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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-Q



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

For the quarterly period ended June 30, 2007

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)



|                                                               |  |                                        
|-------------------------------------------------------------- |  | ---------------------------------------
|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)                             

303-293-5563

(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  x            Non-accelerated Filer ̈

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 August 1, 2007 there were 54,750,612 shares of the registrants common stock outstanding, including 1,679,677 shares of unvested stock
grants.



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##### Table of Contents

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 Condensed Consolidated Financial Statements                                 |  | 4   
|                             |  |                                                                                      
|                             |  | Unaudited Consolidated Balance Sheets                                                 |  | 4   
|                             |  |                                                                                      
|                             |  | Unaudited Consolidated Statements of Income (Loss)                                    |  | 5   
|                             |  |                                                                                      
|                             |  | Consolidated Statement of Changes in Stockholders Equity                             |  | 6   
|                             |  |                                                                                      
|                             |  | Unaudited Consolidated Statements of Cash Flows                                       |  | 7   
|                             |  |                                                                                      
|                             |  | Notes to Unaudited Condensed Consolidated Financial Statements                        |  | 8   
|                             |  |                                                                                      
|ITEM 2.                      |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 20  
|                             |  |                                                                                      
|ITEM 3.                      |  | Quantitative and Qualitative Disclosures About Market Risk                            |  | 34  
|                             |  |                                                                                      
|ITEM 4.                      |  | Controls and Procedures                                                               |  | 35  
|                             | 
|PART IIOTHER INFORMATION    |  | 36                                                                                   
|                             |  |                                                                                      
|ITEM 1.                      |  | Legal Proceedings                                                                     |  | 36  
|                             |  |                                                                                      
|ITEM 1A.                     |  | Risk Factors                                                                          |  | 37  
|                             |  |                                                                                      
|ITEM 2.                      |  | Unregistered Sales of Equity Securities and Use of Proceeds                           |  | 37  
|                             |  |                                                                                      
|ITEM 3.                      |  | Defaults Upon Senior Securities                                                       |  | 37  
|                             |  |                                                                                      
|ITEM 4.                      |  | Submission of Matters to a Vote of Security Holders                                   |  | 37  
|                             |  |                                                                                      
|ITEM 5.                      |  | Other Information                                                                     |  | 37  
|                             |  |                                                                                      
|ITEM 6.                      |  | Exhibits                                                                              |  | 38  



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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.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Revenues are lower than expected.
| | - |  | ---------------------------------



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



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



| |  |  | Credit quality deterioration, which could cause an increase in the provision for credit losses.
| | - |  | -----------------------------------------------------------------------------------------------



| |  |  | 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.



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##### Table of Contents

PART IFINANCIAL INFORMATION



|ITEM 1. | Unaudited Condensed Consolidated Financial Statements
|------- | -----------------------------------------------------

CENTENNIAL BANK HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Balance Sheets (Unaudited)



|                                                                                                                                                                                                                                                                                                                                      |  |                                          |           |   |                  |   |           |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------- | --------- | - | ---------------- | - | --------- | -
|                                                                                                                                                                                                                                                                                                                                      |  | June 30,2007                             |           |   | December 31,2006 |  
|                                                                                                                                                                                                                                                                                                                                      |  | (Dollars in thousands, exceptshare data) |          
|Assets                                                                                                                                                                                                                                                                                                                                |  |                                          |           |   |                  |   |           |  
|Cash and due from banks                                                                                                                                                                                                                                                                                                               |  | $                                        | 48,255    |   |                  | $ | 45,409    |  
|Federal funds sold                                                                                                                                                                                                                                                                                                                    |  |                                          | 4,200     |   |                  |   | 4,211     |  
|                                                                                                                                                                                                                                                                                                                                      |  |                                          |           |   |                  |   |           |  
|Cash and cash equivalents                                                                                                                                                                                                                                                                                                             |  |                                          | 52,455    |   |                  |   | 49,620    |  
|                                                                                                                                                                                                                                                                                                                                      |  |                                          |           |   |                  |   |           |  
|Securities available for sale, at fair value                                                                                                                                                                                                                                                                                          |  |                                          | 143,879   |   |                  |   | 157,260   |  
|Securities held to maturity (fair value of $11,731 and $11,157 at June 30, 2007 and December 31, 2006)                                                                                                                                                                                                                                |  |                                          | 12,160    |   |                  |   | 11,217    |  
|Bank stocks, at cost                                                                                                                                                                                                                                                                                                                  |  |                                          | 32,176    |   |                  |   | 31,845    |  
|                                                                                                                                                                                                                                                                                                                                      |  |                                          |           |   |                  |   |           |  
|Total investments                                                                                                                                                                                                                                                                                                                     |  |                                          | 188,215   |   |                  |   | 200,322   |  
|                                                                                                                                                                                                                                                                                                                                      |  |                                          |           |   |                  |   |           |  
|Loans, net of unearned discount                                                                                                                                                                                                                                                                                                       |  |                                          | 1,893,440 |   |                  |   | 1,947,487 |  
|Less allowance for loan losses                                                                                                                                                                                                                                                                                                        |  |                                          | (35,594   | ) |                  |   | (27,899   | )
|                                                                                                                                                                                                                                                                                                                                      |  |                                          |           |   |                  |   |           |  
|Net loans                                                                                                                                                                                                                                                                                                                             |  |                                          | 1,857,846 |   |                  |   | 1,919,588 |  
|                                                                                                                                                                                                                                                                                                                                      |  |                                          |           |   |                  |   |           |  
|Premises and equipment, net                                                                                                                                                                                                                                                                                                           |  |                                          | 72,046    |   |                  |   | 74,166    |  
|Other real estate owned and foreclosed assets                                                                                                                                                                                                                                                                                         |  |                                          | 1,385     |   |                  |   | 1,207     |  
|Goodwill                                                                                                                                                                                                                                                                                                                              |  |                                          | 392,958   |   |                  |   | 392,958   |  
|Other intangible assets, net                                                                                                                                                                                                                                                                                                          |  |                                          | 37,209    |   |                  |   | 41,599    |  
|Other assets                                                                                                                                                                                                                                                                                                                          |  |                                          | 38,618    |   |                  |   | 41,140    |  
|                                                                                                                                                                                                                                                                                                                                      |  |                                          |           |   |                  |   |           |  
|Total assets                                                                                                                                                                                                                                                                                                                          |  | $                                        | 2,640,732 |   |                  | $ | 2,720,600 |  
|                                                                                                                                                                                                                                                                                                                                      |  |                                          |           |   |                  |   |           |  
|Liabilities and Stockholders Equity                                                                                                                                                                                                                                                                                                  |  |                                          |           |   |                  |   |           |  
|Liabilities:                                                                                                                                                                                                                                                                                                                          |  |                                          |           |   |                  |   |           |  
|Deposits:                                                                                                                                                                                                                                                                                                                             |  |                                          |           |   |                  |   |           |  
|Noninterest-bearing demand                                                                                                                                                                                                                                                                                                            |  | $                                        | 472,777   |   |                  | $ | 517,612   |  
|Interest-bearing demand                                                                                                                                                                                                                                                                                                               |  |                                          | 798,289   |   |                  |   | 777,579   |  
|Savings                                                                                                                                                                                                                                                                                                                               |  |                                          | 77,508    |   |                  |   | 87,265    |  
|Time                                                                                                                                                                                                                                                                                                                                  |  |                                          | 589,838   |   |                  |   | 577,649   |  
|                                                                                                                                                                                                                                                                                                                                      |  |                                          |           |   |                  |   |           |  
|Total deposits                                                                                                                                                                                                                                                                                                                        |  |                                          | 1,938,412 |   |                  |   | 1,960,105 |  
|Securities sold under agreements to repurchase and federal fund purchases                                                                                                                                                                                                                                                             |  |                                          | 37,391    |   |                  |   | 25,469    |  
|Borrowings                                                                                                                                                                                                                                                                                                                            |  |                                          | 26,030    |   |                  |   | 67,632    |  
|Subordinated debentures                                                                                                                                                                                                                                                                                                               |  |                                          | 41,239    |   |                  |   | 41,239    |  
|Interest payable and other liabilities                                                                                                                                                                                                                                                                                                |  |                                          | 29,970    |   |                  |   | 36,696    |  
|                                                                                                                                                                                                                                                                                                                                      |  |                                          |           |   |                  |   |           |  
|Total liabilities                                                                                                                                                                                                                                                                                                                     |  |                                          | 2,073,042 |   |                  |   | 2,131,141 |  
|                                                                                                                                                                                                                                                                                                                                      |  |                                          |           |   |                  |   |           |  
|Commitments and Contingencies (Notes 7 and 12)                                                                                                                                                                                                                                                                                        |  |                                          |           |   |                  |   |           |  
|Stockholders equity:                                                                                                                                                                                                                                                                                                                 |  |                                          |           |   |                  |   |           |  
|Common stock$.001 par value; 100,000,000 shares authorized, 64,268,450 shares issued, 54,752,303 shares outstanding at June 30,
2007 (includes 1,683,577 shares of unvested restricted stock); 64,154,950 shares issued, 57,236,795 shares outstanding at December 31, 2006 (includes 1,725,825 shares of unvested restricted stock) |  |                                          | 64        |   |                  |   | 64        |  
|Additional paid-in capital                                                                                                                                                                                                                                                                                                            |  |                                          | 616,447   |   |                  |   | 614,489   |  
|Shares to be issued for deferred compensation obligations                                                                                                                                                                                                                                                                             |  |                                          | 562       |   |                  |   | 775       |  
|Retained earnings                                                                                                                                                                                                                                                                                                                     |  |                                          | 41,511    |   |                  |   | 42,896    |  
|Accumulated other comprehensive income (loss)                                                                                                                                                                                                                                                                                         |  |                                          | (522      | ) |                  |   | 809       |  
|Treasury Stock, at cost, 8,790,243 and 6,450,418 shares, respectively                                                                                                                                                                                                                                                                 |  |                                          | (90,372   | ) |                  |   | (69,574   | )
|                                                                                                                                                                                                                                                                                                                                      |  |                                          |           |   |                  |   |           |  
|Total stockholders equity                                                                                                                                                                                                                                                                                                            |  |                                          | 567,690   |   |                  |   | 589,459   |  
|                                                                                                                                                                                                                                                                                                                                      |  |                                          |           |   |                  |   |           |  
|Total liabilities and stockholders equity                                                                                                                                                                                                                                                                                            |  | $                                        | 2,640,732 |   |                  | $ | 2,720,600 |  
|                                                                                                                                                                                                                                                                                                                                      |  |                                          |           |   |                  |   |           |  

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 (Loss)  (Unaudited)



|                                                       |  |                                           |            |                           |      |   |            |  |   |            |   |  |   |            |  
|------------------------------------------------------ |  | ----------------------------------------- | ---------- | ------------------------- | ---- | - | ---------- |  | - | ---------- | - |  | - | ---------- | -
|                                                       |  | Three Months Ended June 30,               |            | Six Months Ended June 30, |     
|                                                       |  | 2007                                      |            |                           | 2006 |   | 2007       |  |   | 2006       |  
|                                                       |  | (Dollars in thousands, except share data) |           
|Interest income:                                       |  |                                           |            |                           |      |   |            |  |   |            |   |  |   |            |  
|Loans, including fees                                  |  | $                                         | 39,087     |                           |      | $ | 40,644     |  | $ | 78,825     |   |  | $ | 81,165     |  
|Investment securities:                                 |  |                                           |            |                           |      |   |            |  |   |            |   |  |   |            |  
|Taxable                                                |  |                                           | 608        |                           |      |   | 718        |  |   | 1,229      |   |  |   | 1,494      |  
|Tax-exempt                                             |  |                                           | 1,336      |                           |      |   | 1,055      |  |   | 2,748      |   |  |   | 1,966      |  
|Dividends                                              |  |                                           | 459        |                           |      |   | 433        |  |   | 934        |   |  |   | 860        |  
|Federal funds sold and other                           |  |                                           | 213        |                           |      |   | 116        |  |   | 327        |   |  |   | 191        |  
|                                                       |  |                                           |            |                           |      |   |            |  |   |            |   |  |   |            |  
|Total interest income                                  |  |                                           | 41,703     |                           |      |   | 42,966     |  |   | 84,063     |   |  |   | 85,676     |  
|                                                       |  |                                           |            |                           |      |   |            |  |   |            |   |  |   |            |  
|Interest expense:                                      |  |                                           |            |                           |      |   |            |  |   |            |   |  |   |            |  
|Deposits                                               |  |                                           | 13,738     |                           |      |   | 11,533     |  |   | 27,084     |   |  |   | 21,680     |  
|Federal funds purchased and repurchase agreements      |  |                                           | 448        |                           |      |   | 293        |  |   | 749        |   |  |   | 554        |  
|Borrowings                                             |  |                                           | 592        |                           |      |   | 851        |  |   | 1,530      |   |  |   | 2,399      |  
|Subordinated debentures                                |  |                                           | 938        |                           |      |   | 901        |  |   | 1,870      |   |  |   | 1,748      |  
|                                                       |  |                                           |            |                           |      |   |            |  |   |            |   |  |   |            |  
|Total interest expense                                 |  |                                           | 15,716     |                           |      |   | 13,578     |  |   | 31,233     |   |  |   | 26,381     |  
|                                                       |  |                                           |            |                           |      |   |            |  |   |            |   |  |   |            |  
|Net interest income                                    |  |                                           | 25,987     |                           |      |   | 29,388     |  |   | 52,830     |   |  |   | 59,295     |  
|Provision for loan losses                              |  |                                           | 12,766     |                           |      |   |           |  |   | 13,615     |   |  |   |           |  
|                                                       |  |                                           |            |                           |      |   |            |  |   |            |   |  |   |            |  
|Net interest income, after provision for loan losses   |  |                                           | 13,221     |                           |      |   | 29,388     |  |   | 39,215     |   |  |   | 59,295     |  
|                                                       |  |                                           |            |                           |      |   |            |  |   |            |   |  |   |            |  
|Noninterest income:                                    |  |                                           |            |                           |      |   |            |  |   |            |   |  |   |            |  
|Customer service and other fees                        |  |                                           | 2,409      |                           |      |   | 2,993      |  |   | 4,852      |   |  |   | 5,625      |  
|Loss on sale of securities                             |  |                                           |           |                           |      |   |           |  |   |           |   |  |   | (5         | )
|Gain on sale of loans                                  |  |                                           |           |                           |      |   | 231        |  |   |           |   |  |   | 545        |  
|Other                                                  |  |                                           | 168        |                           |      |   | 381        |  |   | 292        |   |  |   | 552        |  
|                                                       |  |                                           |            |                           |      |   |            |  |   |            |   |  |   |            |  
|Total noninterest income                               |  |                                           | 2,577      |                           |      |   | 3,605      |  |   | 5,144      |   |  |   | 6,717      |  
|                                                       |  |                                           |            |                           |      |   |            |  |   |            |   |  |   |            |  
|Noninterest expense:                                   |  |                                           |            |                           |      |   |            |  |   |            |   |  |   |            |  
|Salaries and employee benefits                         |  |                                           | 10,724     |                           |      |   | 12,082     |  |   | 21,698     |   |  |   | 23,517     |  
|Occupancy expense                                      |  |                                           | 2,056      |                           |      |   | 1,994      |  |   | 4,177      |   |  |   | 4,046      |  
|Furniture and equipment                                |  |                                           | 1,231      |                           |      |   | 1,231      |  |   | 2,471      |   |  |   | 2,396      |  
|Amortization of intangible assets                      |  |                                           | 2,195      |                           |      |   | 2,999      |  |   | 4,390      |   |  |   | 5,997      |  
|Other general and administrative                       |  |                                           | 11,416     |                           |      |   | 6,698      |  |   | 15,568     |   |  |   | 10,788     |  
|                                                       |  |                                           |            |                           |      |   |            |  |   |            |   |  |   |            |  
|Total noninterest expense                              |  |                                           | 27,622     |                           |      |   | 25,004     |  |   | 48,304     |   |  |   | 46,744     |  
|                                                       |  |                                           |            |                           |      |   |            |  |   |            |   |  |   |            |  
|Income (loss) before income taxes                      |  |                                           | (11,824    | )                         |      |   | 7,989      |  |   | (3,945     | ) |  |   | 19,268     |  
|Income tax expense (benefit)                           |  |                                           | (5,030     | )                         |      |   | 2,612      |  |   | (2,560     | ) |  |   | 6,602      |  
|                                                       |  |                                           |            |                           |      |   |            |  |   |            |   |  |   |            |  
|Income (loss) from continuing operations               |  |                                           | (6,794     | )                         |      |   | 5,377      |  |   | (1,385     | ) |  |   | 12,666     |  
|Income from discontinued operations, net of tax        |  |                                           |           |                           |      |   | 349        |  |   |           |   |  |   | 489        |  
|                                                       |  |                                           |            |                           |      |   |            |  |   |            |   |  |   |            |  
|Net income (loss)                                      |  | $                                         | (6,794     | )                         |      | $ | 5,726      |  | $ | (1,385     | ) |  | $ | 13,155     |  
|                                                       |  |                                           |            |                           |      |   |            |  |   |            |   |  |   |            |  
|Earnings (loss) per sharebasic:                       |  |                                           |            |                           |      |   |            |  |   |            |   |  |   |            |  
|Income (loss) from continuing operations               |  | $                                         | (0.13      | )                         |      | $ | 0.09       |  | $ | (0.03      | ) |  | $ | 0.22       |  
|Income (loss) from discontinued operations, net of tax |  |                                           |           |                           |      |   | 0.01       |  |   |           |   |  |   |           |  
|Net income (loss)                                      |  |                                           | (0.13      | )                         |      |   | 0.10       |  |   | (0.03      | ) |  |   | 0.22       |  
|Earnings (loss) per sharediluted:                     |  |                                           |            |                           |      |   |            |  |   |            |   |  |   |            |  
|Income (loss) from continuing operations               |  | $                                         | (0.13      | )                         |      | $ | 0.09       |  | $ | (0.03      | ) |  | $ | 0.22       |  
|Income (loss) from discontinued operations, net of tax |  |                                           |           |                           |      |   | 0.01       |  |   |           |   |  |   |           |  
|Net income (loss)                                      |  |                                           | (0.13      | )                         |      |   | 0.10       |  |   | (0.03      | ) |  |   | 0.22       |  
|Weighted average shares outstanding-basic              |  |                                           | 53,425,770 |                           |      |   | 58,053,314 |  |   | 54,105,373 |   |  |   | 58,552,516 |  
|Weighted average shares outstanding-diluted            |  |                                           | 53,425,770 |                           |      |   | 58,352,355 |  |   | 54,105,373 |   |  |   | 58,849,243 |  

See Notes to Unaudited Condensed Consolidated Financial Statements.



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##### Table of Contents

CENTENNIAL BANK HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Statement of Changes in Stockholders Equity (Unaudited)



|                                |  |                                         |         |                   |   |      |               |  |   |                  |   |  |                                            |        |   |        |   |        |   |  |   |         |  
|------------------------------- |  | --------------------------------------- | ------- | ----------------- | - | ---- | ------------- |  | - | ---------------- | - |  | ------------------------------------------ | ------ | - | ------ | - | ------ | - |  | - | ------- | -
|                                |  | CommonStock andAdditionalPaid-inCapital |         | Sharesto beIssued |   |      | TreasuryStock |  |   | RetainedEarnings |   |  | AccumulatedOtherComprehensiveIncome (Loss) |        |   | Totals |  
|                                |  | (Dollars in thousands)                  |        
|Balance, December 31, 2006      |  | $                                       | 614,553 |                   | $ | 775  |               |  | $ | (69,574          | ) |  | $                                          | 42,896 |   |        | $ | 809    |   |  | $ | 589,459 |  
|Comprehensive loss:             |  |                                         |         |                   |   |      |               |  |   |                  |   |  |                                            |        |   |        |   |        |   |  |   |         |  
|Net loss                        |  |                                         |        |                   |   |     |               |  |   |                 |   |  |                                            | (1,385 | ) |        |   |       |   |  |   | (1,385  | )
|Other comprehensive loss        |  |                                         |        |                   |   |     |               |  |   |                 |   |  |                                            |       |   |        |   | (1,331 | ) |  |   | (1,331  | )
|                                |  |                                         |         |                   |   |      |               |  |   |                  |   |  |                                            |        |   |        |   |        |   |  |   |         |  
|Total comprehensive loss        |  |                                         |        |                   |   |     |               |  |   |                 |   |  |                                            |       |   |        |   |       |   |  |   | (2,716  | )
|Earned stock award compensation |  |                                         | 1,708   |                   |   |     |               |  |   |                 |   |  |                                            |       |   |        |   |       |   |  |   | 1,708   |  
|Repurchase of common stock      |  |                                         |        |                   |   |     |               |  |   | (20,806          | ) |  |                                            |       |   |        |   |       |   |  |   | (20,806 | )
|Deferred compensation           |  |                                         |        |                   |   | 45   |               |  |   |                 |   |  |                                            |       |   |        |   |       |   |  |   | 45      |  
|Common shares issued            |  |                                         | 250     |                   |   | (258 | )             |  |   | 8                |   |  |                                            |       |   |        |   |       |   |  |   |        |  
|                                |  |                                         |         |                   |   |      |               |  |   |                  |   |  |                                            |        |   |        |   |        |   |  |   |         |  
|Balance, June 30, 2007          |  | $                                       | 616,511 |                   | $ | 562  |               |  | $ | (90,372          | ) |  | $                                          | 41,511 |   |        | $ | (522   | ) |  | $ | 567,690 |  
|                                |  |                                         |         |                   |   |      |               |  |   |                  |   |  |                                            |        |   |        |   |        |   |  |   |         |  

See Notes to Unaudited Condensed Consolidated Financial Statements.



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##### Table of Contents

CENTENNIAL BANK HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows (Unaudited)



|                                                                                                                           |  |                           |         |   |      |   |          |  
|-------------------------------------------------------------------------------------------------------------------------- |  | ------------------------- | ------- | - | ---- | - | -------- | -
|                                                                                                                           |  | Six Months Ended June 30, |        
|                                                                                                                           |  | 2007                      |         |   | 2006 |  
|                                                                                                                           |  | (In thousands)            |        
|Cash flows from operating activities:                                                                                      |  |                           |         |   |      |   |          |  
|Net income (loss)                                                                                                          |  | $                         | (1,385  | ) |      | $ | 13,155   |  
|Adjustments to reconcile net income (loss) to net cash provided by operating activities:                                   |  |                           |         |   |      |   |          |  
|Depreciation and amortization                                                                                              |  |                           | 6,704   |   |      |   | 9,009    |  
|Provision for credit losses                                                                                                |  |                           | 13,615  |   |      |   | 15       |  
|Stock compensation                                                                                                         |  |                           | 1,708   |   |      |   | 1,508    |  
|Loss on sale of securities                                                                                                 |  |                           |        |   |      |   | 5        |  
|Loss (gain) on sale of real estate owned and assets                                                                        |  |                           | 177     |   |      |   | (50      | )
|Real estate valuation adjustments                                                                                          |  |                           | 158     |   |      |   |         |  
|Impairment of assets from discontinued operations, net                                                                     |  |                           |        |   |      |   | 201      |  
|Other                                                                                                                      |  |                           | 1,553   |   |      |   | (718     | )
|Proceeds from sales of loans held for sale                                                                                 |  |                           |        |   |      |   | 39,711   |  
|Originations of loans held for sale                                                                                        |  |                           |        |   |      |   | (36,935  | )
|Net change in:                                                                                                             |  |                           |         |   |      |   |          |  
|Accrued interest receivable and other assets                                                                               |  |                           | 1,706   |   |      |   | 3,669    |  
|Accrued interest payable and other liabilities                                                                             |  |                           | (6,726  | ) |      |   | (6,182   | )
|                                                                                                                           |  |                           |         |   |      |   |          |  
|Net cash provided by operating activities                                                                                  |  |                           | 17,510  |   |      |   | 23,388   |  
|                                                                                                                           |  |                           |         |   |      |   |          |  
|Cash flows from investing activities:                                                                                      |  |                           |         |   |      |   |          |  
|Activity in available-for-sale securities:                                                                                 |  |                           |         |   |      |   |          |  
|Maturities, prepayments, and calls                                                                                         |  |                           | 13,140  |   |      |   | 20,652   |  
|Purchases                                                                                                                  |  |                           | (1,909  | ) |      |   | (53,735  | )
|Activity in held-to-maturity securities and bank stocks:                                                                   |  |                           |         |   |      |   |          |  
|Maturities, prepayments, and calls                                                                                         |  |                           | 435     |   |      |   | 10       |  
|Purchases                                                                                                                  |  |                           | (1,373  | ) |      |   |         |  
|Loan originations and principal collections, net                                                                           |  |                           | 46,822  |   |      |   | 137,316  |  
|Proceeds from sales of foreclosed assets                                                                                   |  |                           | 480     |   |      |   | 1,213    |  
|Proceeds from sales of premises and equipment                                                                              |  |                           | 584     |   |      |   | 189      |  
|Additions to premises and equipment                                                                                        |  |                           | (675    | ) |      |   | (6,035   | )
|Proceeds from sale of subsidiary                                                                                           |  |                           |        |   |      |   | 1,835    |  
|                                                                                                                           |  |                           |         |   |      |   |          |  
|Net cash provided by investing activities                                                                                  |  |                           | 57,504  |   |      |   | 101,445  |  
|                                                                                                                           |  |                           |         |   |      |   |          |  
|Cash flows from financing activities:                                                                                      |  |                           |         |   |      |   |          |  
|Net decrease in deposits                                                                                                   |  |                           | (21,693 | ) |      |   | (54,817  | )
|Net decrease in short-term borrowings                                                                                      |  |                           | (40,082 | ) |      |   | (53,547  | )
|Repayment of long-term debt                                                                                                |  |                           | (1,520  | ) |      |   | (265     | )
|Net change in federal funds purchased and repurchase agreements                                                            |  |                           | 11,922  |   |      |   | (12,480  | )
|Repurchase of common stock                                                                                                 |  |                           | (20,806 | ) |      |   | (17,135  | )
|Tax benefit from vesting of stock compensation                                                                             |  |                           |        |   |      |   | 2        |  
|                                                                                                                           |  |                           |         |   |      |   |          |  
|Net cash used by financing activities                                                                                      |  |                           | (72,179 | ) |      |   | (138,242 | )
|                                                                                                                           |  |                           |         |   |      |   |          |  
|Net change in cash and cash equivalents                                                                                    |  |                           | 2,835   |   |      |   | (13,409  | )
|Cash and cash equivalents, beginning of period                                                                             |  |                           | 49,620  |   |      |   | 118,811  |  
|                                                                                                                           |  |                           |         |   |      |   |          |  
|Cash and cash equivalents, end of period                                                                                   |  | $                         | 52,455  |   |      | $ | 105,402  |  
|                                                                                                                           |  |                           |         |   |      |   |          |  
|Cash and cash equivalents-consolidated statements of cash flows                                                            |  |                           | 52,455  |   |      |   | 105,402  |  
|Cash and cash equivalents from discontinued operations recorded in assets held for sale on the consolidated balance sheets |  |                           |        |   |      |   | (14,703  | )
|                                                                                                                           |  |                           |         |   |      |   |          |  
|Cash and cash equivalents-consolidated balance sheets                                                                      |  | $                         | 52,455  |   |      | $ | 90,699   |  
|                                                                                                                           |  |                           |         |   |      |   |          |  
|Supplemental disclosure of non-cash activities:                                                                            |  |                           |         |   |      |   |          |  
|Loans transferred to other real estate owned                                                                               |  |                           | 952     |   |      |   | 524      |  

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
June 30, 2007, those subsidiaries were Guaranty Bank and Trust Company and Centennial Bank of the West, referred to as Guaranty Bank, and CBW, respectively. At June 30, 2006, those subsidiaries were Guaranty Bank, CBW and Collegiate Peaks
Bank, which was sold on November 1, 2006. Reference to Banks means Guaranty Bank and CBW, and we or Company means Centennial Bank Holdings, Inc. on a consolidated basis with the Banks and Collegiate Peaks, if
applicable. References to Centennial or to the holding company are referring to the parent company on a stand alone basis.

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 (including energy 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 sheets 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, valuation of other real estate owned, deferred tax assets and liabilities, goodwill and other intangible assets, and stock compensation expense. Assumptions and factors 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 Loan Losses
| | --- | -------------------------

The allowance for loan losses is reported as a reduction of outstanding loan balances.

An allowance for loan
losses is maintained at a level deemed appropriate by management to adequately provide for known and probable risks in the loan portfolio. The allowance for loan loss is evaluated on a regular basis by management and 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 borrowers ability to repay, estimated value of any underlying collateral and
prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.

In addition to the allowance for loan losses the Company records a reserve for unfunded commitments. Similar to the allowance for loan
loss, the reserve for unfunded commitments is evaluated on a regular basis by management. This reserve is recorded in other liabilities.



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CENTENNIAL BANK HOLDINGS, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements  (Continued)



| | (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 intangible assets acquired in a purchase business combination and determined to have an indefinite useful life are tested for
impairment and not amortized. Intangible assets with definite useful lives are amortized over their estimated useful lives to their estimated residual values.

Goodwill is our only intangible asset with an indefinite life. The annual impairment analysis of goodwill includes identification of
reporting units, the determination of the carrying value of each reporting unit, including the existing goodwill and intangible assets, and estimating the fair value of each reporting unit. We have identified one significant reporting unit 
banking operations. The Company tests for impairment of goodwill annually or if an event occurs or circumstances change that would more likely than not reduce the fair value of the reporting unit. We determine the fair value of our reporting unit
and compare it to its carrying amount. If the carrying amount of a reporting unit exceeds its fair value, we are required to perform a second step to the impairment test to measure the extent of the impairment.

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.



| | (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. Through June 30, 2007, 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 on a
straight-line basis 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, performance conditions, and awards
with both service periods and performance conditions. The performance-based share awards expire December 31, 2012. 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.



| | (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



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CENTENNIAL BANK HOLDINGS, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements  (Continued)



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 56,928 and 77,366 shares of Company common stock for deferred compensation plan obligations at June 30, 2007 and December 31, 2006, respectively,
which are recorded as treasury stock.



| | (h) | Income taxes
| | --- | ------------

Effective,
January 1, 2007, the Company adopted FASB Interpretation 48, Accounting for Uncertainty in Income Taxes (FIN 48). A tax position is recognized as a benefit only if it is more likely than not that the tax position
would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely to be realized on examination. For tax positions not meeting the
more likely than not test, no tax benefit is recorded. The adoption of FIN 48 had no affect on the Companys financial statements.

The Company and its subsidiaries are subject to U.S. federal income tax and State of Colorado tax. The Company is no longer subject to examination by Federal or state taxing authorities for years before 2003. At
June 30, 2007, the Company did not have any unrecognized tax benefits. The Company does not expect the total amount of unrecognized tax benefits to significantly increase or decrease in the next twelve months. The Company recognizes interest
and/or penalties related to income tax matters in other noninterest expense. The Company did not have any amounts accrued for interest and penalties at January 1, 2007.



| | (i) | Earnings (loss) per Common Share
| | --- | --------------------------------

Basic earnings (loss) per share represents income (loss) available to common shareholders divided by the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per share reflect additional common
shares that would have been outstanding if potential dilutive common shares had been issued. In accordance with SFAS No. 128 (As Amended), Earnings per Share, the Companys obligation to issue shares of stock to participants in its
deferred compensation plan has been treated as outstanding shares of stock in the basic earnings per share calculation. Dilutive common shares that may be issued by the Company relate to unvested common share grants subject to a service condition
for the six-month period ended June 30, 2007 and 2006. Earnings (loss) per common share have been computed based on the following:



|                                                                                   |  |                             |  |                           |  |            |  |           
|---------------------------------------------------------------------------------- |  | --------------------------- |  | ------------------------- |  | ---------- |  | ----------
|                                                                                   |  | Three Months Ended June 30, |  | Six Months Ended June 30,
|                                                                                   |  | 2007                        |  | 2006                      |  | 2007       |  | 2006      
|Average common shares outstanding                                                  |  | 53,425,770                  |  | 58,053,314                |  | 54,105,373 |  | 58,552,516
|Effective of dilutive unvested stock grants (1)                                    |  |                            |  | 299,041                   |  |           |  | 296,727   
|                                                                                   |  |                             |  |                           |  |            |  |           
|Average shares outstanding for calculatingdiluted earnings (loss) per common share |  | 53,425,770                  |  | 58,352,355                |  | 54,105,373 |  | 58,849,243
|                                                                                   |  |                             |  |                           |  |            |  |           



|(1) | Impact of stock grants is antidilutive due to the net loss for the three and six months ended June 30, 2007.
|--- | ------------------------------------------------------------------------------------------------------------



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CENTENNIAL BANK HOLDINGS, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements  (Continued)



| | (j) | Impact of Recently Issued Accounting Standards
| | --- | ----------------------------------------------

Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement and Collateral Assignment Split-Dollar Life Insurance Arrangements: In September 2006, the FASB Emerging Issues Task Force
finalized Issue No. 06-4, Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements. This issue requires that a liability be recorded during the service period when a
split-dollar life insurance agreement continues after participants employment or retirement. The required accrued liability will be based on either the post-employment benefit cost for the continuing life insurance or based on the future death
benefit depending on the contractual terms of the underlying agreement. EITF Issue No. 06-4 is effective for fiscal years beginning after December 15, 2007. Given the similarities between the endorsement split-dollar life insurance
arrangements in EITF Issue no. 06-4 and collateral assignment split-dollar life insurance arrangements, questions have arisen regarding whether similar liability recognition models should be used to account for these types of arrangements. To
address these questions, the EITF Issue No. 06-10 was issued. The objective of Issue 06-10 is to determine when and at what amount to recognize the asset, liability and related compensation costs for a collateral assignment split-dollar life
insurance arrangement that provides a benefit to an employee that extends into postretirement periods. EITF Issue No. 06-10 is effective for fiscal years beginning after December 15, 2007, with earlier application permitted. The Company
does not have any collateral assignment split-dollar life insurance arrangements, thus, does not expect any impact from the adoption of EITF 06-10 on its consolidated financial statements. For its endorsement split-dollar life insurance
arrangements, management does not expect the adoption of EITF 06-4 to have a material impact on the Companys consolidated financial statements.

Accounting for Certain Hybrid Financial Instruments:In February 2006, the FASB issued SFAS No. 155, Accounting for Certain Hybrid Financial Instruments.SFAS 155 amendsSFAS 133, Accounting for
Derivative Instruments and Hedging Activities,and SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. SFAS 155 addresses issues from SFAS 133 Implementation Issue No. D1,
Application of Statement 133 to Beneficial Interests in Securitized Financial Assets. Under the original guidance, SFAS 155 removed the exemption for securitized financial instruments and included scenarios where certain discount
mortgage-backed securities (MBSs) and discount collateralized mortgage obligations (CMOs) with embedded derivative components could be subject to the bifurcation rules of SFAS 133, and therefore be marked to
market through earnings. SFAS 155 is effective for all financial instruments acquired or issued after the beginning of an entitys first fiscal year that begins after September 15, 2006. In October 2006, the FASB met to discuss
implementation issues and industry concerns surrounding SFAS 155. In January 2007, the FASB issued SFAS 133 Implementation Issue No. B40. Implementation Issue No. B40 includes a narrow scope exception from paragraph 13(b) of SFAS 133 for securitized
interests that contain only an embedded derivative that is tied to the prepayment risk of the underlying prepayable financial assets, thereby excluding certain discount MBSs and CMOs from the bifurcation test. The guidance in
Implementation Issue No. B40 generally applies to securitized interests in prepayable financial assets acquired after the adoption of SFAS 155. The mortgage-backed securities held by the Company generally are exempt from bifurcation under the
Implementation Issue No. B40 scope exception. The adoption of SFAS 155 did not have a material impact on the Companys consolidated financial statements.

Fair Value Measurements: In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements, which upon adoption
will replace various definitions of fair value in existing accounting literature with a single definition, will establish a framework for measuring fair value, and will require additional disclosures about fair value measurements. The Statement
clarifies that fair value is the price that would be received to sell an asset or the price paid to transfer a liability in the most advantageous market available to the entity and emphasizes that fair value is a market-based measurement and should
be based on the assumptions market participants would use. The Statement also creates a three-level hierarchy under which individual fair value estimates are to be ranked based on the relative reliability of the inputs used in the valuation. This
hierarchy is the basis for the disclosure requirements, with fair value estimates based on the least reliable inputs requiring more extensive disclosures about the valuation method used and the gains and losses associated with those estimates. SFAS
No. 157 is required to be applied whenever another financial accounting standard requires or permits an asset or liability to be measured at fair value. The statement does not expand the use of fair value to any new circumstances. The Company
will be required to apply the new guidance beginning January 1, 2008, and does not expect it to have a material impact on its financial position or results of operations.



11



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##### Table of Contents

CENTENNIAL BANK HOLDINGS, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements  (Continued)



The Fair Value Option for Financial Assets and Financial Liabilities: The FASB
issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities, in February 2007. This Statement permits companies to choose to measure many financial instruments and certain other items at fair value. Once a
company chooses to report an item at fair value, changes in fair value would be reported in earnings at each reporting date. SFAS No. 159 is effective for us on January 1, 2008. Management is presently evaluating this Statement and has not
yet decided whether we will adopt it with respect to specific financial assets and liabilities on the balance sheet as of the effective date of this statement.



| | (k) | Reclassifications
| | --- | -----------------

Certain
amounts in prior year financial statements have been reclassified to conform to the current year presentation. These reclassifications had no impact on the Companys consolidated financial position, results of operations or net change in cash
and cash equivalents.



|(2) | Securities
|--- | ----------

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



|                                                           |  |                   |         |                      |   |                       |  |   |            |   |  |   |        
|---------------------------------------------------------- |  | ----------------- | ------- | -------------------- | - | --------------------- |  | - | ---------- | - |  | - | -------
|                                                           |  | June 30, 2007    
|                                                           |  | Amortizedcost     |         | Grossunrealizedgains |   | Grossunrealizedlosses |  |   | Fair value
|                                                           |  | (In thousands)   
|Securities available for sale:                             |  |                   |         |                      |   |                       |  |   |            |   |  |   |        
|U.S. government agencies and government-sponsored entities |  | $                 | 3,435   |                      | $ |                      |  | $ | (28        | ) |  | $ | 3,407  
|State and municipal                                        |  |                   | 106,478 |                      |   | 1,245                 |  |   | (1,161     | ) |  |   | 106,562
|Mortgage-backed                                            |  |                   | 33,858  |                      |   | 36                    |  |   | (935       | ) |  |   | 32,959 
|Marketable equity securities                               |  |                   | 951     |                      |   |                      |  |   |           |   |  |   | 951    
|                                                           |  |                   |         |                      |   |                       |  |   |            |   |  |   |        
|Securities available for sale                              |  | $                 | 144,722 |                      | $ | 1,281                 |  | $ | (2,124     | ) |  | $ | 143,879
|                                                           |  |                   |         |                      |   |                       |  |   |            |   |  |   |        
|Securities held to maturity:                               |  |                   |         |                      |   |                       |  |   |            |   |  |   |        
|Mortgage-backed                                            |  | $                 | 12,160  |                      | $ |                      |  | $ | (429       | ) |  | $ | 11,731 
|                                                           |  |                   |         |                      |   |                       |  |   |            |   |  |   |        
|                                                           | 
|                                                           |  | December 31, 2006
|                                                           |  | Amortizedcost     |         | Grossunrealizedgains |   | Grossunrealizedlosses |  |   | Fair value
|                                                           |  | (In thousands)   
|Securities available for sale:                             |  |                   |         |                      |   |                       |  |   |            |   |  |   |        
|U.S. government agencies                                   |  | $                 | 2,426   |                      | $ |                      |  | $ | (18        | ) |  | $ | 2,408  
|State and municipal                                        |  |                   | 113,649 |                      |   | 1,998                 |  |   | (76        | ) |  |   | 115,571
|Mortgage-backed                                            |  |                   | 39,039  |                      |   | 38                    |  |   | (637       | ) |  |   | 38,440 
|Marketable equity securities                               |  |                   | 841     |                      |   |                      |  |   |           |   |  |   | 841    
|                                                           |  |                   |         |                      |   |                       |  |   |            |   |  |   |        
|Securities available for sale                              |  | $                 | 155,955 |                      | $ | 2,036                 |  | $ | (731       | ) |  | $ | 157,260
|                                                           |  |                   |         |                      |   |                       |  |   |            |   |  |   |        
|Securities held to maturity:                               |  |                   |         |                      |   |                       |  |   |            |   |  |   |        
|Mortgage-backed                                            |  | $                 | 11,217  |                      | $ | 38                    |  | $ | (98        | ) |  | $ | 11,157 
|                                                           |  |                   |         |                      |   |                       |  |   |            |   |  |   |        

All individual securities that have been in a continuous unrealized loss position for 12 months or
longer at June 30, 2007, were securities that have been issued by U.S. government agencies and government-sponsored entities and have a AAA credit rating as determined by various rating agencies. These securities have fluctuated in value since
their purchase dates as a result of changes in market interest rates. We concluded that the continuous unrealized loss positions on these securities is a result of the level of market interest rates and not a result of the underlying issuers
ability to repay. In addition, we have the ability and intent to hold these securities until their fair value recovers to their cost. Accordingly, we have not recognized an other than temporary impairment in our consolidated statements of income.



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##### Table of Contents

CENTENNIAL BANK HOLDINGS, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements  (Continued)



|(3) | Loans
|--- | -----

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



|                                    |  |                |           |   |                  |   |           |  
|----------------------------------- |  | -------------- | --------- | - | ---------------- | - | --------- | -
|                                    |  | June 30,2007   |           |   | December 31,2006 |  
|                                    |  | (In thousands) |          
|Loans on real estate:               |  |                |           |   |                  |   |           |  
|Residential and commercial mortgage |  | $              | 742,802   |   |                  | $ | 686,056   |  
|Construction                        |  |                | 321,982   |   |                  |   | 427,465   |  
|Equity lines of credit              |  |                | 53,676    |   |                  |   | 56,468    |  
|Commercial loans                    |  |                | 652,911   |   |                  |   | 647,915   |  
|Agricultural loans                  |  |                | 47,891    |   |                  |   | 51,338    |  
|Lease financing                     |  |                | 6,435     |   |                  |   | 6,704     |  
|Installment loans to individuals    |  |                | 45,214    |   |                  |   | 50,222    |  
|Overdrafts                          |  |                | 4,350     |   |                  |   | 4,319     |  
|SBA and other                       |  |                | 22,044    |   |                  |   | 21,121    |  
|                                    |  |                |           |   |                  |   |           |  
|                                    |  |                | 1,897,305 |   |                  |   | 1,951,608 |  
|Less:                               |  |                |           |   |                  |   |           |  
|Allowance for loan losses           |  |                | (35,594   | ) |                  |   | (27,899   | )
|Unearned discount                   |  |                | (3,865    | ) |                  |   | (4,121    | )
|                                    |  |                |           |   |                  |   |           |  
|Net Loans                           |  | $              | 1,857,846 |   |                  | $ | 1,919,588 |  
|                                    |  |                |           |   |                  |   |           |  

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



|                                           |  |                            |        |   |                               |   |        |  
|------------------------------------------ |  | -------------------------- | ------ | - | ----------------------------- | - | ------ | -
|                                           |  | Quarter EndedJune 30, 2007 |        |   | Six Months EndedJune 30, 2007 |  
|                                           |  | (In thousands)             |       
|Balance, beginning of period               |  | $                          | 27,492 |   |                               | $ | 27,899 |  
|Provision for loan losses                  |  |                            | 12,766 |   |                               |   | 13,615 |  
|Loans charged off                          |  |                            | (5,473 | ) |                               |   | (7,165 | )
|Recoveries on loans previously charged-off |  |                            | 809    |   |                               |   | 1,245  |  
|                                           |  |                            |        |   |                               |   |        |  
|Balance, end of period                     |  | $                          | 35,594 |   |                               | $ | 35,594 |  
|                                           |  |                            |        |   |                               |   |        |  

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



|                                             |  |                            |     |                               |   |    
|-------------------------------------------- |  | -------------------------- | --- | ----------------------------- | - | ---
|                                             |  | Quarter EndedJune 30, 2007 |     | Six Months EndedJune 30, 2007
|                                             |  | (In thousands)            
|Balance, beginning of period                 |  | $                          | 572 |                               | $ | 411
|Provision for losses on unfunded commitments |  |                            | 38  |                               |   | 199
|                                             |  |                            |     |                               |   |    
|Balance, end of period                       |  | $                          | 610 |                               | $ | 610
|                                             |  |                            |     |                               |   |    



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CENTENNIAL BANK HOLDINGS, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements  (Continued)



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



|                                              |  |                               |        |                             |   |       
|--------------------------------------------- |  | ----------------------------- | ------ | --------------------------- | - | ------
|                                              |  | June 30, 2007                 |        | December 31, 2006          
|                                              |  | (In thousands)               
|Impaired loans with a valuation allowance     |  | $                             | 41,914 |                             | $ | 23,616
|Impaired loans without a valuation allowance  |  |                               | 13,931 |                             |   | 15,217
|                                              |  |                               |        |                             |   |       
|Total impaired loans                          |  | $                             | 55,845 |                             | $ | 38,833
|                                              |  |                               |        |                             |   |       
|Valuation allowance related to impaired loans |  | $                             | 14,113 |                             | $ | 8,028 
|                                              |  |                               |        |                             |   |       
|                                              |  |                              
|                                              |  | Six Months EndedJune 30, 2007 |        | Year EndedDecember 31, 2006
|                                              |  | (In thousands)               
|Average investment in impaired loans          |  | $                             | 48,094 |                             | $ | 42,660
|                                              |  |                               |        |                             |   |       

Interest income of $162,000 was recognized on nonaccrual loans during the period ended
June 30, 2007. The gross interest income that would have been recorded in the period ended June 30, 2007, if the loans had been current in accordance with their original terms and had been outstanding throughout the period or since
origination, if held for part of the period, was $2,212,000. At June 30, 2007 and December 31, 2006, nonaccrual loans were $35,515,000 and $32,852,000, respectively. At June 30, 2007 and December 31, 2006, there were $122,000 and
$3,000, respectively, in loans past due ninety days or more that were still accruing interest.



|(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 carrying
amount of goodwill was $392,958,000 for the periods ended June 30, 2007 and December 31, 2006.

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  |  | June 30,2007   |         |   | December 31,2006 |  
|                                  |  |              |  | (In thousands) |        
|Non-compete employment agreements |  | 2 years      |  | $              |        |   |                  | $ | 3,606   |  
|Core deposit intangible assets    |  | 7 - 15 years |  |                | 62,975  |   |                  |   | 62,975  |  
|                                  |  |              |  |                |         |   |                  |   |         |  
|Total other intangible assets     |  |              |  | $              | 62,975  |   |                  | $ | 66,581  |  
|Accumulated amortization          |  |              |  |                | (25,766 | ) |                  |   | (24,982 | )
|                                  |  |              |  |                |         |   |                  |   |         |  
|Net other intangible assets       |  |              |  | $              | 37,209  |   |                  | $ | 41,599  |  
|                                  |  |              |  |                |         |   |                  |   |         |  

Following is the aggregate amortization expense recognized in each period:



|                     |  |                    |       |                  |   |              |  |              |       |  |   |      
|-------------------- |  | ------------------ | ----- | ---------------- | - | ------------ |  | ------------ | ----- |  | - | -----
|                     |  | Three Months Ended |       | Six Months Ended
|                     |  | June 30,2007       |       | June 30,2006     |   | June 30,2007 |  | June 30,2006
|                     |  | (In thousands)    
|Amortization expense |  | $                  | 2,195 |                  | $ | 2,999        |  | $            | 4,390 |  | $ | 5,997



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CENTENNIAL BANK HOLDINGS, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements  (Continued)



|(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 $26,030,000 and $67,632,000 outstanding under these obligations at June 30, 2007 and
December 31, 2006, respectively, with a total commitment, including balances outstanding, of $401,118,000 at June 30, 2007.

At
June 30, 2007, borrowings consisted of a line of credit and term notes at the Federal Home Loan Bank of $2,300,000 and $7,595,000 respectively, $15,015,000 under the U.S. Bank revolving credit agreement and a $1,120,000 Treasury Tax and Loan
note balance.

The total commitment, including balances outstanding, for borrowings at the Federal Home Loan Bank for the term notes and
line of credit at June 30, 2007 was $330.1 million. The interest rate on the line of credit varies with the federal funds rate, which was 5.53% at June 30, 2007. The term notes have fixed interest rates that range from 3.25% 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 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 June 30, 2007, the Company had $15.0 million drawn on this line. The Company is in compliance with all outstanding debt covenants, as amended. The interest
rate varies based on a spread over the federal funds rate, with a rate of 6.8% at June 30, 2007. The credit agreement is secured by Guaranty Bank stock.



|(6) | Subordinated Debentures and Trust Preferred Securities
|--- | ------------------------------------------------------

The Company had $41,239,000 in aggregate principal balances of subordinated debentures outstanding with a weighted average cost of 9.0% and 9.1% at June 30, 2007 and December 31, 2006, 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. As of June 30, 2007, the Company was in compliance with all covenants of these subordinated debentures.

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 stockholders 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 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.



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CENTENNIAL BANK HOLDINGS, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements  (Continued)



The following table summarizes the terms of each subordinated debenture issuance at June 30,
2007 (dollars in thousands):



|                           |  |             |  |        |        |              |           |           |           |                  |          |               |               |             |       |   |                     |          
|-------------------------- |  | ----------- |  | ------ | ------ | ------------ | --------- | --------- | --------- | ---------------- | -------- | ------------- | ------------- | ----------- | ----- | - | ------------------- | ---------
|                           |  | Date Issued |  | Amount |        | MaturityDate |           | Call Date |           | Fixed orVariable |          | Rate Adjuster |               | CurrentRate |       |   | 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% |             | 8.01  | % |                     | 7/15/2007
|Guaranty Capital Trust III |  | 7/7/2003    |  |        | 10,310 |              | 7/7/2033  |           | 7/7/2008  |                  | Variable |               | LIBOR + 3.10% |             | 8.46  | % |                     | 7/7/2007 



|* | Call date represents the earliest date the Company can call the debentures.
|- | ---------------------------------------------------------------------------



|(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.

At the dates indicated, the following commitments were outstanding:



|                             |  |                |         |                  |   |        
|---------------------------- |  | -------------- | ------- | ---------------- | - | -------
|                             |  | June 30,2007   |         | December 31,2006
|                             |  | (In thousands)
|Commitments to extend credit |  | $              | 611,068 |                  | $ | 555,757
|Standby letters of credit    |  |                | 35,814  |                  |   | 32,382 
|Commercial letters of credit |  |                |        |                  |   | 274    
|                             |  |                |         |                  |   |        
|Totals                       |  | $              | 646,882 |                  | $ | 588,413
|                             |  |                |         |                  |   |        

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.



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CENTENNIAL BANK HOLDINGS, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements  (Continued)



|(8) | Stock-Based Compensation
|--- | ------------------------

Under the Companys
2005 Amended and Restated Stock Incentive Plan (the Incentive Plan), the Company may grant stock-based compensation awards to nonemployee directors, key employees, consultants and prospective employees under the terms described in the
Incentive Plan. The allowable stock-based compensation awards include the grant of Options, Restricted Stock Awards, Restricted Stock Unit Awards, Performance Stock Awards, Stock Appreciation Rights and other Equity-Based Awards. The Incentive Plan
provides that eligible participants may be granted shares of Company common stock that are subject to forfeiture until the grantee vests in the stock award based on the established conditions, which include service conditions and established
performance measures.

Prior to vesting of the stock awards with a service vesting condition, each grantee shall have the rights of a
stockholder with respect to voting of the granted stock. The recipient is not entitled to dividend rights with respect to the shares of granted stock until vesting occurs. Prior to vesting of the stock awards with performance vesting conditions,
each grantee shall have the rights of a stockholder with respect to voting of the granted stock. The recipient is not entitled to dividend rights with respect to the shares of granted stock until initial vesting occurs, at which time the dividend
rights will exist on vested and unvested shares of granted stock, subject to termination of such rights under the terms of the Incentive Plan.

Other than the stock awards with service and performance-based vesting conditions, no grants have been made under the Incentive Plan. The Incentive Plan authorizes grants of stock-based compensation awards of up to 2,500,000 shares of
Company common stock, subject to adjustments provided by the Incentive Plan. As of June 30, 2007 and December 31, 2006, there were 1,683,577 and 1,725,825 shares of unvested stock granted (net of forfeitures and vestings), with 751,577 and
741,377 shares available for grant under the Incentive Plan, respectively.

A summary of the status of our outstanding stock awards and
the change during the period is presented in the table below:



|                                 |  |           |   |  |                                        |      
|-------------------------------- |  | --------- | - |  | -------------------------------------- | -----
|                                 |  | Shares    |   |  | WeightedAverage FairValue onAward Date
|Outstanding at December 31, 2006 |  | 1,725,825 |   |  | $                                      | 10.67
|Awarded                          |  | 113,500   |   |  |                                        | 8.74 
|Forfeited                        |  | (123,700  | ) |  |                                        | 10.93
|Vested                           |  | (32,048   | ) |  |                                        | 8.95 
|                                 |  |           |   |  |                                        |      
|Outstanding at June 30, 2007     |  | 1,683,577 |   |  | $                                      | 10.52
|                                 |  |           |   |  |                                        |      

The Company recognized $1,708,000 and $1,508,000 in compensation expense for services rendered for
the six months ended June 30, 2007 and 2006, respectively. The total income tax benefit recognized in the consolidated income statement for share-based compensation arrangements was $650,000 and $573,000 for the six months ended June 30,
2007 and 2006, respectively. At June 30, 2007, compensation cost of $9,250,000 related to nonvested awards not yet recognized is expected to be recognized over a weighted-average period of 2.8 years. There was no aggregate intrinsic value at
June 30, 2007 as the stock price at June 30, 2007 was below the fair value on each of the award dates.



|(9) | Capital Ratios
|--- | --------------

At June 30, 2007 and
December 31, 2006, the Company had leverage ratios of 8.59% and 8.93%, Tier 1 risk-weighted capital ratios of 9.15% and 9.92%, and total risk-weighted capital ratios of 10.40% and 11.17%, 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.



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CENTENNIAL BANK HOLDINGS, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements  (Continued)



|(10) | Total Comprehensive Income (Loss)
|---- | ---------------------------------

The following
table presents the components of other comprehensive loss and total comprehensive income (loss) for the periods presented:



|                                                                 |  |                             |        |   |                           |   |       |      |  |   |        |   |  |   |        |  
|---------------------------------------------------------------- |  | --------------------------- | ------ | - | ------------------------- | - | ----- | ---- |  | - | ------ | - |  | - | ------ | -
|                                                                 |  | Three Months Ended June 30, |        |   | Six Months Ended June 30, |  
|                                                                 |  | 2007                        |        |   | 2006                      |   |       | 2007 |  |   | 2006   |  
|                                                                 |  | (In thousands)              |       
|Net income (loss)                                                |  | $                           | (6,794 | ) |                           | $ | 5,726 |      |  | $ | (1,385 | ) |  | $ | 13,155 |  
|Other comprehensive loss:                                        |  |                             |        |   |                           |   |       |      |  |   |        |   |  |   |        |  
|Change in net unrealized gains (losses), net                     |  |                             | (1,940 | ) |                           | $ | (593  | )    |  |   | (2,147 | ) |  |   | (869   | )
|Less: Reclassification adjustments for losses included in income |  |                             |       |   |                           |   |      |      |  |   |       |   |  |   | 5      |  
|                                                                 |  |                             |        |   |                           |   |       |      |  |   |        |   |  |   |        |  
|Net unrealized holding gains (losses)                            |  |                             | (1,940 | ) |                           |   | (593  | )    |  |   | (2,147 | ) |  |   | (864   | )
|Income tax benefit                                               |  |                             | 738    |   |                           |   | 171   |      |  |   | 816    |   |  |   | 296    |  
|                                                                 |  |                             |        |   |                           |   |       |      |  |   |        |   |  |   |        |  
|Other comprehensive loss                                         |  |                             | (1,202 | ) |                           |   | (422  | )    |  |   | (1,331 | ) |  |   | (568   | )
|                                                                 |  |                             |        |   |                           |   |       |      |  |   |        |   |  |   |        |  
|Total comprehensive income (loss)                                |  | $                           | (7,996 | ) |                           | $ | 5,304 |      |  | $ | (2,716 | ) |  | $ | 12,587 |  
|                                                                 |  |                             |        |   |                           |   |       |      |  |   |        |   |  |   |        |  



|(11) | Discontinued Operations
|---- | -----------------------

Discontinued Operations

The Companys results of operations for the six months ended June 30, 2006 included the activity from First MainStreet Insurance, which was
sold on March 1, 2006, and Collegiate Peaks Bank, which was held for sale as of June 30, 2006 and sold on November 1, 2006.

The following tables present the summary results of operations presented in discontinued operations for the period ended June 30, 2006.



|                                                    |  |                               |       |  
|--------------------------------------------------- |  | ----------------------------- | ----- | -
|                                                    |  | Six Months EndedJune 30, 2006 |      
|                                                    |  | (In thousands)                |      
|Interest income                                     |  | $                             | 2,130 |  
|                                                    |  |                               |       |  
|Noninterest income                                  |  | $                             | 687   |  
|                                                    |  |                               |       |  
|Net income from discontinued operations, net of tax |  |                               | 698   |  
|Impairment of assets, net of $123 tax benefit       |  |                               | (201  | )
|Intercompany elimination                            |  |                               | (8    | )
|                                                    |  |                               |       |  
|Income from discontinued operations                 |  | $                             | 489   |  
|                                                    |  |                               |       |  



|(12) | 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 alleged 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. In April 2007, the Company and the trustees participated in mediation. As a result of the
mediation, the parties settled the case and the settlement was approved subsequently by the Bankruptcy Court.

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 alleged that certain activities of Guaranty Bank and its



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##### Table of Contents

CENTENNIAL BANK HOLDINGS, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements  (Continued)



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 court subsequently dismissed the Teper action. In August 2007, the parties settled
the Barnes action. As a result of the settlement, the Company recorded a pre-tax charge of approximately $6.5 million, net of insurance coverage. The settlement is subject to the execution by the parties of a mutually agreeable settlement agreement
and the dismissal of the action with prejudice. The settlement does not constitute an admission of liability or responsibility on the part of Guaranty Bank or its former officer, or an admission of the truth or validity of any allegations or claims
made by the Hoover investors.

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 Condensed Consolidated Financial Statements and unaudited Statistical Information included elsewhere in this Report and Items 1, 1A, 6, 7, 7A and 8 of our 2006
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 June 30, 2007, those subsidiaries included Guaranty Bank and Trust Company and
Centennial Bank of the West. Unless the context requires otherwise, the terms Company, us, we, and our refers to Centennial Bank Holdings, Inc. on a consolidated basis. Collegiate Peaks Bank was a
subsidiary prior to November 1, 2006, the time at which its sale was completed. Collegiate Peaks Bank was classified as held for sale from December 31, 2004 through its sale on November 1, 2006, with the results of operations reported
as discontinued operations in the Companys financial statements. 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. On July 24, 2007, the Company announced that it would merge CBW into Guaranty Bank. Management expects to complete the merger by the end of the year, subject to state and federal regulatory approval.

We offer an array of banking products and services to the communities we serve, including accepting time and demand deposits, originating commercial
loans including energy loans, real estate loans, including construction and 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, from fees on the 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.



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##### Table of Contents

Earnings Summary

Table 1 summarizes certain key financial results for us for the periods indicated:

Table 1



|                                                    |  |                                               |            |   |                           |   |                                |  |   |            |   |  |      |            |                                |  |   |            |  |   |            |  
|--------------------------------------------------- |  | --------------------------------------------- | ---------- | - | ------------------------- | - | ------------------------------ |  | - | ---------- | - |  | ---- | ---------- | ------------------------------ |  | - | ---------- |  | - | ---------- | -
|                                                    |  | Three Months Ended June 30,                   |            |   | Six Months Ended June 30, |  
|                                                    |  | 2007                                          |            |   | 2006                      |   | Change -Favorable(Unfavorable) |  |   | 2007       |   |  | 2006 |            | Change -Favorable(Unfavorable) | 
|                                                    |  | (Dollars in thousands, except per share data) |           
|Results of Operations:                              |  |                                               |            |   |                           |   |                                |  |   |            |   |  |      |            |                                |  |   |            |  |   |            |  
|Interest income                                     |  | $                                             | 41,703     |   |                           | $ | 42,966                         |  | $ | (1,263     | ) |  | $    | 84,063     |                                |  | $ | 85,676     |  | $ | (1,613     | )
|Interest expense                                    |  |                                               | 15,716     |   |                           |   | 13,578                         |  |   | (2,138     | ) |  |      | 31,233     |                                |  |   | 26,381     |  |   | (4,852     | )
|                                                    |  |                                               |            |   |                           |   |                                |  |   |            |   |  |      |            |                                |  |   |            |  |   |            |  
|Net interest income                                 |  |                                               | 25,987     |   |                           |   | 29,388                         |  |   | (3,401     | ) |  |      | 52,830     |                                |  |   | 59,295     |  |   | (6,465     | )
|Provision for loan losses                           |  |                                               | 12,766     |   |                           |   |                               |  |   | (12,766    | ) |  |      | 13,615     |                                |  |   |           |  |   | (13,615    | )
|                                                    |  |                                               |            |   |                           |   |                                |  |   |            |   |  |      |            |                                |  |   |            |  |   |            |  
|Net interest income after provision for loan losses |  |                                               | 13,221     |   |                           |   | 29,388                         |  |   | (16,167    | ) |  |      | 39,215     |                                |  |   | 59,295     |  |   | (20,080    | )
|Noninterest income                                  |  |                                               | 2,577      |   |                           |   | 3,605                          |  |   | (1,028     | ) |  |      | 5,144      |                                |  |   | 6,717      |  |   | (1,573     | )
|Noninterest expense                                 |  |                                               | 27,622     |   |                           |   | 25,004                         |  |   | (2,618     | ) |  |      | 48,304     |                                |  |   | 46,744     |  |   | (1,560     | )
|                                                    |  |                                               |            |   |                           |   |                                |  |   |            |   |  |      |            |                                |  |   |            |  |   |            |  
|Income (loss) before income taxes                   |  |                                               | (11,824    | ) |                           |   | 7,989                          |  |   | (19,813    | ) |  |      | (3,945     | )                              |  |   | 19,268     |  |   | (23,213    | )
|Income tax expense (benefit)                        |  |                                               | (5,030     | ) |                           |   | 2,612                          |  |   | 7,642      |   |  |      | (2,560     | )                              |  |   | 6,602      |  |   | 9,162      |  
|                                                    |  |                                               |            |   |                           |   |                                |  |   |            |   |  |      |            |                                |  |   |            |  |   |            |  
|Income (loss) from continuing operations            |  |                                               | (6,794     | ) |                           |   | 5,377                          |  |   | (12,171    | ) |  |      | (1,385     | )                              |  |   | 12,666     |  |   | (14,051    | )
|Income from discontinued operations (net of tax)    |  |                                               |           |   |                           |   | 349                            |  |   | (349       | ) |  |      |           |                                |  |   | 489        |  |   | (489       | )
|                                                    |  |                                               |            |   |                           |   |                                |  |   |            |   |  |      |            |                                |  |   |            |  |   |            |  
|Net income (loss)                                   |  | $                                             | (6,794     | ) |                           | $ | 5,726                          |  | $ | (12,520    | ) |  | $    | (1,385     | )                              |  | $ | 13,155     |  | $ | (14,540    | )
|                                                    |  |                                               |            |   |                           |   |                                |  |   |            |   |  |      |            |                                |  |   |            |  |   |            |  
|Share Data:                                         |  |                                               |            |   |                           |   |                                |  |   |            |   |  |      |            |                                |  |   |            |  |   |            |  
|Basic earnings (loss) per share                     |  | $                                             | (0.13      | ) |                           | $ | 0.10                           |  | $ | (0.23      | ) |  | $    | (0.03      | )                              |  | $ | 0.22       |  | $ | (0.25      | )
|Diluted earnings (loss) per share                   |  | $                                             | (0.13      | ) |                           | $ | 0.10                           |  | $ | (0.23      | ) |  | $    | (0.03      | )                              |  | $ | 0.22       |  | $ | (0.25      | )
|Average shares outstanding                          |  |                                               | 53,425,770 |   |                           |   | 58,053,314                     |  |   | (4,627,544 | ) |  |      | 54,105,373 |                                |  |   | 58,552,516 |  |   | (4,447,143 | )
|Diluted average shares outstanding                  |  |                                               | 53,425,770 |   |                           |   | 58,352,355                     |  |   | (4,926,585 | ) |  |      | 54,105,373 |                                |  |   | 58,849,243 |  |   | (4,743,870 | )

The $6.8 million second quarter 2007 net loss reflected a decrease of $12.5 million from second
quarter 2006. This decrease is mostly attributable to two items.

First, the Company recorded a $12.8 million provision for loan losses
driven in part by the adoption of a more aggressive credit management philosophy, including an accelerated loan disposition strategy for problem credits, as well as adjustments to expected collateral values of impaired loans.

Second, the Company reached a settlement with respect to the Barnes action regarding investors who provided funds to William Gordon Hoover, Jr., the
Hoover Company or related entities (see Part II, Item I for further discussion of this case). As a result of this settlement, the Company recorded a pre-tax charge of approximately $6.5 million, net of insurance coverage.

The Company recorded a net loss of $1.4 million for the six months ended June 30, 2007 as compared to net income of $13.2 million for the same
period in 2006. This decrease of $14.5 million is mostly attributable to the after-tax impact of the $13.6 million provision for loan loss taken year-to-date in 2007, and the settlement of the Barnes action described above.

The components of the income and expense are discussed below.

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.



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##### Table of Contents

The following table summarizes the Companys net interest income and related spread and margin
for the current quarter and prior four quarters:

Table 2



|                     |  |                        |        |   |               |   |        |                  |  |   |                   |   |  |              |        |   |  |   |        |  
|-------------------- |  | ---------------------- | ------ | - | ------------- | - | ------ | ---------------- |  | - | ----------------- | - |  | ------------ | ------ | - |  | - | ------ | -
|                     |  | Quarter Ended          |       
|                     |  | June 30,2007           |        |   | March 31,2007 |   |        | December 31,2006 |  |   | September 30,2006 |   |  | June 30,2006 |       
|                     |  | (Dollars in thousands) |       
|Net interest income  |  | $                      | 25,987 |   |               | $ | 26,843 |                  |  | $ | 27,906            |   |  | $            | 28,996 |   |  | $ | 29,388 |  
|Interest rate spread |  |                        | 3.98   | % |               |   | 4.16   | %                |  |   | 4.14              | % |  |              | 4.45   | % |  |   | 4.66   | %
|Net interest margin  |  |                        | 5.00   | % |               |   | 5.16   | %                |  |   | 5.12              | % |  |              | 5.34   | % |  |   | 5.51   | %

Second quarter 2007 net interest income of $26.0 million decreased by $3.4 million from the second
quarter 2006. This decrease is a result of a $2.2 million unfavorable rate variance and a $1.2 million volume unfavorable variance (see Table 5).

The unfavorable rate variance from the prior year second quarter is mostly attributable to the cost of funds. The cost of funds increased from 3.39% for the second quarter 2006 to 4.04% for the second quarter 2007, an increase of 65 basis
points. This increase in interest expense from the second quarter of 2006 is due mostly to higher costs associated with time deposits with higher rates as a result of competition, as well as the renewals of certificates of deposits at prevailing
interest rates.

The unfavorable volume variance from the prior year second quarter is mostly due to a decrease in earning assets. Average
earning assets in the second quarter 2007 declined by $56.2 million, or 2.6%, from the same period last year. This decrease was mostly in the loan category, which had a $75.8 million decline in average balances for the three months ended
June 30, 2007 as compared to the same period in 2006. This decline was mostly due to a decrease in construction and land development loans. Part of the Companys strategy is to reduce its exposure in construction and land development
loans. Construction and land development loans were $322.0 million at June 30, 2007 as compared to $486.1 million at June 30, 2006, a decrease of $164.1 million, or 33.8%. All other loan categories increased by $129.4 million from
June 30, 2006 to June 30, 2007.

The following table summarizes the Companys net interest income and related spread and
margin for the year-to-date periods presented:

Table 3



|                     |  |                        |        |   |              |   |        |  
|-------------------- |  | ---------------------- | ------ | - | ------------ | - | ------ | -
|                     |  | Six Months Ended       |       
|                     |  | June 30,2007           |        |   | June 30,2006 |  
|                     |  | (Dollars in thousands) |       
|Net interest income  |  | $                      | 52,830 |   |              | $ | 59,295 |  
|Interest rate spread |  |                        | 4.07   | % |              |   | 4.66   | %
|Net interest margin  |  |                        | 5.08   | % |              |   | 5.47   | %

For the six-month period ended June 30, 2007, net interest income decreased by $6.5 million,
or 10.9%, as compared to the same period in 2006. This decrease is due to a $3.9 million unfavorable rate variance and a $2.6 million unfavorable volume variance (see Table 5).

The unfavorable rate variance for year-to-date 2007 is mostly due to higher cost of funds. In particular, time deposits and money market accounts had
significant increases over the prior year due to continued rate competition and repricing at prevailing higher rates. These increases were partially offset by a favorable rate variance due to an 18 basis point increase in the yield on earning
assets. The yield on loans increased by 21 basis points due to loans repricing at higher rates.

The unfavorable volume variance is mostly
a result of lower average earning assets. As stated above, part of the Companys strategy is to decrease its concentration in construction and land development loans. A decrease in these loans was the reason for most of the $87.9 million
decrease in average earning assets for the first six months of 2007 as compared to the same period in 2006. As of June 30, 2007, construction and land development loans comprised 17% of the total loan portfolio as compared to 25% at
June 30, 2006.



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##### Table of Contents

The following table presents, 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.

Table 4



|                                           |  |                        |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|------------------------------------------ |  | ---------------------- | --------- | ------------------------ | ---- | ------------------- |  | ---- | -------------- |  | ------------------------ | --------- | ------------------- | - | ------ |  | ---- | -
|                                           |  | Quarter Ended June 30, |          
|                                           |  | 2007                   |           |                          | 2006 |                    
|                                           |  | 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)   |  | $                      | 1,882,840 |                          | $    | 39,087              |  | 8.33 | %              |  | $                        | 1,958,639 |                     | $ | 40,644 |  | 8.32 | %
|Securities (1)                             |  |                        |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|Taxable                                    |  |                        | 50,425    |                          |      | 608                 |  | 4.83 | %              |  |                          | 72,183    |                     |   | 718    |  | 3.99 | %
|Tax-exempt                                 |  |                        | 108,394   |                          |      | 1,336               |  | 4.94 | %              |  |                          | 75,540    |                     |   | 1,055  |  | 5.60 | %
|Equity Securities (3)                      |  |                        | 32,000    |                          |      | 545                 |  | 6.83 | %              |  |                          | 30,137    |                     |   | 457    |  | 6.08 | %
|Other earning assets                       |  |                        | 11,282    |                          |      | 127                 |  | 4.52 | %              |  |                          | 4,629     |                     |   | 92     |  | 8.01 | %
|                                           |  |                        |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|Total interest-earning assets              |  |                        | 2,084,941 |                          |      | 41,703              |  | 8.02 | %              |  |                          | 2,141,128 |                     |   | 42,966 |  | 8.05 | %
|Non-earning assets:                        |  |                        |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|Cash and due from banks                    |  |                        | 51,780    |                          |      |                     |  |      |                |  |                          | 76,451    |                     |   |        |  |      |  
|Other assets                               |  |                        | 517,916   |                          |      |                     |  |      |                |  |                          | 618,853   |                     |   |        |  |      |  
|                                           |  |                        |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|Total assets                               |  | $                      | 2,654,637 |                          |      |                     |  |      |                |  | $                        | 2,836,432 |                     |   |        |  |      |  
|                                           |  |                        |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|LIABILITIES AND STOCKHOLDERS EQUITY:      |  |                        |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|Interest-bearing liabilities:              |  |                        |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|Deposits:                                  |  |                        |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|Interest-bearing demand                    |  | $                      | 158,872   |                          | $    | 265                 |  | 0.67 | %              |  | $                        | 175,008   |                     | $ | 193    |  | 0.44 | %
|Money Market                               |  |                        | 623,639   |                          |      | 5,904               |  | 3.80 | %              |  |                          | 637,214   |                     |   | 5,412  |  | 3.40 | %
|Savings                                    |  |                        | 78,050    |                          |      | 152                 |  | 0.78 | %              |  |                          | 95,709    |                     |   | 179    |  | 0.75 | %
|Time certificates of deposit               |  |                        | 583,158   |                          |      | 7,417               |  | 5.10 | %              |  |                          | 566,560   |                     |   | 5,749  |  | 4.07 | %
|                                           |  |                        |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|Total interest-bearing deposits            |  |                        | 1,443,719 |                          |      | 13,738              |  | 3.82 | %              |  |                          | 1,474,491 |                     |   | 11,533 |  | 3.14 | %
|Borrowings:                                |  |                        |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|Repurchase agreements                      |  |                        | 36,459    |                          |      | 434                 |  | 4.76 | %              |  |                          | 26,419    |                     |   | 291    |  | 4.30 | %
|Federal funds purchased                    |  |                        | 1,120     |                          |      | 14                  |  | 5.13 | %              |  |                          | 145       |                     |   | 2      |  | 4.95 | %
|Borrowings                                 |  |                        | 39,329    |                          |      | 592                 |  | 6.04 | %              |  |                          | 66,126    |                     |   | 851    |  | 5.25 | %
|Subordinated debentures                    |  |                        | 41,239    |                          |      | 938                 |  | 9.12 | %              |  |                          | 41,239    |                     |   | 901    |  | 8.76 | %
|                                           |  |                        |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|Total interest-bearing liabilities         |  |                        | 1,561,866 |                          |      | 15,716              |  | 4.04 | %              |  |                          | 1,608,420 |                     |   | 13,578 |  | 3.39 | %
|Noninterest bearing liabilities:           |  |                        |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|Demand deposits                            |  |                        | 478,520   |                          |      |                     |  |      |                |  |                          | 519,168   |                     |   |        |  |      |  
|Other liabilities                          |  |                        | 32,603    |                          |      |                     |  |      |                |  |                          | 108,888   |                     |   |        |  |      |  
|                                           |  |                        |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|Total liabilities                          |  |                        | 2,072,989 |                          |      |                     |  |      |                |  |                          | 2,236,476 |                     |   |        |  |      |  
|Stockholders Equity                       |  |                        | 581,648   |                          |      |                     |  |      |                |  |                          | 599,956   |                     |   |        |  |      |  
|                                           |  |                        |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|Total liabilities and stockholders equity |  | $                      | 2,654,637 |                          |      |                     |  |      |                |  | $                        | 2,836,432 |                     |   |        |  |      |  
|                                           |  |                        |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|Net interest income                        |  |                        |           |                          | $    | 25,987              |  |      |                |  |                          |           |                     | $ | 29,388 |  |      |  
|                                           |  |                        |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|Net interest margin                        |  |                        |           |                          |      |                     |  | 5.00 | %              |  |                          |           |                     |   |        |  | 5.51 | %
|                                           |  |                        |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  

---

|(1) | Yields on loans and securities have not been adjusted to a tax-equivalent basis. Net interest margin on a fully tax-equivalent basis would have been 5.15% and 5.63% for the three
months ended June 30, 2007 and June 30, 2006, respectively.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | Net loan fees of $1.6 million and $1.9 million for the three months ended June 30, 2007 and 2006 are included in the yield computation.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------



|(3) | 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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##### Table of Contents

Table 4 (Continued)



|                                           |  |                           |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|------------------------------------------ |  | ------------------------- | --------- | ------------------------ | ---- | ------------------- |  | ---- | -------------- |  | ------------------------ | --------- | ------------------- | - | ------ |  | ---- | -
|                                           |  | Six Months Ended June 30, |          
|                                           |  | 2007                      |           |                          | 2006 |                    
|                                           |  | 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)   |  | $                         | 1,896,185 |                          | $    | 78,825              |  | 8.38 | %              |  | $                        | 2,003,053 |                     | $ | 81,165 |  | 8.17 | %
|Securities (1)                             |  |                           |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|Taxable                                    |  |                           | 51,226    |                          |      | 1,229               |  | 4.84 | %              |  |                          | 72,536    |                     |   | 1,494  |  | 4.15 | %
|Tax-exempt                                 |  |                           | 110,759   |                          |      | 2,748               |  | 5.00 | %              |  |                          | 74,244    |                     |   | 1,966  |  | 5.34 | %
|Equity Securities (3)                      |  |                           | 31,925    |                          |      | 1,020               |  | 6.44 | %              |  |                          | 29,439    |                     |   | 860    |  | 5.89 | %
|Other earning assets                       |  |                           | 7,638     |                          |      | 241                 |  | 6.37 | %              |  |                          | 6,358     |                     |   | 191    |  | 6.06 | %
|                                           |  |                           |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|Total interest-earning assets              |  |                           | 2,097,733 |                          |      | 84,063              |  | 8.08 | %              |  |                          | 2,185,630 |                     |   | 85,676 |  | 7.90 | %
|Non-earning assets:                        |  |                           |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|Cash and due from banks                    |  |                           | 54,322    |                          |      |                     |  |      |                |  |                          | 77,257    |                     |   |        |  |      |  
|Other assets                               |  |                           | 518,931   |                          |      |                     |  |      |                |  |                          | 621,854   |                     |   |        |  |      |  
|                                           |  |                           |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|Total assets                               |  | $                         | 2,670,986 |                          |      |                     |  |      |                |  | $                        | 2,884,741 |                     |   |        |  |      |  
|                                           |  |                           |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|LIABILITIES AND STOCKHOLDERS EQUITY:      |  |                           |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|Interest-bearing liabilities:              |  |                           |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|Deposits:                                  |  |                           |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|Interest-bearing demand                    |  | $                         | 159,470   |                          | $    | 515                 |  | 0.65 | %              |  | $                        | 174,386   |                     | $ | 345    |  | 0.40 | %
|Money Market                               |  |                           | 627,677   |                          |      | 11,761              |  | 3.78 | %              |  |                          | 612,612   |                     |   | 9,619  |  | 3.17 | %
|Savings                                    |  |                           | 81,295    |                          |      | 316                 |  | 0.78 | %              |  |                          | 97,438    |                     |   | 362    |  | 0.75 | %
|Time certificates of deposit               |  |                           | 577,576   |                          |      | 14,492              |  | 5.06 | %              |  |                          | 590,513   |                     |   | 11,354 |  | 3.88 | %
|                                           |  |                           |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|Total interest-bearing deposits            |  |                           | 1,446,018 |                          |      | 27,084              |  | 3.78 | %              |  |                          | 1,474,949 |                     |   | 21,680 |  | 2.96 | %
|Borrowings:                                |  |                           |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|Repurchase agreements                      |  |                           | 30,705    |                          |      | 732                 |  | 4.81 | %              |  |                          | 24,897    |                     |   | 536    |  | 4.23 | %
|Federal funds purchased                    |  |                           | 644       |                          |      | 17                  |  | 5.19 | %              |  |                          | 787       |                     |   | 18     |  | 4.68 | %
|Borrowings                                 |  |                           | 52,843    |                          |      | 1,530               |  | 5.84 | %              |  |                          | 100,899   |                     |   | 2,399  |  | 4.82 | %
|Subordinated debentures                    |  |                           | 41,239    |                          |      | 1,870               |  | 9.14 | %              |  |                          | 41,247    |                     |   | 1,748  |  | 8.55 | %
|                                           |  |                           |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|Total interest-bearing liabilities         |  |                           | 1,571,449 |                          |      | 31,233              |  | 4.01 | %              |  |                          | 1,642,779 |                     |   | 26,381 |  | 3.24 | %
|Noninterest bearing liabilities:           |  |                           |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|Demand deposits                            |  |                           | 480,875   |                          |      |                     |  |      |                |  |                          | 529,433   |                     |   |        |  |      |  
|Other liabilities                          |  |                           | 33,578    |                          |      |                     |  |      |                |  |                          | 110,702   |                     |   |        |  |      |  
|                                           |  |                           |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|Total liabilities                          |  |                           | 2,085,902 |                          |      |                     |  |      |                |  |                          | 2,282,914 |                     |   |        |  |      |  
|Stockholders Equity                       |  |                           | 585,084   |                          |      |                     |  |      |                |  |                          | 601,827   |                     |   |        |  |      |  
|                                           |  |                           |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|Total liabilities and stockholders equity |  | $                         | 2,670,986 |                          |      |                     |  |      |                |  | $                        | 2,884,741 |                     |   |        |  |      |  
|                                           |  |                           |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|Net interest income                        |  |                           |           |                          | $    | 52,830              |  |      |                |  |                          |           |                     | $ | 59,295 |  |      |  
|                                           |  |                           |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|Net interest margin                        |  |                           |           |                          |      |                     |  | 5.08 | %              |  |                          |           |                     |   |        |  | 5.47 | %
|                                           |  |                           |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  

---

|(1) | Yields on loans and securities have not been adjusted to a tax-equivalent basis. Net interest margin on a fully tax-equivalent basis would have been 5.24% and 5.59% for the six
months ended June 30, 2007 and June 30, 2006, respectively.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | Net loan fees of $3.1 million and $3.9 million for the six months ended June 30, 2007 and 2006 are included in the yield computation.
|--- | -------------------------------------------------------------------------------------------------------------------------------------



|(3) | Includes Bankers Bank of the West stock, Federal Agricultural Mortgage Corporation (Farmer Mac) stock, Federal Reserve Bank stock and Federal Home Loan Bank stock.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------



24



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##### Table of Contents

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 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.

Table 5



|                             |  |                                                                             |        |   |                                                                          |   |        |        |  |   |            |   |  |      |        |   |        |   |        |   |  |   |        |  
|---------------------------- |  | --------------------------------------------------------------------------- | ------ | - | ------------------------------------------------------------------------ | - | ------ | ------ |  | - | ---------- | - |  | ---- | ------ | - | ------ | - | ------ | - |  | - | ------ | -
|                             |  | Three Months Ended June 30, 2007Compared to Three Months EndedJune 30, 2006 |        |   | Six Months Ended June 30, 2007Compared to Six Months Ended June 30, 2006 |  
|                             |  | Net Change                                                                  |        |   | Rate                                                                     |   |        | Volume |  |   | Net Change |   |  | Rate |        |   | Volume |  
|                             |  | (In thousands)                                                              |       
|Interest income:             |  |                                                                             |        |   |                                                                          |   |        |        |  |   |            |   |  |      |        |   |        |   |        |   |  |   |        |  
|Loans held for investment    |  | $                                                                           | (1,557 | ) |                                                                          | $ | 17     |        |  | $ | (1,574     | ) |  | $    | (2,340 | ) |        | $ | 2,208  |   |  | $ | (4,548 | )
|Securities                   |  |                                                                             |        |   |                                                                          |   |        |        |  |   |            |   |  |      |        |   |        |   |        |   |  |   |        |  
|Taxable                      |  |                                                                             | (110   | ) |                                                                          |   | 262    |        |  |   | (372       | ) |  |      | (265   | ) |        |   | 338    |   |  |   | (603   | )
|Tax-exempt                   |  |                                                                             | 281    |   |                                                                          |   | (104   | )      |  |   | 385        |   |  |      | 782    |   |        |   | (115   | ) |  |   | 897    |  
|Equity Securities            |  |                                                                             | 88     |   |                                                                          |   | 59     |        |  |   | 29         |   |  |      | 160    |   |        |   | 84     |   |  |   | 76     |  
|Other earning assets         |  |                                                                             | 35     |   |                                                                          |   | (15    | )      |  |   | 50         |   |  |      | 50     |   |        |   | 10     |   |  |   | 40     |  
|                             |  |                                                                             |        |   |                                                                          |   |        |        |  |   |            |   |  |      |        |   |        |   |        |   |  |   |        |  
|Total interest income        |  |                                                                             | (1,263 | ) |                                                                          |   | 219    |        |  |   | (1,482     | ) |  |      | (1,613 | ) |        |   | 2,525  |   |  |   | (4,138 | )
|Interest expense:            |  |                                                                             |        |   |                                                                          |   |        |        |  |   |            |   |  |      |        |   |        |   |        |   |  |   |        |  
|Deposits:                    |  |                                                                             |        |   |                                                                          |   |        |        |  |   |            |   |  |      |        |   |        |   |        |   |  |   |        |  
|Interest-bearing demand      |  |                                                                             | 72     |   |                                                                          |   | 88     |        |  |   | (16        | ) |  |      | 170    |   |        |   | 197    |   |  |   | (27    | )
|Money Market                 |  |                                                                             | 492    |   |                                                                          |   | 604    |        |  |   | (112       | ) |  |      | 2,142  |   |        |   | 1,900  |   |  |   | 242    |  
|Savings                      |  |                                                                             | (27    | ) |                                                                          |   | 8      |        |  |   | (35        | ) |  |      | (46    | ) |        |   | 18     |   |  |   | (64    | )
|Time certificates of deposit |  |                                                                             | 1,668  |   |                                                                          |   | 1,495  |        |  |   | 173        |   |  |      | 3,138  |   |        |   | 3,381  |   |  |   | (243   | )
|Repurchase agreements        |  |                                                                             | 143    |   |                                                                          |   | 25     |        |  |   | 118        |   |  |      | 196    |   |        |   | 62     |   |  |   | 134    |  
|Federal funds purchased      |  |                                                                             | 12     |   |                                                                          |   | 0      |        |  |   | 12         |   |  |      | (1     | ) |        |   | 15     |   |  |   | (16    | )
|Borrowings                   |  |                                                                             | (259   | ) |                                                                          |   | 187    |        |  |   | (446       | ) |  |      | (869   | ) |        |   | 732    |   |  |   | (1,601 | )
|Subordinated debentures      |  |                                                                             | 37     |   |                                                                          |   | 37     |        |  |   | 0          |   |  |      | 122    |   |        |   | 122    |   |  |   | 0      |  
|                             |  |                                                                             |        |   |                                                                          |   |        |        |  |   |            |   |  |      |        |   |        |   |        |   |  |   |        |  
|Total interest expense       |  |                                                                             | 2,138  |   |                                                                          |   | 2,444  |        |  |   | (306       | ) |  |      | 4,852  |   |        |   | 6,427  |   |  |   | (1,575 | )
|                             |  |                                                                             |        |   |                                                                          |   |        |        |  |   |            |   |  |      |        |   |        |   |        |   |  |   |        |  
|Net interest income          |  | $                                                                           | (3,401 | ) |                                                                          | $ | (2,225 | )      |  | $ | (1,176     | ) |  | $    | (6,465 | ) |        | $ | (3,902 | ) |  | $ | (2,563 | )
|                             |  |                                                                             |        |   |                                                                          |   |        |        |  |   |            |   |  |      |        |   |        |   |        |   |  |   |        |  

Provision for Loan Losses

The provision for loan losses represents a charge against earnings. The provision is the amount required to maintain the allowance for loan losses at a
level that, in our judgment, is adequate to absorb probable incurred losses inherent in the loan portfolio as of the balance sheet date. In periods when an existing allowance is determined to exceed the amount required, the allowance is reduced,
which decreases the charge to earnings through the provision for loan losses. When an existing allowance is deemed to be less than the amount required, an additional provision is recorded, resulting in an additional charge to earnings through the
provision for loan losses.

In the second quarter of 2007, the Company recorded a $12.8 million provision for loan losses as compared to
zero in the same period in 2006. There were several factors causing the significant increase in the provision for loan loss in the second quarter of 2007. The Company modified its credit management philosophy during the second quarter. As a result,
the Company also enhanced its risk rating methodology and problem loan identification process and instituted more aggressive collection efforts and an accelerated disposition strategy regarding problem credits. Further, new collateral valuations and
sales of existing properties in the second quarter contributed to this increase due to adjustments to the expected collateral values of impaired loans.

During the second quarter, total impaired loans increased due to the change in the Companys credit management philosophy. Please see the nonperforming assets and allowance for loan loss analysis in the Balance
Sheet Analysis section of this document for additional information on our asset quality.

For the six months ended June 30, 2007, the
Company recorded a provision for loan loss of $13.6 million as compared to none in the same period in 2006. This increase is mostly attributable to the $12.8 million provision for loan loss taken in the second quarter of 2007 as discussed above.



25



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##### Table of Contents

Noninterest Income

The following table presents the major categories of noninterest income for the current quarter and prior four quarters:

Table 6



|                                  |  |                |       |               |   |                  |  |   |                   |   |              |   |       |  |   |      
|--------------------------------- |  | -------------- | ----- | ------------- | - | ---------------- |  | - | ----------------- | - | ------------ | - | ----- |  | - | -----
|                                  |  | Quarter Ended 
|                                  |  | June 30,2007   |       | March 31,2007 |   | December 31,2006 |  |   | September 30,2006 |   | June 30,2006
|                                  |  | (In thousands)
|Noninterest income:               |  |                |       |               |   |                  |  |   |                   |   |              |   |       |  |   |      
|Customer service and other fees   |  | $              | 2,409 |               | $ | 2,443            |  | $ | 2,137             |   |              | $ | 3,015 |  | $ | 2,993
|Gain (loss) on sale of securities |  |                |      |               |   |                 |  |   | (5                | ) |              |   | 6     |  |   |     
|Gain on sale of loans             |  |                |      |               |   |                 |  |   | (55               | ) |              |   | 229   |  |   | 231  
|Other                             |  |                | 168   |               |   | 124              |  |   | 449               |   |              |   | 224   |  |   | 381  
|                                  |  |                |       |               |   |                  |  |   |                   |   |              |   |       |  |   |      
|Total noninterest income          |  | $              | 2,577 |               | $ | 2,567            |  | $ | 2,526             |   |              | $ | 3,474 |  | $ | 3,605
|                                  |  |                |       |               |   |                  |  |   |                   |   |              |   |       |  |   |      

Noninterest income for second quarter 2007 decreased by $1.0 million from the second quarter 2006.
The decrease in noninterest income between the second quarter 2007 and second quarter 2006 was partly caused by the discontinuation of our residential mortgage group at the end of the third quarter 2006. Noninterest income for second quarter 2007
remained relatively flat for the third consecutive quarter.

The following table presents the major categories of noninterest income for
the year-to-date periods presented:

Table 7



|                                  |  |                  |       |              |   |       |  
|--------------------------------- |  | ---------------- | ----- | ------------ | - | ----- | -
|                                  |  | Six Months Ended |      
|                                  |  | June 30,2007     |       | June 30,2006 |  
|                                  |  | (In thousands)   |      
|Noninterest income:               |  |                  |       |              |   |       |  
|Customer service and other fees   |  | $                | 4,852 |              | $ | 5,625 |  
|Gain (loss) on sale of securities |  |                  |      |              |   | (5    | )
|Gain on sale of loans             |  |                  |      |              |   | 545   |  
|Other                             |  |                  | 292   |              |   | 552   |  
|                                  |  |                  |       |              |   |       |  
|Total noninterest income          |  | $                | 5,144 |              | $ | 6,717 |  
|                                  |  |                  |       |              |   |       |  

Noninterest income for the first six months of 2007 decreased by $1.6 million from the same period
in 2006. The decrease in noninterest income between the year-to-date period in 2007 and the same period in 2006 was partly caused by a reduction in loan placement and other fees in 2007 as compared to 2006, as well as the discontinuation of our
residential mortgage group at the end of the third quarter 2006.

Noninterest Expense

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

Table 8



|                                  |  |                |        |               |   |                  |  |                   |        |              |   |        |  |   |       
|--------------------------------- |  | -------------- | ------ | ------------- | - | ---------------- |  | ----------------- | ------ | ------------ | - | ------ |  | - | ------
|                                  |  | Quarter Ended 
|                                  |  | June 30,2007   |        | March 31,2007 |   | December 31,2006 |  | September 30,2006 |        | June 30,2006
|                                  |  | (In thousands)
|Noninterest expense:              |  |                |        |               |   |                  |  |                   |        |              |   |        |  |   |       
|Salaries and employee benefits    |  | $              | 10,724 |               | $ | 10,974           |  | $                 | 10,662 |              | $ | 12,006 |  | $ | 12,082
|Occupancy expense                 |  |                | 2,056  |               |   | 2,121            |  |                   | 2,040  |              |   | 1,891  |  |   | 1,994 
|Furniture and equipment           |  |                | 1,231  |               |   | 1,240            |  |                   | 1,176  |              |   | 1,289  |  |   | 1,231 
|Amortization of intangible assets |  |                | 2,195  |               |   | 2,195            |  |                   | 2,960  |              |   | 2,858  |  |   | 2,999 
|Other general and administrative  |  |                | 11,416 |               |   | 4,152            |  |                   | 4,467  |              |   | 4,225  |  |   | 6,698 
|                                  |  |                |        |               |   |                  |  |                   |        |              |   |        |  |   |       
|Total noninterest expense         |  | $              | 27,622 |               | $ | 20,682           |  | $                 | 21,305 |              | $ | 22,269 |  | $ | 25,004
|                                  |  |                |        |               |   |                  |  |                   |        |              |   |        |  |   |       



26



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##### Table of Contents

Second quarter 2007 noninterest expense increased from the second quarter 2006 by $2.6 million, or 10.5%.
The increase in the second quarter 2007 as compared to the same period in 2006 is due to the following factors:

In the second quarter of
2007, the Company recorded a $6.5 million settlement charge with respect to the Barnes action (described in Part II, Item 1). Additionally, other general and administrative expense includes a $1.0 million charge in the second quarter 2007
related to certain costs incurred as part of the announced merger of the two subsidiary banks of the Company. The Company expects to consummate the merger of the two subsidiary banks by the end of 2007, subject to state and federal regulatory
approval. The Company expects the total cost of the merger to be approximately $1.5 million.

In the second quarter of 2006, the Company
incurred a $1.6 million charge associated with a management transition.

Without the three items above, noninterest expense would have
decreased by $3.3 million for the second quarter of 2007 as compared to the second quarter of 2006. The remaining decrease is primarily attributable to a decrease in salaries and benefits expense and a decrease to amortization expense. The number of
full-time equivalent employees fell by 48, or approximately 8.5%, from June 30, 2006 to June 30, 2007. The decrease in the amortization of intangible assets for the second quarter 2007 compared to the same period in 2006 is mostly
attributable to accelerated amortization methods on core deposit intangibles, as well as the expiration of noncompete agreements.

The
following table presents, for the year-to-date periods indicated, the major categories of noninterest expense:

Table 9



|                                  |  |                  |        |              |   |       
|--------------------------------- |  | ---------------- | ------ | ------------ | - | ------
|                                  |  | Six Months Ended
|                                  |  | June 30,2007     |        | June 30,2006
|                                  |  | (In thousands)  
|Noninterest expense:              |  |                  |        |              |   |       
|Salaries and employee benefits    |  | $                | 21,698 |              | $ | 23,517
|Occupancy expense                 |  |                  | 4,177  |              |   | 4,046 
|Furniture and equipment           |  |                  | 2,471  |              |   | 2,396 
|Amortization of intangible assets |  |                  | 4,390  |              |   | 5,997 
|Other general and administrative  |  |                  | 15,568 |              |   | 10,788
|                                  |  |                  |        |              |   |       
|Total noninterest expense         |  | $                | 48,304 |              | $ | 46,744
|                                  |  |                  |        |              |   |       

Overall noninterest expense increased by $1.6 million, or 3.3%, for the six months ended
June 30, 2007 as compared to the same period in 2006. This increase is mostly attributable to second quarter 2007 settlement charge for the Barnes action described above, as well as the charge related to the announced merger of our subsidiaries
described above. Partially offsetting these increases, are a $1.8 million decrease in salaries and employee benefits, a $1.6 million decrease in amortization of intangible assets and a $1.6 million decrease to costs associated with a management
transition in the second quarter of 2006.

Income Tax Expense (Benefit)

The Company recorded a tax benefit for both the quarterly and year-to-date periods ended June 30, 2007. The tax benefit for the quarterly and the
year-to-date periods ended June 30, 2007, are a result of net losses for each respective period.

The effective tax rate on income
from continuing operations was 32.7% and 34.3% for the three and six-month periods ending June 30, 2006, respectively. The primary difference between the expected tax rate and the effective tax rates for 2006 was tax-exempt income.



27



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##### Table of Contents

BALANCE SHEET ANALYSIS

The following sets forth certain key consolidated balance sheet data:

Table 10



|                                          |  |                |           |               |   |                  |  |                   |           |              |   |           |  |   |          
|----------------------------------------- |  | -------------- | --------- | ------------- | - | ---------------- |  | ----------------- | --------- | ------------ | - | --------- |  | - | ---------
|                                          |  | June 30,2007   |           | March 31,2007 |   | December 31,2006 |  | September 30,2006 |           | June 30,2006
|                                          |  | (In thousands)
|Net loans (including loans held for sale) |  | $              | 1,857,846 |               | $ | 1,859,121        |  | $                 | 1,919,588 |              | $ | 1,955,529 |  | $ | 1,906,513
|Total assets                              |  |                | 2,640,732 |               |   | 2,693,384        |  |                   | 2,720,600 |              |   | 2,886,647 |  |   | 2,850,281
|Deposits                                  |  |                | 1,938,412 |               |   | 1,971,869        |  |                   | 1,960,105 |              |   | 1,968,264 |  |   | 1,998,054

Loans

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

Table 11



|                                               |  |                |           |   |               |   |           |                  |  |   |                   |   |  |              |           |   |  |   |           |  
|---------------------------------------------- |  | -------------- | --------- | - | ------------- | - | --------- | ---------------- |  | - | ----------------- | - |  | ------------ | --------- | - |  | - | --------- | -
|                                               |  | June 30,2007   |           |   | March 31,2007 |   |           | December 31,2006 |  |   | September 30,2006 |   |  | June 30,2006 |          
|                                               |  | (In thousands) |          
|Real estate  Mortgage                         |  | $              | 742,802   |   |               | $ | 708,416   |                  |  | $ | 686,056           |   |  | $            | 663,170   |   |  | $ | 583,020   |  
|Real estate  Construction                     |  |                | 321,982   |   |               |   | 353,323   |                  |  |   | 427,465           |   |  |              | 463,468   |   |  |   | 486,060   |  
|Equity lines of credit                         |  |                | 53,676    |   |               |   | 54,904    |                  |  |   | 56,468            |   |  |              | 60,817    |   |  |   | 64,355    |  
|Commercial                                     |  |                | 652,911   |   |               |   | 651,796   |                  |  |   | 647,915           |   |  |              | 654,829   |   |  |   | 664,202   |  
|Agricultural                                   |  |                | 47,891    |   |               |   | 46,958    |                  |  |   | 51,338            |   |  |              | 54,805    |   |  |   | 52,897    |  
|Consumer                                       |  |                | 45,214    |   |               |   | 43,891    |                  |  |   | 50,222            |   |  |              | 53,714    |   |  |   | 54,955    |  
|Leases receivable and other                    |  |                | 32,829    |   |               |   | 31,213    |                  |  |   | 32,144            |   |  |              | 32,931    |   |  |   | 26,470    |  
|                                               |  |                |           |   |               |   |           |                  |  |   |                   |   |  |              |           |   |  |   |           |  
|Total gross loans                              |  |                | 1,897,305 |   |               |   | 1,890,501 |                  |  |   | 1,951,608         |   |  |              | 1,983,734 |   |  |   | 1,931,959 |  
|Less: allowance for loan losses                |  |                | (35,594   | ) |               |   | (27,492   | )                |  |   | (27,899           | ) |  |              | (25,977   | ) |  |   | (25,297   | )
|Unearned discount                              |  |                | (3,865    | ) |               |   | (3,888    | )                |  |   | (4,121            | ) |  |              | (4,328    | ) |  |   | (4,737    | )
|                                               |  |                |           |   |               |   |           |                  |  |   |                   |   |  |              |           |   |  |   |           |  
|Net Loans                                      |  | $              | 1,857,846 |   |               | $ | 1,859,121 |                  |  | $ | 1,919,588         |   |  | $            | 1,953,429 |   |  | $ | 1,901,925 |  
|                                               |  |                |           |   |               |   |           |                  |  |   |                   |   |  |              |           |   |  |   |           |  
|Loans held for sale at lower of cost or market |  | $              |          |   |               | $ |          |                  |  | $ |                  |   |  | $            | 2,100     |   |  | $ | 4,588     |  
|                                               |  |                |           |   |               |   |           |                  |  |   |                   |   |  |              |           |   |  |   |           |  

Total loans, net of unearned discount, at June 30, 2007, were $33.8 million lower than at
June 30, 2006. This decrease is due in part to our continued strategy to reduce our concentration in residential construction, land and land development loans. The June 30, 2007 construction and land development loan balances decreased by
$164.1 million from June 30, 2006.

Compared to the prior quarter, loan balances, net of unearned discount, increased by $6.8 million
due mostly to increases in categories other than construction and land development loans.

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 potential risk associated with loans 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.

Table 12



|                                                                                    |  |                |         |   |               |   |        |                  |  |   |                   |   |  |              |        |   |  |   |        |  
|----------------------------------------------------------------------------------- |  | -------------- | ------- | - | ------------- | - | ------ | ---------------- |  | - | ----------------- | - |  | ------------ | ------ | - |  | - | ------ | -
|                                                                                    |  | Quarter Ended  |        
|                                                                                    |  | June 30,2007   |         |   | March 31,2007 |   |        | December 31,2006 |  |   | September 30,2006 |   |  | June 30,2006 |       
|                                                                                    |  | (In thousands) |        
|Nonaccrual loans and leases, not restructured                                       |  | $              | 35,515  |   |               | $ | 31,940 |                  |  | $ | 32,852            |   |  | $            | 26,812 |   |  | $ | 30,684 |  
|Accruing loans past due 90 days or more                                             |  |                | 122     |   |               |   | 323    |                  |  |   | 3                 |   |  |              | 396    |   |  |   | 84     |  
|Other real estate owned                                                             |  |                | 1,385   |   |               |   | 861    |                  |  |   | 1,207             |   |  |              | 5,090  |   |  |   | 1,041  |  
|                                                                                    |  |                |         |   |               |   |        |                  |  |   |                   |   |  |              |        |   |  |   |        |  
|Total nonperforming assets                                                          |  | $              | 37,022  |   |               | $ | 33,124 |                  |  | $ | 34,062            |   |  | $            | 32,298 |   |  | $ | 31,809 |  
|                                                                                    |  |                |         |   |               |   |        |                  |  |   |                   |   |  |              |        |   |  |   |        |  
|Nonperforming loans                                                                 |  | $              | 35,637  |   |               | $ | 32,263 |                  |  | $ | 32,855            |   |  | $            | 27,208 |   |  | $ | 30,768 |  
|Other impaired loans                                                                |  |                | 20,208  |   |               |   | 8,079  |                  |  |   | 5,978             |   |  |              | 17,076 |   |  |   | 16,166 |  
|                                                                                    |  |                |         |   |               |   |        |                  |  |   |                   |   |  |              |        |   |  |   |        |  
|Total impaired loans                                                                |  | $              | 55,845  |   |               | $ | 40,342 |                  |  | $ | 38,833            |   |  | $            | 44,284 |   |  | $ | 46,934 |  
|Allocated allowance for loan losses                                                 |  |                | (14,113 | ) |               |   | (7,673 | )                |  |   | (8,028            | ) |  |              | (6,468 | ) |  |   | (5,685 | )
|                                                                                    |  |                |         |   |               |   |        |                  |  |   |                   |   |  |              |        |   |  |   |        |  
|Net investment in impaired loans                                                    |  | $              | 41,732  |   |               | $ | 32,669 |                  |  | $ | 30,805            |   |  | $            | 37,816 |   |  | $ | 41,249 |  
|                                                                                    |  |                |         |   |               |   |        |                  |  |   |                   |   |  |              |        |   |  |   |        |  
|Charged-off loans                                                                   |  | $              | (5,473  | ) |               | $ | (1,692 | )                |  | $ | (1,088            | ) |  | $            | (1,736 | ) |  | $ | (2,012 | )
|Recoveries                                                                          |  |                | 809     |   |               |   | 436    |                  |  |   | 366               |   |  |              | 177    |   |  |   | 593    |  
|                                                                                    |  |                |         |   |               |   |        |                  |  |   |                   |   |  |              |        |   |  |   |        |  
|Net charge-off loans                                                                |  | $              | (4,664  | ) |               | $ | (1,256 | )                |  | $ | (722              | ) |  | $            | (1,559 | ) |  | $ | (1,419 | )
|                                                                                    |  |                |         |   |               |   |        |                  |  |   |                   |   |  |              |        |   |  |   |        |  
|Allowance for loan losses to loans, net of unearned discount                        |  |                | 1.88    | % |               |   | 1.46   | %                |  |   | 1.43              | % |  |              | 1.31   | % |  |   | 1.31   | %
|Allowance for loan losses to nonaccrual loans                                       |  |                | 100.22  | % |               |   | 86.07  | %                |  |   | 84.92             | % |  |              | 96.89  | % |  |   | 82.44  | %
|Allowance for loan losses to nonperforming assets                                   |  |                | 96.14   | % |               |   | 83.00  | %                |  |   | 81.91             | % |  |              | 80.43  | % |  |   | 79.53  | %
|Allowance for loan losses to nonperforming loans                                    |  |                | 99.88   | % |               |   | 85.21  | %                |  |   | 84.92             | % |  |              | 95.48  | % |  |   | 82.22  | %
|Nonperforming assets to loans, net of unearned discount and other real estate owned |  |                | 1.96    | % |               |   | 1.76   | %                |  |   | 1.75              | % |  |              | 1.63   | % |  |   | 1.65   | %
|Annualized net charge-offs to average loans                                         |  |                | 0.99    | % |               |   | 0.27   | %                |  |   | 0.15              | % |  |              | 0.32   | % |  |   | 0.29   | %
|Nonaccrual loans to loans, net of unearned discount                                 |  |                | 1.88    | % |               |   | 1.69   | %                |  |   | 1.69              | % |  |              | 1.35   | % |  |   | 1.59   | %

Second quarter 2007 nonperforming assets increased by $3.9 million from the first quarter 2007,
while total impaired loans increased by $15.5 million for the same period. The significant increase in impaired loans during the second quarter of 2007 was due mostly to the Company modifying its credit management philosophy. As a result of this
change in credit management philosophy, the Company enhanced its risk rating methodology and problem loan identification process and instituted more aggressive collection efforts and an accelerated disposition strategy regarding problem credits.

As of June 30, 2007, the five largest nonperforming loans amounted to $14.6 million, or 41.2%, of the total nonperforming loans as of
June 30, 2007. These loans were all real estate acquisition and development loans in Northern Colorado.

Our coverage of allowance for
loan losses to loans of 1.88% at June 30, 2007, increased from 1.43% at December 31, 2006 and 1.31% at June 30, 2006. The increase was mostly due to the increase in impaired loans in the second quarter of 2007. The allowance for loan
losses is computed based on the methodology established by management. The increase in the allowance as a percent of total loans corresponds to the direction of the credit quality measures above.



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##### Table of Contents

Allowance for Loan Losses

The allowance for loan losses is maintained at a level that, in our judgment, is adequate to absorb probable incurred losses in the loan portfolio. The
amount of the allowance 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 incurred 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.

The following table provides a summary of the activity within the allowance for loan loss account for the periods presented:

Table 13



|                             |  |                          |        |      |   |        |  
|---------------------------- |  | ------------------------ | ------ | ---- | - | ------ | -
|                             |  | Six Months EndedJune 30, |       
|                             |  | 2007                     |        | 2006 |  
|                             |  | (In thousands)           |       
|Balance, beginning of period |  | $                        | 27,899 |      | $ | 27,475 |  
|Loan charge-offs:            |  |                          |        |      |   |        |  
|Real estate - mortgage       |  |                          | 1,638  |      |   | 1,118  |  
|Real estate - construction   |  |                          | 5,053  |      |   | 1,033  |  
|Commercial                   |  |                          | 259    |      |   | 684    |  
|Agricultural                 |  |                          |       |      |   | 24     |  
|Consumer                     |  |                          | 192    |      |   | 234    |  
|Lease receivable and other   |  |                          | 23     |      |   | 10     |  
|                             |  |                          |        |      |   |        |  
|Total loan charge-offs:      |  |                          | 7,165  |      |   | 3,103  |  
|                             |  |                          |        |      |   |        |  
|Recoveries:                  |  |                          |        |      |   |        |  
|Real estate - mortgage       |  |                          | 486    |      |   | 109    |  
|Real estate - construction   |  |                          | 55     |      |   | 41     |  
|Commercial                   |  |                          | 229    |      |   | 909    |  
|Agricultural                 |  |                          | 13     |      |   | 27     |  
|Consumer                     |  |                          | 79     |      |   | 122    |  
|Lease receivable and other   |  |                          | 383    |      |   |       |  
|                             |  |                          |        |      |   |        |  
|Total loan recoveries        |  |                          | 1,245  |      |   | 1,208  |  
|                             |  |                          |        |      |   |        |  
|Net loan charge-offs         |  |                          | 5,920  |      |   | 1,895  |  
|Provision for loan losses    |  |                          | 13,615 |      |   | (283   | )
|                             |  |                          |        |      |   |        |  
|Balance, end of period       |  | $                        | 35,594 |      | $ | 25,297 |  
|                             |  |                          |        |      |   |        |  

Securities

We manage our investment portfolio principally to provide liquidity, balance our overall interest rate risk and to provide collateral for public deposits and customer repurchase agreements.



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The carrying value of our portfolio of investment securities at June 30, 2007 and December 31,
2006 was as follows:

Table 14



|                                                 |  |                |         |                  |   |                    |  |   |         |   |  |       |   
|------------------------------------------------ |  | -------------- | ------- | ---------------- | - | ------------------ |  | - | ------- | - |  | ----- | --
|                                                 |  | June 30,2007   |         | December 31,2006 |   | Increase(Decrease) |  |   | %Change |  
|                                                 |  | (In thousands) |        
|Securities available-for-sale:                   |  |                |         |                  |   |                    |  |   |         |   |  |       |   
|U.S. Government agencies                         |  | $              | 3,407   |                  | $ | 2,408              |  | $ | 999     |   |  | 41.5  | % 
|Obligations of states and political subdivisions |  |                | 106,562 |                  |   | 115,571            |  |   | (9,009  | ) |  | (7.8  | )%
|Mortgage backed securities                       |  |                | 32,959  |                  |   | 38,440             |  |   | (5,481  | ) |  | (14.3 | )%
|Marketable equity securities                     |  |                | 951     |                  |   | 841                |  |   | 110     |   |  | 13.1  | % 
|                                                 |  |                |         |                  |   |                    |  |   |         |   |  |       |   
|Total securities available-for-sale              |  | $              | 143,879 |                  | $ | 157,260            |  | $ | (13,381 | ) |  | (8.5  | )%
|                                                 |  |                |         |                  |   |                    |  |   |         |   |  |       |   
|Securities held-to-maturity:                     |  |                |         |                  |   |                    |  |   |         |   |  |       |   
|                                                 |  |                |         |                  |   |                    |  |   |         |   |  |       |   
|Mortgage-backed                                  |  | $              | 12,160  |                  | $ | 11,217             |  | $ | 943     |   |  | 8.4   | % 
|                                                 |  |                |         |                  |   |                    |  |   |         |   |  |       |   

The carrying value of our investment securities at June 30, 2007 was $156.0 million, compared
to the December 31, 2006 carrying value of $168.5 million. The decrease in the level of our investments from December 31, 2006, is primarily due to a decision not to maintain excess collateral for certain deposits and customer repurchase
agreements.

Deposits

At the end of
the second quarter 2007, deposits were $1.9 billion, reflecting a decrease of $21.7 million, or 1.1%, from December 31, 2006. The decrease in deposits from December 31, 2006 was driven primarily by a decline in noninterest-bearing deposits
due in part to the normal volatility within our commercial and public deposit base. Even with the decline, noninterest bearing deposits still comprised over 24 percent of total deposits at June 30, 2007, which helped to keep our overall cost of
funds lower.

Table 15



|                             |  |                        |           |           |                      |   |         |   |           |  |        |  
|---------------------------- |  | ---------------------- | --------- | --------- | -------------------- | - | ------- | - | --------- |  | ------ | -
|                             |  | At June 30, 2007       |           |           | At December 31, 2006 |  
|                             |  | Balance                |           | % ofTotal |                      |   | Balance |   | % ofTotal | 
|                             |  | (Dollars in thousands) |          
|Noninterest bearing deposits |  | $                      | 472,777   |           | 24.39                | % |         | $ | 517,612   |  | 26.41  | %
|Interest bearing demand      |  |                        | 156,440   |           | 8.07                 | % |         |   | 169,289   |  | 8.64   | %
|Money market                 |  |                        | 641,849   |           | 33.11                | % |         |   | 608,290   |  | 31.03  | %
|Savings                      |  |                        | 77,508    |           | 4.00                 | % |         |   | 87,265    |  | 4.45   | %
|Time                         |  |                        | 589,838   |           | 30.43                | % |         |   | 577,649   |  | 29.47  | %
|                             |  |                        |           |           |                      |   |         |   |           |  |        |  
|Total Deposits               |  | $                      | 1,938,412 |           | 100.00               | % |         | $ | 1,960,105 |  | 100.00 | %
|                             |  |                        |           |           |                      |   |         |   |           |  |        |  

Borrowings and Subordinated Debentures

At June 30, 2007, our outstanding borrowings were $26.0 million. These borrowings consisted of $2.3 million and $7.6 million of line of credit and
term notes, respectively, at the Federal Home Loan Bank (FHLB); $15.0 million on a U.S. Bank revolving credit agreement; and a $1.1 million Treasury Tax and Loan balance.

Our total available credit from the FHLB, including outstanding balances, was $330.1 million at June 30, 2007. The interest rate on the FHLB line of
credit varies with the federal funds rate, which was 5.53% at June 30, 2007. The term notes have fixed interest rates that range from 3.25% to 6.22%. We have a blanket pledge and security agreement with the FHLB, which encompasses certain loans
and securities as collateral for these borrowings.

We have a $70 million revolving credit agreement 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. As of June 30, 2007,
we had an outstanding balance of $15.0 million and were in compliance with all debt covenants, as amended. The line of credit has a variable rate based on the federal funds rate, which was 6.76% at June 30, 2007. The line of credit is secured
by the stock of Guaranty Bank. U.S. Bank performs various commercial banking services for the Company for which they receive usual and customary fees.



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##### Table of Contents

At June 30, 2007, we had a $41,239,000 aggregate principal balance of subordinated debentures
outstanding with a weighted average cost of 9.14%. 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.

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 stockholders 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 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 its 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.

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.

For regulatory and debt-covenant purposes, the Company maintains capital above the
minimum core standards. The Company maintains capital at a well-capitalized level. Under the regulations adopted by the federal regulatory authorities, a bank is well-capitalized if the institution has a total risk-based capital ratio of 10.0% or
greater, a Tier 1 risk-based capital ratio of 6.0% or greater, and a leverage ratio of 5.0% or greater, and is not subject to any order or written directive by any such regulatory authority to meet and maintain a specific capital level for any
capital measure. Our subsidiary banks are required to maintain similar capital levels under capital adequacy guidelines. At June 30, 2007, our subsidiary banks were all well-capitalized.

The following table provides the current capital ratios as of the dates presented, along with the regulatory capital requirements:

Table 16



|                                |  |              |   |  |                  |   |  |                           |   |  |                                                    |  
|------------------------------- |  | ------------ | - |  | ---------------- | - |  | ------------------------- | - |  | -------------------------------------------------- | -
|                                |  | June 30,2007 |   |  | December 31,2006 |   |  | MinimumCapitalRequirement |   |  | MinimumRequirementFor WellCapitalizedInstitution |  
|Total Risk-Based Capital Ratio  |  | 10.40        | % |  | 11.17            | % |  | 8.00                      | % |  | 10.00                                              | %
|Tier 1 Risk Based Capital Ratio |  | 9.15         | % |  | 9.92             | % |  | 4.00                      | % |  | 6.00                                               | %
|Leverage Ratio                  |  | 8.59         | % |  | 8.93             | % |  | 4.00                      | % |  | 5.00                                               | %



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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
June 30, 2007, the following financial instruments were outstanding whose contract amounts represented credit risk:

Table 17



|                             |  |                |         |                  |   |        
|---------------------------- |  | -------------- | ------- | ---------------- | - | -------
|                             |  | June 30,2007   |         | December 31,2006
|                             |  | (In thousands)
|Commitments to extend credit |  | $              | 611,068 |                  | $ | 555,757
|Standby letters of credit    |  |                | 35,814  |                  |   | 32,382 
|Commercial letters of credit |  |                |        |                  |   | 274    
|                             |  |                |         |                  |   |        
|Totals                       |  | $              | 646,882 |                  | $ | 588,413
|                             |  |                |         |                  |   |        

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 deal with such fluctuations by using 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

Managements Discussion and Analysis of financial condition and results of operations
discusses the Companys condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these condensed consolidated financial
statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the date of the condensed consolidated financial statements and the reported
amounts of revenues and expenses during the reporting period. On an on-going basis, management evaluates its estimates and judgments, including those related to customers and suppliers, allowance for loan losses, bad debts, investments, financing
operations, long-lived assets, contingencies and litigation. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which have
formed the basis for making such judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from the recorded estimates under different assumptions or conditions. A
summary of critical accounting policies and estimates are listed in the Managements Discussion and Analysis of Financial Condition and Results of Operations section of the Companys 2006 Annual Report Form 10-K for the fiscal
year ended December 31, 2006. There have been no changes to these critical accounting policies in 2007.



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##### Table of Contents

|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 to 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 June 30, 2007, we had a negative gap of $173.3 million, or 6.6% of our total assets, that would be subject to re-pricing within one year, with a
total positive gap of $233.1 million, or 8.8% of our total assets that would reprice within 5 years. The liability sensitive gap position in the less than three month category is largely the result of classifying interest-bearing NOW accounts, money
market accounts, and savings accounts as immediately repriceable and therefore maturing in the less than three month column.

The following
table sets forth information concerning re-pricing opportunities for our interest-earning assets and interest bearing liabilities as of June 30, 2007. 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 re-pricing date.



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Table 18



|                                                               |  |                   |           |   |                    |   |          |             |  |   |             |   |  |                            |         |       |  |   |           |  |   |          
|-------------------------------------------------------------- |  | ----------------- | --------- | - | ------------------ | - | -------- | ----------- |  | - | ----------- | - |  | -------------------------- | ------- | ----- |  | - | --------- |  | - | ---------
|                                                               |  | Less Than 3Months |           |   | 3 Months to 1 Year |   |          | 1 to 5Years |  |   | Over 5Years |   |  | Not InterestRate Sensitive |         | Total
|                                                               |  | (In thousands)   
|Interest-bearing cash and cash equivalents                     |  | $                 | 4,210     |   |                    | $ |         |             |  | $ |            |   |  | $                          |        |       |  | $ |          |  | $ | 4,210    
|Investment securities                                          |  |                   | 27,341    |   |                    |   | 9,910    |             |  |   | 29,455      |   |  |                            | 89,333  |       |  |   | 32,176    |  |   | 188,215  
|Loans, gross                                                   |  |                   | 1,056,867 |   |                    |   | 183,160  |             |  |   | 451,017     |   |  |                            | 177,760 |       |  |   | 33,249    |  |   | 1,902,053
|All other assets                                               |  |                   |          |   |                    |   |         |             |  |   |            |   |  |                            |        |       |  |   | 546,254   |  |   | 546,254  
|                                                               |  |                   |           |   |                    |   |          |             |  |   |             |   |  |                            |         |       |  |   |           |  |   |          
|Totals                                                         |  | $                 | 1,088,418 |   |                    | $ | 193,070  |             |  | $ | 480,472     |   |  | $                          | 267,093 |       |  | $ | 611.679   |  | $ | 2,640,732
|                                                               |  |                   |           |   |                    |   |          |             |  |   |             |   |  |                            |         |       |  |   |           |  |   |          
|Deposits                                                       |  | $                 | 1,020,482 |   |                    | $ | 378,445  |             |  | $ | 66,708      |   |  | $                          |        |       |  | $ | 472,777   |  | $ | 1,938,412
|Assets under repurchase agreements and federal funds purchases |  |                   | 37,391    |   |                    |   |         |             |  |   |            |   |  |                            |        |       |  |   |          |  |   | 37,391   
|Borrowings                                                     |  |                   | 1,126     |   |                    |   | 17,332   |             |  |   | 7,327       |   |  |                            | 245     |       |  |   |          |  |   | 26,030   
|Subordinated debentures                                        |  |                   |          |   |                    |   |         |             |  |   |            |   |  |                            | 41,239  |       |  |   |          |  |   | 41,239   
|All other liabilities                                          |  |                   |          |   |                    |   |         |             |  |   |            |   |  |                            |        |       |  |   | 29,970    |  |   | 29,970   
|Stockholders equity                                           |  |                   |          |   |                    |   |         |             |  |   |            |   |  |                            |        |       |  |   | 567,690   |  |   | 567,690  
|                                                               |  |                   |           |   |                    |   |          |             |  |   |             |   |  |                            |         |       |  |   |           |  |   |          
|Totals                                                         |  | $                 | 1,058,999 |   |                    | $ | 395,777  |             |  | $ | 74,035      |   |  | $                          | 41,484  |       |  | $ | 1,070,437 |  | $ | 2,640,732
|                                                               |  |                   |           |   |                    |   |          |             |  |   |             |   |  |                            |         |       |  |   |           |  |   |          
|Period gap (assets minus liabilities)                          |  | $                 | 29,419    |   |                    | $ | (202,707 | )           |  | $ | 406,437     |   |  | $                          | 225,609 |       |  |   |           |  |   |          
|Cumulative gap                                                 |  | $                 | 29,419    |   |                    | $ | (173,288 | )           |  | $ | 233,149     |   |  | $                          | 458,758 |       |  |   |           |  |   |          
|Cumulative rate sensitive gap %                                |  |                   | 1.1       | % |                    |   | (6.6     | )%          |  |   | 8.8         | % |  |                            | 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 June 30, 2007 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 alleged 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. In April 2007, the Company and the trustees participated in mediation. As a result of the
mediation, the parties settled the case and the settlement was approved subsequently by the Bankruptcy Court.

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 alleged 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 court subsequently dismissed the Teper action.
In August 2007, the parties settled the Barnes action. As a result of the settlement, the Company incurred a pre-tax charge of approximately $6.5 million, net of insurance coverage. The settlement is subject to the execution by the parties of a
mutually agreeable settlement agreement and the dismissal of the action with prejudice. The settlement does not constitute an admission of liability or responsibility on the part of Guaranty Bank or its former officer, or an admission of the truth
or validity of any allegations or claims made by the Hoover investors.

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 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, 2006, 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 second quarter 2007.



|                    |  |                      |  |                            |      |                                                                       |         |     |                                                                                          |          
|------------------- |  | -------------------- |  | -------------------------- | ---- | --------------------------------------------------------------------- | ------- | --- | ---------------------------------------------------------------------------------------- | ---------
|                    |  | TotalSharesPurchased |  | AveragePrice Paidper Share |      | Total Number ofShares Purchasedas Part of PubliclyAnnounced Plans (1) |         |     | Maximum Number ofShares that May Yet bePurchased Under the Plansat The End of the Period
|April 1 to April 30 |  | 249,300              |  | $                          | 8.88 |                                                                       | 249,300 |     |                                                                                          | 781,900  
|May 1 to May 31     |  | 454,447              |  |                            | 8.92 |                                                                       | 447,600 | (2) |                                                                                          | 2,334,300
|June 1 to June 30   |  |                     |  |                            |     |                                                                       |        |     |                                                                                          | 2,334,300
|                    |  |                      |  |                            |      |                                                                       |         |     |                                                                                          |          
|                    |  | 703,747              |  | $                          | 8.91 |                                                                       | 696,900 |     |                                                                                          | 2,334,300
|                    |  |                      |  |                            |      |                                                                       |         |     |                                                                                          |          



|(1) | The Company has 334,300 shares remaining under its stock repurchase program
announced on February 13, 2007. On May 8, 2007, we announced the authorization of a new stock repurchase program to repurchase up to 2,000,000 shares of our common stock from time to time over a one-year period in the open market or through
private transactions in accordance with applicable regulations of the Securities and Exchange Commission.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | The difference of 6,847 shares between total shares purchased and total number of
shares purchased as part of publicly announced plans relates to the net settlement of vested restricted stock awards.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|ITEM 3. | Defaults Upon Senior Securities
|------- | -------------------------------

None.



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

None.



|ITEM 5. | Other Information
|------- | -----------------

On July 31, 2007, the
Company entered into Amendment No. 4 to the Revolving Credit Agreement with U.S. Bank National Association to modify the return on equity covenant as it applies to the provision for loan loss taken in the second quarter of 2007.

On August 8, 2007, the Company entered into Amendment No. 5 to the Revolving Credit Agreement with U.S. Bank National Association to modify the
return on equity covenant as it applies to the settlement charge with respect to the Barnes action described in Part II, Item 1.



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|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          |  | Director Compensation.                                                                                                                                                            
|               | 
|10.2           |  | Amendment No. 4 to Revolving Credit Agreement with U.S. Bank National Association, dated July 31, 2007.                                                                           
|               | 
|10.3           |  | Amendment No. 5 to Revolving Credit Agreement with U.S. Bank National Association, dated August 8, 2007.                                                                          
|               | 
|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: August 8, 2007 |  |  |  | CENTENNIAL BANK HOLDINGS, INC.                      
|                     |  | 
|                     |  |  |  | /S/ PAUL W. TAYLOR                                  
|                     |  |  |  | Paul W. Taylor                                      
|                     |  |  |  | Executive Vice President and Chief Financial Officer



39