,773      |  
|                                                       |  |                                   |            |                                |   |            |  |      |            |  |   |            |  
|Total interest income                                  |  |                                   | 44,224     |                                |   | 34,514     |  |      | 129,900    |  |   | 96,925     |  
|                                                       |  |                                   |            |                                |   |            |  |      |            |  |   |            |  
|Interest expense:                                      |  |                                   |            |                                |   |            |  |      |            |  |   |            |  
|Deposits                                               |  |                                   | 12,283     |                                |   | 6,648      |  |      | 33,963     |  |   | 15,041     |  
|Federal funds purchased and repurchase agreements      |  |                                   | 351        |                                |   | 293        |  |      | 905        |  |   | 737        |  
|Subordinated debentures                                |  |                                   | 972        |                                |   | 669        |  |      | 2,720      |  |   | 1,839      |  
|Borrowings                                             |  |                                   | 1,623      |                                |   | 1,031      |  |      | 4,022      |  |   | 2,237      |  
|                                                       |  |                                   |            |                                |   |            |  |      |            |  |   |            |  
|Total interest expense                                 |  |                                   | 15,229     |                                |   | 8,641      |  |      | 41,610     |  |   | 19,854     |  
|                                                       |  |                                   |            |                                |   |            |  |      |            |  |   |            |  
|Net interest income                                    |  |                                   | 28,995     |                                |   | 25,873     |  |      | 88,290     |  |   | 77,071     |  
|Provision for credit losses                            |  |                                   | 1,566      |                                |   |           |  |      | 1,566      |  |   | 1,700      |  
|                                                       |  |                                   |            |                                |   |            |  |      |            |  |   |            |  
|Net interest income, after provision for loan losses   |  |                                   | 27,429     |                                |   | 25,873     |  |      | 86,724     |  |   | 75,371     |  
|Noninterest income:                                    |  |                                   |            |                                |   |            |  |      |            |  |   |            |  
|Customer service and other fees                        |  |                                   | 3,015      |                                |   | 2,035      |  |      | 8,640      |  |   | 5,957      |  
|Other                                                  |  |                                   | 459        |                                |   | 697        |  |      | 1,551      |  |   | 1,692      |  
|                                                       |  |                                   |            |                                |   |            |  |      |            |  |   |            |  
|Total noninterest income                               |  |                                   | 3,474      |                                |   | 2,732      |  |      | 10,191     |  |   | 7,649      |  
|Noninterest expense:                                   |  |                                   |            |                                |   |            |  |      |            |  |   |            |  
|Compensation and employee benefits                     |  |                                   | 12,006     |                                |   | 9,828      |  |      | 35,523     |  |   | 30,224     |  
|Occupancy                                              |  |                                   | 1,891      |                                |   | 1,651      |  |      | 5,937      |  |   | 4,939      |  
|Furniture and equipment                                |  |                                   | 1,286      |                                |   | 924        |  |      | 3,682      |  |   | 2,590      |  
|Amortization of intangible assets                      |  |                                   | 2,858      |                                |   | 2,968      |  |      | 8,855      |  |   | 9,157      |  
|Merger, acquisition and transition                     |  |                                   | 239        |                                |   | 752        |  |      | 1,866      |  |   | 8,436      |  
|Other general and administrative                       |  |                                   | 4,662      |                                |   | 4,604      |  |      | 13,823     |  |   | 11,581     |  
|                                                       |  |                                   |            |                                |   |            |  |      |            |  |   |            |  
|Total noninterest expense                              |  |                                   | 22,942     |                                |   | 20,727     |  |      | 69,686     |  |   | 66,927     |  
|                                                       |  |                                   |            |                                |   |            |  |      |            |  |   |            |  
|Income before income taxes                             |  |                                   | 7,961      |                                |   | 7,878      |  |      | 27,229     |  |   | 16,093     |  
|Income tax expense                                     |  |                                   | 2,521      |                                |   | 2,748      |  |      | 9,123      |  |   | 5,482      |  
|                                                       |  |                                   |            |                                |   |            |  |      |            |  |   |            |  
|Income from continuing operations                      |  |                                   | 5,440      |                                |   | 5,130      |  |      | 18,106     |  |   | 10,611     |  
|Income (loss) from discontinued operations, net of tax |  |                                   | 380        |                                |   |           |  |      | 869        |  |   | (794       | )
|                                                       |  |                                   |            |                                |   |            |  |      |            |  |   |            |  
|Net income                                             |  | $                                 | 5,820      |                                | $ | 5,130      |  | $    | 18,975     |  | $ | 9,817      |  
|                                                       |  |                                   |            |                                |   |            |  |      |            |  |   |            |  
|Earnings per sharebasic:                              |  |                                   |            |                                |   |            |  |      |            |  |   |            |  
|Income from continuing operations                      |  | $                                 | 0.10       |                                | $ | 0.10       |  | $    | 0.31       |  | $ | 0.20       |  
|Income (loss) from discontinued operations, net of tax |  |                                   |           |                                |   |           |  |      | 0.02       |  |   | (0.01      | )
|Net income                                             |  |                                   | 0.10       |                                |   | 0.10       |  |      | 0.33       |  |   | 0.19       |  
|Earnings per sharediluted:                            |  |                                   |            |                                |   |            |  |      |            |  |   |            |  
|Income from continuing operations                      |  | $                                 | 0.10       |                                | $ | 0.10       |  | $    | 0.31       |  | $ | 0.20       |  
|Income (loss) from discontinued operations, net of tax |  |                                   |           |                                |   |           |  |      | 0.02       |  |   | (0.01      | )
|Net income                                             |  |                                   | 0.10       |                                |   | 0.10       |  |      | 0.33       |  |   | 0.19       |  
|Weighted average shares outstanding-basic              |  |                                   | 57,093,056 |                                |   | 51,902,934 |  |      | 58,060,683 |  |   | 52,137,132 |  
|Weighted average shares outstanding-diluted            |  |                                   | 57,499,412 |                                |   | 52,002,019 |  |      | 58,394,354 |  |   | 52,170,523 |  

See Notes to Unaudited Condensed Consolidated Financial Statements.



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##### Table of Contents

CENTENNIAL BANK HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income (Unaudited)



|                                                                      |  |                                 |       |                                |   |       |  |   |        |   |  |   |       
|--------------------------------------------------------------------- |  | ------------------------------- | ----- | ------------------------------ | - | ----- |  | - | ------ | - |  | - | ------
|                                                                      |  | Three Months EndedSeptember 30, |       | Nine Months EndedSeptember 30,
|                                                                      |  | 2006                            |       | 2005                           |   | 2006  |  |   | 2005  
|                                                                      |  | (In thousands)                 
|Net income                                                            |  | $                               | 5,820 |                                | $ | 5,130 |  | $ | 18,975 |   |  | $ | 9,817 
|Other comprehensive income (loss), net of tax:                        |  |                                 |       |                                |   |       |  |   |        |   |  |   |       
|Change in net unrealized gain (loss) on securities available for sale |  |                                 | 496   |                                |   | 82    |  |   | (71    | ) |  |   | 907   
|                                                                      |  |                                 |       |                                |   |       |  |   |        |   |  |   |       
|Comprehensive income                                                  |  | $                               | 6,316 |                                | $ | 5,212 |  | $ | 18,904 |   |  | $ | 10,724
|                                                                      |  |                                 |       |                                |   |       |  |   |        |   |  |   |       

See Notes to Unaudited Condensed Consolidated Financial Statements.



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CENTENNIAL BANK HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Statement of Changes in Stockholders Equity (Unaudited)



|                                                                        |  |                                   |   |  |                                         |         |   |                                                       |   |               |  |   |                  |   |                                     |   |        |        |   |     |   |  |   |         |  
|----------------------------------------------------------------------- |  | --------------------------------- | - |  | --------------------------------------- | ------- | - | ----------------------------------------------------- | - | ------------- |  | - | ---------------- | - | ----------------------------------- | - | ------ | ------ | - | --- | - |  | - | ------- | -
|                                                                        |  | Shares ofCommonStock              |   |  | CommonStock andAdditionalPaid-inCapital |         |   | Shares to beIssued forDeferredCompensationObligations |   | TreasuryStock |  |   | RetainedEarnings |   | AccumulatedOtherComprehensiveIncome |   |        | Totals |  
|                                                                        |  | (In thousands, except share data) |  
|Balance, December 31, 2005                                              |  | 60,403,764                        |   |  | $                                       | 612,152 |   |                                                       | $ |              |  | $ | (31,975          | ) |                                     | $ | 18,478 |        | $ | 93  |   |  | $ | 598,748 |  
|Comprehensive income:                                                   |  |                                   |   |  |                                         |         |   |                                                       |   |               |  |   |                  |   |                                     |   |        |        |   |     |   |  |   |         |  
|Net income                                                              |  |                                  |   |  |                                         |        |   |                                                       |   |              |  |   |                 |   |                                     |   | 18,975 |        |   |    |   |  |   | 18,975  |  
|Change in net unrealized loss on securities available for sale          |  |                                  |   |  |                                         |        |   |                                                       |   |              |  |   |                 |   |                                     |   |       |        |   | (71 | ) |  |   | (71     | )
|                                                                        |  |                                   |   |  |                                         |         |   |                                                       |   |               |  |   |                  |   |                                     |   |        |        |   |     |   |  |   |         |  
|Total comprehensive income                                              |  |                                   |   |  |                                         |         |   |                                                       |   |               |  |   |                  |   |                                     |   |        |        |   |     |   |  |   | 18,904  |  
|Stock compensation awards, net                                          |  | 473,442                           |   |  |                                         |        |   |                                                       |   |              |  |   |                 |   |                                     |   |       |        |   |    |   |  |   |        |  
|Earned stock award compensation                                         |  |                                  |   |  |                                         | 2,382   |   |                                                       |   |              |  |   |                 |   |                                     |   |       |        |   |    |   |  |   | 2,382   |  
|Repurchase of common stock                                              |  | (2,393,600                        | ) |  |                                         |        |   |                                                       |   |              |  |   | (25,072          | ) |                                     |   |       |        |   |    |   |  |   | (25,072 | )
|Shares to be issued for settlement of deferred compensation obligations |  |                                  |   |  |                                         | (500    | ) |                                                       |   | 751           |  |   |                 |   |                                     |   |       |        |   |    |   |  |   | 251     |  
|Tax effect of equity compensation                                       |  |                                  |   |  |                                         | 2       |   |                                                       |   |              |  |   |                 |   |                                     |   |       |        |   |    |   |  |   | 2       |  
|                                                                        |  |                                   |   |  |                                         |         |   |                                                       |   |               |  |   |                  |   |                                     |   |        |        |   |     |   |  |   |         |  
|Balance, September 30, 2006                                             |  | 58,483,606                        |   |  | $                                       | 614,036 |   |                                                       | $ | 751           |  | $ | (57,047          | ) |                                     | $ | 37,453 |        | $ | 22  |   |  | $ | 595,215 |  
|                                                                        |  |                                   |   |  |                                         |         |   |                                                       |   |               |  |   |                  |   |                                     |   |        |        |   |     |   |  |   |         |  

See Notes to Unaudited Condensed Consolidated Financial Statements.



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CENTENNIAL BANK HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Statement of Cash Flows (Unaudited)



|                                                                                  |  |                                |          |   |      |   |          |  
|--------------------------------------------------------------------------------- |  | ------------------------------ | -------- | - | ---- | - | -------- | -
|                                                                                  |  | Nine Months EndedSeptember 30, |         
|                                                                                  |  | 2006                           |          |   | 2005 |  
|                                                                                  |  | (In thousands)                 |         
|Cash flows from operating activities:                                             |  |                                |          |   |      |   |          |  
|Net income                                                                        |  | $                              | 18,975   |   |      | $ | 9,817    |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                                |          |   |      |   |          |  
|Provision for credit losses                                                       |  |                                | 1,588    |   |      |   | 1,700    |  
|Stock compensation costs                                                          |  |                                | 2,382    |   |      |   | 275      |  
|Depreciation and amortization                                                     |  |                                | 13,370   |   |      |   | 12,045   |  
|Loss (gain) on sale of securities and loans                                       |  |                                | (775     | ) |      |   | (1,071   | )
|Loss (gain) on sale of real estate owned and assets                               |  |                                | (196     | ) |      |   | (601     | )
|Impairment of discontinued operations                                             |  |                                | 201      |   |      |   | 1,584    |  
|Other                                                                             |  |                                | (434     | ) |      |   | 984      |  
|Proceeds from sales of loans held for sale                                        |  |                                | 55,390   |   |      |   | 78,056   |  
|Originations of loans held for sale                                               |  |                                | (49,896  | ) |      |   | (75,708  | )
|Net change in:                                                                    |  |                                |          |   |      |   |          |  
|Accrued interest receivable and other assets                                      |  |                                | 4,301    |   |      |   | (15,553  | )
|Accrued interest payable and other liabilities                                    |  |                                | (8,355   | ) |      |   | 9,346    |  
|                                                                                  |  |                                |          |   |      |   |          |  
|Net cash provided by operating activities                                         |  |                                | 36,551   |   |      |   | 20,874   |  
|                                                                                  |  |                                |          |   |      |   |          |  
|Cash flows from investing activities:                                             |  |                                |          |   |      |   |          |  
|Activity in available-for-sale securities:                                        |  |                                |          |   |      |   |          |  
|Maturities, prepayments, and calls                                                |  |                                | 70,981   |   |      |   | 135,374  |  
|Purchases                                                                         |  |                                | (96,679  | ) |      |   | (143,164 | )
|Activity in held-to-maturity securities and bank stocks:                          |  |                                |          |   |      |   |          |  
|Maturities, prepayments, and calls                                                |  |                                | 297      |   |      |   | 250      |  
|Purchases                                                                         |  |                                | (4,395   | ) |      |   |          |  
|Loan originations and principal collections, net                                  |  |                                | 76,324   |   |      |   | (125,525 | )
|Proceeds from sales of foreclosed assets                                          |  |                                | 1,784    |   |      |   | 5,204    |  
|Proceeds from sales of premises and equipment                                     |  |                                | 6,382    |   |      |   | 373      |  
|Additions to premises and equipment                                               |  |                                | (13,318  | ) |      |   | (11,910  | )
|Proceeds from sale of subsidiary and other investment                             |  |                                | 1,835    |   |      |   | 1,516    |  
|Payments on discontinued operations                                               |  |                                |         |   |      |   | (74      | )
|                                                                                  |  |                                |          |   |      |   |          |  
|Net cash provided (used) by investing activities                                  |  |                                | 43,211   |   |      |   | (137,956 | )
|                                                                                  |  |                                |          |   |      |   |          |  
|Cash flows from financing activities:                                             |  |                                |          |   |      |   |          |  
|Net change in deposits                                                            |  |                                | (83,754  | ) |      |   | 42,466   |  
|Net change in short-term borrowings                                               |  |                                | 7,172    |   |      |   | 58,405   |  
|Repayment of long-term debt                                                       |  |                                | (388     | ) |      |   | 20,163   |  
|Net change in federal funds purchased and repurchase agreements                   |  |                                | (4,824   | ) |      |   | 3,813    |  
|Repurchase of common stock                                                        |  |                                | (25,328  | ) |      |   | (4,659   | )
|                                                                                  |  |                                |          |   |      |   |          |  
|Net cash provided (used) by financing activities                                  |  |                                | (107,122 | ) |      |   | 120,188  |  
|                                                                                  |  |                                |          |   |      |   |          |  
|Net change in cash and cash equivalents                                           |  |                                | (27,360  | ) |      |   | 3,106    |  
|Cash and cash equivalents, beginning of period                                    |  |                                | 98,942   |   |      |   | 90,927   |  
|                                                                                  |  |                                |          |   |      |   |          |  
|Cash and cash equivalents, end of period                                          |  | $                              | 71,582   |   |      | $ | 94,033   |  
|                                                                                  |  |                                |          |   |      |   |          |  
|Supplemental disclosure of cash flow activity:                                    |  |                                |          |   |      |   |          |  
|Interest paid on deposits and borrowed funds                                      |  | $                              | 42,776   |   |      | $ | 20,236   |  
|Income taxes paid                                                                 |  |                                | 18,393   |   |      |   | 5,798    |  
|Supplemental disclosure of non-cash activities:                                   |  |                                |          |   |      |   |          |  
|Loans transferred to other real estate owned                                      |  |                                | 5,094    |   |      |   | 1,791    |  

See Notes to Unaudited Condensed Consolidated Financial Statements.



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##### Table of Contents

CENTENNIAL BANK HOLDINGS, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

(1) Organization, Operations and Basis of Presentation

Centennial Bank Holdings, Inc. is a financial holding company and a bank holding company registered under the Bank Holding Company Act of 1956, as amended. Our principal business is to serve as a holding company for our subsidiaries. As of
September 30, 2006, those subsidiaries were Guaranty Bank and Trust Company, Centennial Bank of the West, and Collegiate Peaks Bank, referred to as Guaranty Bank, CBW, and Collegiate Peaks, respectively. Collegiate Peaks was held for sale as of
September 30, 2006, with completion of the sale on November 1, 2006. Reference to Banks means Guaranty Bank and CBW, and Company means Centennial Bank Holdings, Inc. on a consolidated basis with the Banks,
Collegiate Peaks and First MainStreet Insurance, which was sold on March 1, 2006.

The Banks are full-service community banks offering an array of
banking products and services to the communities they serve, including accepting time and demand deposits and originating commercial loans, real estate loans, including construction loans and mortgage loans, Small Business Administration guaranteed
loans and consumer loans. CBW also provides trust services, including personal trust administration, estate settlement, investment management accounts and self-directed IRAs.

(a) Basis of Presentation

The accounting and reporting policies of the Company conform to U.S. generally accepted accounting principles. All significant intercompany balances and transactions have been eliminated. Our financial statements
reflect all adjustments that are, in the opinion of management, necessary for a fair presentation of the financial position and results of operations for the periods presented. Certain information and note disclosures normally included in
consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. The interim operating results
are not necessarily indicative of operating results for the full year.

(b) Use of Estimates

The preparation of the consolidated financial statements in conformity with U.S. generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the dates of the consolidated balance sheet and income and expense for the periods presented. Actual results could differ significantly
from those estimates. Material estimates that are particularly susceptible to significant changes include the assessment for impairment of certain investment securities, the allowance for loan losses, deferred tax assets and liabilities, goodwill
and other intangible assets, and stock compensation expense. Assumptions and factors used in the estimate of stock compensation costs are evaluated on an annual basis or whenever events or changes in circumstance indicate that the previous
assumptions and factors have changed. The result of the analysis could result in adjustments to the estimates.

(c) Allowance for
Credit Losses

The allowance for loan losses and the reserve for unfunded loan commitments when combined are
referred to as the allowance for credit losses. The allowance for loan losses is reported as a reduction of outstanding loan balances and the reserve for unfunded loan commitments is included within interest payable and other liabilities.

The allowance for credit losses is evaluated on a regular basis by management and is based upon managements periodic
review of the collectibility of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrowers ability to repay, estimated value of any underlying collateral and
prevailing economic conditions. Loans that are deemed to be uncollectible are charged off and deducted from the allowance for loan losses. The provision for loan losses and recoveries on loans previously charged off are added to the allowance for
loan losses. This evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision as more information becomes available. The allowance for credit losses is maintained at a level deemed appropriate by
management to adequately provide for known and inherent risks in lending commitments and irrevocable payment obligations.



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(d) Goodwill and Other Intangible Assets

Goodwill represents the excess of cost over the fair value of the net assets of businesses acquired. Goodwill and other intangible assets
acquired in a purchase business combination and determined to have an indefinite useful life are not amortized, but instead are tested for impairment at least annually. Other intangible assets with definite useful lives are amortized over their
estimated useful lives to their estimated residual values. Goodwill is the only intangible asset with an indefinite life. Goodwill is reviewed for impairment at least annually or whenever events or changes in circumstance indicate that the carrying
value may be greater than fair value. The goodwill impairment analysis is based on an evaluation of reporting units. The Company has one significant reporting unit  banking operations.

Core deposit intangible assets, referred to as CDI, and other definite-lived intangible assets are recognized apart from goodwill at the
time of acquisition based on valuations prepared by independent third parties or other estimates of fair value. In preparing such valuations, the third parties consider variables such as deposit servicing costs, attrition rates, and market discount
rates. CDI assets are amortized to expense over their useful lives, which we have estimated to range from 7 years to 15 years. The other definite-lived intangible assets are amortized over their useful lives, which range from 1 year to 7 years.

(e) Impairment of Long-Lived Assets

Long-lived assets, such as premises and equipment, and definite-lived intangible assets subject to amortization, are reviewed for
impairment whenever events or changes in circumstance indicate that the carrying value of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying value of the asset to the estimated
undiscounted future cash flows expected to be generated by the asset. If the carrying value of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized by the amount by which the carrying value of the asset
exceeds the fair value of the asset, less costs to sell. Assets to be disposed of are separately presented in the balance sheet and reported at the lower of the carrying value or fair value less costs to sell, and are no longer depreciated. The
assets and liabilities of a disposal group classified as held for sale are presented separately in the appropriate asset and liability sections of the consolidated balance sheet. The gain or loss and income from a disposal group are recorded as
discontinued operations on the consolidated statement of income.

(f) Stock Incentive Plan

The Companys Amended and Restated 2005 Stock Incentive Plan (Plan) provides for up to 2,500,000 grants of stock options,
stock awards, stock units awards, performance stock awards, stock appreciation rights, and other equity-based awards to key employees, nonemployee directors, consultants and prospective employees. As of September 30, 2006, the Company has only
granted stock awards. The Company accounts for the equity-based compensation using the provisions of Statement of Financial Accounting Standards (SFAS) No. 123R, Share-Based Payment. The Company recognizes expense for
services received in a share-based payment transaction as services are received. That cost is recognized over the period during which an employee or director provides service in exchange for the award. The Company has issued stock awards that vest
based on service periods from one to four years, and performance conditions. The maximum contractual term for the performance-based share awards is December 31, 2012. Costs are recognized over a weighted-average period of 4.6 years.

The compensation cost of employee and director services received in exchange for stock awards is based on the grant-date fair value of
the award (as determined by quoted market prices). The stock compensation expense recognized reflects estimated forfeitures, adjusted as necessary based on actual forfeitures. The Company recognized $874,000 and $2,382,000 in compensation expense
for services rendered for the three and nine months ended September 30, 2006, respectively. The Company recognized $275,000 in compensation expense for services rendered for the three and nine months ended September 30, 2005. At
September 30, 2006, the Company had a total of 1,719,275 unvested restricted shares of stock issued and outstanding. At September 30, 2006, there was $11,483,000 of unrecognized compensation costs related to unvested share-based
compensation granted under the Plan.



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|                                  |  |           |   |  |                                         |      
|--------------------------------- |  | --------- | - |  | --------------------------------------- | -----
|                                  |  | Shares    |   |  | Weighted AverageFair Value onAward Date
|Outstanding at December 31, 2005  |  | 1,278,631 |   |  | $                                       | 10.88
|Awarded                           |  | 801,318   |   |  |                                         | 10.48
|Forfeited                         |  | (327,876  | ) |  |                                         | 10.97
|Vested                            |  | (32,798   | ) |  |                                         | 10.50
|                                  |  |           |   |  |                                         |      
|Outstanding at September 30, 2006 |  | 1,719,275 |   |  | $                                       | 10.82
|                                  |  |           |   |  |                                         |      

The weighted-average grant-date fair value of stock awards for the nine month period ended
September 30, 2005 was $10.80 per share.

(g) Deferred Compensation Plans

The Company has Deferred Compensation Plans (the Plans) that allow directors and certain key employees to voluntarily defer compensation.
Compensation expense is recorded for the deferred compensation and a related liability is recognized. Participants may elect designated investment options for the notional investment of their deferred compensation. The recorded obligations are
adjusted for deemed income or loss related to the investments selected. Participants in certain Plans are given the opportunity to elect to have all or a portion of their deferred compensation earn a rate of return equal to the total return on the
Companys common stock. The Plans do not provide for diversification of a participants assets allocated to Company common stock and assets allocated to Company common stock can only be settled with a fixed number of shares of stock. In
accordance with Emerging Issues Task Force Issue 97-14, Accounting for Deferred Compensation Arrangements Where Amounts Earned Are Held in a Rabbi Trust and Invested, the deferred compensation obligation associated with Company common stock
is classified as a component of stockholders equity. Subsequent changes in the fair value of the common stock are not reflected in earnings or stockholders equity of the Company. Company common stock held by the Company for the
satisfaction of obligations of the Plans is classified as treasury stock. The Company held 75,249 and 50,000 shares of Company common stock for deferred compensation plan obligations at September 30, 2006 and December 31, 2005,
respectively, which are recorded as treasury stock.

(g) Impact of Recently Issued Accounting Standards

During July 2006, the Financial Accounting Standards Board adopted FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes(FIN 48). FIN 48 was issued to clarify the requirements of Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes, relating to the recognition of income tax benefits. FIN 48 addresses recognizing
and measuring tax benefits when the benefits realization is uncertain. The cumulative effect of applying the provisions of FIN 48 upon adoption will be reported as an adjustment to beginning retained earnings. FIN 48 is effective for public
companies with fiscal years beginning after December 15, 2006. We do not expect there to be any material effect on either our results of operations or financial condition when we adopt FIN 48.

SFAS No. 157, Fair Value Measurements defines fair value, establishes a framework for measuring fair value in generally accepted accounting
principles (GAAP), and expands disclosures about fair value measurements. This Statement applies under other accounting pronouncements that require or permit fair value measurements. Accordingly, this Statement does not require any new fair value
measurements. However, for some entities, the application of this Statement will change current practice. We do not expect there to be any material effect on either our results of operations or financial condition when we adopt FAS No. 157 This
Statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years.

SFAS No. 158, Employers Accounting for Defined Benefit Pension and Other Postretirement Plans requires an employer to recognize the overfunded or underfunded status of a defined benefit
postretirement plan (other than a multiemployer plan) as an asset or liability in its statement of financial position and to recognize changes in that funded status in the year in which the changes occur through comprehensive income. This Statement
also requires an employer to measure the funded status of a plan as of the date of its year-end statement of financial position, with limited exceptions. An employer with publicly traded equity securities is required to initially recognize the
funded status of a defined benefit postretirement plan and to provide the required disclosures as of the end of the fiscal year ending after December 15, 2006. The requirement to measure plan assets and benefit obligations as of the date of the
employers fiscal year-end statement of financial position is effective for fiscal years ending after December 15, 2008. We do not expect there to be any material effect on either our results of operations or financial condition when we
adopt FAS No. 158.



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In September 2006, the U.S. Securities and Exchange Commission issued Staff Accounting Bulletin
No. 108, Considering the Effects of Prior Year Misstatements When Quantifying Misstatements in Current Year Financial Statements (SAB 108). SAB 108 addresses how the effects of prior year uncorrected errors must be considered in
quantifying misstatements in current year financial statements. The effects of prior year uncorrected errors include potential accumulation of improper amounts that may result in a material misstatement on the balance sheet or the reversal of prior
period errors in the current period that result in a material misstatement of the current period income statement amounts. Adjustments to current or prior period financial statements would be required in the event that after application of various
approaches for assessing materiality of misstatement in current period financial statements and consideration of all relevant quantitative and qualitative factors, a misstatement is determined to be material. SAB 108 will be applicable to all
financial statements issued by the Company after November 15, 2006.

(i) Reclassifications

Certain amounts in prior year financial statements have been reclassified to conform to the current year presentation.

(2) Securities

The amortized cost and estimated fair
value of debt securities are as follows:



|                               |  |                    |         |                        |       |                         |        |   |            |        
|------------------------------ |  | ------------------ | ------- | ---------------------- | ----- | ----------------------- | ------ | - | ---------- | -------
|                               |  | September 30, 2006
|                               |  | Amortized Cost     |         | Gross Unrealized Gains |       | Gross Unrealized Losses |        |   | Fair Value
|                               |  | (In thousands)    
|Securities available for sale: |  |                    |         |                        |       |                         |        |   |            |        
|U.S. treasuries                |  | $                  | 5,005   |                        |      |                         | (7     | ) |            | 4,998  
|U.S. government agencies       |  |                    | 5,417   |                        |      |                         | (26    | ) |            | 5,391  
|State and municipal            |  |                    | 112,539 |                        | 1,419 |                         | (905   | ) |            | 113,053
|Mortgage-backed                |  |                    | 40,766  |                        | 54    |                         | (802   | ) |            | 40,018 
|Marketable equity securities   |  |                    | 822     |                        | 2     |                         |       |   |            | 824    
|                               |  |                    |         |                        |       |                         |        |   |            |        
|Securities available for sale  |  | $                  | 164,549 |                        | 1,475 |                         | (1,740 | ) |            | 164,284
|                               |  |                    |         |                        |       |                         |        |   |            |        
|Securities held to maturity:   |  |                    |         |                        |       |                         |        |   |            |        
|Mortgage-backed                |  | $                  | 10,133  |                        | 23    |                         | (114   | ) |            | 10,042 
|                               |  |                    |         |                        |       |                         |        |   |            |        



|                               |  |                   |         |                        |     |                         |        |   |            |        
|------------------------------ |  | ----------------- | ------- | ---------------------- | --- | ----------------------- | ------ | - | ---------- | -------
|                               |  | December 31, 2005
|                               |  | Amortized Cost    |         | Gross Unrealized Gains |     | Gross Unrealized Losses |        |   | Fair Value
|                               |  | (In thousands)   
|Securities available for sale: |  |                   |         |                        |     |                         |        |   |            |        
|U.S. treasuries                |  | $                 | 13,165  |                        |    |                         | (89    | ) |            | 13,076 
|U.S. government agencies       |  |                   | 5,391   |                        |    |                         | (24    | ) |            | 5,367  
|State and municipal            |  |                   | 72,110  |                        | 949 |                         | (166   | ) |            | 72,893 
|Mortgage-backed                |  |                   | 50,797  |                        | 29  |                         | (783   | ) |            | 50,043 
|Marketable equity securities   |  |                   | 1,697   |                        | 5   |                         |       |   |            | 1,702  
|                               |  |                   |         |                        |     |                         |        |   |            |        
|Securities available for sale  |  | $                 | 143,160 |                        | 983 |                         | (1,062 | ) |            | 143,081
|                               |  |                   |         |                        |     |                         |        |   |            |        
|Securities held to maturity:   |  |                   |         |                        |     |                         |        |   |            |        
|Mortgage-backed                |  | $                 | 5,798   |                        |    |                         | (112   | ) |            | 5,686  
|                               |  |                   |         |                        |     |                         |        |   |            |        

Certain individual securities have been in a continuous unrealized loss position for 12 months or
longer at September 30, 2006. These securities have fluctuated in value since their purchase dates because of changes in market interest rates. The Company has concluded that the continuous unrealized loss position of 12 months or longer is a
result of the level of market interest rates and not a result of the underlying issuers ability to repay and are, therefore, temporarily impaired. In addition, we have the ability to hold these securities until their fair value recovers to
their cost. Accordingly, an impairment was not recognized in our consolidated statements of income.



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(3) Loans

A summary of net loans held for investment by loan type at the dates indicated is as follows:



|                                    |  |                    |           |   |                   |   |           |  
|----------------------------------- |  | ------------------ | --------- | - | ----------------- | - | --------- | -
|                                    |  | September 30, 2006 |           |   | December 31, 2005 |  
|                                    |  | (In thousands)     |          
|Loans on real estate:               |  |                    |           |   |                   |   |           |  
|Residential and commercial mortgage |  | $                  | 663,170   |   |                   | $ | 584,590   |  
|Construction                        |  |                    | 463,468   |   |                   |   | 530,716   |  
|Equity lines of credit              |  |                    | 60,817    |   |                   |   | 70,386    |  
|Commercial loans                    |  |                    | 654,829   |   |                   |   | 724,929   |  
|Agricultural loans                  |  |                    | 54,805    |   |                   |   | 71,707    |  
|Lease financing                     |  |                    | 7,392     |   |                   |   | 677       |  
|Installment loans to individuals    |  |                    | 53,714    |   |                   |   | 63,121    |  
|Overdrafts                          |  |                    | 1,213     |   |                   |   | 2,006     |  
|SBA and other                       |  |                    | 24,326    |   |                   |   | 24,321    |  
|                                    |  |                    |           |   |                   |   |           |  
|                                    |  |                    | 1,983,734 |   |                   |   | 2,072,453 |  
|Less:                               |  |                    |           |   |                   |   |           |  
|Allowance for loan losses           |  |                    | (25,977   | ) |                   |   | (27,475   | )
|Net of unearned discount            |  |                    | (4,328    | ) |                   |   | (4,860    | )
|                                    |  |                    |           |   |                   |   |           |  
|                                    |  | $                  | 1,953,410 |   |                   | $ | 2,040,118 |  
|                                    |  |                    |           |   |                   |   |           |  
|Loans available for sale            |  | $                  | 2,100     |   |                   | $ | 6,820     |  
|                                    |  |                    |           |   |                   |   |           |  

A summary of transactions in the allowance for loan losses for the period indicated is as follows:



|                                           |  |                                 |        |   |                                     |   |        |  
|------------------------------------------ |  | ------------------------------- | ------ | - | ----------------------------------- | - | ------ | -
|                                           |  | Quarter EndedSeptember 30, 2006 |        |   | Nine Months EndedSeptember 30, 2006 |  
|Balance, beginning of period               |  | $                               | 25,297 |   |                                     | $ | 27,475 |  
|Provision for loan losses                  |  |                                 | 2,239  |   |                                     |   | 1,956  |  
|Loans charged off                          |  |                                 | (1,736 | ) |                                     |   | (4,839 | )
|Recoveries on loans previously charged-off |  |                                 | 177    |   |                                     |   | 1,385  |  
|                                           |  |                                 |        |   |                                     |   |        |  
|Balance, end of period                     |  | $                               | 25,977 |   |                                     | $ | 25,977 |  
|                                           |  |                                 |        |   |                                     |   |        |  

A summary of transactions in the reserve for unfunded commitments for the periods indicated is as follows:



|                                                      |  |                                 |       |   |                                     |   |      |  
|----------------------------------------------------- |  | ------------------------------- | ----- | - | ----------------------------------- | - | ---- | -
|                                                      |  | Quarter EndedSeptember 30, 2006 |       |   | Nine Months EndedSeptember 30, 2006 |  
|Balance, beginning of period                          |  | $                               | 1,001 |   |                                     | $ | 718  |  
|Provision (credit) for losses on unfunded commitments |  |                                 | (673  | ) |                                     |   | (390 | )
|                                                      |  |                                 |       |   |                                     |   |      |  
|Balance, end of period                                |  | $                               | 328   |   |                                     | $ | 328  |  
|                                                      |  |                                 |       |   |                                     |   |      |  

The following table details key information regarding the Companys impaired loans at the dates indicated:



|                                                      |  |                    |        |                   |   |       
|----------------------------------------------------- |  | ------------------ | ------ | ----------------- | - | ------
|                                                      |  | September 30, 2006 |        | December 31, 2005
|                                                      |  | (In thousands)    
|Impaired loans with a specific valuation allowance    |  | $                  | 16,514 |                   | $ | 44,267
|Impaired loans without a specific valuation allowance |  |                    | 27,770 |                   |   | 6,023 
|                                                      |  |                    |        |                   |   |       
|Total impaired loans                                  |  | $                  | 44,284 |                   | $ | 50,290
|                                                      |  |                    |        |                   |   |       
|Valuation allowance related to impaired loans         |  | $                  | 6,468  |                   | $ | 10,360
|                                                      |  |                    |        |                   |   |       
|Average investment in impaired loans                  |  | $                  | 43,935 |                   | $ | 38,425
|                                                      |  |                    |        |                   |   |       

Interest income of $2,790,000 was recognized on impaired loans for the period ended
September 30, 2006. At September 30, 2006 and December 31, 2005, nonaccrual loans were $26,812,000 and $29,608,000, respectively.



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(4) Goodwill and Other Intangible Assets

Goodwill and other intangible assets arise from business combinations. Goodwill and other intangible assets deemed to have indefinite lives generated from
purchase combinations are tested for impairment no less than annually.

Other intangible assets with definite lives are amortized over
their respective estimated useful lives to their estimated residual values. The amortization expense represents the estimated decline in the value of the underlying deposits or loan customers acquired.

The changes in the carrying amount of goodwill for the nine months ended September 30, 2006 is as follows:



|                                                          |  |                                      |               |  
|--------------------------------------------------------- |  | ------------------------------------ | ------------- | -
|                                                          |  | Nine Months Ended September 30, 2006 |              
|                                                          |  |                                      | (In thousands | )
|Balance, beginning of period                              |  | $                                    | 392,507       |  
|Goodwill associated with disposal of subsidiary (Note 10) |  |                                      | (1,161        | )
|                                                          |  |                                      |               |  
|Balance, end of period                                    |  | $                                    | 391,346       |  
|                                                          |  |                                      |               |  

The following table presents the gross amounts of core deposit and customer relationship
intangibles and the related accumulated amortization at the dates indicated:



|                                         |  |             |  |                   |         |   |                  |   |         |  
|---------------------------------------- |  | ----------- |  | ----------------- | ------- | - | ---------------- | - | ------- | -
|                                         |  | Useful life |  | September 30,2006 |         |   | December 31,2005 |  
|                                         |  |             |  | (In thousands)    |        
|Noncompete employment agreements         |  | 2 years     |  | $                 | 3,606   |   |                  | $ | 3,706   |  
|Core deposit intangible assets           |  | 7 15 years |  |                   | 62,975  |   |                  |   | 62,975  |  
|Expirations  First MainStreet Insurance |  | 7 years     |  |                   |        |   |                  |   | 1,477   |  
|                                         |  |             |  |                   |         |   |                  |   |         |  
|                                         |  |             |  |                   | 66,581  |   |                  |   | 68,158  |  
|Accumulated amortization                 |  |             |  |                   | (22,023 | ) |                  |   | (13,236 | )
|                                         |  |             |  |                   |         |   |                  |   |         |  
|                                         |  |             |  | $                 | 44,558  |   |                  | $ | 54,922  |  
|                                         |  |             |  |                   |         |   |                  |   |         |  

Amortization expense for intangible assets for the nine months ended September 30, 2006 and
2005 was $8,855,000 and $9,157,000, respectively.

(5) Borrowings

Borrowings include Treasury Tax and Loan notes, Federal Home Loan Bank (FHLB) borrowings, and a revolving credit agreement with U.S. Bank National Association. The Company had $136,965,000 and $130,198,000
outstanding under these obligations at September 30, 2006 and December 31, 2005, respectively, with a total available commitment of $383,251,000 at September 30, 2006.

At September 30, 2006, borrowings consisted of a line of credit and term notes at the Federal Home Loan Bank, of $107,000,000 and $14,610,000,
respectively, $14,700,000 under the U.S. Bank revolving credit agreement and a $655,000 Treasury Tax and Loan note balance.

The maximum
allowable balance for borrowing at the Federal Home Loan Bank at September 30, 2006 was $312,251,000. The interest rate on the line of credit varies with the federal funds rate. The term notes have fixed interest rates that range from 2.52% to
6.22%. A blanket pledge and security agreement with the Federal Home Loan Bank, which encompasses certain loans and securities, serves as collateral for these borrowings.

The $70 million revolving credit agreement, as amended, with U.S. Bank National Association contains financial covenants, including maintaining a minimum return on average assets, a maximum nonperforming assets to
total loans ratio and regulatory capital ratios that qualify the Company as well-capitalized. As of September 30, 2006, the Company had $14.7 million drawn on this line and was in compliance with all debt covenants. The interest rate varies
based on a spread over the federal funds rate, with a rate of 6.8% at September 30, 2006. The line of credit is secured by Guaranty Bank stock.



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##### Table of Contents

(6) Subordinated Debentures and Trust Preferred Securities

The Company had $41,239,000 and $41,275,000 in aggregate principal balances of subordinated debentures outstanding with a weighted average cost of 9.1%
and 8.3% at September 30, 2006 and December 31, 2005, respectively. The subordinated debentures were issued in four separate series. Each issuance has a maturity of thirty years from its date of issue. The subordinated debentures were
issued to trusts established by the Company, which in turn issued $40 million of trust preferred securities. Generally and with certain limitations, the Company is permitted to call the debentures subsequent to the first five or ten years, as
applicable, after issue if certain conditions are met, or at any time upon the occurrence and continuation of certain changes in either the tax treatment or the capital treatment of the trusts, the debentures or the preferred securities.

These securities are currently included in Tier I capital for purposes of determining the Companys Tier I and total risk-based capital ratios.
The Board of Governors of the Federal Reserve System, which is the holding companys banking regulator, has promulgated a modification of the capital regulations affecting trust preferred securities. Under this modification, beginning
March 31, 2009, the Company will be required to use a more restrictive formula to determine the amount of trust preferred securities that can be included in regulatory Tier I capital. At that time, the Company will be allowed to include in Tier
I capital an amount of trust preferred securities equal to no more than 25% of the sum of all core capital elements, which is generally defined as shareholders equity less certain intangibles, including goodwill, core deposit intangibles and
customer relationship intangibles, net of any related deferred income tax liability. The regulations currently in effect through December 31, 2008, limit the amount of trust preferred securities that can be included in Tier I capital to 25% of
the sum of core capital elements without a deduction for permitted intangibles. The Company expects that our Tier I capital ratios will be at or above the existing well-capitalized levels on March 31, 2009, the first date on which the modified
capital regulations must be applied.

The following table summarizes the terms of each subordinated debenture issuance at
September 30, 2006 (dollars in thousands):



|                           |  |             |  |                  |        |              |           |            |           |                      |          |               |              |   |                          |       |   |                     |           
|-------------------------- |  | ----------- |  | ---------------- | ------ | ------------ | --------- | ---------- | --------- | -------------------- | -------- | ------------- | ------------ | - | ------------------------ | ----- | - | ------------------- | ----------
|Series                     |  | Date Issued |  | Principal Amount |        | MaturityDate |           | Call Date* |           | Fixed orVariableRate |          | Rate Adjuster |              |   | Rate atSeptember 30,2006 |       |   | Next RateReset Date
|CenBank Trust I            |  | 9/7/2000    |  | $                | 10,310 |              | 9/7/2030  |            | 9/7/2010  |                      | Fixed    |               | N/A          |   |                          | 10.60 | % |                     | N/A       
|CenBank Trust II           |  | 2/22/2001   |  |                  | 5,155  |              | 2/22/2031 |            | 2/22/2011 |                      | Fixed    |               | N/A          |   |                          | 10.20 | % |                     | N/A       
|CenBank Trust III          |  | 4/15/2004   |  |                  | 15,464 |              | 4/15/2034 |            | 4/15/2009 |                      | Variable |               | LIBOR + 2.65 | % |                          | 8.14  | % |                     | 10/16/2006
|Guaranty Capital Trust III |  | 7/7/2003    |  |                  | 10,310 |              | 7/7/2033  |            | 7/7/2008  |                      | Variable |               | LIBOR + 3.10 | % |                          | 8.59  | % |                     | 10/16/2006

---

|* | Call date represents the earliest date the Company can call the debentures without penalty.
|- | -------------------------------------------------------------------------------------------

(7) Commitments

The Company is a party to credit-related financial instruments with off-balance
sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit, stand-by letters of credit and commercial letters of credit. Such commitments involve, to
varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheets.

The
Companys exposure to credit loss is represented by the contractual amount of these commitments. The Company follows the same credit policies in making commitments as it does for on-balance sheet instruments.



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##### Table of Contents

At the dates indicated, the following commitments were outstanding:



|                             |  |                   |         |                  |   |        
|---------------------------- |  | ----------------- | ------- | ---------------- | - | -------
|                             |  | September 30,2006 |         | December 31,2005
|                             |  | (In thousands)   
|Contractual Obligations      |  |                   |         |                  |   |        
|Commitments to extend credit |  | $                 | 514,893 |                  | $ | 634,737
|Standby letters of credit    |  |                   | 31,920  |                  |   | 37,952 
|Commercial letters of credit |  |                   | 266     |                  |   | 472    
|                             |  |                   |         |                  |   |        
|Totals                       |  | $                 | 547,079 |                  | $ | 673,161
|                             |  |                   |         |                  |   |        

Commitments to extend credit are agreements to lend to a customer as long as there is no violation
of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Several of the commitments may expire without being drawn upon. Therefore, the total
commitment amounts do not necessarily represent future cash requirements. The amount of collateral obtained, if it is deemed necessary by the Company, is based on managements credit evaluation of the customer.

Commitments to extend credit under overdraft protection agreements are commitments for possible future extensions of credit to existing deposit
customers. These lines of credit are uncollateralized and usually do not contain a specified maturity date and might not be drawn upon to the total extent to which the Company is committed.

Stand-by letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. Those letters
of credit are primarily issued to support public and private borrowing arrangements. Substantially all letters of credit issued have expiration dates within one year. The credit risk involved in issuing letters of credit is essentially the same as
that involved in extending loan facilities to customers. The Company generally holds collateral supporting those commitments if deemed necessary.

The Company enters into commercial letters of credit on behalf of its customers, which authorize a third party to draw drafts on the Company up to a stipulated amount and with specific terms and conditions. A commercial letter of credit is
a conditional commitment on the part of the Company to provide payment on drafts drawn in accordance with the terms of the commercial letter of credit.

(8) Capital Ratios

At September 30, 2006 and December 31, 2005, the Company had leverage ratios of 8.55% and
7.97%, Tier 1 risk-weighted capital ratios of 9.27% and 8.83%, and total risk-weighted capital ratios of 10.48% and 10.08%, respectively. The Company actively monitors its regulatory capital ratios to ensure that the Company and its bank
subsidiaries are well capitalized under the applicable regulatory framework.

(9) Merger, Acquisition and Transition Expenses

The Company recorded merger, acquisition, and transition expenses of $239,000 and $1,866,000 for the three and nine months ended September 30, 2006,
respectively, and included $1,425,000 of contractual severance obligations associated with the management transition announced in May 2006.

(10) Assets
Held for Sale and Discontinued Operations

Business Disposition

On March 1, 2006, the Company sold substantially all of the assets of its First MainStreet Insurance, Ltd. subsidiary for $3,215,000, of which $1,835,000 was paid in cash at closing, and the release of the
Company from certain contractual obligations. The sale of the subsidiary did not result in a gain or loss due to a reallocation of the initial goodwill allocated to First MainStreet Insurance, Ltd. First MainStreet Insurance, Ltd. net income for the
period from January 1, 2006 to March 1, 2006 of $17,000 is included in income from discontinued operations for the nine months ended September 30, 2006.



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##### Table of Contents

Assets Held for Sale

On June 19, 2006, the Company signed a definitive agreement to sell Collegiate Peaks to a new group of investors. This agreement followed the August 25, 2005 definitive agreement for the sale of Collegiate
Peaks that was terminated on April 25, 2006. The Company consummated the sale of Collegiate Peaks as of November 1, 2006. Pursuant to the Companys 2005 decision to sell Collegiate Peaks, the Company classified Collegiate Peaks
assets and liabilities as held for sale at the lower of cost or fair value as of September 30, 2006 and December 31, 2005. The following tables present the assets and liabilities of Collegiate Peaks that are presented as held for sale in
the consolidated balance sheets at September 30, 2006 and December 31, 2005, and the results of operations that are presented in discontinued operations for the nine months ended September 30, 2006.



|                                                       |  |                   |        |                  |   |       
|------------------------------------------------------ |  | ----------------- | ------ | ---------------- | - | ------
|                                                       |  | September 30,2006 |        | December 31,2005
|                                                       |  | (In thousands)   
|Assets held for sale:                                  |  |                   |        |                  |   |       
|Cash and cash equivalents                              |  | $                 | 15,306 |                  | $ | 19,869
|Investments                                            |  |                   | 16,400 |                  |   | 16,647
|Loans and leases, net                                  |  |                   | 52,195 |                  |   | 48,150
|Other intangible assets                                |  |                   | 3,458  |                  |   | 3,528 
|Goodwill                                               |  |                   | 8,922  |                  |   | 8,922 
|Other assets                                           |  |                   | 1,127  |                  |   | 1,154 
|                                                       |  |                   |        |                  |   |       
|Total assets held for sale                             |  | $                 | 97,408 |                  | $ | 98,270
|                                                       |  |                   |        |                  |   |       
|Liabilities associated with assets held for sale:      |  |                   |        |                  |   |       
|Deposits                                               |  | $                 | 70,780 |                  | $ | 74,069
|Securities sold under repurchase agreements            |  |                   | 7,621  |                  |   | 4,682 
|Other liabilities                                      |  |                   | 1,658  |                  |   | 1,666 
|                                                       |  |                   |        |                  |   |       
|Total liabilities associated with assets held for sale |  | $                 | 80,059 |                  | $ | 80,417
|                                                       |  |                   |        |                  |   |       



|                                                    |  |                   |       |                   |   |      
|--------------------------------------------------- |  | ----------------- | ----- | ----------------- | - | -----
|                                                    |  | Nine Months Ended
|                                                    |  | September 30,2006 |       | September 30,2005
|Interest income                                     |  | $                 | 4,115 |                   | $ | 3,499
|Noninterest income                                  |  |                   | 280   |                   |   | 317  
|Net income from discontinued operations, net of tax |  |                   | 1,061 |                   |   | 790  

The income from discontinued operations consisted of the following:



|                                              |  |                                     |       |  
|--------------------------------------------- |  | ----------------------------------- | ----- | -
|                                              |  | Nine Months EndedSeptember 30, 2006 |      
|Net income  First MainStreet Insurance, Ltd. |  | $                                   | 17    |  
|Net income  Collegiate Peaks                 |  |                                     | 1,061 |  
|Impairment of Collegiate Peaks assets         |  |                                     | (325  | )
|Tax benefit                                   |  |                                     | 124   |  
|Intercompany elimination                      |  |                                     | (8    | )
|                                              |  |                                     |       |  
|Income from discontinued operations           |  | $                                   | 869   |  
|                                              |  |                                     |       |  

(11) Contingencies

On December 31, 2004, an adversary proceeding was filed against Guaranty Bank and Trust Company in the United States Bankruptcy Court for the District of Colorado, by the trustees of the Will Hoover Company, or
the Hoover Company, and William Gordon Hoover, Jr., or Hoover, seeking to avoid certain transfers that occurred over a four-year period commencing in 1999 under the United States Bankruptcy Code. The trustees allege that certain transfers were made
by the Hoover Company and Hoover with actual fraudulent intent, that the transfers were made



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##### Table of Contents

for less than reasonably equivalent value and occurred at a time when the Hoover Company and Hoover were insolvent, or
were rendered insolvent by the transfers, and that certain other transfers were preferential as to other creditors, were made for less than reasonably equivalent value or were made by the Hoover Company or Hoover with actual fraudulent intent. On
September 7, 2005, the Bankruptcy Court granted, in part, Guaranty Banks initial response and dismissed $8.5 million of the claims relating to alleged transfers for payment of items credited in the check collection process. On
November 10, 2005, the trustees filed a motion in District Court requesting reconsideration of the Bankruptcy Courts order dismissing those claims. The District Court summarily denied the trustees motion on November 21, 2005.
The Trustees filed another motion for reconsideration with the Bankruptcy Court on November 9, 2006. We intend to vigorously oppose the motion.

On August 29, 2006, Guaranty Bank filed a motion for partial summary judgment on the trustees claims to recover payments on alleged overdrafts in the amount of approximately $1.7 million. The motion is pending at this time. On
September 1, 2006, the trustees amended the complaint to include a claim, based on similar arguments, to recover interest payments on loans to Hoover and the Hoover Company in the amount of $0.1 million. We continue to vigorously contest the
remaining claims, which amount to approximately $2.9 million, approximately $1.7 million of which are the subject of the pending motion for partial summary judgment. We have established a reserve that, after consultation with our counsel, we have
determined is appropriate for this litigation.

On July 22, 2005 and August 18, 2005, two separate but similar actions (i.e., the
Barnes action and Teper action, respectively) were filed against Guaranty Bank and a former officer in the Denver District Court, Denver, Colorado by investors who provided funds to Hoover, the Hoover Company or related entities. The investors
allege that certain activities of Guaranty Bank and its former officer with respect to the customer relationship with Hoover, the Hoover Company and related entities aided and abetted Hoover and the Hoover Company in securities violations and
violations of the Colorado Organized Crime Control Act and amounted to a civil conspiracy, causing the investors to incur damages. The investors are seeking actual and statutory treble damages against Guaranty Bank and its former officer. The
alleged actual losses claimed in connection with such activities are approximately $13.0 million, of which approximately $12.2 million relate to the Barnes action and approximately $0.8 million relate to the Teper action. In a series of preliminary
rulings in April 2006 relating to both actions, the District Court dismissed a number of the claims representing alleged damages in excess of $1.0 million.

The court recently entered judgment in favor of Guaranty Bank and its officer with respect to the claims brought by two of the three plaintiffs in the Teper action. Only one plaintiff remains in the Teper action. The
alleged actual losses of the remaining plaintiff are approximately $0.6 million. We will continue to vigorously defend both the Barnes action and Teper action.

At this time, we cannot determine whether the outcome of the above matters will have a material adverse impact on our consolidated financial position or results of operations. To the extent these suits are not settled
or dismissed, the Company will incur ongoing legal costs, to the extent such legal costs will not be covered by insurance, which could have an adverse impact on our results of operations.

In the ordinary course of our business, we are party to various other legal actions, which we believe are incidental to the operation of our business.
Although the ultimate outcome and amount of liability, if any, with respect to these other legal actions to which we are currently a party cannot presently be ascertained with certainty, in the opinion of management, based upon information currently
available to us, any resulting liability is not likely to have a material adverse effect on the Companys consolidated financial position, results of operations or cash flows.



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##### Table of Contents

ITEM 2. Managements Discussion and Analysis of Financial Condition and Results of Operations

This MD&A should
be read together with our unaudited Consolidated Financial Statements and unaudited Statistical Information included elsewhere in this Report and Items 1, 1A, 6, 7, 7A and 8 of our 2005 Annual Report on Form 10-K. Also, please see the disclosure in
the Forward-Looking Statements and Factors that Could Affect Future Results section in this report for certain other factors that could cause actual results or future events to differ materially from those anticipated in the
forward-looking statements included in this report or from historical performance.

Overview

We are a financial holding company and a bank holding company providing banking and other financial services throughout our targeted Colorado markets to
consumers and to small and medium-sized businesses, including the owners and employees of those businesses, through our bank subsidiaries. At September 30, 2006, those subsidiaries included Guaranty Bank and Trust Company, Centennial Bank of
the West, and Collegiate Peaks Bank, which was held for sale at September 30, 2006, with completion of the sale on November 1, 2006. Unless the context requires otherwise, the terms Company, us, we, and
our refers to Centennial Bank Holdings, Inc. on a consolidated basis. We refer to Guaranty Bank and Trust Company as Guaranty Bank, Centennial Bank of the West as CBW, and Collegiate Peaks Bank as Collegiate Peaks. We refer to Guaranty
Bank and CBW as the Banks.

We offer an array of banking products and services to the communities we serve, including accepting time and
demand deposits, originating commercial loans, real estate loans, including construction loans and commercial mortgage loans, Small Business Administration guaranteed loans and consumer loans. We derive our income primarily from interest received on
real estate related loans, commercial loans and leases and consumer loans and, to a lesser extent, fees from the sale or referral of loans, interest on investment securities and fees received in connection with servicing loan and deposit accounts.
Our major operating expenses are the interest we pay on deposits and borrowings and general operating expenses. We rely primarily on locally generated deposits to provide us with funds for making loans. We are subject to competition from other
financial institutions and our operating results, like those of other financial institutions operating exclusively or primarily in Colorado, are significantly influenced by economic conditions in Colorado, including the strength of the real estate
market. In addition, both the fiscal and regulatory policies of the federal government and regulatory authorities that govern financial institutions and market interest rates also impact our financial condition, results of operations and cash flows.

On October 1, 2005, we consummated our stock-for-stock acquisition of First MainStreet Financial, Ltd., a financial holding company,
pursuant to which its wholly owned subsidiary, First MainStreet Bank, N.A., merged with and into CBW. First MainStreet Financials insurance agency, First MainStreet Insurance, Ltd., was subsequently sold by us on March 1, 2006. The
acquisition of First MainStreet resulted in the issuance of 9,517,727 shares of our common stock. We acquired $245.2 million of loans and $332.8 million of deposits as a result of the First MainStreet acquisition. On November 1, 2005, we
completed the acquisition of Foothills Bank, which was merged into Guaranty Bank. Foothills had $90.8 million in loans and deposits of $114.2 million at consummation of the transaction.

On June 19, 2006, the Company signed a definitive agreement to sell Collegiate Peaks to a new group of management-led investors. This agreement
followed the August 25, 2005 definitive agreement for the sale of Collegiate Peaks that was terminated on April 25, 2006. The Company consummated the sale of Collegiate Peaks as of November 1, 2006. Pursuant to the Companys 2005
decision to sell Collegiate Peaks, the Company classified Collegiate Peaks assets and liabilities as held for sale at the lower of cost or fair value as of September 30, 2006 and December 31, 2005.



19



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##### Table of Contents

RESULTS OF OPERATIONS

The following table summarizes certain key financial results for us for the periods indicated:



|                                                       |  |                                  |            |      |                                 |                                 |  |   |           |   |      |   |            |                                 |   |            |   |  |   |           |  
|------------------------------------------------------ |  | -------------------------------- | ---------- | ---- | ------------------------------- | ------------------------------- |  | - | --------- | - | ---- | - | ---------- | ------------------------------- | - | ---------- | - |  | - | --------- | -
|                                                       |  | Three Months Ended September 30, |            |      | Nine Months Ended September 30, |                                
|                                                       |  | 2006                             |            | 2005 |                                 | Change -Favorable (Unfavorable) |  |   | 2006      |   | 2005 |   |            | Change -Favorable (Unfavorable) |  
|(In thousands, except share data)                      |  |                                  |            |      |                                 |                                 |  |   |           |   |      |   |            |                                 |  
|Results of Operations:                                 |  |                                  |            |      |                                 |                                 |  |   |           |   |      |   |            |                                 |   |            |   |  |   |           |  
|Interest income                                        |  | $                                | 44,224     |      | $                               | 34,514                          |  | $ | 9,710     |   |      | $ | 129,900    |                                 | $ | 96,925     |   |  | $ | 32,975    |  
|Interest expense                                       |  |                                  | 15,229     |      |                                 | 8,641                           |  |   | (6,588    | ) |      |   | 41,610     |                                 |   | 19,854     |   |  |   | (21,756   | )
|                                                       |  |                                  |            |      |                                 |                                 |  |   |           |   |      |   |            |                                 |   |            |   |  |   |           |  
|Net interest income                                    |  |                                  | 28,995     |      |                                 | 25,873                          |  |   | 3,122     |   |      |   | 88,290     |                                 |   | 77,071     |   |  |   | 11,219    |  
|Provision for credit losses                            |  |                                  | 1,566      |      |                                 |                                |  |   | (1,566    | ) |      |   | 1,566      |                                 |   | 1,700      |   |  |   | 134       |  
|                                                       |  |                                  |            |      |                                 |                                 |  |   |           |   |      |   |            |                                 |   |            |   |  |   |           |  
|Net interest income after provision for loan losses    |  |                                  | 27,429     |      |                                 | 25,873                          |  |   | 1,556     |   |      |   | 86,724     |                                 |   | 75,371     |   |  |   | 11,353    |  
|Noninterest income                                     |  |                                  | 3,474      |      |                                 | 2,732                           |  |   | 742       |   |      |   | 10,191     |                                 |   | 7,649      |   |  |   | 2,542     |  
|Noninterest expense                                    |  |                                  | 22,942     |      |                                 | 20,727                          |  |   | (2,215    | ) |      |   | 69,686     |                                 |   | 66,927     |   |  |   | (2,759    | )
|                                                       |  |                                  |            |      |                                 |                                 |  |   |           |   |      |   |            |                                 |   |            |   |  |   |           |  
|Income before income taxes                             |  |                                  | 7,961      |      |                                 | 7,878                           |  |   | 83        |   |      |   | 27,229     |                                 |   | 16,093     |   |  |   | 11,136    |  
|Income tax expense                                     |  |                                  | 2,521      |      |                                 | 2,748                           |  |   | 227       |   |      |   | 9,123      |                                 |   | 5,482      |   |  |   | (3,641    | )
|                                                       |  |                                  |            |      |                                 |                                 |  |   |           |   |      |   |            |                                 |   |            |   |  |   |           |  
|Income from continuing operations                      |  |                                  | 5,440      |      |                                 | 5,130                           |  |   | 310       |   |      |   | 18,106     |                                 |   | 10,611     |   |  |   | 7,495     |  
|Income (loss) from discontinued operations, net of tax |  |                                  | 380        |      |                                 |                                |  |   | 380       |   |      |   | 869        |                                 |   | (794       | ) |  |   | 1,663     |  
|                                                       |  |                                  |            |      |                                 |                                 |  |   |           |   |      |   |            |                                 |   |            |   |  |   |           |  
|Net income                                             |  | $                                | 5,820      |      | $                               | 5,130                           |  | $ | 690       |   |      | $ | 18,975     |                                 | $ | 9,817      |   |  | $ | 9,158     |  
|                                                       |  |                                  |            |      |                                 |                                 |  |   |           |   |      |   |            |                                 |   |            |   |  |   |           |  
|Share Data:                                            |  |                                  |            |      |                                 |                                 |  |   |           |   |      |   |            |                                 |   |            |   |  |   |           |  
|Basic earnings per share                               |  | $                                | 0.10       |      | $                               | 0.10                            |  | $ | 0.00      |   |      | $ | 0.33       |                                 | $ | 0.19       |   |  | $ | 0.14      |  
|Diluted earnings per share                             |  | $                                | 0.10       |      | $                               | 0.10                            |  | $ | 0.00      |   |      | $ | 0.33       |                                 | $ | 0.19       |   |  | $ | 0.14      |  
|Average shares outstanding                             |  |                                  | 57,093,056 |      |                                 | 51,902,934                      |  |   | 5,190,119 |   |      |   | 58,060,683 |                                 |   | 52,137,132 |   |  |   | 5,923,551 |  
|Diluted average shares outstanding                     |  |                                  | 57,499,412 |      |                                 | 52,002,019                      |  |   | 5,497,393 |   |      |   | 58,394,354 |                                 |   | 52,170,523 |   |  |   | 6,223,831 |  

Net income for the three and nine month periods ended September 30, 2006 reflected increases
over the same prior year periods of $0.7 million and $9.2 million, respectively. These increases in net income were significantly impacted by inclusion of First MainStreet and Foothills Bank, acquired in the fourth quarter of 2005, in the 2006
operating results. The impact on net income of those acquisitions on the change between third quarter 2006 and third quarter 2005 was mitigated by our $1.6 million provision for credit losses in the third quarter 2006. The increase in the year to
date earnings at September 30, 2006 from the September 30, 2005 year to date earnings was further affected by a first quarter 2005 charge of $4.9 million for change of control and retention bonuses related to the December 31, 2004
acquisition of Guaranty Corporation.



20



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Net Interest Income and Net Interest Margin

Net interest income, which is our primary source of income, represents the difference between interest earned on assets and interest paid on liabilities.
The interest rate spread is the difference between the yield on our interest bearing assets and liabilities. Net interest margin is net interest income expressed as a percentage of average interest-earning assets.



|                     |  |                   |        |   |              |   |        |               |  |   |                  |   |  |                   |        |   |  |   |        |  
|-------------------- |  | ----------------- | ------ | - | ------------ | - | ------ | ------------- |  | - | ---------------- | - |  | ----------------- | ------ | - |  | - | ------ | -
|                     |  | Quarter Ended     |       
|                     |  | September 30,2006 |        |   | June 30,2006 |   |        | March 31,2006 |  |   | December 31,2005 |   |  | September 30,2005 |       
|Net interest income  |  | $                 | 28,995 |   |              | $ | 29,388 |               |  | $ | 29,907           |   |  | $                 | 30,797 |   |  | $ | 25,873 |  
|Interest rate spread |  |                   | 4.45   | % |              |   | 4.66   | %             |  |   | 4.67             | % |  |                   | 4.54   | % |  |   | 4.72   | %
|Net interest margin  |  |                   | 5.34   | % |              |   | 5.51   | %             |  |   | 5.44             | % |  |                   | 5.39   | % |  |   | 5.41   | %

Net interest income increased for third quarter 2006 from the same period of the previous year by
$3.1 million, while the net interest margin decreased by 7 basis points. The change in net interest income was significantly impacted by the fourth quarter 2005 acquisitions of First MainStreet and Foothills Bank and increases in the targeted
federal funds rate from the fourth quarter 2005 through the second quarter of 2006.

The 5.34% net interest margin for third quarter 2006
reflected a decrease of 17 basis points from the second quarter 2006 net interest margin. The yield on interest earning assets increased during the quarter. However, the third quarter decrease in deposits led to using more costly funding sources,
which resulted in an increase in the cost of funds. This shift in funding sources is the primary factor in the lower net interest margin.

The following tables present, for the periods indicated, average assets, liabilities and stockholders equity, as well as the net interest income from average interest-earning assets and the resultant annualized yields expressed in
percentages. Nonaccrual loans are included in the calculation of average loans while accrued interest thereon is excluded from the computation of yields earned.



21



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|                                            |  |                             |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|------------------------------------------- |  | --------------------------- | --------- | ------------------------ | ---- | ------------------- |  | ---- | -------------- |  | ------------------------ | --------- | ------------------- | - | ------ |  | ---- | -
|                                            |  | Quarter Ended September 30, |          
|                                            |  | 2006                        |           |                          | 2005 |                    
|                                            |  | AverageBalance              |           | InterestIncome orExpense |      | AverageYield orCost |  |      | AverageBalance |  | InterestIncome orExpense |           | AverageYield orCost |  
|                                            |  | (Dollars in thousands)      |          
|ASSETS:                                     |  |                             |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|Interest-earning assets:                    |  |                             |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|Gross loans, net of unearned fees (1)(2)(3) |  | $                           | 1,947,126 |                          | $    | 41,427              |  | 8.44 | %              |  | $                        | 1,728,822 |                     | $ | 32,909 |  | 7.55 | %
|Investment securities(1)                    |  |                             |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|Taxable                                     |  |                             | 61,554    |                          |      | 713                 |  | 4.59 | %              |  |                          | 75,816    |                     |   | 638    |  | 3.34 | %
|Tax-exempt                                  |  |                             | 112,292   |                          |      | 1,542               |  | 5.45 | %              |  |                          | 54,822    |                     |   | 626    |  | 4.53 | %
|Equity Securities (4)                       |  |                             | 30,731    |                          |      | 485                 |  | 6.27 | %              |  |                          | 20,435    |                     |   | 230    |  | 4.47 | %
|Other earning assets                        |  |                             | 3,244     |                          |      | 57                  |  | 6.88 | %              |  |                          | 15,880    |                     |   | 111    |  | 2.77 | %
|                                            |  |                             |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|Total interest-earning assets               |  |                             | 2,154,947 |                          |      | 44,224              |  | 8.14 | %              |  |                          | 1,895,775 |                     |   | 34,514 |  | 7.22 | %
|                                            |  |                             |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|Non-earning assets:                         |  |                             |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|Cash and due from banks                     |  |                             | 73,837    |                          |      |                     |  |      |                |  |                          | 62,416    |                     |   |        |  |      |  
|Other assets                                |  |                             | 621,997   |                          |      |                     |  |      |                |  |                          | 514,748   |                     |   |        |  |      |  
|                                            |  |                             |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|Total assets                                |  | $                           | 2,850,781 |                          |      |                     |  |      |                |  | $                        | 2,472,939 |                     |   |        |  |      |  
|                                            |  |                             |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|LIABILITIES AND STOCKHOLDERS EQUITY:       |  |                             |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|Interest-bearing liabilities:               |  |                             |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|Deposits:                                   |  |                             |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|Interest-bearing demand                     |  | $                           | 159,634   |                          | $    | 194                 |  | 0.48 | %              |  | $                        | 106,906   |                     | $ | 103    |  | 0.38 | %
|Money Market                                |  |                             | 647,741   |                          |      | 5,909               |  | 3.62 | %              |  |                          | 498,507   |                     |   | 2,605  |  | 2.07 | %
|Savings                                     |  |                             | 91,928    |                          |      | 173                 |  | 0.75 | %              |  |                          | 76,858    |                     |   | 139    |  | 0.72 | %
|Time certificates of deposit                |  |                             | 548,846   |                          |      | 6,007               |  | 4.34 | %              |  |                          | 494,306   |                     |   | 3,801  |  | 3.05 | %
|                                            |  |                             |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|Total interest-bearing deposits             |  |                             | 1,448,149 |                          |      | 12,283              |  | 3.36 | %              |  |                          | 1,176,577 |                     |   | 6,648  |  | 2.24 | %
|Borrowings:                                 |  |                             |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|Repurchase agreements                       |  |                             | 31,083    |                          |      | 349                 |  | 4.45 | %              |  |                          | 31,252    |                     |   | 249    |  | 3.16 | %
|Federal funds purchased                     |  |                             | 122       |                          |      | 2                   |  | 4.94 | %              |  |                          | 4,771     |                     |   | 44     |  | 3.66 | %
|Subordinated debentures                     |  |                             | 41,239    |                          |      | 972                 |  | 9.35 | %              |  |                          | 41,608    |                     |   | 669    |  | 6.38 | %
|Borrowings                                  |  |                             | 115,591   |                          |      | 1,623               |  | 5.57 | %              |  |                          | 115,982   |                     |   | 1,031  |  | 3.53 | %
|                                            |  |                             |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|Total interest-bearing liabilities          |  |                             | 1,636,184 |                          |      | 15,229              |  | 3.69 | %              |  |                          | 1,370,190 |                     |   | 8,641  |  | 2.50 | %
|                                            |  |                             |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|Noninterest bearing liabilities:            |  |                             |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|Demand deposits                             |  |                             | 508,993   |                          |      |                     |  |      |                |  |                          | 482,336   |                     |   |        |  |      |  
|Other liabilities                           |  |                             | 110,275   |                          |      |                     |  |      |                |  |                          | 102,445   |                     |   |        |  |      |  
|                                            |  |                             |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|Total liabilities                           |  |                             | 2,255,452 |                          |      |                     |  |      |                |  |                          | 1,954,971 |                     |   |        |  |      |  
|Stockholders equity                        |  |                             | 595,329   |                          |      |                     |  |      |                |  |                          | 517,968   |                     |   |        |  |      |  
|                                            |  |                             |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|Total liabilities and stockholders equity  |  | $                           | 2,850,781 |                          |      |                     |  |      |                |  | $                        | 2,472,939 |                     |   |        |  |      |  
|                                            |  |                             |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|Net interest income                         |  |                             |           |                          | $    | 28,995              |  |      |                |  |                          |           |                     | $ | 25,873 |  |      |  
|                                            |  |                             |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|Net interest margin                         |  |                             |           |                          |      |                     |  | 5.34 | %              |  |                          |           |                     |   |        |  | 5.41 | %
|                                            |  |                             |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  

---

|(1) | Yields on loans and securities have not been adjusted to a tax-equivalent basis.
|--- | --------------------------------------------------------------------------------

|(2) | Average gross loans include nonaccrual loans, which were $26.8 million and $8.4 million at September 30, 2006 and 2005, respectively.
|--- | -------------------------------------------------------------------------------------------------------------------------------------

|(3) | Net loan fees of $1.5 million and $1.9 million for the three months ended September 30, 2006 and 2005 are included in the yield computation.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Includes Bankers Bank of the West stock, Federal Agricultural Mortgage Corporation (Farmer Mac) stock, Federal Reserve Bank stock and Federal Home Loan Bank stock.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|                                            |  |                                 |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|------------------------------------------- |  | ------------------------------- | --------- | ------------------------ | ---- | ------------------- |  | ---- | -------------- |  | ------------------------ | --------- | ------------------- | - | ------ |  | ---- | -
|                                            |  | Nine Months Ended September 30, |          
|                                            |  | 2006                            |           |                          | 2005 |                    
|                                            |  | AverageBalance                  |           | InterestIncome orExpense |      | AverageYield orCost |  |      | AverageBalance |  | InterestIncome orExpense |           | AverageYield orCost |  
|                                            |  | (Dollars in thousands)          |          
|ASSETS:                                     |  |                                 |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|Interest-earning assets:                    |  |                                 |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|Gross loans, net of unearned fees (1)(2)(3) |  | $                               | 1,984,197 |                          | $    | 122,592             |  | 8.26 | %              |  | $                        | 1,684,687 |                     | $ | 91,989 |  | 7.30 | %
|Investment securities(1)                    |  |                                 |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|Taxable                                     |  |                                 | 69,112    |                          |      | 2,207               |  | 4.27 | %              |  |                          | 84,940    |                     |   | 2,121  |  | 3.34 | %
|Tax-exempt                                  |  |                                 | 87,066    |                          |      | 3,420               |  | 5.25 | %              |  |                          | 46,279    |                     |   | 1,797  |  | 5.19 | %
|Equity Securities (4)                       |  |                                 | 29,874    |                          |      | 1,345               |  | 6.02 | %              |  |                          | 15,563    |                     |   | 597    |  | 5.13 | %
|Other earning assets                        |  |                                 | 5,054     |                          |      | 336                 |  | 8.88 | %              |  |                          | 22,885    |                     |   | 421    |  | 2.46 | %
|                                            |  |                                 |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|Total interest-earning assets               |  |                                 | 2,175,303 |                          |      | 129,900             |  | 7.98 | %              |  |                          | 1,854,354 |                     |   | 96,925 |  | 6.99 | %
|                                            |  |                                 |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|Non-earning assets:                         |  |                                 |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|Cash and due from banks                     |  |                                 | 76,109    |                          |      |                     |  |      |                |  |                          | 57,901    |                     |   |        |  |      |  
|Other assets                                |  |                                 | 622,119   |                          |      |                     |  |      |                |  |                          | 514,007   |                     |   |        |  |      |  
|                                            |  |                                 |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|Total assets                                |  | $                               | 2,873,531 |                          |      |                     |  |      |                |  | $                        | 2,426,262 |                     |   |        |  |      |  
|                                            |  |                                 |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|LIABILITIES AND STOCKHOLDERS EQUITY:       |  |                                 |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|Interest-bearing liabilities:               |  |                                 |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|Deposits:                                   |  |                                 |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|Interest-bearing demand                     |  | $                               | 169,415   |                          | $    | 538                 |  | 0.42 | %              |  | $                        | 113,303   |                     | $ | 300    |  | 0.35 | %
|Money market                                |  |                                 | 624,450   |                          |      | 15,527              |  | 3.32 | %              |  |                          | 514,444   |                     |   | 6,298  |  | 1.64 | %
|Savings                                     |  |                                 | 95,581    |                          |      | 534                 |  | 0.75 | %              |  |                          | 80,174    |                     |   | 425    |  | 0.71 | %
|Time certificates of deposit                |  |                                 | 576,471   |                          |      | 17,364              |  | 4.03 | %              |  |                          | 455,962   |                     |   | 8,018  |  | 2.35 | %
|                                            |  |                                 |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|Total interest-bearing deposits             |  |                                 | 1,465,917 |                          |      | 33,964              |  | 3.10 | %              |  |                          | 1,163,883 |                     |   | 15,041 |  | 1.73 | %
|Borrowings:                                 |  |                                 |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|Repurchase agreements                       |  |                                 | 26,982    |                          |      | 872                 |  | 4.32 | %              |  |                          | 30,330    |                     |   | 605    |  | 2.67 | %
|Federal funds purchased                     |  |                                 | 563       |                          |      | 20                  |  | 4.75 | %              |  |                          | 5,279     |                     |   | 132    |  | 3.34 | %
|Subordinated debentures                     |  |                                 | 41,245    |                          |      | 2,720               |  | 8.82 | %              |  |                          | 41,808    |                     |   | 1,839  |  | 5.88 | %
|Borrowings                                  |  |                                 | 105,850   |                          |      | 4,035               |  | 5.10 | %              |  |                          | 89,274    |                     |   | 2,237  |  | 3.35 | %
|                                            |  |                                 |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|Total interest-bearing liabilities          |  |                                 | 1,640,557 |                          |      | 41,610              |  | 3.39 | %              |  |                          | 1,330,574 |                     |   | 19,854 |  | 1.99 | %
|                                            |  |                                 |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|Noninterest bearing liabilities:            |  |                                 |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|Demand deposits                             |  |                                 | 522,537   |                          |      |                     |  |      |                |  |                          | 480,793   |                     |   |        |  |      |  
|Other liabilities                           |  |                                 | 110,580   |                          |      |                     |  |      |                |  |                          | 96,879    |                     |   |        |  |      |  
|                                            |  |                                 |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|Total liabilities                           |  |                                 | 2,273,674 |                          |      |                     |  |      |                |  |                          | 1,908,246 |                     |   |        |  |      |  
|Stockholders equity                        |  |                                 | 599,857   |                          |      |                     |  |      |                |  |                          | 518,016   |                     |   |        |  |      |  
|                                            |  |                                 |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|Total liabilities and stockholders equity  |  | $                               | 2,873,531 |                          |      |                     |  |      |                |  | $                        | 2,426,262 |                     |   |        |  |      |  
|                                            |  |                                 |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|Net interest income                         |  |                                 |           |                          | $    | 88,290              |  |      |                |  |                          |           |                     | $ | 77,071 |  |      |  
|                                            |  |                                 |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|Net interest margin                         |  |                                 |           |                          |      |                     |  | 5.43 | %              |  |                          |           |                     |   |        |  | 5.56 | %
|                                            |  |                                 |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  

---

|(1) | Yields on loans and securities have not been adjusted to a tax-equivalent basis.
|--- | --------------------------------------------------------------------------------

|(2) | Average gross loans include nonaccrual loans, which were $26.8 million and $8.4 million at September 30, 2006 and 2005, respectively.
|--- | -------------------------------------------------------------------------------------------------------------------------------------

|(3) | Net loan fees of $5.3 million and $5.9 million for the nine months ended September 30, 2006 and 2005 are included in the yield computation.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Includes Bankers Bank of the West stock, Federal Agricultural Mortgage Corporation (Farmer Mac) stock, Federal Reserve Bank stock and Federal Home Loan Bank stock.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------

Year to date 2006 net interest income increased from the same period of the previous year by $11.2 million, while the net
interest margin decreased by 13 basis points to 5.43%. The changes in net interest income and net interest margin were impacted by the fourth quarter 2005 acquisitions of First MainStreet and Foothills Bank and increases in the targeted federal
funds rate from the fourth quarter 2005 through the second quarter of 2006.

The following table presents the dollar amount of changes in
interest income and interest expense for the major categories of our interest-earning assets and interest-bearing liabilities. Information is provided for each category of interest-earning assets and interest-bearing liabilities with respect to
(i) changes attributable to changes in volume (i.e., changes in average balances multiplied by the prior-period average rate) and (ii) changes attributable



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to rate (i.e., changes in average rate multiplied by prior-period average balances). For purposes of this table, changes
attributable to both rate and volume, which cannot be segregated, have been allocated proportionately to the change due to volume and the change due to rate.



|                             |  |                                                                                      |        |   |      |   |        |        |  |   |        |  
|---------------------------- |  | ------------------------------------------------------------------------------------ | ------ | - | ---- | - | ------ | ------ |  | - | ------ | -
|                             |  | Nine Months Ended September 30, 2006 Comparedto Nine Months Ended
September 30, 2005 |       
|                             |  | Net Change                                                                           |        |   | Rate |   |        | Volume | 
|                             |  | (In thousands)                                                                       |       
|Interest income:             |  |                                                                                      |        |   |      |   |        |        |  |   |        |  
|Loans held for investment    |  | $                                                                                    | 30,603 |   |      | $ | 13,013 |        |  | $ | 17,590 |  
|Investment securities        |  |                                                                                      |        |   |      |   |        |        |  |   |        |  
|Taxable                      |  |                                                                                      | 86     |   |      |   | 260    |        |  |   | (174   | )
|Tax-exempt                   |  |                                                                                      | 1,623  |   |      |   | 21     |        |  |   | 1,602  |  
|Equity Securities            |  |                                                                                      | 748    |   |      |   | 119    |        |  |   | 629    |  
|Other earning assets         |  |                                                                                      | (85    | ) |      |   | (121   | )      |  |   | 36     |  
|                             |  |                                                                                      |        |   |      |   |        |        |  |   |        |  
|Total interest income        |  |                                                                                      | 32,975 |   |      |   | 13,292 |        |  |   | 19,683 |  
|                             |  |                                                                                      |        |   |      |   |        |        |  |   |        |  
|Interest expense:            |  |                                                                                      |        |   |      |   |        |        |  |   |        |  
|Deposits:                    |  |                                                                                      |        |   |      |   |        |        |  |   |        |  
|Interest-bearing demand      |  |                                                                                      | 238    |   |      |   | 68     |        |  |   | 170    |  
|Money Market                 |  |                                                                                      | 9,229  |   |      |   | 7,644  |        |  |   | 1,585  |  
|Savings                      |  |                                                                                      | 109    |   |      |   | 24     |        |  |   | 85     |  
|Time certificates of deposit |  |                                                                                      | 9,346  |   |      |   | 6,818  |        |  |   | 2,528  |  
|Repurchase agreements        |  |                                                                                      | 267    |   |      |   | 325    |        |  |   | (58    | )
|Federal funds purchased      |  |                                                                                      | (112   | ) |      |   | 100    |        |  |   | (212   | )
|Subordinated debentures      |  |                                                                                      | 881    |   |      |   | 905    |        |  |   | (24    | )
|Borrowings                   |  |                                                                                      | 1,798  |   |      |   | 1,326  |        |  |   | 472    |  
|                             |  |                                                                                      |        |   |      |   |        |        |  |   |        |  
|Total interest expense       |  |                                                                                      | 21,756 |   |      |   | 17,210 |        |  |   | 4,546  |  
|                             |  |                                                                                      |        |   |      |   |        |        |  |   |        |  
|Net interest income          |  | $                                                                                    | 11,219 |   |      | $ | (3,918 | )      |  | $ | 15,137 |  
|                             |  |                                                                                      |        |   |      |   |        |        |  |   |        |  

The increase in our net interest income caused by an increase in volume was driven by the fourth
quarter 2005 acquisitions of First MainStreet and Foothills Bank. The impact of the rising interest rate environment caused a decrease in our net interest income of $3.9 million, reflecting that our interest-bearing liabilities had greater interest
rate sensitivity than our interest-earning assets.

Provision for Credit Losses

The provision for credit losses represents a charge against earnings. The provision is the amount required to maintain the allowance for loan losses and
the reserve for unfunded commitments at a level that, in our judgment, is adequate to absorb losses inherent in the loan portfolio. In periods when an existing allowance or reserve is determined to exceed the amount required, the allowance or
reserve is reduced, which decreases the charge to earnings through the provision for credit losses. When an existing allowance or reserve is deemed to be understated, an additional provision is recorded, resulting in an additional charge to earnings
through the provision for credit losses.

The nine month period ended September 30, 2006 reflected a $1.6 million third quarter 2006
provision for credit losses, while the nine month period ended September 30, 2005 reflected a $1.7 million first quarter 2005 provision for credit losses.

Please see the nonperforming assets and allowance for loan loss analysis in the Financial Condition section of this document for additional information on our asset quality.



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##### Table of Contents

Noninterest Income

The following table presents the major categories of noninterest income:



|                                  |  |                   |       |              |   |               |  |   |                  |   |  |                   |       |   |  |   |      
|--------------------------------- |  | ----------------- | ----- | ------------ | - | ------------- |  | - | ---------------- | - |  | ----------------- | ----- | - |  | - | -----
|                                  |  | Quarter Ended    
|(In thousands)                    |  | September 30,2006 |       | June 30,2006 |   | March 31,2006 |  |   | December 31,2005 |   |  | September 30,2005
|Noninterest income:               |  |                   |       |              |   |               |  |   |                  |   |  |                   |       |   |  |   |      
|Customer service and other fees   |  | $                 | 3,015 |              | $ | 2,993         |  | $ | 2,632            |   |  | $                 | 2,524 |   |  | $ | 2,035
|Gain (loss) on sale of securities |  |                   | 6     |              |   |              |  |   | (5               | ) |  |                   | (16   | ) |  |   |     
|Gain on sale of loans             |  |                   | 229   |              |   | 230           |  |   | 314              |   |  |                   | 256   |   |  |   | 433  
|Gain (loss) on sale of assets     |  |                   | 108   |              |   | 179           |  |   | (91              | ) |  |                   | (195  | ) |  |   | 260  
|Other                             |  |                   | 116   |              |   | 203           |  |   | 262              |   |  |                   | 97    |   |  |   | 4    
|                                  |  |                   |       |              |   |               |  |   |                  |   |  |                   |       |   |  |   |      
|Total noninterest income          |  | $                 | 3,474 |              | $ | 3,605         |  | $ | 3,112            |   |  | $                 | 2,666 |   |  | $ | 2,732
|                                  |  |                   |       |              |   |               |  |   |                  |   |  |                   |       |   |  |   |      

After increases in noninterest income in the 2006 first and second quarters of 17% and 16%,
respectively, our third quarter 2006 noninterest income decreased from the second quarter 2006 by $131,000, or 4%, to $3.5 million. The growth in customer service and other fees moderated in the third quarter, after accelerated growth in the first
two quarters of 2006 that resulted from the introduction of new deposit products and a new service charge structure in early 2006.

In the
third quarter 2006, we discontinued our residential mortgage group. The residential mortgage group generated $229,000 and $773,000 of income from the sale of mortgages for the three and nine months ended September 30, 2006.

Our increase in noninterest income for the third quarter 2006 over the third quarter 2005 was impacted by the fourth quarter 2005 acquisitions of First
MainStreet and Foothills Bank.

Noninterest Expense

The following table presents, for the periods indicated, the major categories of noninterest expense:



|                                            |  |                   |        |              |   |               |  |                  |        |                   |   |        |  |   |       
|------------------------------------------- |  | ----------------- | ------ | ------------ | - | ------------- |  | ---------------- | ------ | ----------------- | - | ------ |  | - | ------
|                                            |  | Quarter Ended    
|                                            |  | September 30,2006 |        | June 30,2006 |   | March 31,2006 |  | December 31,2005 |        | September 30,2005
|                                            |  | (In thousands)   
|Compensation and employee benefits          |  | $                 | 12,006 |              | $ | 12,082        |  | $                | 11,435 |                   | $ | 11,202 |  | $ | 9,828 
|Occupancy expense                           |  |                   | 1,891  |              |   | 1,995         |  |                  | 2,052  |                   |   | 1,947  |  |   | 1,651 
|Furniture and equipment                     |  |                   | 1,286  |              |   | 1,230         |  |                  | 1,165  |                   |   | 1,188  |  |   | 924   
|Amortization of intangible assets           |  |                   | 2,858  |              |   | 2,998         |  |                  | 2,998  |                   |   | 3,232  |  |   | 2,968 
|Merger, acquisition and transition expenses |  |                   | 239    |              |   | 1,540         |  |                  | 88     |                   |   | 1,995  |  |   | 752   
|Other general and administrative            |  |                   | 4,662  |              |   | 5,159         |  |                  | 4,002  |                   |   | 5,492  |  |   | 4,604 
|                                            |  |                   |        |              |   |               |  |                  |        |                   |   |        |  |   |       
|Total noninterest expense                   |  | $                 | 22,942 |              | $ | 25,004        |  | $                | 21,740 |                   | $ | 25,056 |  | $ | 20,727
|                                            |  |                   |        |              |   |               |  |                  |        |                   |   |        |  |   |       

Noninterest expense for third quarter 2006 of $22.9 million decreased from the second quarter 2006
by $2.1 million. Merger, acquisition and transition expenses decreased by $1.3 million. This decrease was the result of $1.5 million second quarter charges that were partially offset by third quarter 2006 costs primarily associated with the
discontinuance of our residential mortgage group. Third quarter 2006 other general and administrative costs decreased by $0.5 million from the second quarter 2006, primarily due to a reduction in professional services expense. Third quarter 2006
salary expense was essentially the same as compared to the second quarter 2006 despite employee additions to our business banking unit and the hiring of other officer-level employees.

Third quarter 2006 noninterest expense was $2.2 million greater than noninterest expense for third quarter 2005. This increase in noninterest expense is
due primarily to additional expenses resulting from the First MainStreet and Foothills Bank acquisitions.



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##### Table of Contents

FINANCIAL CONDITION

The following sets forth certain key consolidated balance sheet data:



|                                          |  |                   |           |              |   |               |  |                  |           |                   |   |           |  |   |          
|----------------------------------------- |  | ----------------- | --------- | ------------ | - | ------------- |  | ---------------- | --------- | ----------------- | - | --------- |  | - | ---------
|                                          |  | September 30,2005 |           | June 30,2006 |   | March 31,2006 |  | December 31,2005 |           | September 30,2005
|                                          |  | (In thousands)   
|Net loans (including loans held for sale) |  | $                 | 1,955,529 |              | $ | 1,906,513     |  | $                | 1,983,882 |                   | $ | 2,046,938 |  | $ | 1,744,529
|Total assets                              |  |                   | 2,886,647 |              |   | 2,850,281     |  |                  | 2,916,510 |                   |   | 2,980,757 |  |   | 2,540,169
|Deposits                                  |  |                   | 1,968,264 |              |   | 1,998,055     |  |                  | 2,077,076 |                   |   | 2,048,352 |  |   | 1,721,609

Loans

The following table sets forth the amount of our loans outstanding at the dates indicated:



|                                |  |                   |           |   |               |   |           |                |  |   |                  |   |  |                   |           |   |  |   |           |  
|------------------------------- |  | ----------------- | --------- | - | ------------- | - | --------- | -------------- |  | - | ---------------- | - |  | ----------------- | --------- | - |  | - | --------- | -
|                                |  | September 30,2006 |           |   | June 30, 2006 |   |           | March 31, 2006 |  |   | December 31,2005 |   |  | September 30,2005 |          
|                                |  | (In thousands)    |          
|Real estate - Mortgage          |  | $                 | 663,170   |   |               | $ | 583,020   |                |  | $ | 595,860          |   |  | $                 | 584,590   |   |  | $ | 288,534   |  
|Real estate - Construction      |  |                   | 463,468   |   |               |   | 486,060   |                |  |   | 504,426          |   |  |                   | 530,716   |   |  |   | 670,416   |  
|Equity lines of credit          |  |                   | 60,817    |   |               |   | 64,355    |                |  |   | 67,284           |   |  |                   | 70,386    |   |  |   | 75,982    |  
|Commercial                      |  |                   | 654,829   |   |               |   | 664,202   |                |  |   | 702,556          |   |  |                   | 724,929   |   |  |   | 587,762   |  
|Agricultural                    |  |                   | 54,805    |   |               |   | 52,897    |                |  |   | 57,054           |   |  |                   | 71,707    |   |  |   | 65,466    |  
|Consumer                        |  |                   | 53,714    |   |               |   | 54,955    |                |  |   | 56,986           |   |  |                   | 63,121    |   |  |   | 50,776    |  
|Leases receivable and other     |  |                   | 32,931    |   |               |   | 26,470    |                |  |   | 25,714           |   |  |                   | 27,004    |   |  |   | 26,341    |  
|                                |  |                   |           |   |               |   |           |                |  |   |                  |   |  |                   |           |   |  |   |           |  
|Total gross loans               |  |                   | 1,983,734 |   |               |   | 1,931,959 |                |  |   | 2,009,880        |   |  |                   | 2,072,453 |   |  |   | 1,765,277 |  
|Less: allowance for loan losses |  |                   | (25,977   | ) |               |   | (25,297   | )              |  |   | (26,999          | ) |  |                   | (27,475   | ) |  |   | (25,019   | )
|Unearned discount               |  |                   | (4,328    | ) |               |   | (4,737    | )              |  |   | (4,729           | ) |  |                   | (4,860    | ) |  |   | (1,744    | )
|                                |  |                   |           |   |               |   |           |                |  |   |                  |   |  |                   |           |   |  |   |           |  
|Net Loans                       |  | $                 | 1,953,429 |   |               | $ | 1,901,925 |                |  | $ | 1,978,152        |   |  | $                 | 2,040,118 |   |  | $ | 1,738,514 |  
|                                |  |                   |           |   |               |   |           |                |  |   |                  |   |  |                   |           |   |  |   |           |  
|Loans held for sale             |  | $                 | 2,100     |   |               | $ | 4,588     |                |  | $ | 5,730            |   |  | $                 | 6,820     |   |  | $ | 6,015     |  
|                                |  |                   |           |   |               |   |           |                |  |   |                  |   |  |                   |           |   |  |   |           |  

At September 30, 2006, total loans, net of unearned discount, of $2.0 billion were $92.9
million less than the December 31, 2005 balance and $49.7 million greater than the June 30, 2006 balance. The decline in the loan portfolio from December 31, 2005 was primarily due to the increased pace of loan repayments in our real
estate portfolio in the first two quarters of 2006, tempered by an increase in the third quarter 2006 real estate loan portfolio of $55.2 million. The third quarter 2006 real estate loan portfolio increases were derived from organic growth.

Nonperforming Assets

Credit risk related to nonperforming assets arises as a result of lending activities. To manage this risk, we employ frequent monitoring procedures and take prompt corrective action when necessary. We employ a risk rating system that
identifies the overall potential amount of risk associated with each loan in our loan portfolio. This monitoring and rating system is designed to help management determine current and potential problems so that corrective actions can be taken
promptly.

Generally, loans are placed on nonaccrual status when they become 90 days or more past due or at such earlier time as management
determines timely recognition of interest to be in doubt. Accrual of interest is discontinued on a loan when we believe, after considering economic and business conditions and analysis of the borrowers financial condition, that the collection
of interest is doubtful.



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##### Table of Contents

The following table summarizes the loans for which the accrual of interest has been discontinued, loans
with payments more than 90 days past due and still accruing interest, loans that have been restructured, and other real estate owned. For reporting purposes, other real estate owned (OREO) consists of all real estate, other than bank
premises, actually owned or controlled by us, including real estate acquired through foreclosure.



|                                                                                           |  |                   |        |   |              |   |        |               |  |   |                  |   |  |                   |         |   |  |   |         |  
|------------------------------------------------------------------------------------------ |  | ----------------- | ------ | - | ------------ | - | ------ | ------------- |  | - | ---------------- | - |  | ----------------- | ------- | - |  | - | ------- | -
|                                                                                           |  | Quarter Ended     |       
|                                                                                           |  | September 30,2006 |        |   | June 30,2006 |   |        | March 31,2006 |  |   | December 31,2005 |   |  | September 30,2005 |        
|                                                                                           |  | (In thousands)    |       
|Nonaccrual loans, not restructured                                                         |  | $                 | 26,812 |   |              | $ | 30,684 |               |  | $ | 28,746           |   |  | $                 | 29,608  |   |  | $ | 8,352   |  
|Accruing loans past due 90 days or more                                                    |  |                   | 396    |   |              |   | 84     |               |  |   | 1                |   |  |                   | 131     |   |  |   | 1,806   |  
|Other real estate owned                                                                    |  |                   | 5,090  |   |              |   | 1,041  |               |  |   | 1,267            |   |  |                   | 1,465   |   |  |   | 2,532   |  
|                                                                                           |  |                   |        |   |              |   |        |               |  |   |                  |   |  |                   |         |   |  |   |         |  
|Total nonperforming assets                                                                 |  | $                 | 32,298 |   |              | $ | 31,809 |               |  | $ | 30,014           |   |  | $                 | 31,204  |   |  | $ | 12,690  |  
|                                                                                           |  |                   |        |   |              |   |        |               |  |   |                  |   |  |                   |         |   |  |   |         |  
|Nonperforming loans                                                                        |  | $                 | 27,208 |   |              | $ | 30,768 |               |  | $ | 28,747           |   |  | $                 | 29,739  |   |  | $ | 10,158  |  
|Other impaired loans                                                                       |  |                   | 17,076 |   |              |   | 16,166 |               |  |   | 11,841           |   |  |                   | 20,551  |   |  |   | 17,599  |  
|                                                                                           |  |                   |        |   |              |   |        |               |  |   |                  |   |  |                   |         |   |  |   |         |  
|Total impaired loans                                                                       |  | $                 | 44,284 |   |              | $ | 46,934 |               |  | $ | 40,588           |   |  | $                 | 50,290  |   |  | $ | 27,757  |  
|Allocated allowance for loan losses                                                        |  |                   | (6,468 | ) |              |   | (5,685 | )             |  |   | (9,296           | ) |  |                   | (10,360 | ) |  |   | (10,445 | )
|                                                                                           |  |                   |        |   |              |   |        |               |  |   |                  |   |  |                   |         |   |  |   |         |  
|Net investment in impaired loans                                                           |  | $                 | 37,816 |   |              | $ | 41,249 |               |  | $ | 31,292           |   |  | $                 | 39,930  |   |  | $ | 17,312  |  
|                                                                                           |  |                   |        |   |              |   |        |               |  |   |                  |   |  |                   |         |   |  |   |         |  
|Charged-off loans                                                                          |  | $                 | (1,736 | ) |              | $ | (2,012 | )             |  | $ | (1,091           | ) |  | $                 | (3,060  | ) |  | $ | (592    | )
|Recoveries                                                                                 |  |                   | 177    |   |              |   | 593    |               |  |   | 615              |   |  |                   | 679     |   |  |   | 76      |  
|                                                                                           |  |                   |        |   |              |   |        |               |  |   |                  |   |  |                   |         |   |  |   |         |  
|Net charge-off loans                                                                       |  | $                 | (1,559 | ) |              | $ | (1,419 | )             |  | $ | (476             | ) |  | $                 | (2,381  | ) |  | $ | (516    | )
|                                                                                           |  |                   |        |   |              |   |        |               |  |   |                  |   |  |                   |         |   |  |   |         |  
|Allowance for loan losses                                                                  |  | $                 | 25,977 |   |              | $ | 25,297 |               |  | $ | 26,999           |   |  | $                 | 27,475  |   |  | $ | 25,019  |  
|                                                                                           |  |                   |        |   |              |   |        |               |  |   |                  |   |  |                   |         |   |  |   |         |  
|Allowance for loan losses to loans, net of unearned discount                               |  |                   | 1.31   | % |              |   | 1.31   | %             |  |   | 1.35             | % |  |                   | 1.33    | % |  |   | 1.43    | %
|Allowance for loan losses to nonaccrual loans                                              |  |                   | 96.89  | % |              |   | 82.44  | %             |  |   | 93.92            | % |  |                   | 92.80   | % |  |   | 299.56  | %
|Allowance for loan losses to nonperforming assets                                          |  |                   | 95.48  | % |              |   | 79.53  | %             |  |   | 89.95            | % |  |                   | 88.05   | % |  |   | 197.16  | %
|Allowance for loan losses to impaired loans                                                |  |                   | 58.66  | % |              |   | 53.90  | %             |  |   | 66.52            | % |  |                   | 54.63   | % |  |   | 90.14   | %
|Nonperforming assets to loans, net of deferred fees and costs, and other real estate owned |  |                   | 1.63   | % |              |   | 1.65   | %             |  |   | 1.50             | % |  |                   | 1.51    | % |  |   | 0.73    | %
|Annualized net charge-offs (recoveries) to average loans                                   |  |                   | 0.32   | % |              |   | 0.29   | %             |  |   | 0.09             | % |  |                   | 0.53    | % |  |   | 0.12    | %
|Nonperforming loans to loans, net of unearned discount                                     |  |                   | 1.37   | % |              |   | 1.59   | %             |  |   | 1.43             | % |  |                   | 1.44    | % |  |   | 58.00   | %

Nonperforming assets of $32.3 million at September 30, 2006 reflected increases of $0.5
million from June 30, 2006 and $0.1 million from December 31, 2005. The increase from June 30, 2006 in nonperforming assets consists primarily of a $4.0 million increase in OREO and a $3.9 million decrease in nonaccrual loans. In
September 2006, we transferred the $4.2 million balance of a single loan relationship to OREO.

Our nonperforming loans and impaired loans
decreased by $2.5 million and $6.0 million from December 31, 2005, respectively. The ratio of our allowance for loan losses to nonaccrual loans and allowance for loan losses to impaired loans each increased 4 percentage points from
December 31, 2005.

At September 30, 2006, the allowance for loan losses was $26.0 million, which represents an increase of $0.7
million from June 30, 2006 and a decrease of $1.5 million from December 31, 2005. The ratio of the allowance for loan losses to nonperforming assets was 95.5% at September 30, 2006 and represented an increase of 16.0 percentage points
and 7.4 percentage points from June 30, 2006 and December 31, 2005, respectively. The ratio of the allowance for loan losses to loans, net of unearned discount, was 1.3% at September 30, 2006, June 30, 2006 and
December 31, 2005. Management believes that the allowance for loan losses is adequate to cover potential losses in the companys loan portfolio based on its analysis of loans, including the collateral position of identified substandard
loans.



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##### Table of Contents

Allowance for Loan Losses

The allowance for loan losses and provision for unfunded commitments is maintained at a level that, in our judgment, is adequate to absorb probable loan
losses in the loan portfolio. The amount of the allowance and reserve is based on managements evaluation of the collectibility of the loan portfolio, historical loss experience, and other significant factors affecting loan portfolio
collectibility, including the level and trends in delinquent, nonaccrual and adversely classified loans, trends in volume and terms of loans, levels and trends in credit concentrations, effects of changes in underwriting standards, policies,
procedures and practices, national and local economic trends and conditions, changes in capabilities and experience of lending management and staff, and other external factors including industry conditions, competition and regulatory requirements.

Our methodology for evaluating the adequacy of the allowance for loan losses has two basic elements: first, the identification of impaired
loans and the measurement of an estimated loss for each individual loan identified; and second, estimating an allowance for probable losses on other loans. The specific allowance for impaired loans and the remaining allowance are combined to
determine the required allowance for loan losses. The amount calculated is compared to the actual allowance for loan losses and adjustments are recorded through the provision for loan losses.



|                             |  |                                |        |      |   |       
|---------------------------- |  | ------------------------------ | ------ | ---- | - | ------
|                             |  | Nine Months EndedSeptember 30,
|Allowance for Loan Losses    |  | 2006                           |        | 2005
|                             |  | (In thousands)                
|Balance, beginning of period |  | $                              | 27,475 |      | $ | 25,022
|Loan charge-offs:            |  |                                |        |      |   |       
|Real estate - mortgage       |  |                                | 1,594  |      |   | 1,216 
|Real estate - construction   |  |                                | 1,981  |      |   | 20    
|Commercial                   |  |                                | 871    |      |   | 921   
|Agricultural                 |  |                                | 24     |      |   |      
|Consumer                     |  |                                | 348    |      |   | 226   
|Lease receivable and other   |  |                                | 21     |      |   | 98    
|                             |  |                                |        |      |   |       
|Total loan charge-offs:      |  |                                | 4,839  |      |   | 2,481 
|                             |  |                                |        |      |   |       
|Recoveries:                  |  |                                |        |      |   |       
|Real estate - mortgage       |  |                                | 211    |      |   | 95    
|Real estate - construction   |  |                                | 48     |      |   | 84    
|Commercial                   |  |                                | 919    |      |   | 422   
|Agricultural                 |  |                                | 29     |      |   | 7     
|Consumer                     |  |                                | 178    |      |   | 69    
|Lease receivable and other   |  |                                |       |      |   | 101   
|                             |  |                                |        |      |   |       
|Total loan recoveries        |  |                                | 1,385  |      |   | 778   
|                             |  |                                |        |      |   |       
|Net loan charge-offs         |  |                                | 3,454  |      |   | 1,703 
|Provision for loan losses    |  |                                | 1,956  |      |   | 1,700 
|                             |  |                                |        |      |   |       
|Balance, end of period       |  | $                              | 25,977 |      | $ | 25,019
|                             |  |                                |        |      |   |       

The allowance for loan losses of $26.0 million at September 30, 2006 represented 1.3% of
loans, net of unearned discount and 96.9% of nonaccrual loans. At December 31, 2005, the allowance for loan losses was 1.3% of the loans, net of unearned discount and 92.8% of nonaccrual loans. Nonperforming loans with high collateral value to
loan value require a relatively smaller reserve than uncollateralized loans or loans with minimal collateral coverage. At September 30, 2006, our nonperforming loans continued to have estimated collateral values in relation to loan values that
allow for an allowance to nonperforming loan ratio of less than 100%.

Through September 2006, we charged off $4.8 million, of which $1.9
million was associated with the balance transfer of a single loan relationship to OREO. Excluding the charge-off of this single loan relationship, the 2006 charge-offs were $0.5 million greater than our charge-offs for the same period of the prior
year. Our recoveries for the nine months ended September 30, 2006 were $0.6 million greater than the recoveries for the same period in the prior year.



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Investment Securities

We manage our investment portfolio principally to provide liquidity and balance our overall interest rate risk. To a lesser extent, we manage our
investment portfolio to provide earnings with a view to minimizing credit risk.

The carrying value of our portfolio of investment
securities at September 30, 2006 and December 31, 2005 was as follows:



|                                                 |  |                   |         |                  |   |                  |  |   |         |   |  |       |   
|------------------------------------------------ |  | ----------------- | ------- | ---------------- | - | ---------------- |  | - | ------- | - |  | ----- | --
|                                                 |  | September 30,2006 |         | December 31,2005 |   | IncreaseDecrease |  |   | %Change |  
|                                                 |  | (In thousands)    |        
|Securities available-for-sale:                   |  |                   |         |                  |   |                  |  |   |         |   |  |       |   
|U.S. Treasury securities                         |  | $                 | 4,998   |                  | $ | 13,076           |  | $ | (8,078  | ) |  | (61.8 | )%
|U.S. Government agencies                         |  |                   | 5,391   |                  |   | 5,367            |  |   | 24      |   |  | 0.4   | % 
|Obligations of states and political subdivisions |  |                   | 113,053 |                  |   | 72,893           |  |   | 40,160  |   |  | 55.1  | % 
|Mortgage backed securities                       |  |                   | 40,018  |                  |   | 50,043           |  |   | (10,025 | ) |  | (20.0 | )%
|Marketable equity securities                     |  |                   | 824     |                  |   | 1,702            |  |   | (878    | ) |  | (51.6 | )%
|                                                 |  |                   |         |                  |   |                  |  |   |         |   |  |       |   
|Total securities available-for-sale              |  | $                 | 164,284 |                  | $ | 143,081          |  | $ | 21,203  |   |  | 14.8  | % 
|                                                 |  |                   |         |                  |   |                  |  |   |         |   |  |       |   
|Securities held-to-maturity:                     |  |                   |         |                  |   |                  |  |   |         |   |  |       |   
|                                                 |  |                   |         |                  |   |                  |  |   |         |   |  |       |   
|Mortgage-backed                                  |  | $                 | 10,133  |                  | $ | 5,798            |  | $ | 4,244   |   |  | 73.2  | % 
|                                                 |  |                   |         |                  |   |                  |  |   |         |   |  |       |   

The carrying value of our investment securities at September 30, 2006 was $164.3 million,
compared to December 31, 2005 of $143.1 million. Our state and political subdivisions balance increased by $40.2 million, $40.0 million of which represents the addition of a second quarter loan that was structured as a municipal security. The
decrease in U.S. Treasury securities was the result of the maturity of several U.S. Treasury securities, with the decrease in mortgage-backed securities caused by paydowns.

Deposits

At September 30, 2006,
our deposits were $2.0 billion, which reflects a decrease of $80.1 million from December 31, 2005 and a decrease of $29.8 million from June 30, 2006. Since December 31, 2005, certificates of deposits declined $72.1 million.
Certificates of deposit represented 28.5% of total deposits at September 30, 2006 down from 30.9% at December 31, 2005. The decline in certificates of deposit was due to our continuing strategy to reduce our reliance on certificates of
deposit as a funding source.



|                             |  |                        |           |           |                      |   |         |   |           |  |        |  
|---------------------------- |  | ---------------------- | --------- | --------- | -------------------- | - | ------- | - | --------- |  | ------ | -
|                             |  | At September 30, 2006  |           |           | At December 31, 2005 |  
|                             |  | Balance                |           | % ofTotal |                      |   | Balance |   | % ofTotal | 
|                             |  | (Dollars in thousands) |          
|Noninterest bearing deposits |  | $                      | 524,808   |           | 26.66                | % |         | $ | 593,811   |  | 28.99  | %
|Interest bearing demand      |  |                        | 159,732   |           | 8.12                 | % |         |   | 160,283   |  | 7.82   | %
|Money market                 |  |                        | 634,120   |           | 32.22                | % |         |   | 561,747   |  | 27.42  | %
|Savings                      |  |                        | 88,695    |           | 4.50                 | % |         |   | 99,496    |  | 4.86   | %
|Time                         |  |                        | 560,909   |           | 28.50                | % |         |   | 633,015   |  | 30.91  | %
|                             |  |                        |           |           |                      |   |         |   |           |  |        |  
|                             |  | $                      | 1,968,264 |           | 100.00               | % |         | $ | 2,048,352 |  | 100.00 | %
|                             |  |                        |           |           |                      |   |         |   |           |  |        |  

Borrowings and Subordinated Debentures

At September 30, 2006, our outstanding borrowings were $137.0 million. These borrowings consisted of $107.0 million and $14.6 million on a line of
credit and term notes at the Federal Home Loan Bank, respectively, $14.7 million on a U.S. Bank revolving credit agreement, and a $0.7 million Treasury Tax and Loan balance.

Our maximum credit allowance for total borrowings at the Federal Home Loan Bank as of September 30, 2006 was $383.3 million. The interest rate on
the line of credit varies with the federal funds rate. The term notes have fixed interest rates that range from 2.52% to 6.22%. We have a blanket pledge and security agreement with the Federal Home Loan Bank, which encompasses certain loans and
securities as collateral for these borrowings.



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We have a $70 million revolving credit agreement, as amended, with U.S. Bank National Association that
contains financial covenants, including maintaining a minimum return on average assets, a maximum nonperforming assets to total loans ratio and regulatory capital ratios that qualify the Company as well-capitalized. The interest rate on this
revolving credit agreement, which varies based on a spread over the federal funds rate, was 6.78% at September 30, 2006. We were in compliance with all debt covenants at quarter end. This agreement is secured by Guaranty Bank stock. U.S. Bank
performs various banking services for the Company for which they receive usual and customary fees in addition to providing us with this credit facility.

At September 30, 2006, we had a $41,239,000 aggregate principal balance of subordinated debentures outstanding with a weighted average cost of 9.1%. The subordinated debentures were issued in four separate
series. Each issuance has a maturity of thirty years from its date of issue. The subordinated debentures were issued to trusts established by us, which in turn issued $40 million of trust preferred securities. Generally and with certain limitations,
the Company is permitted to call the debentures subsequent to the first five or ten years, as applicable, after issue if certain conditions are met, or at any time upon the occurrence and continuation of certain changes in either the tax treatment
or the capital treatment of the trusts, the debentures or the preferred securities.

Capital Resources

Current risk-based regulatory capital standards generally require banks and bank holding companies to maintain a ratio of core or Tier
1 capital (consisting principally of common equity) to risk-weighted assets of at least 4%, a ratio of Tier 1 capital to average total assets (leverage ratio) of at least 4% and a ratio of total capital (which includes Tier 1 capital plus
certain forms of subordinated debt, a portion of the allowance for loan losses and preferred stock) to risk-weighted assets of at least 8%. Risk-weighted assets are calculated by multiplying the balance in each category of assets by a risk factor,
which ranges from zero for cash assets and certain government obligations to 100% for high-risk loans, and adding the products together.

At September 30, 2006, the Company had a total risk-weighted capital ratio of 10.48%, a Tier 1 risk-weighted capital ratio of 9.27% and a leverage ratio of 8.55%. The Company actively monitors its regulatory capital ratios to ensure
that the Company and its bank subsidiaries are well capitalized under the applicable regulatory framework.

Contractual Obligations and
Off-Balance Sheet Arrangements

The Company is a party to credit-related financial instruments with off-balance sheet risk in the normal
course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit, stand-by letters of credit and commercial letters of credit. Such commitments involve, to varying degrees, elements of
credit and interest rate risk in excess of the amount recognized in the consolidated balance sheets.

The Companys exposure to credit
loss is represented by the contractual amount of these commitments. The Company follows the same credit policies in making commitments as it does for on-balance sheet instruments.

At September 30, 2006, the following financial instruments were outstanding whose contract amounts represented credit risk:



|                             |  |                   |         |                  |   |        
|---------------------------- |  | ----------------- | ------- | ---------------- | - | -------
|                             |  | September 30,2006 |         | December 31,2005
|                             |  | (In thousands)   
|Contractual Obligations      |  |                   |         |                  |   |        
|Commitments to extend credit |  | $                 | 514,893 |                  | $ | 634,737
|Standby letters of credit    |  |                   | 31,920  |                  |   | 37,952 
|Commercial letters of credit |  |                   | 266     |                  |   | 472    
|                             |  |                   |         |                  |   |        
|Totals                       |  | $                 | 547,079 |                  | $ | 673,161
|                             |  |                   |         |                  |   |        



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Liquidity

Based on our existing business plan, we believe that our level of liquid assets is sufficient to meet our current and presently anticipated funding needs.

We rely on dividends from our Banks as a primary source of liquidity for the holding company. We plan to continue to utilize the available dividends from
the Banks for holding company operations, subject to regulatory and other restrictions. In general, the Banks are able to dividend earnings to the holding company, subject to the Banks maintaining a well-capitalized ratio. We require liquidity for
the payment of interest on the subordinated debentures, for operating expenses, principally salaries and benefits, for repurchases of our common stock, and, if declared by our board of directors, for the payment of dividends to our stockholders.

The Banks rely on deposits as their principal source of funds and, therefore, must be in a position to service depositors needs as
they arise. Fluctuations in the balances of a few large depositors may cause temporary increases and decreases in liquidity from time to time. We have dealt with such fluctuations from existing liquidity sources.

We believe that if the level of liquid assets (our primary liquidity) does not meet our liquidity needs, other available sources of liquid assets (our
secondary liquidity), including the purchase of federal funds, sales of securities under agreements to repurchase, sales of loans, discount window borrowings from the Federal Reserve Bank and our lines of credit with the Federal Home Loan Bank of
Topeka and U.S. Bank could be employed to meet those current and presently anticipated funding needs.

Application of Critical
Accounting Policies and Accounting Estimates

Our accounting policies are integral to understanding the financial results reported. Our
most complex accounting policies require managements judgment to ascertain the valuation of assets, liabilities, commitments and contingencies. We have established detailed policies and control procedures that are intended to ensure valuation
methods are well controlled and consistently applied from period to period. In addition, the policies and procedures are intended to ensure that the process for changing methodologies occurs in an appropriate manner. The following is a brief
description of our current accounting policies that we believe are critical and involve significant management judgment.

Allowance for
Loan Losses The loan portfolio is the largest category of assets on our balance sheet. We determine probable losses inherent in our loan portfolio and establish an allowance for those losses by considering factors including historical
loss rates, expected cash flows and estimated collateral values. In assessing these factors, we use organizational history and experience with credit decisions and related outcomes. The allowance for loan losses represents our best estimate of
losses inherent in the existing loan portfolio. The allowance for loan losses is increased by the provision for loan losses charged to expense and reduced by loans charged off, net of recoveries. We evaluate our allowance for loan losses quarterly.
If our underlying assumptions later prove to be inaccurate based on subsequent loss evaluations, the allowance for loan losses is adjusted.

We estimate the appropriate level of allowance for loan losses by separately evaluating impaired and nonimpaired loans. A specific allowance is assigned to an impaired loan when expected cash flows or collateral do not justify the carrying
amount of the loan. The methodology used to assign an allowance to a nonimpaired loan is much more subjective. Generally, the allowance assigned to nonimpaired loans is determined by applying historical loss rates to existing loans with similar risk
characteristics and by exercising judgment to assess the impact of factors such as changes in economic conditions, changes in credit policies or underwriting standards, and changes in the level of credit risk associated with specific industries and
markets. Because the economic and business climate in any given industry or market, and its impact on any given borrower, can change rapidly, the risk profile of the loan portfolio is continually assessed and adjusted when appropriate.
Notwithstanding these procedures, there still exists the possibility that our assessment could prove to be significantly incorrect and that an immediate adjustment to the allowance for loan losses would be required.

We estimate the appropriate level of loan loss allowance by conducting a detailed review of a significant number of much smaller portfolio segments that
comprise the consumer and commercial loan portfolios. We segment the loan portfolio into as many components as practical. Each component would normally have similar characteristics, such as risk classification, past due status, type of loan,
industry or collateral. The risk profile of certain segments of the loan portfolio may be improving, while the risk profile of others may be deteriorating. As a result, changes in the appropriate level of the allowance for different segments may
offset one another. Adjustments to the allowance represent the impact from the analysis of all loan segments.



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Investment in Debt and Equity Securities We classify our investments in debt and equity
securities as either held-to-maturity or available-for-sale in accordance with Statement of Financial Accounting Standards No. 115, Accounting for Certain Investments in Debt and Equity Securities. Securities classified as held-to-maturity are
recorded at cost or amortized cost. Available-for-sale securities are carried at fair value. Fair value calculations are based on quoted market prices when such prices are available. If quoted market prices are not available, estimates of fair value
are computed using a variety of techniques, including extrapolation from the quoted prices of similar instruments or recent trades for thinly traded securities, fundamental analysis, or through obtaining purchase quotes. Due to the subjective nature
of the valuation process, it is possible that the actual fair values of these investments could differ from the estimated amounts, thereby affecting our financial position and results of operations. If the estimated value of investments is less than
the cost or amortized cost, we evaluate whether an event or change in circumstances has occurred that may have a significant adverse effect on the fair value of the investment. If such an event or change has occurred and we determine that the
impairment is other-than-temporary, we expense the impairment of the investment in the period in which the event or change occurred.

Impairment of Goodwill Goodwill represents the excess of the purchase price over the fair value of net assets acquired. Goodwill is evaluated for impairment annually, unless there are factors present that may be indicative of
a potential impairment, in which case, a goodwill impairment test is performed more frequently than annually. The first step in testing for impairment is to determine the fair value of each reporting unit. If the carrying amount of any reporting
unit exceeds its fair value, an impairment to goodwill is recorded. The evaluation of goodwill involves estimations of discount rates, the timing of projected future cash flows, and utilization of market based valuation techniques. The assumptions
used in the evaluation of goodwill are subject to change with changes in economic conditions and other factors. Changes in assumptions used to evaluate this intangible asset affect its value and could have a material adverse impact on our results of
operations.

This discussion has highlighted those accounting policies that we consider to be critical to our financial reporting process.
However, all the accounting policies are important, and therefore you are encouraged to review each of the policies included in Note 1 to our consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31,
2005 to gain a better understanding of how our financial performance is measured and reported.



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ITEM 3. Quantitative and Qualitative Disclosure about Market Risk

Market risk is the risk of loss in a
financial instrument arising from adverse changes in market prices and rates, foreign currency exchange rates, commodity prices and equity prices. Our market risk arises primarily from interest rate risk inherent in our lending and deposit taking
activities. To that end, management actively monitors and manages our interest rate risk exposure. We do not have any market risk sensitive instruments entered into for trading purposes. We manage our interest rate sensitivity by matching the
re-pricing opportunities on our earning assets to those on our funding liabilities. We use various asset/liability strategies to manage the re-pricing characteristics of our assets and liabilities designed to ensure that exposure to interest rate
fluctuations is limited within our guidelines of acceptable levels of risk-taking. Hedging strategies, including the terms and pricing of loans and deposits and managing the deployment of our securities, are used to reduce mismatches in interest
rate re-pricing opportunities of portfolio assets and their funding sources.

Our Asset Liability Management Committee, or ALCO, addresses
interest rate risk. The committee is comprised of members of our senior management. The ALCO monitors interest rate risk by analyzing the potential impact on the net portfolio of equity value and net interest income from potential changes in
interest rates, and considers the impact of alternative strategies or changes in balance sheet structure. The ALCO manages our balance sheet in part to maintain the potential impact on net portfolio value and net interest income within acceptable
ranges despite changes in interest rates.

Our exposure to interest rate risk is reviewed on at least a quarterly basis by the ALCO and our
board of directors. Interest rate risk exposure is measured using interest rate sensitivity analysis to determine our change in net portfolio value and net interest income in the event of hypothetical changes in interest rates. If potential changes
to net portfolio value and net interest income resulting from hypothetical interest rate changes are not within board-approved limits, the board may direct management to adjust the asset and liability mix to bring interest rate risk within
board-approved limits.

We monitor and evaluate our interest rate risk position on a quarterly basis using traditional gap analysis,
earnings at risk analysis and economic value at risk analysis under 100 and 200 basis point change scenarios. Each of these analyses measures different interest rate risk factors inherent in the balance sheet. Traditional gap analysis, although not
a complete view of these risks, provides a fair representation of our current interest rate risk exposure.

Gap Analysis A
traditional measure of a financial institutions interest rate risk is the static gap analysis. Traditional gap analysis calculates the dollar amount of mismatches between assets and liabilities, at certain time periods, whose interest rates
are subject to repricing at their contractual maturity date or repricing period. A static gap is the difference between the amount of assets and liabilities that are expected to mature or re-price within a specific period. Generally, a positive gap
benefits an institution during periods of rising interest rates, and a negative gap benefits an institution during periods of declining interest rates.

At September 30, 2006, we had a negative gap of 4.2% of our total assets, which represents the $120 million deficiency of interest-earning assets under interest-bearing liabilities that would reprice within one
year. Our cumulative gap indicates that we have $502.1 million of assets in excess of liabilities that are subject to repricing. The following table sets forth information concerning repricing opportunities for our interest-earning assets and
interest-bearing liabilities as of September 30, 2006. The amount of assets and liabilities shown within a particular period were determined in accordance with their contractual maturities, except that adjustable rate products are included in
the period in which they are first scheduled to adjust and not in the period in which they mature. Such assets and liabilities are classified by the earlier of their maturity or repricing date.



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|                                                               |  |                        |           |    |                   |   |          |             |  |   |             |   |  |                  |         |   |       |   |           |   |  |   |          
|-------------------------------------------------------------- |  | ---------------------- | --------- | -- | ----------------- | - | -------- | ----------- |  | - | ----------- | - |  | ---------------- | ------- | - | ----- | - | --------- | - |  | - | ---------
|                                                               |  | Less Than 3Months      |           |    | 3 Months to 1Year |   |          | 1 to 5Years |  |   | Over 5Years |   |  | NonrateSensitive |         |   | Total
|                                                               |  | (Dollars in thousands)
|Interest-bearing cash and cash equivalents                     |  | $                      | 7,835     |    |                   | $ |         |             |  | $ |            |   |  | $                |        |   |       | $ |          |   |  | $ | 7,835    
|Investment securities                                          |  |                        | 36,775    |    |                   |   | 7,142    |             |  |   | 31,141      |   |  |                  | 99,359  |   |       |   | 31,683    |   |  |   | 206,100  
|Loans, gross                                                   |  |                        | 1,114,585 |    |                   |   | 243,510  |             |  |   | 457,795     |   |  |                  | 140,449 |   |       |   | 25,167    |   |  |   | 1,981,506
|All other assets                                               |  |                        | 40,262    |    |                   |   | 8,999    |             |  |   | 24,584      |   |  |                  | 6,826   |   |       |   | 610,535   |   |  |   | 691,206  
|                                                               |  |                        |           |    |                   |   |          |             |  |   |             |   |  |                  |         |   |       |   |           |   |  |   |          
|Totals                                                         |  | $                      | 1,199,457 |    |                   | $ | 259,651  |             |  | $ | 513,520     |   |  | $                | 246,634 |   |       | $ | 667,385   |   |  | $ | 2,886,647
|                                                               |  |                        |           |    |                   |   |          |             |  |   |             |   |  |                  |         |   |       |   |           |   |  |   |          
|Deposits                                                       |  | $                      | 1,055,330 |    |                   | $ | 293,579  |             |  | $ | 94,547      |   |  | $                |        |   |       | $ | 524,808   |   |  | $ | 1,968,264
|Assets under repurchase agreements and federal funds purchases |  |                        | 36,635    |    |                   |   |         |             |  |   |            |   |  |                  |        |   |       |   |          |   |  |   | 36,635   
|Borrowings                                                     |  |                        | 122,355   |    |                   |   | 14,699   |             |  |   |            |   |  |                  |        |   |       |   | (89       | ) |  |   | 136,965  
|Subordinated debentures                                        |  |                        |          |    |                   |   |         |             |  |   |            |   |  |                  | 41,239  |   |       |   |          |   |  |   | 41,239   
|All other liabilities                                          |  |                        | 49,146    |    |                   |   | 7,345    |             |  |   | 2,271       |   |  |                  |        |   |       |   | 49,567    |   |  |   | 108,329  
|Stockholders equity                                           |  |                        |          |    |                   |   |         |             |  |   |            |   |  |                  |        |   |       |   | 595,215   |   |  |   | 595,215  
|                                                               |  |                        |           |    |                   |   |          |             |  |   |             |   |  |                  |         |   |       |   |           |   |  |   |          
|Totals                                                         |  | $                      | 1,263,466 |    |                   | $ | 315,623  |             |  | $ | 96,818      |   |  | $                | 41,239  |   |       | $ | 1,169,501 |   |  | $ | 2,886,647
|                                                               |  |                        |           |    |                   |   |          |             |  |   |             |   |  |                  |         |   |       |   |           |   |  |   |          
|Period gap (assets minus liabilities)                          |  |                        | (64,009   | )  |                   |   | (55,972  | )           |  |   | 416,702     |   |  |                  | 205,395 |   |       |   | (502,116  | ) |  |   |          
|Cumulative gap                                                 |  |                        | (64,009   | )  |                   |   | (119,981 | )           |  |   | 296,721     |   |  |                  | 502,116 |   |       |   |           |   |  |   |          
|Cumulative rate sensitive gap %                                |  |                        | (2.2      | )% |                   |   | (4.2     | )%          |  |   | 10.3        | % |  |                  | 17.4    | % |       |   |           |   |  |   |          

ITEM 4. Controls and Procedures

As of the end of the period covered by this report, an evaluation was
carried out by the Companys management, with the participation of the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the Companys disclosure controls and procedures (as defined in Rule 15d-15(e) under
the Securities Exchange Act of 1934). The Companys disclosure controls were designed to provide a reasonable assurance that information required to be disclosed in reports that we file or submit under the Securities Exchange Act of 1934 is
recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. It should be noted that the design of any system of controls is based in part upon certain assumptions
about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote. However, the controls have been designed to provide
reasonable assurance of achieving the controls stated goals. Based on that evaluation, the Companys Chief Executive Officer and Chief Financial Officer, have concluded that the Companys disclosure controls and procedures are
effective at September 30, 2006 to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934 was (i) accumulated and communicated to management, including the
Companys Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure and (ii) recorded, processed, summarized and reported within the time periods specified in the rules and forms of the
Securities and Exchange Commission.

There have been no changes in the Companys internal control over financial reporting (as defined
in Rule 15d-15(f) under the Securities Exchange Act of 1934) during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Companys internal control over financial reporting.



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PART IIOTHER INFORMATION

ITEM 1. Legal Proceedings

On December 31, 2004, an adversary proceeding was filed against Guaranty
Bank and Trust Company in the United States Bankruptcy Court for the District of Colorado, by the trustees of the Will Hoover Company, or the Hoover Company, and William Gordon Hoover, Jr., or Hoover, seeking to avoid certain transfers that occurred
over a four-year period commencing in 1999 under the United States Bankruptcy Code. The trustees allege that certain transfers were made by the Hoover Company and Hoover with actual fraudulent intent, that the transfers were made for less than
reasonably equivalent value and occurred at a time when the Hoover Company and Hoover were insolvent, or were rendered insolvent by the transfers, and that certain other transfers were preferential as to other creditors, were made for less than
reasonably equivalent value or were made by the Hoover Company or Hoover with actual fraudulent intent. On September 7, 2005, the Bankruptcy Court granted, in part, Guaranty Banks initial response and dismissed $8.5 million of the claims
relating to alleged transfers for payment of items credited in the check collection process. On November 10, 2005, the trustees filed a motion in District Court requesting reconsideration of the Bankruptcy Courts order dismissing those
claims. The District Court summarily denied the trustees motion on November 21, 2005. The Trustees filed another motion for reconsideration with the Bankruptcy Court on November 9, 2006. We intend to vigorously oppose the motion.

On August 29, 2006, Guaranty Bank filed a motion for partial summary judgment on the trustees claims to recover payments on
alleged overdrafts in the amount of approximately $1.7 million. The motion is pending at this time. On September 1, 2006, the trustees amended the complaint to include a claim, based on similar arguments, to recover interest payments on loans
to Hoover and the Hoover Company in the amount of $0.1 million. We continue to vigorously contest the remaining claims, which amount to approximately $2.9 million, approximately $1.7 million of which are the subject of the pending motion for partial
summary judgment. We have established a reserve that, after consultation with our counsel, we have determined is appropriate for this litigation.

On July 22, 2005 and August 18, 2005, two separate but similar actions (i.e., the Barnes action and Teper action, respectively) were filed against Guaranty Bank and a former officer in the Denver District Court, Denver, Colorado
by investors who provided funds to Hoover, the Hoover Company or related entities. The investors allege that certain activities of Guaranty Bank and its former officer with respect to the customer relationship with Hoover, the Hoover Company and
related entities aided and abetted Hoover and the Hoover Company in securities violations and violations of the Colorado Organized Crime Control Act and amounted to a civil conspiracy, causing the investors to incur damages. The investors are
seeking actual and statutory treble damages against Guaranty Bank and its former officer. The alleged actual losses claimed in connection with such activities are approximately $13.0 million, of which approximately $12.2 million relate to the Barnes
action and approximately $0.8 million relate to the Teper action. In a series of preliminary rulings in April 2006 relating to both actions, the District Court dismissed a number of the claims representing alleged damages in excess of $1.0 million.

The court recently entered judgment in favor of Guaranty Bank and its officer with respect to the claims brought by two of the three
plaintiffs in the Teper action. Only one plaintiff remains in the Teper action. The alleged actual losses of the remaining plaintiff are approximately $0.6 million. We will continue to vigorously defend both the Barnes action and Teper action.

At this time, we cannot determine whether the outcome of the above matters will have a material adverse impact on our consolidated
financial position or results of operations. To the extent these suits are not settled or dismissed, the Company will incur ongoing legal costs, to the extent such legal costs will not be covered by insurance, which could have an adverse impact on
our results of operations.

In the ordinary course of our business, we are party to various other legal actions, which we believe are
incidental to the operation of our business. Although the ultimate outcome and amount of liability, if any, with respect to these other legal actions to which we are currently a party cannot presently be ascertained with certainty, in the opinion of
management, based upon information currently available to us, any resulting liability is not likely to have a material adverse effect on the Companys consolidated financial position, results of operations or cash flows.



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ITEM 1A. Risk Factors

In addition to the other information set forth in this report, you should carefully
consider the factors discussed in Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2005, which could materially affect our business, financial condition and/or operating results. The
risks described in our Annual Report on Form 10-K are not the only risks facing the Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially affect our business, financial
condition and/or operating results.

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds



| | (a) | None.
| | --- | -----



| | (b) | None.
| | --- | -----

(c) The following table provides information with
respect to purchases made by or on behalf of the Company or any affiliated purchaser (as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934), of our common stock during the third quarter 2006.



|                                  |  |                                  |  |                             |       |                                                                    |         |                                                                                        |        
|--------------------------------- |  | -------------------------------- |  | --------------------------- | ----- | ------------------------------------------------------------------ | ------- | -------------------------------------------------------------------------------------- | -------
|Period                            |  | TotalNumber ofSharesPurchased(1) |  | Average PricePaid Per Share |       | Total Number ofShares Purchasedas Part
ofPubliclyAnnouncedPlans(2) |         | Maximum Numberof Shares that MayYet Be PurchasedUnder the Plans atthe End of
thePeriod
|July 1 to July 31, 2006           |  | 500,000                          |  | $                           | 10.13 |                                                                    | 500,000 |                                                                                        | 966,400
|August 1 to August 31, 2006       |  | 310,000                          |  |                             | 10.09 |                                                                    | 310,000 |                                                                                        | 656,400
|September 1 to September 30, 2006 |  | N/A                              |  |                             | N/A   |                                                                    | N/A     |                                                                                        | N/A    
|                                  |  |                                  |  |                             |       |                                                                    |         |                                                                                        |        
|Total                             |  | 810,000                          |  | $                           | 10.11 |                                                                    | 810,000 |                                                                                        | 656,400
|                                  |  |                                  |  |                             |       |                                                                    |         |                                                                                        |        

---

|(1) | No shares were purchased other than as part of a publicly announced plan.
|--- | -------------------------------------------------------------------------

|(2) | On March 2, 2006, we announced a stock repurchase program to repurchase up to 3,000,000
shares of our common stock from time to time over a one-year period in the open market or through private transactions. Shares purchased through September 30, 2006 under this plan were 2,343,600. As of November 2, 2006, the Company has
220,510 shares remaining to be repurchased under this plan. On October 25, 2006, we announced a new stock repurchase program to repurchase up to 2,500,000 shares of our common stock from time to time over a one-year period in the open market or
through private transactions. This new program is not reflected in the above table.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

ITEM 3. Defaults Upon Senior Securities

None.

ITEM 4. Submission of Matters to a Vote of Security Holders

None.



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##### Table of Contents

ITEM 5. Other Information

On November 7, 2006, we renewed our $70 million 364-day Revolving Credit
Agreement with U.S. Bank National Association. This agreement requires the Company to comply with certain financial covenants, including maintaining a minimum return on average assets, a maximum nonperforming assets to total loans ratio and
regulatory capital ratios that qualify the Company as well-capitalized. This agreement also contains other covenants, conditions, representations and warranties and events of default customary for facilities of this type. This credit facility is
secured by a pledge of 100% of the outstanding capital stock of the Companys bank subsidiary, Guaranty Bank and Trust Company, pursuant to a Pledge Agreement, dated as of November 8, 2005.

Under the credit facility, the Company is able to borrow at an interest rate equal to, at the Companys option, either (i) the lending
banks federal funds rate plus 1.50%, (ii) the lending banks prime rate minus 0.75% or (iii) LIBOR plus 1.50%. As of November 7, 2006, the Company had no outstanding balance under the credit facility. The amendment renewing
the Revolving Credit Agreement is filed as Exhibit 10.3 to this Form 10-Q.

In addition to this credit facility, U.S. Bank performs various
banking services for the Company for which they receive usual and customary fees.

On November 8, 2006, the Company amended and
restated its financial advisory services agreement with Castle Creek Financial LLC, of which John M. Eggemeyer, the Companys Chairman of the Board, is a co-founder and the chief executive officer. The amendments to the agreement were
immaterial to the Company. The amended and restated services agreement is filed as Exhibit 10.2 to this Form 10-Q.



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##### Table of Contents

ITEM 6. Exhibits



|               |  |                                                                                                                                                                                             
|-------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Description                                                                                                                                                                                 
|               | 
|3.1            |  | Amended and Restated Certification of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 to Registrants Form S-1 Registration Statement (No.
333-124855)).          
|               | 
|3.2            |  | Amended and Restated Bylaws of the Registrant (incorporated by reference to Exhibit 3.2 to Registrants Form S-1 Registration Statement (No. 333-124855)).                                  
|               | 
|10.1          |  | Change-in-Control Agreement, dated July 24, 2006, between Sherri L. Heronema and the Registrant (incorporated by reference to Exhibit 10.1 to Registrants Form 8-K filed on July 25,
2006).
|               | 
|10.2           |  | Services Agreement, dated as of November 8, 2006, by and between Castle Creek Financial LLC and the Registrant                                                                              
|               | 
|10.3           |  | Amendment No. 3 to the Revolving Credit Agreement, dated November 7, 2006, between U.S. Bank National Association and the Registrant.                                                       
|               | 
|31.1           |  | Section 302 Certification of Chief Executive Officer.                                                                                                                                       
|               | 
|31.2           |  | Section 302 Certification of Chief Financial Officer.                                                                                                                                       
|               | 
|32.1           |  | Section 906 Certification of Chief Executive Officer.                                                                                                                                       
|               | 
|32.2           |  | Section 906 Certification of Chief Financial Officer.                                                                                                                                       

---

| | Indicates a management contract or compensatory plan or arrangement
|- | -------------------------------------------------------------------



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SIGNATURES

Pursuant to the requirements 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.



|                        |  |                                                     
|----------------------- |  | ----------------------------------------------------
|Date: November 13, 2006 |  | CENTENNIAL BANK HOLDINGS, INC.                      
|                        | 
|                        |  | /s/ PAUL W. TAYLOR                                  
|                        |  | Paul W. Taylor                                      
|                        |  | Executive Vice President and Chief Financial Officer



39