##### Table of Contents

---

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



---

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 March 31, 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



---

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)                             

303-296-9600

(Registrants telephone number, including area code)



---

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days.    Yes  x    No ̈

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

Large
Accelerated Filer ̈Accelerated Filer   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 May 2, 2007 there were 55,195,718 shares of the registrants common stock outstanding, including 1,729,925 shares of unvested stock
grants.



---



---

##### 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 |  | 5                                                                                    
|                             |  |                                                                                      
|ITEM 1.                      |  | Unaudited Condensed Consolidated Financial Statements                                 |  | 5   
|                             |  |                                                                                      
|                             |  | Unaudited Consolidated Balance Sheets                                                 |  | 5   
|                             |  |                                                                                      
|                             |  | Unaudited Consolidated Statements of Income                                           |  | 6   
|                             |  |                                                                                      
|                             |  | Unaudited Consolidated Statements of Comprehensive Income                             |  | 7   
|                             |  |                                                                                      
|                             |  | Consolidated Statement of Changes in Stockholders Equity                             |  | 8   
|                             |  |                                                                                      
|                             |  | Unaudited Consolidated Statements of Cash Flows                                       |  | 9   
|                             |  |                                                                                      
|                             |  | Notes to Unaudited Condensed Consolidated Financial Statements                        |  | 10  
|                             |  |                                                                                      
|ITEM 2.                      |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 21  
|                             |  |                                                                                      
|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  



2



---

##### 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.
| | - |  | ------------------------------------------------------------------



3



---

##### Table of Contents

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.



4



---

##### Table of Contents

PART IFINANCIAL INFORMATION



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

CENTENNIAL BANK HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Balance Sheets (Unaudited)



|                                                                                                                                                                                                                     |  |                                   |           |   |                  |   |           |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------- | --------- | - | ---------------- | - | --------- | -
|                                                                                                                                                                                                                     |  | March 31,2007                     |           |   | December 31,2006 |  
|                                                                                                                                                                                                                     |  | (In thousands, except share data) |          
|Assets                                                                                                                                                                                                               |  |                                   |           |   |                  |   |           |  
|Cash and due from banks                                                                                                                                                                                              |  | $                                 | 68,639    |   |                  | $ | 45,409    |  
|Federal funds sold                                                                                                                                                                                                   |  |                                   | 25,431    |   |                  |   | 4,211     |  
|                                                                                                                                                                                                                     |  |                                   |           |   |                  |   |           |  
|Cash and cash equivalents                                                                                                                                                                                            |  |                                   | 94,070    |   |                  |   | 49,620    |  
|                                                                                                                                                                                                                     |  |                                   |           |   |                  |   |           |  
|Securities available for sale, at fair value                                                                                                                                                                         |  |                                   | 149,631   |   |                  |   | 157,260   |  
|Securities held to maturity (fair value of $11,122 and $11,157 at March 31, 2007 and December 31, 2006)                                                                                                              |  |                                   | 11,179    |   |                  |   | 11,217    |  
|Bank stocks, at cost                                                                                                                                                                                                 |  |                                   | 31,995    |   |                  |   | 31,845    |  
|                                                                                                                                                                                                                     |  |                                   |           |   |                  |   |           |  
|Total investments                                                                                                                                                                                                    |  |                                   | 192,805   |   |                  |   | 200,322   |  
|                                                                                                                                                                                                                     |  |                                   |           |   |                  |   |           |  
|Loans, net of unearned discount                                                                                                                                                                                      |  |                                   | 1,886,613 |   |                  |   | 1,947,487 |  
|Less allowance for loan losses                                                                                                                                                                                       |  |                                   | (27,492   | ) |                  |   | (27,899   | )
|                                                                                                                                                                                                                     |  |                                   |           |   |                  |   |           |  
|Net loans                                                                                                                                                                                                            |  |                                   | 1,859,121 |   |                  |   | 1,919,588 |  
|                                                                                                                                                                                                                     |  |                                   |           |   |                  |   |           |  
|Premises and equipment, net                                                                                                                                                                                          |  |                                   | 73,599    |   |                  |   | 74,166    |  
|Other real estate owned and foreclosed assets                                                                                                                                                                        |  |                                   | 861       |   |                  |   | 1,207     |  
|Goodwill                                                                                                                                                                                                             |  |                                   | 392,958   |   |                  |   | 392,958   |  
|Other intangible assets, net                                                                                                                                                                                         |  |                                   | 39,404    |   |                  |   | 41,599    |  
|Other assets                                                                                                                                                                                                         |  |                                   | 40,566    |   |                  |   | 41,140    |  
|                                                                                                                                                                                                                     |  |                                   |           |   |                  |   |           |  
|Total assets                                                                                                                                                                                                         |  | $                                 | 2,693,384 |   |                  | $ | 2,720,600 |  
|                                                                                                                                                                                                                     |  |                                   |           |   |                  |   |           |  
|Liabilities and Stockholders Equity                                                                                                                                                                                 |  |                                   |           |   |                  |   |           |  
|Liabilities:                                                                                                                                                                                                         |  |                                   |           |   |                  |   |           |  
|Deposits:                                                                                                                                                                                                            |  |                                   |           |   |                  |   |           |  
|Noninterest-bearing demand                                                                                                                                                                                           |  | $                                 | 519,951   |   |                  | $ | 517,612   |  
|Interest-bearing demand                                                                                                                                                                                              |  |                                   | 789,921   |   |                  |   | 777,579   |  
|Savings                                                                                                                                                                                                              |  |                                   | 81,689    |   |                  |   | 87,265    |  
|Time                                                                                                                                                                                                                 |  |                                   | 580,308   |   |                  |   | 577,649   |  
|                                                                                                                                                                                                                     |  |                                   |           |   |                  |   |           |  
|Total deposits                                                                                                                                                                                                       |  |                                   | 1,971,869 |   |                  |   | 1,960,105 |  
|Securities sold under agreements to repurchase and federal funds purchased                                                                                                                                           |  |                                   | 34,695    |   |                  |   | 25,469    |  
|Borrowings                                                                                                                                                                                                           |  |                                   | 29,804    |   |                  |   | 67,632    |  
|Subordinated debentures                                                                                                                                                                                              |  |                                   | 41,239    |   |                  |   | 41,239    |  
|Interest payable and other liabilities                                                                                                                                                                               |  |                                   | 34,680    |   |                  |   | 36,696    |  
|                                                                                                                                                                                                                     |  |                                   |           |   |                  |   |           |  
|Total liabilities                                                                                                                                                                                                    |  |                                   | 2,112,287 |   |                  |   | 2,131,141 |  
|                                                                                                                                                                                                                     |  |                                   |           |   |                  |   |           |  
|Stockholders equity:                                                                                                                                                                                                |  |                                   |           |   |                  |   |           |  
|Common stock$.001 par value; 100,000,000 shares authorized, 64,233,450 shares issued, 55,475,018 shares outstanding at March 31,
2007; 64,154,950 shares issued, 57,236,795 shares outstanding at December 31, 2006 |  |                                   | 64        |   |                  |   | 64        |  
|Additional paid-in capital                                                                                                                                                                                           |  |                                   | 615,356   |   |                  |   | 614,489   |  
|Shares to be issued for deferred compensation obligations                                                                                                                                                            |  |                                   | 798       |   |                  |   | 775       |  
|Retained earnings                                                                                                                                                                                                    |  |                                   | 48,305    |   |                  |   | 42,896    |  
|Accumulated other comprehensive income                                                                                                                                                                               |  |                                   | 680       |   |                  |   | 809       |  
|Treasury Stock, at cost, 8,168,756 and 6,450,418, respectively                                                                                                                                                       |  |                                   | (84,106   | ) |                  |   | (69,574   | )
|                                                                                                                                                                                                                     |  |                                   |           |   |                  |   |           |  
|Total stockholders equity                                                                                                                                                                                           |  |                                   | 581,097   |   |                  |   | 589,459   |  
|                                                                                                                                                                                                                     |  |                                   |           |   |                  |   |           |  
|Total liabilities and stockholders equity                                                                                                                                                                           |  | $                                 | 2,693,384 |   |                  | $ | 2,720,600 |  
|                                                                                                                                                                                                                     |  |                                   |           |   |                  |   |           |  

See Notes to Unaudited Condensed Consolidated Financial Statements.



5



---

##### Table of Contents

CENTENNIAL BANK HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Statements of Income (Unaudited)



|                                                       |  |                                       |            |      |   |            |  
|------------------------------------------------------ |  | ------------------------------------- | ---------- | ---- | - | ---------- | -
|                                                       |  | Three Months Ended March 31,          |           
|                                                       |  | 2007                                  |            | 2006 |  
|                                                       |  | (In thousands, except per share data) |           
|Interest income:                                       |  |                                       |            |      |   |            |  
|Loans, including fees                                  |  | $                                     | 39,738     |      | $ | 40,521     |  
|Investment securities:                                 |  |                                       |            |      |   |            |  
|Taxable                                                |  |                                       | 621        |      |   | 776        |  
|Tax-exempt                                             |  |                                       | 1,412      |      |   | 911        |  
|Dividends                                              |  |                                       | 475        |      |   | 427        |  
|Federal funds sold and other                           |  |                                       | 114        |      |   | 75         |  
|                                                       |  |                                       |            |      |   |            |  
|Total interest income                                  |  |                                       | 42,360     |      |   | 42,710     |  
|                                                       |  |                                       |            |      |   |            |  
|Interest expense:                                      |  |                                       |            |      |   |            |  
|Deposits                                               |  |                                       | 13,346     |      |   | 10,147     |  
|Federal funds purchased and repurchase agreements      |  |                                       | 301        |      |   | 261        |  
|Subordinated debentures                                |  |                                       | 932        |      |   | 847        |  
|Borrowings                                             |  |                                       | 938        |      |   | 1,548      |  
|                                                       |  |                                       |            |      |   |            |  
|Total interest expense                                 |  |                                       | 15,517     |      |   | 12,803     |  
|                                                       |  |                                       |            |      |   |            |  
|Net interest income                                    |  |                                       | 26,843     |      |   | 29,907     |  
|Provision for credit losses                            |  |                                       | 1,010      |      |   |           |  
|                                                       |  |                                       |            |      |   |            |  
|Net interest income, after provision for credit losses |  |                                       | 25,833     |      |   | 29,907     |  
|Noninterest income:                                    |  |                                       |            |      |   |            |  
|Customer service and other fees                        |  |                                       | 2,443      |      |   | 2,498      |  
|Gain (loss) on sale of securities                      |  |                                       |           |      |   | (5         | )
|Gain on sale of mortgages                              |  |                                       |           |      |   | 314        |  
|Other                                                  |  |                                       | 124        |      |   | 305        |  
|                                                       |  |                                       |            |      |   |            |  
|Total noninterest income                               |  |                                       | 2,567      |      |   | 3,112      |  
|Noninterest expense:                                   |  |                                       |            |      |   |            |  
|Salaries and employee benefits                         |  |                                       | 10,974     |      |   | 11,435     |  
|Occupancy expense                                      |  |                                       | 2,121      |      |   | 2,052      |  
|Furniture and equipment                                |  |                                       | 1,240      |      |   | 1,165      |  
|Amortization of intangible assets                      |  |                                       | 2,195      |      |   | 2,998      |  
|Merger, acquisition and transition expenses            |  |                                       |           |      |   | 88         |  
|Other general and administrative                       |  |                                       | 3,991      |      |   | 4,002      |  
|                                                       |  |                                       |            |      |   |            |  
|Total noninterest expense                              |  |                                       | 20,521     |      |   | 21,740     |  
|                                                       |  |                                       |            |      |   |            |  
|Income before income taxes                             |  |                                       | 7,879      |      |   | 11,279     |  
|Income tax expense                                     |  |                                       | 2,470      |      |   | 3,990      |  
|                                                       |  |                                       |            |      |   |            |  
|Income from continuing operations                      |  |                                       | 5,409      |      |   | 7,289      |  
|Income from discontinued operations, net of tax        |  |                                       |           |      |   | 140        |  
|                                                       |  |                                       |            |      |   |            |  
|Net income                                             |  | $                                     | 5,409      |      | $ | 7,429      |  
|                                                       |  |                                       |            |      |   |            |  
|Weighted average shares outstanding-basic              |  |                                       | 54,792,527 |      |   | 59,057,264 |  
|Effect of dilutive unvested stock awards               |  |                                       | 109,702    |      |   | 183,516    |  
|                                                       |  |                                       |            |      |   |            |  
|Weighted average shares outstanding-diluted            |  |                                       | 54,902,229 |      |   | 59,240,780 |  
|                                                       |  |                                       |            |      |   |            |  
|Earnings per sharebasic:                              |  |                                       |            |      |   |            |  
|Income from continuing operations                      |  | $                                     | 0.10       |      | $ | 0.13       |  
|Income from discontinued operations, net of tax        |  |                                       |           |      |   |           |  
|Net income                                             |  |                                       | 0.10       |      |   | 0.13       |  
|Earnings per sharediluted:                            |  |                                       |            |      |   |            |  
|Income from continuing operations                      |  | $                                     | 0.10       |      | $ | 0.13       |  
|Income from discontinued operations, net of tax        |  |                                       |           |      |   |           |  
|Net income                                             |  |                                       | 0.10       |      |   | 0.13       |  

See Notes to Unaudited Condensed Consolidated Financial Statements.



6



---

##### Table of Contents

CENTENNIAL BANK HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income (Unaudited)



|                                                               |  |                              |       |   |      |   |       |  
|-------------------------------------------------------------- |  | ---------------------------- | ----- | - | ---- | - | ----- | -
|                                                               |  | Three Months Ended March 31, |      
|                                                               |  | 2007                         |       |   | 2006 |  
|                                                               |  | (In thousands)               |      
|Net income                                                     |  | $                            | 5,409 |   |      | $ | 7,429 |  
|Other comprehensive income, net of tax                         |  |                              |       |   |      |   |       |  
|Change in net unrealized gain on securities available for sale |  |                              | (129  | ) |      |   | (146  | )
|                                                               |  |                              |       |   |      |   |       |  
|Total comprehensive income                                     |  | $                            | 5,280 |   |      | $ | 7,283 |  
|                                                               |  |                              |       |   |      |   |       |  

See Notes to Unaudited Condensed Consolidated Financial Statements.



7



---

##### Table of Contents

CENTENNIAL BANK HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Statement of Changes in Stockholders Equity (Unaudited)



|                                                               |  |                                   |   |  |                                         |         |                   |   |     |               |  |   |                  |   |                                     |   |        |        |   |      |   |  |   |         |  
|-------------------------------------------------------------- |  | --------------------------------- | - |  | --------------------------------------- | ------- | ----------------- | - | --- | ------------- |  | - | ---------------- | - | ----------------------------------- | - | ------ | ------ | - | ---- | - |  | - | ------- | -
|                                                               |  | Shares ofCommonStock              |   |  | CommonStock andAdditionalPaid-inCapital |         | Sharesto beIssued |   |     | TreasuryStock |  |   | RetainedEarnings |   | AccumulatedOtherComprehensiveIncome |   |        | Totals |  
|                                                               |  | (In thousands, except share data) |  
|Balance, December 31, 2006                                     |  | 57,236,795                        |   |  | $                                       | 614,553 |                   | $ | 775 |               |  | $ | (69,574          | ) |                                     | $ | 42,896 |        | $ | 809  |   |  | $ | 589,459 |  
|Comprehensive income(loss):                                    |  |                                   |   |  |                                         |         |                   |   |     |               |  |   |                  |   |                                     |   |        |        |   |      |   |  |   |         |  
|Net income                                                     |  |                                  |   |  |                                         |        |                   |   |    |               |  |   |                 |   |                                     |   | 5,409  |        |   |     |   |  |   | 5,409   |  
|Change in net unrealized gain on securities available for sale |  |                                  |   |  |                                         |        |                   |   |    |               |  |   |                 |   |                                     |   |       |        |   | (129 | ) |  |   | (129    | )
|                                                               |  |                                   |   |  |                                         |         |                   |   |     |               |  |   |                  |   |                                     |   |        |        |   |      |   |  |   |         |  
|Total comprehensive income                                     |  |                                  |   |  |                                         |        |                   |   |    |               |  |   |                 |   |                                     |   |       |        |   |     |   |  |   | 5,280   |  
|Stock compensation awards, net of forfeitures                  |  | 34,100                            |   |  |                                         |        |                   |   |    |               |  |   |                 |   |                                     |   |       |        |   |     |   |  |   |        |  
|Earned stock award compensation                                |  |                                  |   |  |                                         | 867     |                   |   |    |               |  |   |                 |   |                                     |   |       |        |   |     |   |  |   | 867     |  
|Repurchase of common stock                                     |  | (1,718,800                        | ) |  |                                         |        |                   |   |    |               |  |   | (14,537          | ) |                                     |   |       |        |   |     |   |  |   | (14,537 | )
|Deferred compensation obligations                              |  | 3,305                             |   |  |                                         |        |                   |   | 28  |               |  |   |                 |   |                                     |   |       |        |   |     |   |  |   | 28      |  
|Common shares issued                                           |  |                                  |   |  |                                         |        |                   |   | (5  | )             |  |   | 5                |   |                                     |   |       |        |   |     |   |  |   |        |  
|                                                               |  |                                   |   |  |                                         |         |                   |   |     |               |  |   |                  |   |                                     |   |        |        |   |      |   |  |   |         |  
|Balance, March 31, 2007                                        |  | 55,555,400                        |   |  | $                                       | 615,420 |                   | $ | 798 |               |  | $ | (84,106          | ) |                                     | $ | 48,305 |        | $ | 680  |   |  | $ | 581,097 |  
|                                                               |  |                                   |   |  |                                         |         |                   |   |     |               |  |   |                  |   |                                     |   |        |        |   |      |   |  |   |         |  

See Notes to Unaudited Condensed Consolidated Financial Statements.



8



---

##### Table of Contents

CENTENNIAL BANK HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows (Unaudited)



|                                                                                                                           |  |                              |         |   |      |   |         |  
|-------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------- | ------- | - | ---- | - | ------- | -
|                                                                                                                           |  | Three Months Ended March 31, |        
|                                                                                                                           |  | 2007                         |         |   | 2006 |  
|                                                                                                                           |  | (In thousands)               |        
|Cash flows from operating activities:                                                                                      |  |                              |         |   |      |   |         |  
|Net income                                                                                                                 |  | $                            | 5,409   |   |      | $ | 7,429   |  
|Adjustments to reconcile net income to net cash provided by operating activities:                                          |  |                              |         |   |      |   |         |  
|Depreciation and amortization                                                                                              |  |                              | 3,423   |   |      |   | 4,460   |  
|Provision for credit losses                                                                                                |  |                              | 1,010   |   |      |   | 8       |  
|Stock compensation                                                                                                         |  |                              | 867     |   |      |   | 700     |  
|Loss on sale of securities                                                                                                 |  |                              |        |   |      |   | 5       |  
|Loss on sale of other real estate owned and assets                                                                         |  |                              | 96      |   |      |   | 122     |  
|Real estate valuation adjustments                                                                                          |  |                              | 158     |   |      |   |        |  
|Loss on discontinued operations                                                                                            |  |                              |        |   |      |   | 201     |  
|Other                                                                                                                      |  |                              | (279    | ) |      |   | (377    | )
|Proceeds from sales of loans held for sale                                                                                 |  |                              |        |   |      |   | 21,991  |  
|Originations of loans held for sale                                                                                        |  |                              |        |   |      |   | (20,586 | )
|Net change in:                                                                                                             |  |                              |         |   |      |   |         |  
|Accrued interest receivable and other assets                                                                               |  |                              | 1,530   |   |      |   | 1,906   |  
|Accrued interest payable and other liabilities                                                                             |  |                              | (2,519  | ) |      |   | 2,213   |  
|                                                                                                                           |  |                              |         |   |      |   |         |  
|Net cash provided by operating activities                                                                                  |  |                              | 9,695   |   |      |   | 18,072  |  
|                                                                                                                           |  |                              |         |   |      |   |         |  
|Cash flows from investing activities:                                                                                      |  |                              |         |   |      |   |         |  
|Activity in available-for-sale securities:                                                                                 |  |                              |         |   |      |   |         |  
|Maturities, prepayments, and calls                                                                                         |  |                              | 8,970   |   |      |   | 9,956   |  
|Purchases                                                                                                                  |  |                              | (1,527  | ) |      |   | (6,569  | )
|Activity in held-to-maturity securities:                                                                                   |  |                              |         |   |      |   |         |  
|Maturities, prepayments, and calls                                                                                         |  |                              | 39      |   |      |   |        |  
|Loan originations and principal collections, net                                                                           |  |                              | 58,788  |   |      |   | 63,918  |  
|Proceeds from sales of other real estate owned and foreclosed assets                                                       |  |                              | 349     |   |      |   | 453     |  
|Proceeds from sales of premises and equipment                                                                              |  |                              | 2       |   |      |   | 115     |  
|Additions to premises and equipment                                                                                        |  |                              | (522    | ) |      |   | (4,730  | )
|Proceeds from sale of subsidiary                                                                                           |  |                              |        |   |      |   | 1,835   |  
|                                                                                                                           |  |                              |         |   |      |   |         |  
|Net cash provided (used) by investing activities                                                                           |  |                              | 66,099  |   |      |   | 64,978  |  
|                                                                                                                           |  |                              |         |   |      |   |         |  
|Cash flows from financing activities:                                                                                      |  |                              |         |   |      |   |         |  
|Net change in deposits                                                                                                     |  |                              | 11,764  |   |      |   | 20,791  |  
|Net change in short-term borrowings                                                                                        |  |                              | (36,391 | ) |      |   | (72,985 | )
|Repayment of long-term debt                                                                                                |  |                              | (1,405  | ) |      |   |        |  
|Net change in federal funds purchased and repurchase agreements                                                            |  |                              | 9,225   |   |      |   | (18,483 | )
|Repurchase of common stock                                                                                                 |  |                              | (14,537 | ) |      |   | (3,603  | )
|                                                                                                                           |  |                              |         |   |      |   |         |  
|Net cash provided (used) by financing activities                                                                           |  |                              | (31,344 | ) |      |   | (74,280 | )
|                                                                                                                           |  |                              |         |   |      |   |         |  
|Net change in cash and cash equivalents                                                                                    |  |                              | 44,450  |   |      |   | 8,770   |  
|Cash and cash equivalents, beginning of period                                                                             |  |                              | 49,620  |   |      |   | 118,811 |  
|                                                                                                                           |  |                              |         |   |      |   |         |  
|Cash and cash equivalents, end of period                                                                                   |  | $                            | 94,070  |   |      | $ | 127,581 |  
|                                                                                                                           |  |                              |         |   |      |   |         |  
|Cash and cash equivalentsconsolidated statements of cash flows                                                            |  | $                            | 94,070  |   |      | $ | 127,581 |  
|Cash and cash equivalents from discontinued operations recorded in assets held for sale on the consolidated balance sheets |  |                              |        |   |      |   | (12,870 | )
|                                                                                                                           |  |                              |         |   |      |   |         |  
|Cash and cash equivalentsconsolidated balance sheets                                                                      |  | $                            | 94,070  |   |      | $ | 114,711 |  
|                                                                                                                           |  |                              |         |   |      |   |         |  
|Supplemental disclosure of cash flow activity:                                                                             |  |                              |         |   |      |   |         |  
|Interest paid on deposits and borrowed funds                                                                               |  | $                            | 16,694  |   |      | $ | 14,077  |  
|Income taxes paid                                                                                                          |  |                              | 18,393  |   |      |   |        |  
|Supplemental disclosure of noncash activities:                                                                             |  |                              |         |   |      |   |         |  
|Note receivable from sale of subsidiary                                                                                    |  |                              |        |   |      |   | 1,175   |  
|Loans transferred to other real estate owned                                                                               |  |                              | 255     |   |      |   | 162     |  

See Notes to Unaudited Condensed Consolidated Financial Statements.



9



---

##### 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
March 31, 2007, those subsidiaries were Guaranty Bank and Trust Company and Centennial Bank of the West, referred to as Guaranty Bank, and CBW, respectively. At March 31, 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 credit losses, valuation of other real estate owned, deferred tax assets and liabilities, goodwill and other intangible assets, and stock compensation expense. Assumptions and factors
used in the estimate of stock compensation costs are evaluated on an annual basis or whenever events or changes in circumstance indicate that the previous assumptions and factors have changed. The result of the analysis could result in adjustments
to the estimates.



| | (c) | Allowance for Credit Losses
| | --- | ---------------------------

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

An allowance for credit
losses is maintained at a level deemed appropriate by management to adequately provide for known and inherent risks in the loan portfolio and commitments for the extension of credit. The allowance for loan losses and reserve for unfunded commitments
are 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.



10



---

##### Table of Contents

| | (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 at October 31 each year 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. The other definite-lived intangible assets are amortized over their useful lives, which range from 1 year to 7 years.



| | (e) | Impairment of Long-Lived Assets
| | --- | -------------------------------

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



| | (f) | Stock Incentive Plan
| | --- | --------------------

The
Companys Amended and Restated 2005 Stock Incentive Plan (Plan) provides for up to 2,500,000 grants of stock options, stock awards, stock units awards, performance stock awards, stock appreciation rights, and other equity-based
awards to key employees, nonemployee directors, consultants and prospective employees. As of December 31, 2006, the Company has only granted stock awards. The Company accounts for the equity-based compensation using the provisions of Statement
of Financial Accounting Standards (SFAS) No. 123R, Share-Based Payment. The Company recognizes expense for services received in a share-based payment transaction as services are received. That cost is recognized 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 are given



11



---

##### Table of Contents

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 76,904 and 77,366 shares of Company common stock for deferred compensation plan obligations at March 31, 2007 and December 31, 2006, respectively, which are recorded as
treasury stock.



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

Income taxes
are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

The Company adopted the provisions of FIN 48 on January 1, 2007. This Interpretation clarifies the accounting and reporting for
uncertainties in income tax law. It prescribes a comprehensive model for the financial statement recognition, measurement, presentation and disclosure of uncertain tax positions. Differences between a tax position taken or expected to be taken in
the Companys tax returns and the amount of benefit recognized and measured in the financial statements result in unrecognized tax benefits, which are recorded in the balance sheet as either a liability for unrecognized tax benefits or
reductions to recorded tax assets, as applicable.

The adoption of FIN 48 did not have any impact on the Companys
consolidated financial statements. At January 1, 2007, the Company had no unrecognized tax benefits that, if recognized, would effect the effective tax rate. The Company does not expect any significant increase in the amount of unrecognized tax
benefits over the next 12 months.

The Company recognizes interest and penalties related to unrecognized tax benefits in
other interest expense and other noninterest expense, respectively. There have been no significant interest or penalties recognized in the financial statements of the Company.

The Company files income tax returns in the U.S. federal jurisdiction and the state of Colorado. The Company is currently not under
examination by any federal or state tax authority, but remains subject to income tax examinations for each of its open tax years (2003 through 2006) in the jurisdictions in which it files.



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

Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements: In September 2006, the FASB issued EITF Issue 06-4, Accounting for
Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements (EITF 06-4). Under EITF 06-4, an employer that enters into an endorsement split-dollar life insurance arrangement
that provides an employee with a postretirement benefit should recognize a liability for the future benefits promised based on the substantive agreement with the employee. EITF 06-4 is effective for fiscal years beginning after December 15,
2007, with earlier application permitted. Management has not yet determined the impact of EITF 06-4 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,which amends SFAS 133, Accounting forDerivative Instruments and Hedging Activities,and SFAS No. 140, Accounting for Transfers and Servicing ofFinancial Assets and
Extinguishments of Liabilities.In February 2006, the FASB issued SFAS No. 155, Accounting for Certain Hybrid Financial Instruments (SFAS 155). SFAS 155 amends SFAS 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 exempt from bifurcation under the Implementation Issue No. B40 scope exception. Management
does not expect the adoption of SFAS 155 to have a material impact on the Companys consolidated financial statements.



12



---

##### Table of Contents

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.

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.



| | (j) | 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:



|                               |  |                   |         |                      |   |                       |  |   |            |   |  |   |        
|------------------------------ |  | ----------------- | ------- | -------------------- | - | --------------------- |  | - | ---------- | - |  | - | -------
|                               |  | March 31, 2007   
|                               |  | Amortizedcost     |         | Grossunrealizedgains |   | Grossunrealizedlosses |  |   | Fair value
|                               |  | (In thousands)   
|Securities available for sale: |  |                   |         |                      |   |                       |  |   |            |   |  |   |        
|U.S. government agencies       |  | $                 | 3,414   |                      | $ |                      |  | $ | (15        | ) |  | $ | 3,399  
|State and municipal            |  |                   | 107,876 |                      |   | 1,769                 |  |   | (185       | ) |  |   | 109,460
|Mortgage-backed                |  |                   | 36,339  |                      |   | 38                    |  |   | (511       | ) |  |   | 35,866 
|Marketable equity securities   |  |                   | 904     |                      |   | 2                     |  |   |           |   |  |   | 906    
|                               |  |                   |         |                      |   |                       |  |   |            |   |  |   |        
|Securities available for sale  |  | $                 | 148,533 |                      | $ | 1,809                 |  | $ | (711       | ) |  | $ | 149,631
|                               |  |                   |         |                      |   |                       |  |   |            |   |  |   |        
|Securities held to maturity:   |  |                   |         |                      |   |                       |  |   |            |   |  |   |        
|Mortgage-backed                |  | $                 | 11,179  |                      | $ | 42                    |  | $ | (99        | ) |  | $ | 11,122 
|                               |  |                   |         |                      |   |                       |  |   |            |   |  |   |        
|                               |  | 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 
|                               |  |                   |         |                      |   |                       |  |   |            |   |  |   |        



13



---

##### Table of Contents

All individual securities that have been in a continuous unrealized loss position for 12 months or longer
at March 31, 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 the temporary impairment in our consolidated statements of income.



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

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



|                                    |  |                |           |   |                  |   |           |  
|----------------------------------- |  | -------------- | --------- | - | ---------------- | - | --------- | -
|                                    |  | March 31,2007  |           |   | December 31,2006 |  
|                                    |  | (In thousands) |          
|Loans on real estate:               |  |                |           |   |                  |   |           |  
|Residential and commercial mortgage |  | $              | 708,416   |   |                  | $ | 686,056   |  
|Construction                        |  |                | 353,323   |   |                  |   | 427,465   |  
|Equity lines of credit              |  |                | 54,904    |   |                  |   | 56,468    |  
|Commercial loans                    |  |                | 651,796   |   |                  |   | 647,915   |  
|Agricultural loans                  |  |                | 46,958    |   |                  |   | 51,338    |  
|Lease financing                     |  |                | 6,503     |   |                  |   | 6,704     |  
|Installment loans to individuals    |  |                | 43,891    |   |                  |   | 50,222    |  
|Overdrafts                          |  |                | 4,499     |   |                  |   | 4,319     |  
|SBA and other                       |  |                | 20,211    |   |                  |   | 21,121    |  
|                                    |  |                |           |   |                  |   |           |  
|                                    |  |                | 1,890,501 |   |                  |   | 1,951,608 |  
|Less:                               |  |                |           |   |                  |   |           |  
|Allowance for loan losses           |  |                | (27,492   | ) |                  |   | (27,899   | )
|Unearned discount                   |  |                | (3,888    | ) |                  |   | (4,121    | )
|                                    |  |                |           |   |                  |   |           |  
|Net Loans                           |  | $              | 1,859,121 |   |                  | $ | 1,919,588 |  
|                                    |  |                |           |   |                  |   |           |  

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



|                                           |  |                |        |  
|------------------------------------------ |  | -------------- | ------ | -
|                                           |  | Quarter Ended  |       
|                                           |  | March 31, 2007 |       
|                                           |  | (In thousands) |       
|Balance, beginning of period               |  | $              | 27,899 |  
|Provision for credit lossesloan losses    |  |                | 849    |  
|Loans charged off                          |  |                | (1,692 | )
|Recoveries on loans previously charged-off |  |                | 436    |  
|                                           |  |                |        |  
|Balance, end of period                     |  | $              | 27,492 |  
|                                           |  |                |        |  

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



|                                                 |  |                |    
|------------------------------------------------ |  | -------------- | ---
|                                                 |  | Quarter Ended 
|                                                 |  | March 31, 2007
|                                                 |  | (In thousands)
|Balance, beginning of period                     |  | $              | 411
|Provision for credit lossesunfunded commitments |  |                | 161
|                                                 |  |                |    
|Balance, end of period                           |  | $              | 572
|                                                 |  |                |    



14



---

##### Table of Contents

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



|                                              |  |                             |        |                             |   |       
|--------------------------------------------- |  | --------------------------- | ------ | --------------------------- | - | ------
|                                              |  | March 31,2007               |        | December 31,2006           
|                                              |  | (In thousands)             
|Impaired loans with a valuation allowance     |  | $                           | 24,782 |                             | $ | 23,616
|Impaired loans without a valuation allowance  |  |                             | 15,560 |                             |   | 15,217
|                                              |  |                             |        |                             |   |       
|Total impaired loans                          |  | $                           | 40,342 |                             | $ | 38,833
|                                              |  |                             |        |                             |   |       
|Valuation allowance related to impaired loans |  | $                           | 7,673  |                             | $ | 8,028 
|                                              |  |                             |        |                             |   |       
|                                              |  | Quarter EndedMarch 31, 2007 |        | Year EndedDecember 31, 2006
|                                              |  | (In thousands)             
|Average investment in impaired loans          |  | $                           | 39,588 |                             | $ | 42,660
|                                              |  |                             |        |                             |   |       

There was no interest income recognized on nonaccrual loans during the period ended March 31,
2007. The gross interest income that would have been recorded in the period ended March 31, 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 $870,000. At March 31, 2007 and December 31, 2006, nonaccrual loans were $31,940,000 and $32,852,000, respectively. At March 31, 2007, $323,000 in loans past due ninety days or more was still accruing
interest.



15



---

##### Table of Contents

|(4) | Other Intangible Assets
|--- | -----------------------

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



|                                 |  |             |  |                |         |   |              |   |         |  
|-------------------------------- |  | ----------- |  | -------------- | ------- | - | ------------ | - | ------- | -
|                                 |  |             |  | March 31,      |         |   | December 31, |  
|                                 |  | Useful life |  | 2007           |         |   | 2006         |  
|                                 |  |             |  | (In thousands) |        
|Noncompete employment agreements |  | 2 years     |  | $              |        |   |              | $ | 3,606   |  
|Core deposit intangible assets   |  | 7 -15 years |  |                | 62,975  |   |              |   | 62,975  |  
|                                 |  |             |  |                |         |   |              |   |         |  
|                                 |  |             |  | $              | 62,975  |   |              | $ | 66,581  |  
|Accumulated amortization         |  |             |  |                | (23,571 | ) |              |   | (24,982 | )
|                                 |  |             |  |                |         |   |              |   |         |  
|                                 |  |             |  | $              | 39,404  |   |              | $ | 41,599  |  
|                                 |  |             |  |                |         |   |              |   |         |  

Amortization expense for intangible assets for the three months ended March 31, 2007 and 2006
was $2,195,000 and $2,998,000, respectively.



|(5) | Borrowings
|--- | ----------

Borrowings include Treasury Tax and
Loan notes, Federal Home Loan Bank (FHLB) borrowings, and a revolving credit agreement with U.S. Bank National Association. The Company had $29,804,000 and $67,632,000 outstanding under these obligations at March 31, 2007 and
December 31, 2006, respectively, with a total commitment, including balances outstanding, of $382,307,000 at March 31, 2007.

At
March 31, 2007, borrowings consisted of term notes at the Federal Home Loan Bank, of $7,704,000, $21,905,000 under the U.S. Bank revolving credit agreement and a $195,000 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
March 31, 2007 was $311.3 million. The interest rate on the line of credit varies with the federal funds rate, which was 5.3% at March 31, 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 March 31, 2007, the Company had $21.9 million drawn on this line and was in compliance with all debt covenants. The interest rate varies based on a spread over the federal funds
rate, with a rate of 6.8% at March 31, 2007. The credit agreement is secured by Guaranty Bank stock.



16



---

##### Table of Contents

|(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 March 31, 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.

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

The following table summarizes the terms of each subordinated debenture issuance at March 31, 2007 (dollars in thousands):



|                           |  |            |  |                 |        |              |           |            |           |                      |          |               |            |   |                      |       |   |                    |          
|-------------------------- |  | ---------- |  | --------------- | ------ | ------------ | --------- | ---------- | --------- | -------------------- | -------- | ------------- | ---------- | - | -------------------- | ----- | - | ------------------ | ---------
|Series                     |  | DateIssued |  | PrincipalAmount |        | MaturityDate |           | Call Date* |           | Fixed orVariableRate |          | Rate Adjuster |            |   | Rate atMarch 31,2007 |       |   | Next RateResetDate
|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  | % |                    | 4/16/2007
|Guaranty Capital Trust III |  | 7/7/2003   |  |                 | 10,310 |              | 7/7/2033  |            | 7/7/2008  |                      | Variable |               | LIBOR+3.10 | % |                      | 8.46  | % |                    | 4/7/2007 

---

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



|(7) | Commitments
|--- | -----------

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

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



17



---

##### Table of Contents

At the dates indicated, the following commitments were outstanding:



|                             |  |                |         |                  |   |        
|---------------------------- |  | -------------- | ------- | ---------------- | - | -------
|                             |  | March 31,2007  |         | December 31,2006
|                             |  | (In thousands)
|Commitments to extend credit |  | $              | 611,486 |                  | $ | 555,757
|Standby letters of credit    |  |                | 33,794  |                  |   | 32,382 
|Commercial letters of credit |  |                | 328     |                  |   | 274    
|                             |  |                |         |                  |   |        
|Totals                       |  | $              | 645,608 |                  | $ | 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.



|(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 March 31, 2007 and December 31, 2006, there were 1,759,925 and 1,725,825 shares of unvested stock granted (net of forfeitures), with 707,277 and 741,377
shares available for grant under the Incentive Plan, respectively.



18



---

##### Table of Contents

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                          |  | 78,500    |   |  |                                        | 8.55 
|Forfeited                        |  | (44,400   | ) |  |                                        | 10.98
|                                 |  |           |   |  |                                        |      
|Outstanding at March 31, 2007    |  | 1,759,925 |   |  | $                                      | 10.57
|                                 |  |           |   |  |                                        |      

The Company recognized $867,000 and $700,000 in compensation expense for services rendered for the
three months ended March 31, 2007 and 2006, respectively. The total income tax benefit recognized in the consolidated income statement for share-based compensation arrangements was $329,000 and $266,000 for the three months ended March 31,
2007 and 2006, respectively. At March 31, 2007, compensation cost of $9,896,000 related to nonvested awards not yet recognized is expected to be recognized over a weighted-average period of 3.0 years. No awards vested during the three months
ended March 31, 2007 or 2006.



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

At March 31, 2007 and
December 31, 2006, the Company had leverage ratios of 9.00% and 8.93%, Tier 1 risk-weighted capital ratios of 9.67% and 9.92%, and total risk-weighted capital ratios of 10.92% 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.



|(10) | Discontinued Operations
|---- | -----------------------

Business Disposition

On March 1, 2006, the Company sold substantially all of the assets of its First MainStreet Insurance, Ltd. subsidiary for $3,215,000, of which
$1,835,000 was paid in cash at closing, and the release of the Company from certain contractual obligations. The sale of the subsidiary did not result in a gain or loss due to a reallocation of the initial goodwill allocated to First MainStreet
Insurance, Ltd. First MainStreet Insurance, Ltd. net income for the period from January 1, 2006 to March 1, 2006 of $17,000 is included in income from discontinued operations for the three months ended March 31, 2006.

Discontinued Operations

The Companys results
of operations for the three months ended March 31, 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 March 31, 2006 and sold on
October 1, 2006. The following tables present the summary results of operations presented in discontinued operations for the period ended March 31, 2006.



|                                                    |  |                                 |       |  
|--------------------------------------------------- |  | ------------------------------- | ----- | -
|                                                    |  | Three MonthsEnded March 31,2006 |      
|                                                    |  | (In thousands)                  |      
|Interest income                                     |  | $                               | 1,295 |  
|                                                    |  |                                 |       |  
|Noninterest income                                  |  | $                               | 591   |  
|                                                    |  |                                 |       |  
|Net income from discontinued operations, net of tax |  | $                               | 342   |  
|Impairment of assets, net of $123 tax benefit       |  |                                 | (202  | )
|                                                    |  |                                 |       |  
|Income from discontinued operations                 |  | $                               | 140   |  
|                                                    |  |                                 |       |  



19



---

##### Table of Contents

|(11) | Contingencies
|---- | -------------

On December 31, 2004, an
adversary proceeding was filed against Guaranty Bank and Trust Company in the United States Bankruptcy Court for the District of Colorado, by the trustees of the Will Hoover Company, or the Hoover Company, and William Gordon Hoover, Jr., or Hoover,
seeking to avoid certain transfers that occurred over a four-year period commencing in 1999 under the United States Bankruptcy Code. The trustees 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. On September 7, 2005, the Bankruptcy Court granted, in part, Guaranty Banks initial response
and dismissed $8.5 million of the claims relating to alleged transfers for payment of items credited in the check collection process. On August 29, 2006, Guaranty Bank filed a motion for partial summary judgment on the trustees claims to
recover payments on alleged overdrafts in the amount of approximately $1.7 million, which the court denied. The remaining claims amount to approximately $2.9 million. In April 2007, the Company and the trustees participated in mediation. As a result
of the mediation, the parties are currently in final settlement discussions. Any settlement will be subject to the approval of the Bankruptcy Court. The Company does not expect the settlement amount to materially exceed the amount the Company had
reserved as of March 31, 2007 for this litigation.

On July 22, 2005 and August 18, 2005, two separate but similar actions
(i.e., the Barnes action and Teper action, respectively) were filed against Guaranty Bank and a former officer in the Denver District Court, Denver, Colorado by investors who provided funds to Hoover, the Hoover Company or related entities.
The investors allege that certain activities of Guaranty Bank and its former officer with respect to the customer relationship with Hoover, the Hoover Company and related entities aided and abetted Hoover and the Hoover Company in securities
violations and violations of the Colorado Organized Crime Control Act and amounted to a civil conspiracy, causing the investors to incur damages. The court has subsequently dismissed the entire Teper action. The investors in the Barnes action are
seeking actual and statutory treble damages, as well as interest and attorneys fees, against Guaranty Bank and its former officer. The currently outstanding alleged actual losses claimed in connection with the Barnes action are approximately
$10.5 million. We will continue to vigorously defend the Barnes action. At this time, we cannot determine whether the outcome of the Barnes action will have a material adverse impact on our consolidated financial position or results of operations.
To the extent the Barnes action is not settled or dismissed, the Company will incur ongoing legal defense costs and be exposed to a possible adverse judgment. If such legal defense costs and any adverse judgment are not covered by insurance, the
legal defense costs and judgment incurred could have an adverse impact on our results of operations.

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



20



---

##### Table of Contents

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

This MD&A should be read together with our unaudited Consolidated Financial Statements and unaudited Statistical Information included elsewhere in this Report and Items 1, 1A, 6, 7, 7A and 8 of our 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 March 31, 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.

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.



21



---

##### Table of Contents

RESULTS OF OPERATIONS

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



|                                                      |  |                                   |            |   |      |   |            |                   |  |   |            |  
|----------------------------------------------------- |  | --------------------------------- | ---------- | - | ---- | - | ---------- | ----------------- |  | - | ---------- | -
|                                                      |  | Three Months Ended March 31,      |           
|                                                      |  |                                   |            |   |      |   |            | Change - Increase | 
|                                                      |  | 2007                              |            |   | 2006 |   |            | (Decrease)        | 
|                                                      |  | (In thousands, except share data) |           
|Results of Operations:                                |  |                                   |            |   |      |   |            |                   |  |   |            |  
|Interest income                                       |  | $                                 | 42,360     |   |      | $ | 42,710     |                   |  | $ | (350       | )
|Interest expense                                      |  |                                   | 15,517     |   |      |   | 12,803     |                   |  |   | 2,714      |  
|                                                      |  |                                   |            |   |      |   |            |                   |  |   |            |  
|Net interest income                                   |  |                                   | 26,843     |   |      |   | 29,907     |                   |  |   | (3,064     | )
|Provision for credit losses                           |  |                                   | 1,010      |   |      |   |           |                   |  |   | 1,010      |  
|                                                      |  |                                   |            |   |      |   |            |                   |  |   |            |  
|Net interest income after provision for credit losses |  |                                   | 25,833     |   |      |   | 29,907     |                   |  |   | (4,074     | )
|Noninterest income                                    |  |                                   | 2,567      |   |      |   | 3,112      |                   |  |   | (545       | )
|Noninterest expense                                   |  |                                   | 20,521     |   |      |   | 21,740     |                   |  |   | (1,219     | )
|                                                      |  |                                   |            |   |      |   |            |                   |  |   |            |  
|Income before income taxes                            |  |                                   | 7,879      |   |      |   | 11,279     |                   |  |   | (3,400     | )
|Income tax expense                                    |  |                                   | 2,470      |   |      |   | 3,990      |                   |  |   | (1,520     | )
|                                                      |  |                                   |            |   |      |   |            |                   |  |   |            |  
|Income from continuing operations                     |  |                                   | 5,409      |   |      |   | 7,289      |                   |  |   | (1,880     | )
|Income from discontinued operations (net of tax)      |  |                                   |           |   |      |   | 140        |                   |  |   | (140       | )
|                                                      |  |                                   |            |   |      |   |            |                   |  |   |            |  
|Net income                                            |  | $                                 | 5,409      |   |      | $ | 7,429      |                   |  | $ | (2,020     | )
|                                                      |  |                                   |            |   |      |   |            |                   |  |   |            |  
|Share Data:                                           |  |                                   |            |   |      |   |            |                   |  |   |            |  
|Basic earnings per share                              |  | $                                 | 0.10       |   |      | $ | 0.13       |                   |  | $ | (0.03      | )
|Diluted earnings per share                            |  | $                                 | 0.10       |   |      | $ | 0.13       |                   |  | $ | (0.03      | )
|Average shares outstanding                            |  |                                   | 54,792,527 |   |      |   | 59,057,264 |                   |  |   | (4,264,737 | )
|Diluted average shares outstanding                    |  |                                   | 54,902,229 |   |      |   | 59,240,780 |                   |  |   | (4,338,551 | )
|                                                      |  |                                   |           
|Selected Ratios:                                      |  |                                   |            |   |      |   |            |                   |  |   |            |  
|Return on assets                                      |  |                                   | 0.82       | % |      |   | 1.03       | %                 |  |   | (0.21      | )
|Return on equity                                      |  |                                   | 3.73       | % |      |   | 5.01       | %                 |  |   | (1.28      | )
|Average equity to average total assets                |  |                                   | 21.90      | % |      |   | 20.53      | %                 |  |   | 1.37       |  

The $5.4 million first quarter 2007 net income reflected a decrease of $2.0 million from first
quarter 2006. First quarter 2007 interest income was consistent with the prior year quarter, while increases in interest expense and provision for credit losses were the primary factors leading to the decrease in net income. Our first quarter 2007
noninterest expense decreased from first quarter 2006 by $1.2 million, which was primarily the result of a reduction in salaries and benefits of $0.5 million and a reduction in amortization of intangible assets of $0.8 million.



22



---

##### Table of Contents

Net Interest Income and Net Interest Margin

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



|                     |  |                        |        |   |                  |   |        |                   |  |   |              |   |  |               |        |   |  |   |        |  
|-------------------- |  | ---------------------- | ------ | - | ---------------- | - | ------ | ----------------- |  | - | ------------ | - |  | ------------- | ------ | - |  | - | ------ | -
|                     |  | Quarter Ended          |       
|                     |  | March 31,2007          |        |   | December 31,2006 |   |        | September 30,2006 |  |   | June 30,2006 |   |  | March 31,2006 |       
|                     |  | (Dollars in thousands) |       
|Net interest income  |  | $                      | 26,843 |   |                  | $ | 27,906 |                   |  | $ | 28,996       |   |  | $             | 29,388 |   |  | $ | 29,907 |  
|Interest rate spread |  |                        | 4.16   | % |                  |   | 4.14   | %                 |  |   | 4.45         | % |  |               | 4.66   | % |  |   | 4.67   | %
|Net interest margin  |  |                        | 5.16   | % |                  |   | 5.12   | %                 |  |   | 5.34         | % |  |               | 5.51   | % |  |   | 5.44   | %

First quarter 2007 net interest income of $26.8 million decreased by $3.1 million from the first
quarter 2006. The reduction in net interest income was the result of a $0.4 million decrease in interest income and a $2.7 million increase in interest expense.

The decline in our loan portfolio, primarily driven by a strategy to reduce residential construction, land and land development loans, was the cause of the decrease in interest income. Our yield on interest-earning
assets was 8.14% for the first quarter 2007, an increase of 37 basis points from the first quarter 2006. First quarter 2007 interest expense increased by $2.7 million from the first quarter 2006, which was caused by rising interest rates in the
first half of 2006 combined with increased costs caused by robust competition for deposits. Our cost of interest-bearing liabilities increased to 3.98% from a first quarter 2006 cost of 3.10%. Our first quarter 2007 net interest margin of 5.16%
decreased by 28 basis points from the net interest margin for the first quarter 2006, while the interest rate spread decreased by 51 basis points.

Our net interest margin of 5.16% for the first quarter 2007 reflected an improvement of 4 basis points from the fourth quarter 2006, while our interest rate spread improved by 2 basis points over the fourth quarter 2006. Our yield on
interest-earning assets increased by 9 basis points from the fourth quarter 2006, while our cost of interest-bearing liabilities increased by 7 basis points from the fourth quarter 2006.

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



23



---

##### Table of Contents

|                                            |  |                         |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|------------------------------------------- |  | ----------------------- | --------- | ------------------------ | ---- | ------------------- |  | ---- | -------------- |  | ------------------------ | --------- | ------------------- | - | ------ |  | ---- | -
|                                            |  | Quarter Ended March 31, |          
|                                            |  | 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)(3) |  | $                       | 1,909,713 |                          | $    | 39,738              |  | 8.44 | %              |  | $                        | 2,048,380 |                     | $ | 40,521 |  | 8.02 | %
|Investment securities(1)                    |  |                         |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|Taxable                                     |  |                         | 51,173    |                          |      | 621                 |  | 4.93 | %              |  |                          | 72,893    |                     |   | 776    |  | 4.32 | %
|Tax-exempt                                  |  |                         | 113,152   |                          |      | 1,412               |  | 5.06 | %              |  |                          | 72,933    |                     |   | 911    |  | 5.07 | %
|Equity Securities (4)                       |  |                         | 31,849    |                          |      | 485                 |  | 6.18 | %              |  |                          | 28,733    |                     |   | 427    |  | 6.03 | %
|Other earning assets                        |  |                         | 4,327     |                          |      | 104                 |  | 9.72 | %              |  |                          | 6,044     |                     |   | 75     |  | 5.03 | %
|                                            |  |                         |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|Total interest-earning assets               |  |                         | 2,110,214 |                          |      | 42,360              |  | 8.14 | %              |  |                          | 2,228,983 |                     |   | 42,710 |  | 7.77 | %
|Non-earning assets:                         |  |                         |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|Cash and due from banks                     |  |                         | 56,891    |                          |      |                     |  |      |                |  |                          | 78,425    |                     |   |        |  |      |  
|Other assets                                |  |                         | 520,445   |                          |      |                     |  |      |                |  |                          | 622,304   |                     |   |        |  |      |  
|                                            |  |                         |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|Total assets                                |  | $                       | 2,687,550 |                          |      |                     |  |      |                |  | $                        | 2,929,712 |                     |   |        |  |      |  
|                                            |  |                         |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|                                            |  |                         |           |                          |      |                    
|LIABILITIES AND STOCKHOLDERS EQUITY:       |  |                         |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|Interest-bearing liabilities:               |  |                         |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|Deposits:                                   |  |                         |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|Interest-bearing demand                     |  | $                       | 160,075   |                          | $    | 250                 |  | 0.63 | %              |  | $                        | 173,758   |                     | $ | 152    |  | 0.35 | %
|Money Market                                |  |                         | 631,760   |                          |      | 5,856               |  | 3.76 | %              |  |                          | 587,737   |                     |   | 4,215  |  | 2.91 | %
|Savings                                     |  |                         | 84,575    |                          |      | 164                 |  | 0.79 | %              |  |                          | 99,187    |                     |   | 184    |  | 0.75 | %
|Time certificates of deposit                |  |                         | 571,931   |                          |      | 7,076               |  | 5.02 | %              |  |                          | 612,721   |                     |   | 5,603  |  | 3.71 | %
|                                            |  |                         |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|Total interest-bearing deposits             |  |                         | 1,448,341 |                          |      | 13,346              |  | 3.74 | %              |  |                          | 1,473,403 |                     |   | 10,154 |  | 2.79 | %
|Borrowings:                                 |  |                         |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|Repurchase agreements                       |  |                         | 24,887    |                          |      | 299                 |  | 4.87 | %              |  |                          | 23,359    |                     |   | 239    |  | 4.15 | %
|Federal funds purchased                     |  |                         | 154       |                          |      | 2                   |  | 5.83 | %              |  |                          | 1,436     |                     |   | 22     |  | 6.21 | %
|Subordinated debentures                     |  |                         | 41,239    |                          |      | 932                 |  | 9.17 | %              |  |                          | 41,256    |                     |   | 847    |  | 8.33 | %
|Borrowings                                  |  |                         | 66,508    |                          |      | 938                 |  | 5.72 | %              |  |                          | 136,059   |                     |   | 1,541  |  | 4.59 | %
|                                            |  |                         |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|Total interest-bearing liabilities          |  |                         | 1,581,129 |                          |      | 15,517              |  | 3.98 | %              |  |                          | 1,675,513 |                     |   | 12,803 |  | 3.10 | %
|Noninterest bearing liabilities:            |  |                         |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|Demand deposits                             |  |                         | 483,293   |                          |      |                     |  |      |                |  |                          | 540,189   |                     |   |        |  |      |  
|Other liabilities                           |  |                         | 34,661    |                          |      |                     |  |      |                |  |                          | 112,620   |                     |   |        |  |      |  
|                                            |  |                         |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|Total liabilities                           |  |                         | 2,099,083 |                          |      |                     |  |      |                |  |                          | 2,328,322 |                     |   |        |  |      |  
|Stockholders Equity                        |  |                         | 588,467   |                          |      |                     |  |      |                |  |                          | 601,390   |                     |   |        |  |      |  
|                                            |  |                         |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|Total liabilities and stockholders equity  |  | $                       | 2,687,550 |                          |      |                     |  |      |                |  | $                        | 2,929,712 |                     |   |        |  |      |  
|                                            |  |                         |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|Net interest income                         |  |                         |           |                          | $    | 26,843              |  |      |                |  |                          |           |                     | $ | 29,907 |  |      |  
|                                            |  |                         |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  
|Net interest margin                         |  |                         |           |                          |      |                     |  | 5.16 | %              |  |                          |           |                     |   |        |  | 5.44 | %
|                                            |  |                         |           |                          |      |                     |  |      |                |  |                          |           |                     |   |        |  |      |  

---

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

|(2) | Average gross loans include nonaccrual loans, which were $31.9 million and $28.7 million at March 31, 2007 and 2006, respectively.
|--- | ----------------------------------------------------------------------------------------------------------------------------------

|(3) | Net loan fees of $1.4 million and $2.0 million for the three months ended March 31, 2007 and 2006, respectively, are included in the yield computation.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------

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



24



---

##### 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.



|                             |  |                                                                                |        |   |      |   |        |        |  |   |        |  
|---------------------------- |  | ------------------------------------------------------------------------------ | ------ | - | ---- | - | ------ | ------ |  | - | ------ | -
|                             |  | Three Months Ended March 31, 2007 Comparedto Three Months Ended March 31,
2006 |       
|                             |  | Net Change                                                                     |        |   | Rate |   |        | Volume | 
|                             |  | (In thousands)                                                                 |       
|Interest income:             |  |                                                                                |        |   |      |   |        |        |  |   |        |  
|Loans held for investment    |  | $                                                                              | (783   | ) |      | $ | 2,569  |        |  | $ | (3,352 | )
|Investment securities        |  |                                                                                |        |   |      |   |        |        |  |   |        |  
|Taxable                      |  |                                                                                | (155   | ) |      |   | 137    |        |  |   | (292   | )
|Tax-exempt                   |  |                                                                                | 501    |   |      |   | (1     | )      |  |   | 502    |  
|Equity Securities            |  |                                                                                | 58     |   |      |   | 11     |        |  |   | 47     |  
|Other earning assets         |  |                                                                                | 29     |   |      |   | 42     |        |  |   | (13    | )
|                             |  |                                                                                |        |   |      |   |        |        |  |   |        |  
|Total interest income        |  |                                                                                | (350   | ) |      |   | 2,758  |        |  |   | (3,108 | )
|                             |  |                                                                                |        |   |      |   |        |        |  |   |        |  
|                             |  |                                                                                |       
|Interest expense:            |  |                                                                                |        |   |      |   |        |        |  |   |        |  
|Deposits:                    |  |                                                                                |        |   |      |   |        |        |  |   |        |  
|Interest-bearing demand      |  |                                                                                | 98     |   |      |   | 109    |        |  |   | (11    | )
|Money Market                 |  |                                                                                | 1,641  |   |      |   | 1,306  |        |  |   | 335    |  
|Savings                      |  |                                                                                | (20    | ) |      |   | 9      |        |  |   | (29    | )
|Time certificates of deposit |  |                                                                                | 1,473  |   |      |   | 1,815  |        |  |   | (342   | )
|Repurchase agreements        |  |                                                                                | 60     |   |      |   | 44     |        |  |   | 16     |  
|Federal funds purchased      |  |                                                                                | (20    | ) |      |   | (3     | )      |  |   | (17    | )
|Subordinated debentures      |  |                                                                                | 85     |   |      |   | 85     |        |  |   | 0      |  
|Borrowings                   |  |                                                                                | (603   | ) |      |   | 556    |        |  |   | (1,159 | )
|                             |  |                                                                                |        |   |      |   |        |        |  |   |        |  
|Total interest expense       |  |                                                                                | 2,714  |   |      |   | 3,921  |        |  |   | (1,207 | )
|                             |  |                                                                                |        |   |      |   |        |        |  |   |        |  
|                             |  |                                                                                |       
|Net interest income          |  | $                                                                              | (3,064 | ) |      | $ | (1,163 | )      |  | $ | (1,901 | )
|                             |  |                                                                                |        |   |      |   |        |        |  |   |        |  

Provision for Credit Losses

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

In the first quarter 2007, the company recorded a $1.0 million provision for credit losses,
including $0.2 million for the reserve on unfunded commitments, and net charge-offs of $1.3 million compared to a $2.7 million provision for credit losses, including $0.1 million for the reserve on unfunded commitments, and $0.7 million net
charge-offs in the fourth quarter 2006. No provision was recorded during the three month period ended March 31, 2006.

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



25



---

##### Table of Contents

Noninterest Income

The following table presents the major categories of noninterest income:



|                                  |  |                |       |   |                  |   |       |                   |  |              |       |               |   |       |  |   |       |  
|--------------------------------- |  | -------------- | ----- | - | ---------------- | - | ----- | ----------------- |  | ------------ | ----- | ------------- | - | ----- |  | - | ----- | -
|                                  |  | Quarter Ended  |      
|                                  |  | March 31,2007  |       |   | December 31,2006 |   |       | September 30,2006 |  | June 30,2006 |       | March 31,2006 |  
|                                  |  | (In thousands) |      
|Noninterest income:               |  |                |       |   |                  |   |       |                   |  |              |       |               |   |       |  |   |       |  
|Customer service and other fees   |  | $              | 2,443 |   |                  | $ | 2,137 |                   |  | $            | 2,892 |               | $ | 2,858 |  | $ | 2,498 |  
|Gain (loss) on sale of securities |  |                |      |   |                  |   | (5    | )                 |  |              | 6     |               |   |      |  |   | (5    | )
|Gain on sale of loans             |  |                |      |   |                  |   | (55   | )                 |  |              | 229   |               |   | 231   |  |   | 314   |  
|Gain (loss) on sale of assets     |  |                | (96   | ) |                  |   | 133   |                   |  |              | 108   |               |   | 179   |  |   | (91   | )
|Other                             |  |                | 220   |   |                  |   | 316   |                   |  |              | 239   |               |   | 337   |  |   | 396   |  
|                                  |  |                |       |   |                  |   |       |                   |  |              |       |               |   |       |  |   |       |  
|Total noninterest income          |  | $              | 2,567 |   |                  | $ | 2,526 |                   |  | $            | 3,474 |               | $ | 3,605 |  | $ | 3,112 |  
|                                  |  |                |       |   |                  |   |       |                   |  |              |       |               |   |       |  |   |       |  

Noninterest income for first quarter 2007 decreased by $0.5 million from the first quarter 2006.
The $0.5 million decrease in noninterest income between the first quarter 2007 and first quarter 2006 was primarily caused by the discontinuation of our residential mortgage group at the end of the third quarter 2006 and a reduction in first quarter
2007 loan placement and other fees as compared to the first quarter 2006. Noninterest income for first quarter 2007 increased $41,000 from the fourth quarter 2006, primarily due to a $0.3 million increase in customer service and other fees.

Noninterest Expense

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



|                                            |  |                |        |                  |   |                   |  |              |        |               |   |        |  |   |       
|------------------------------------------- |  | -------------- | ------ | ---------------- | - | ----------------- |  | ------------ | ------ | ------------- | - | ------ |  | - | ------
|                                            |  | Quarter Ended 
|                                            |  | March 31,2007  |        | December 31,2006 |   | September 30,2006 |  | June 30,2006 |        | March 31,2006
|                                            |  | (In thousands)
|Noninterest expense:                        |  |                |        |                  |   |                   |  |              |        |               |   |        |  |   |       
|Salaries and employee benefits              |  | $              | 10,974 |                  | $ | 10,662            |  | $            | 12,006 |               | $ | 12,082 |  | $ | 11,435
|Occupancy expense                           |  |                | 2,121  |                  |   | 2,040             |  |              | 1,891  |               |   | 1,994  |  |   | 2,052 
|Furniture and equipment                     |  |                | 1,240  |                  |   | 1,176             |  |              | 1,289  |               |   | 1,229  |  |   | 1,165 
|Amortization of intangible assets           |  |                | 2,195  |                  |   | 2,960             |  |              | 2,858  |               |   | 2,999  |  |   | 2,998 
|Merger, acquisition and transition expenses |  |                |       |                  |   |                  |  |              | 239    |               |   | 1,539  |  |   | 88    
|Other general and administrative            |  |                | 3,991  |                  |   | 4,384             |  |              | 4,659  |               |   | 5,162  |  |   | 4,002 
|                                            |  |                |        |                  |   |                   |  |              |        |               |   |        |  |   |       
|Total noninterest expense                   |  | $              | 20,521 |                  | $ | 21,222            |  | $            | 22,942 |               | $ | 25,005 |  | $ | 21,740
|                                            |  |                |        |                  |   |                   |  |              |        |               |   |        |  |   |       

First quarter 2007 noninterest expense decreased from the first quarter 2006 by $1.2 million. The
change between the first quarter 2007 and first quarter 2006 was driven primarily by a decrease in incentive payments to employees and a reduction in amortization of intangible assets due to the expiration of noncompete agreements and changes in the
amortization of core deposit intangible assets.

Noninterest expense for the first quarter 2007 of $20.5 million decreased $0.7 million
from the fourth quarter 2006. First quarter 2007 salaries and employee benefits increased by $0.3 million from the fourth quarter 2006. The first quarter 2007 increase in salaries and employee benefits included a $0.6 million decrease in salaries,
incentive payments and bonus expenses, offset by increases in payroll taxes, employee benefits and equity-based compensation. Payroll taxes and employee benefits increased by $0.5 million, primarily driven by lower fourth quarter 2006 payroll taxes
due to employees that had exceeded the FICA and other employer tax match limits. Equity-based compensation increased by $0.3 million, attributable to a reduction in the fourth quarter 2006 expense due to a revision of estimated forfeitures. First
quarter 2007 intangible amortization expense decreased by $0.8 million from the fourth quarter 2006.



26



---

##### Table of Contents

FINANCIAL CONDITION

The following sets forth certain key consolidated balance sheet data:



|                                          |  |                |           |                  |   |                   |  |              |           |               |   |           |  |   |          
|----------------------------------------- |  | -------------- | --------- | ---------------- | - | ----------------- |  | ------------ | --------- | ------------- | - | --------- |  | - | ---------
|                                          |  | March 31,2007  |           | December 31,2006 |   | September 30,2006 |  | June 30,2006 |           | March 30,2006
|                                          |  | (In thousands)
|Net loans (including loans held for sale) |  | $              | 1,859,121 |                  | $ | 1,919,588         |  | $            | 1,955,529 |               | $ | 1,906,513 |  | $ | 1,983,882
|Total assets                              |  |                | 2,693,384 |                  |   | 2,720,600         |  |              | 2,886,647 |               |   | 2,850,281 |  |   | 2,916,510
|Deposits                                  |  |                | 1,971,869 |                  |   | 1,960,105         |  |              | 1,968,264 |               |   | 1,998,055 |  |   | 2,077,076

Loans

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



|                                               |  |                |           |   |                  |   |           |                   |  |   |              |   |  |               |           |   |  |   |           |  
|---------------------------------------------- |  | -------------- | --------- | - | ---------------- | - | --------- | ----------------- |  | - | ------------ | - |  | ------------- | --------- | - |  | - | --------- | -
|                                               |  | March 31,2007  |           |   | December 31,2006 |   |           | September 30,2006 |  |   | June 30,2006 |   |  | March 31,2006 |          
|                                               |  | (In thousands) |          
|Real estate                                    |  |                |           |   |                  |   |           |                   |  |   |              |   |  |               |           |   |  |   |           |  
|Mortgage                                       |  | $              | 708,416   |   |                  | $ | 686,056   |                   |  | $ | 663,170      |   |  | $             | 583,020   |   |  | $ | 595,860   |  
|Construction                                   |  |                | 353,323   |   |                  |   | 427,465   |                   |  |   | 463,468      |   |  |               | 486,060   |   |  |   | 504,426   |  
|Equity lines of credit                         |  |                | 54,904    |   |                  |   | 56,468    |                   |  |   | 60,817       |   |  |               | 64,355    |   |  |   | 67,284    |  
|Commercial                                     |  |                | 651,796   |   |                  |   | 647,915   |                   |  |   | 654,829      |   |  |               | 664,202   |   |  |   | 702,556   |  
|Agricultural                                   |  |                | 46,958    |   |                  |   | 51,338    |                   |  |   | 54,805       |   |  |               | 52,897    |   |  |   | 57,054    |  
|Consumer                                       |  |                | 43,891    |   |                  |   | 50,222    |                   |  |   | 53,714       |   |  |               | 54,955    |   |  |   | 56,986    |  
|Leases receivable and other                    |  |                | 31,213    |   |                  |   | 32,144    |                   |  |   | 32,931       |   |  |               | 26,470    |   |  |   | 25,714    |  
|                                               |  |                |           |   |                  |   |           |                   |  |   |              |   |  |               |           |   |  |   |           |  
|Total gross loans                              |  |                | 1,890,501 |   |                  |   | 1,951,608 |                   |  |   | 1,983,734    |   |  |               | 1,931,959 |   |  |   | 2,009,880 |  
|Less: allowance for loan losses                |  |                | (27,492   | ) |                  |   | (27,899   | )                 |  |   | (25,977      | ) |  |               | (25,297   | ) |  |   | (26,999   | )
|Unearned discount                              |  |                | (3,888    | ) |                  |   | (4,121    | )                 |  |   | (4,328       | ) |  |               | (4,737    | ) |  |   | (4,729    | )
|                                               |  |                |           |   |                  |   |           |                   |  |   |              |   |  |               |           |   |  |   |           |  
|Net Loans                                      |  | $              | 1,859,121 |   |                  | $ | 1,919,588 |                   |  | $ | 1,953,429    |   |  | $             | 1,901,925 |   |  | $ | 1,978,152 |  
|                                               |  |                |           |   |                  |   |           |                   |  |   |              |   |  |               |           |   |  |   |           |  
|                                               |  |                |           |   |                 
|Loans held for sale at lower of cost or market |  | $              |          |   |                  | $ |          |                   |  | $ | 2,119        |   |  | $             | 4,588     |   |  | $ | 5,730     |  
|                                               |  |                |           |   |                  |   |           |                   |  |   |              |   |  |               |           |   |  |   |           |  

March 31, 2007 total loans, net of unearned discount, decreased by $118.5 million from the
balance at March 31, 2006 to $1.9 billion. The decline is due in part to our continued strategy to reduce our concentration in residential construction, land and land development loans and increase commercial and industrial, consumer and energy
loans. The March 31, 2007 real estate portfolio balances, net of unearned discount, decreased by $53.1 million from December 31, 2006, primarily driven by decreases in the residential construction, land and land development loans, while
commercial and industrial loans had a modest increase.

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.



27



---

##### Table of Contents

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



|                                                                                     |  |                        |        |   |                  |   |        |                   |  |   |              |   |  |               |        |   |  |   |        |  
|------------------------------------------------------------------------------------ |  | ---------------------- | ------ | - | ---------------- | - | ------ | ----------------- |  | - | ------------ | - |  | ------------- | ------ | - |  | - | ------ | -
|                                                                                     |  | Quarter Ended          |       
|                                                                                     |  | March 31,2007          |        |   | December 31,2006 |   |        | September 30,2006 |  |   | June 30,2006 |   |  | March 31,2006 |       
|                                                                                     |  | (Dollars in thousands) |       
|Nonaccrual loans                                                                     |  | $                      | 31,940 |   |                  | $ | 32,852 |                   |  | $ | 26,812       |   |  | $             | 30,684 |   |  | $ | 28,746 |  
|Accruing loans past due 90 days or more                                              |  |                        | 323    |   |                  |   | 3      |                   |  |   | 396          |   |  |               | 84     |   |  |   | 1      |  
|Other real estate owned                                                              |  |                        | 861    |   |                  |   | 1,207  |                   |  |   | 5,090        |   |  |               | 1,041  |   |  |   | 1,267  |  
|                                                                                     |  |                        |        |   |                  |   |        |                   |  |   |              |   |  |               |        |   |  |   |        |  
|Total nonperforming assets                                                           |  | $                      | 33,124 |   |                  | $ | 34,062 |                   |  | $ | 32,298       |   |  | $             | 31,809 |   |  | $ | 30,014 |  
|                                                                                     |  |                        |        |   |                  |   |        |                   |  |   |              |   |  |               |        |   |  |   |        |  
|                                                                                     |  |                        |        |   |                 
|Nonperforming loans                                                                  |  | $                      | 32,263 |   |                  | $ | 32,855 |                   |  | $ | 27,208       |   |  | $             | 30,768 |   |  | $ | 28,747 |  
|Other impaired loans                                                                 |  |                        | 8,079  |   |                  |   | 5,978  |                   |  |   | 17,076       |   |  |               | 16,166 |   |  |   | 11,841 |  
|                                                                                     |  |                        |        |   |                  |   |        |                   |  |   |              |   |  |               |        |   |  |   |        |  
|Total impaired loans                                                                 |  |                        | 40,342 |   |                  |   | 38,833 |                   |  |   | 44,284       |   |  |               | 46,934 |   |  |   | 40,588 |  
|Allocated allowance for loan losses                                                  |  |                        | (7,673 | ) |                  |   | (8,028 | )                 |  |   | (6,468       | ) |  |               | (5,685 | ) |  |   | (9,296 | )
|                                                                                     |  |                        |        |   |                  |   |        |                   |  |   |              |   |  |               |        |   |  |   |        |  
|Net investment in impaired loans                                                     |  | $                      | 32,669 |   |                  | $ | 30,805 |                   |  | $ | 37,816       |   |  | $             | 41,249 |   |  | $ | 31,292 |  
|                                                                                     |  |                        |        |   |                  |   |        |                   |  |   |              |   |  |               |        |   |  |   |        |  
|                                                                                     |  |                        |        |   |                 
|Charged-off loans                                                                    |  | $                      | (1,692 | ) |                  | $ | (1,088 | )                 |  | $ | (1,736       | ) |  | $             | (2,012 | ) |  | $ | (1,091 | )
|Recoveries                                                                           |  |                        | 436    |   |                  |   | 366    |                   |  |   | 177          |   |  |               | 593    |   |  |   | 615    |  
|                                                                                     |  |                        |        |   |                  |   |        |                   |  |   |              |   |  |               |        |   |  |   |        |  
|Net recoveries (charge-offs)                                                         |  | $                      | (1,256 | ) |                  | $ | (722   | )                 |  | $ | (1,559       | ) |  | $             | (1,419 | ) |  | $ | (476   | )
|                                                                                     |  |                        |        |   |                  |   |        |                   |  |   |              |   |  |               |        |   |  |   |        |  
|                                                                                     |  |                        |        |   |                 
|Provision for credit loss                                                            |  | $                      | 1,010  |   |                  | $ | 2,724  |                   |  | $ | 1,566        |   |  | $             |       |   |  | $ |       |  
|                                                                                     |  |                        |        |   |                  |   |        |                   |  |   |              |   |  |               |        |   |  |   |        |  
|                                                                                     |  |                        |        |   |                 
|Allowance for loan losses                                                            |  | $                      | 27,492 |   |                  | $ | 27,899 |                   |  | $ | 25,977       |   |  | $             | 25,297 |   |  | $ | 26,999 |  
|                                                                                     |  |                        |        |   |                  |   |        |                   |  |   |              |   |  |               |        |   |  |   |        |  
|Reserve on unfunded commitments                                                      |  | $                      | 572    |   |                  | $ | 411    |                   |  | $ | 328          |   |  | $             | 1,001  |   |  | $ | 718    |  
|                                                                                     |  |                        |        |   |                  |   |        |                   |  |   |              |   |  |               |        |   |  |   |        |  
|Allowance for loan losses to loans, net of unearned discount                         |  |                        | 1.46   | % |                  |   | 1.43   | %                 |  |   | 1.31         | % |  |               | 1.31   | % |  |   | 1.35   | %
|Allowance for loan losses to nonaccrual loans                                        |  |                        | 86.07  | % |                  |   | 84.92  | %                 |  |   | 96.89        | % |  |               | 82.44  | % |  |   | 93.92  | %
|Allowance for loan losses to nonperforming assets                                    |  |                        | 83.00  | % |                  |   | 81.91  | %                 |  |   | 80.43        | % |  |               | 79.32  | % |  |   | 89.96  | %
|Allowance for loan losses to impaired loans                                          |  |                        | 68.15  | % |                  |   | 71.84  | %                 |  |   | 58.66        | % |  |               | 53.90  | % |  |   | 66.52  | %
|Nonperforming assets to loans, net of unearned discount, and other real estate owned |  |                        | 1.75   | % |                  |   | 1.75   | %                 |  |   | 1.63         | % |  |               | 1.65   | % |  |   | 1.50   | %
|Annualized net charge-offs (recoveries) to average loans                             |  |                        | 0.45   | % |                  |   | 0.15   | %                 |  |   | 0.32         | % |  |               | 0.29   | % |  |   | 0.09   | %
|Nonaccrual loans to loans, net of unearned discount                                  |  |                        | 1.69   | % |                  |   | 1.69   | %                 |  |   | 1.35         | % |  |               | 1.59   | % |  |   | 1.43   | %

First quarter 2007 nonperforming assets increased by $3.1 million from the first quarter 2006,
while total impaired loans decreased by $0.2 million. The change in nonperforming assets was primarily impacted by a $3.2 million increase in nonaccrual loans and a $0.4 million decrease in other real estate owned. Our coverage of allowance for loan
losses to loans of 1.46% increased by 11 basis points at March 31, 2007 from March 31, 2006, while the 83.0% allowance for loan losses to nonperforming assets reflected a decrease of 7 percentage points.

When compared to the fourth quarter 2006, the first quarter 2007 nonperforming assets decreased by $0.9 million, with nonaccrual loans and OREO
decreasing by $1.2 million and accruing loans past due 90 days or more increasing $0.3 million. The first quarter 2007 allowance for loan losses to loans increased by 3 basis points from the fourth quarter 2006, while the allowance for loan losses
to nonperforming assets increased by 1.1 percentage points.



28



---

##### Table of Contents

Allowance for Credit Losses

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

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



|                             |  |                              |        |      |   |       
|---------------------------- |  | ---------------------------- | ------ | ---- | - | ------
|                             |  | Three Months Ended March 31,
|                             |  | 2007                         |        | 2006
|                             |  | (In thousands)              
|Balance, beginning of period |  | $                            | 27,899 |      | $ | 27,475
|Loan charge-offs:            |  |                              |        |      |   |       
|Real estatemortgage         |  |                              | 963    |      |   | 523   
|Real estateconstruction     |  |                              | 535    |      |   | 10    
|Commercial                   |  |                              | 43     |      |   | 442   
|Agricultural                 |  |                              |       |      |   | 21    
|Consumer                     |  |                              | 130    |      |   | 23    
|Lease receivable and other   |  |                              | 21     |      |   | 72    
|                             |  |                              |        |      |   |       
|Total loan charge-offs       |  |                              | 1,692  |      |   | 1,091 
|                             |  |                              |        |      |   |       
|Recoveries:                  |  |                              |        |      |   |       
|Real estatemortgage         |  |                              | 195    |      |   | 44    
|Real estateconstruction     |  |                              | 55     |      |   | 34    
|Commercial                   |  |                              | 120    |      |   | 483   
|Agricultural                 |  |                              |       |      |   |      
|Consumer                     |  |                              | 46     |      |   | 53    
|Lease receivable and other   |  |                              | 20     |      |   | 1     
|                             |  |                              |        |      |   |       
|Total loan recoveries        |  |                              | 436    |      |   | 615   
|                             |  |                              |        |      |   |       
|Net loan charge-offs         |  |                              | 1,256  |      |   | 476   
|Provision for loan losses    |  |                              | 849    |      |   |      
|                             |  |                              |        |      |   |       
|Balance, end of period       |  | $                            | 27,492 |      | $ | 26,999
|                             |  |                              |        |      |   |       



29



---

##### Table of Contents

Investment Securities

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

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



|                                                 |  |                |         |                   |   |                   |  |   |          |   |  |      |   
|------------------------------------------------ |  | -------------- | ------- | ----------------- | - | ----------------- |  | - | -------- | - |  | ---- | --
|                                                 |  | March 31, 2007 |         | December 31, 2006 |   | Increase Decrease |  |   | % Change |  
|                                                 |  |                |        
|                                                 |  | (In thousands) |        
|Securities available-for-sale:                   |  |                |         |                   |   |                   |  |   |          |   |  |      |   
|U.S. Government agencies                         |  | $              | 3,399   |                   | $ | 2,408             |  | $ | 991      |   |  | 41.2 | % 
|Obligations of states and political subdivisions |  |                | 109,460 |                   |   | 115,571           |  |   | (6,111   | ) |  | (5.3 | )%
|Mortgage backed securities                       |  |                | 35,866  |                   |   | 38,440            |  |   | (2,574   | ) |  | (6.7 | )%
|Marketable equity securities                     |  |                | 906     |                   |   | 841               |  |   | 65       |   |  | 7.7  | % 
|                                                 |  |                |         |                   |   |                   |  |   |          |   |  |      |   
|Total securities available-for-sale              |  | $              | 149,631 |                   | $ | 157,260           |  | $ | (7,629   | ) |  | -4.9 | % 
|                                                 |  |                |         |                   |   |                   |  |   |          |   |  |      |   
|Securities held-to-maturity:                     |  |                |         |                   |   |                   |  |   |          |   |  |      |   
|Mortgage-backed                                  |  | $              | 11,179  |                   | $ | 11,217            |  | $ | (38      | ) |  | -0.3 | % 
|                                                 |  |                |         |                   |   |                   |  |   |          |   |  |      |   

The carrying value of our investment securities at March 31, 2007 was $160.8 million,
compared to December 31, 2006 of $168.5 million. We decreased the level of our investments as we required less collateral for our deposits.

Deposits

At the end of the first quarter 2007, deposits were $2.0 billion, reflecting an increase of $11.8 million from
December 31, 2006. The increase in deposits from December 31, 2006 was driven primarily by a $16.1 million increase in money market deposits, and included increases of $2.3 million and $2.7 million in noninterest-bearing deposits and
certificates of deposits, respectively, while savings deposits and interest-bearing demand deposits declined by $9.3 million. Our noninterest-bearing deposits as a percentage of total deposits decreased 4 basis points to 26.4%, with certificates of
deposits comprising 29.4% of total deposits, reflecting a decrease of 4 basis points from December 31, 2006.



|                             |  |                        |           |           |                      |   |         |   |           |  |        |  
|---------------------------- |  | ---------------------- | --------- | --------- | -------------------- | - | ------- | - | --------- |  | ------ | -
|                             |  | At March 31, 2007      |           |           | At December 31, 2006 |  
|                             |  | Balance                |           | % ofTotal |                      |   | Balance |   | % ofTotal | 
|                             |  | (Dollars in thousands) |          
|Noninterest bearing deposits |  | $                      | 519,951   |           | 26.37                | % |         | $ | 517,612   |  | 26.41  | %
|Interest bearing demand      |  |                        | 165,555   |           | 8.40                 | % |         |   | 169,289   |  | 8.64   | %
|Money market                 |  |                        | 624,366   |           | 31.66                | % |         |   | 608,290   |  | 31.03  | %
|Savings                      |  |                        | 81,689    |           | 4.14                 | % |         |   | 87,265    |  | 4.45   | %
|Time                         |  |                        | 580,308   |           | 29.43                | % |         |   | 577,649   |  | 29.47  | %
|                             |  |                        |           |           |                      |   |         |   |           |  |        |  
|Total deposits               |  | $                      | 1,971,869 |           | 100.00               | % |         | $ | 1,960,105 |  | 100.00 | %
|                             |  |                        |           |           |                      |   |         |   |           |  |        |  

Borrowings and Subordinated Debentures

At March 31, 2007, our outstanding borrowings were $29.8 million. These borrowings consisted of $7.7 million of term notes at the Federal Home Loan
Bank (FHLB), $21.9 million on a U.S. Bank revolving credit agreement, and a $0.2 million Treasury Tax and Loan balance.

Our
total available credit from the FHLB, including outstanding balances, was $311.3 million at March 31, 2007. The interest rate on the FHLB line of credit varies with the federal funds rate, which was 5.3% at March 31, 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.



30



---

##### Table of Contents

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 March 31, 2007, we had an
outstanding balance of $21.9 million and were in compliance with all debt covenants. The line of credit has a variable rate based on the federal funds rate, which was 6.7% at March 31, 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.

At
March 31, 2007, we had a $41,239,000 aggregate principal balance of subordinated debentures outstanding with a weighted average cost of 9.04%. The subordinated debentures were issued in four separate series. Each issuance has a maturity of
thirty years from its date of issue. The subordinated debentures were issued to trusts established by us, which in turn issued $40 million of trust preferred securities. Generally and with certain limitations, the Company is permitted to call the
debentures subsequent to the first five or ten years, as applicable, after issue if certain conditions are met, or at any time upon the occurrence and continuation of certain changes in either the tax treatment or the capital treatment of the
trusts, the debentures or the preferred securities.

Capital Resources

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

At March 31, 2007, the Company had a total risk-weighted capital ratio of 10.92%, a Tier 1 risk-weighted capital ratio of 9.67% and a leverage ratio of 9.00%. The Company actively monitors its regulatory capital ratios to ensure that
the Company and its bank subsidiaries are well capitalized under the applicable regulatory framework.

Contractual Obligations and
Off-Balance Sheet Arrangements

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

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

At March 31, 2007, the following financial instruments were outstanding whose contract amounts represented credit risk:



|                             |  |                |         |                  |   |        
|---------------------------- |  | -------------- | ------- | ---------------- | - | -------
|                             |  | March 31,2007  |         | December 31,2006
|                             |  | (In thousands)
|Commitments to extend credit |  | $              | 611,486 |                  | $ | 555,757
|Standby letters of credit    |  |                | 33,794  |                  |   | 32,382 
|Commercial letters of credit |  |                | 328     |                  |   | 274    
|                             |  |                |         |                  |   |        
|Totals                       |  | $              | 645,608 |                  | $ | 588,413
|                             |  |                |         |                  |   |        



31



---

##### Table of Contents

Liquidity

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

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

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

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

Application of Critical
Accounting Policies and Accounting Estimates

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

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

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

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



32



---

##### Table of Contents

Investment in Debt and Equity Securities We classify our investments in debt and equity
securities as either held-to-maturity or available-for-sale. Securities classified as held-to-maturity are recorded at cost or amortized cost. Available-for-sale securities are carried at fair value. Fair value calculations are based on quoted
market prices when such prices are available. If quoted market prices are not available, estimates of fair value are computed using a variety of techniques, including extrapolation from the quoted prices of similar instruments or recent trades for
thinly traded securities, fundamental analysis, or through obtaining purchase quotes. Due to the subjective nature of the valuation process, it is possible that the actual fair values of these investments could differ from the estimated amounts,
thereby affecting our financial position and results of operations. If the estimated value of investments is less than the cost or amortized cost, we evaluate whether an event or change in circumstances has occurred that may have a significant
adverse effect on the fair value of the investment. If such an event or change has occurred and we determine that the impairment is other-than-temporary, we expense the impairment of the investment in the period in which the event or change
occurred.

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

Accounting for Uncertainty in Income Taxes Under FASB Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income Taxesan interpretation of FASB Statement No. 109, the Company records the
financial statement effects of an income tax position when it is more likely than not, based on the technical merits, that it will be sustained upon examination. A tax position that meets the more-likely-than-not recognition threshold is measured
and recorded as the largest amount of tax benefit that is greater than 50 percent likely of being realized upon ultimate settlement with a taxing authority. Previously recognized tax positions are derecognized in the first period in which it is no
longer more likely than not that the tax position will be sustained. The benefit associated with previously unrecognized tax positions are generally recognized in the first period in which the more-likely-than-not threshold is met at the reporting
date, the tax matter is ultimately settled through negotiation or litigation or when the related statute of limitations for the relevant taxing authority to examine and challenge the tax position has expired. The recognition, derecognition and
measurement of tax positions are based on managements best judgment given the facts, circumstance and information available at the reporting date. The Company records penalties and interest associated with uncertain deductible temporary
differences as a component of other noninterest expense. See the discussion of Income Taxes under Note 2(h) in the Notes to the Consolidated Financial Statements.

This discussion has highlighted those accounting policies that we consider to be critical to our financial reporting process. However, all the accounting
policies are important, and therefore you are encouraged to review each of the policies included in Note 1 to our consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2006 to gain a better
understanding of how our financial performance is measured and reported.



33



---

##### 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 within our guidelines of acceptable levels of risk-taking. Hedging strategies, including the terms and pricing of loans and deposits and managing the deployment of our securities, are
used to reduce mismatches in interest rate re-pricing opportunities of portfolio assets and their funding sources.

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

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

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

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

At March 31, 2007, we had a negative gap of $149.0 million, or negative 5.5% of our total assets, that would be subject to re-pricing within one
year, with a total positive gap of $500.4 million, or 18.6% of our total assets that would reprice within 5 years. The following table sets forth information concerning re-pricing opportunities for our interest-earning assets and interest bearing
liabilities as of March 31, 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.



34



---

##### Table of Contents

|                                                               |  |                        |           |   |                   |   |          |              |  |   |             |   |  |                           |         |       |  |   |           |  |   |          
|-------------------------------------------------------------- |  | ---------------------- | --------- | - | ----------------- | - | -------- | ------------ |  | - | ----------- | - |  | ------------------------- | ------- | ----- |  | - | --------- |  | - | ---------
|                                                               |  | Less Than 3Months      |           |   | 3 Months to1 Year |   |          | 1 to 5 Years |  |   | Over 5Years |   |  | Not InterestRateSensitive |         | Total
|                                                               |  | (Dollars in thousands)
|Interest-bearing cash and cash equivalents                     |  | $                      | 31,266    |   |                   | $ |         |              |  | $ |            |   |  | $                         |        |       |  | $ |          |  | $ | 31,266   
|Investment securities                                          |  |                        | 29,254    |   |                   |   | 10,862   |              |  |   | 28,841      |   |  |                           | 91,852  |       |  |   | 31,995    |  |   | 192,804  
|Loans, gross                                                   |  |                        | 1,038,889 |   |                   |   | 176,715  |              |  |   | 483,720     |   |  |                           | 166,655 |       |  |   | 29,658    |  |   | 1,895,637
|All other assets                                               |  |                        |          |   |                   |   |         |              |  |   |            |   |  |                           |        |       |  |   | 573,677   |  |   | 573,677  
|                                                               |  |                        |           |   |                   |   |          |              |  |   |             |   |  |                           |         |       |  |   |           |  |   |          
|Totals                                                         |  | $                      | 1,099,409 |   |                   | $ | 187,577  |              |  | $ | 512,561     |   |  | $                         | 258,507 |       |  | $ | 635,330   |  | $ | 2,693,384
|                                                               |  |                        |           |   |                   |   |          |              |  |   |             |   |  |                           |         |       |  |   |           |  |   |          
|Deposits                                                       |  | $                      | 995,225   |   |                   | $ | 383,991  |              |  | $ | 72,702      |   |  | $                         |        |       |  | $ | 519,951   |  | $ | 1,971,869
|Assets under repurchase agreements and federal funds purchases |  |                        | 34,695    |   |                   |   |         |              |  |   |            |   |  |                           |        |       |  |   |          |  |   | 34,695   
|Borrowings                                                     |  |                        | 201       |   |                   |   | 21,922   |              |  |   | 7,324       |   |  |                           | 357     |       |  |   |          |  |   | 29,804   
|Subordinated debentures                                        |  |                        |          |   |                   |   |         |              |  |   |            |   |  |                           | 41,239  |       |  |   |          |  |   | 41,239   
|All other liabilities                                          |  |                        |          |   |                   |   |         |              |  |   |            |   |  |                           |        |       |  |   | 34,680    |  |   | 34,680   
|Stockholders equity                                           |  |                        |          |   |                   |   |         |              |  |   |            |   |  |                           |        |       |  |   | 581,097   |  |   | 581,097  
|                                                               |  |                        |           |   |                   |   |          |              |  |   |             |   |  |                           |         |       |  |   |           |  |   |          
|Totals                                                         |  | $                      | 1,030,121 |   |                   | $ | 405,913  |              |  | $ | 80,026      |   |  | $                         | 41,596  |       |  | $ | 1,135,728 |  | $ | 2,693,384
|                                                               |  |                        |           |   |                   |   |          |              |  |   |             |   |  |                           |         |       |  |   |           |  |   |          
|Period gap (assets minus liabilities)                          |  | $                      | 69,288    |   |                   | $ | (218,336 | )            |  | $ | 432,535     |   |  | $                         | 216,911 |       |  |   |           |  |   |          
|Cumulative gap                                                 |  | $                      | 69,288    |   |                   | $ | (149,048 | )            |  | $ | 283,487     |   |  | $                         | 500,398 |       |  |   |           |  |   |          
|Cumulative rate sensitive gap %                                |  |                        | 2.6       | % |                   |   | (5.5     | )%           |  |   | 10.5        | % |  |                           | 18.6    | %     |  |   |           |  |   |          



|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 March 31, 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.



35



---

##### Table of Contents

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. On September 7, 2005, the Bankruptcy Court granted, in part, Guaranty Banks initial response
and dismissed $8.5 million of the claims relating to alleged transfers for payment of items credited in the check collection process. On August 29, 2006, Guaranty Bank filed a motion for partial summary judgment on the trustees claims to
recover payments on alleged overdrafts in the amount of approximately $1.7 million, which the court denied. The remaining claims amount to approximately $2.9 million. In April 2007, the Company and the trustees participated in mediation. As a result
of the mediation, the parties are currently in final settlement discussions. Any settlement will be subject to the approval of the Bankruptcy Court. The Company does not expect the settlement amount to materially exceed the amount the Company had
reserved as of March 31, 2007 for this litigation.

On July 22, 2005 and August 18, 2005, two separate but similar actions
(i.e., the Barnes action and Teper action, respectively) were filed against Guaranty Bank and a former officer in the Denver District Court, Denver, Colorado by investors who provided funds to Hoover, the Hoover Company or related entities.
The investors allege that certain activities of Guaranty Bank and its former officer with respect to the customer relationship with Hoover, the Hoover Company and related entities aided and abetted Hoover and the Hoover Company in securities
violations and violations of the Colorado Organized Crime Control Act and amounted to a civil conspiracy, causing the investors to incur damages. The court has subsequently dismissed the entire Teper action. The investors in the Barnes action are
seeking actual and statutory treble damages, as well as interest and attorneys fees, against Guaranty Bank and its former officer. The currently outstanding alleged actual losses claimed in connection with the Barnes action are approximately
$10.5 million. We will continue to vigorously defend the Barnes action. At this time, we cannot determine whether the outcome of the Barnes action will have a material adverse impact on our consolidated financial position or results of operations.
To the extent the Barnes action is not settled or dismissed, the Company will incur ongoing legal defense costs and be exposed to a possible adverse judgment. If such legal defense costs and any adverse judgment are not covered by insurance, the
legal defense costs and judgment incurred could have an adverse impact on our results of operations.

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



36



---

##### 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 first quarter 2007.



|                          |  |                                |  |                             |      |                                                                    |           |                                                                                        |          
|------------------------- |  | ------------------------------ |  | --------------------------- | ---- | ------------------------------------------------------------------ | --------- | -------------------------------------------------------------------------------------- | ---------
|Period                    |  | Total Numberof SharesPurchased |  | Average PricePaid Per Share |      | Total Number ofShares Purchasedas Part ofPubliclyAnnouncedPlans(1) |           | Maximum Numberof Shares that MayYet Be PurchasedUnder the Plans atthe End of thePeriod
|January 1 to January 31   |  |                               |  | $                           |     |                                                                    |          |                                                                                        | 1,825,510
|February 1 to February 28 |  | 1,496,600                      |  |                             | 8.44 |                                                                    | 1,496,600 |                                                                                        | 1,253,400
|March 1 to March 31       |  | 222,200                        |  |                             | 8.55 |                                                                    | 222,200   |                                                                                        | 1,031,200
|                          |  |                                |  |                             |      |                                                                    |           |                                                                                        |          
|Total                     |  | 1,718,800                      |  | $                           | 8.46 |                                                                    | 1,718,800 |                                                                                        | 1,031,200
|                          |  |                                |  |                             |      |                                                                    |           |                                                                                        |          

---

|(1) | On February 13, 2007, we
announced the authorization of an additional 924,490 shares to our existing stock repurchase program authorized in October 2006, to be purchased 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. Under the increased program, we are authorized to repurchase up to 2,750,000 shares.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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. This new program is not reflected in the above table.



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

None.



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

None.



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

None.



37



---

##### Table of Contents

|ITEM 6. | Exhibits
|------- | --------



|               |  |                                                                                                                                                                                   
|-------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Description                                                                                                                                                                       
|3.1            |  | Amended and Restated Certification of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 to Registrants Form S-1 Registration Statement (No.
333-124855)).
|               | 
|3.2            |  | Amended and Restated Bylaws of the Registrant (incorporated by reference to Exhibit 3.2 to Registrants Form S-1 Registration Statement (No. 333-124855)).                        
|               | 
|10.1          |  | Centennial Bank Holdings, Inc. Change in Control Severance Plan, adopted as of December 11, 2006 and amended and restated as of May 7, 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
|- | -------------------------------------------------------------------



38



---

##### Table of Contents

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: May 8, 2007 |  | CENTENNIAL BANK HOLDINGS, INC.                       |  | 
|                  |  |                                                     
|                  |  | /s/ PAUL W. TAYLOR                                   |  | 
|                  |  | Paul W. Taylor                                       |  | 
|                  |  | Executive Vice President and Chief Financial Officer |  | 



39