----

**UNITED      STATES**

**SECURITIES      AND EXCHANGE COMMISSION**

**Washington,      D.C. 20549**

**FORM      10-Q**

|   |   | (Mark                One)                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|   | þ | QUARTERLY                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE                ACT OF                1934                                                                                                                                                                                                                                                                                                                                       |   |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |
|   |   | For                the quarterly period ended September                30,                2006                                                                           |   |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |
|   |   | Or                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |
|   | o      | TRANSITION                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE                ACT OF                1934                                                                                                                                                                                                                                                                                                                                      |   |

**REPUBLIC      BANCORP INC.**

|   | Michigan                                                                                                         |   | 38-2604669                                          |   |
|--------|------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------|--------|
|   | (State                or other jurisdiction of incorporation or organization)                                    |   | (I.R.S.                Employer Identification No.) |   |
|   |                                                                                                             |   |                                                |   |
|   | 1070                East Main Street, Owosso, Michigan                                                           |   | 48867                                               |   |
|   | (Address                of principal executive offices)                                                          |   | (Zip                Code)                           |   |
|   |                                                                                                             |   |                                                |   |
|   | (989)                725-7337                                                                                    |   |                                                |   |
|   | (Registrant's                telephone number, including area code)                                              |   |                                                |   |
|   |                                                                                                             |   |                                                |   |
|   |                                                                                                             |   |
|   | (Former                name, former address and former fiscal year, if changed since last                report) |   |

**APPLICABLE      ONLY TO CORPORATE ISSUERS:**

| Common                Stock Outstanding as of October 31, 2006: |                             |
|-----------------------------------------------------------------|----------------------------------|
| Common                Stock, $5 Par Value Per Share             | 74,648,000                Shares |

----

| **PART                I.**                              | FINANCIAL                INFORMATION                                                                                                           |   |                                 |
|---------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------|
|                                                    |                                                                                                                                           |   |                                 |
| Item                1.                                  | Financial                Statements (Unaudited)                                                                                                |   |                                 |
|                                                    |                                                                                                                                           |   |                                 |
|                                                    | Consolidated                Balance Sheets as of September 30, 2006 and December 31, 2005                                                      |   | 2                                    |
|                                                    |                                                                                                                                           |   |                                 |
|                                                    | Consolidated                Statements of Income for the Three and Nine Months Ended September                30,                2006 and 2005 |   | 3                                    |
|                                                    |                                                                                                                                           |   |                                 |
|                                                    | Consolidated                Statements of Cash Flows for the Nine Months Ended September 30,                2006 and                2005       |   | 4                                    |
|                                                    |                                                                                                                                           |   |                                 |
|                                                    | Notes                to Consolidated Financial Statements                                                                                      |   | 5                -                12 |
|                                                    |                                                                                                                                           |   |                                 |
| Item                2.                                  | Management’s                Discussion and Analysis of Financial Condition and Results of                Operations                      |   | 13                - 26               |
|                                                    |                                                                                                                                           |   |                                 |
| Item                3.                                  | Quantitative                and Qualitative Disclosures About Market Risk                                                                      |   | 27                - 29               |
|                                                    |                                                                                                                                           |   |                                 |
| Item                4.                                  | Controls                and Procedures                                                                                                         |   | 29                                   |
|                                                    |                                                                                                                                           |   |                                 |
| **PART                II.**                             | OTHER                INFORMATION                                                                                                               |   |                                 |
|                                                    |                                                                                                                                           |   |                                 |
| Item                1.                                  | Legal                Proceedings                                                                                                               |   | 30                                   |
|                                                    |                                                                                                                                           |   |                                 |
| Item                2.                                  | Purchases                of Equity Securities by the Issuer and Affiliated                Purchasers                                           |   | 30                                   |
|                                                    |                                                                                                                                           |   |                                 |
| Item                6.                                  | Exhibits                                                                                                                                       |   | 30                                   |
|                                                    |                                                                                                                                           |   |                                 |
| **SIGNATURE**                                           |                                                                                                                                           |   | 31                                   |
|                                                    |                                                                                                                                           |   |                                 |
|                   Exhibit                12 - | Calculations                of Ratios of Earnings to Combined Fixed Charges                                                                    |   |                                 |
|                                                    |                                                                                                                                           |   |                                 |
| Exhibits                31(a)-(b) -                     | Certifications                of the Principal Executive Officer and Principal Financial                Officer                                |   |                                      |
|                                                    |                                                                                                                                           |   |                                 |
| Exhibits                32(a)-(b) -                     | Certifications                of the Chief Executive Officer and Chief Financial Officer                                                       |   |                                 |

----

**PART      I - FINANCIAL INFORMATION**

**REPUBLIC      BANCORP INC. AND SUBSIDIARIES**

| (Dollars                in thousands)                                                                                                                       |   | September                30,2006 |              | December                31, 2005 |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------|-------------------|----------------------------------|--------|
|                                                                                                                                                        |   |                             | (Unaudited)  |                             |   | (Note                1) |   |
| **ASSETS**                                                                                                                                                  |   |                             |              |                             |   |   |   |
| Cash                and cash equivalents                                                                                                                    |   | $                                | 53,119            |                             | $      | 52,527 |   |
| Mortgage                loans held for sale                                                                                                                 |   |                             | 107,659           |                             |   | 38,259 |   |
| Securities                available for sale, at market                                                                                                     |   |                             | 896,446           |                             |   | 861,623 |   |
| Securities                held to maturity, at cost                                                                                                         |   |                             | 207,239           |                             |   | 227,262 |   |
| Loans,                net of unearned income                                                                                                                |   |                             | 4,666,230         |                             |   | 4,628,258 |   |
| Less                allowance for loan losses                                                                                                               |   |                             | (44,284           | )                                |   | (42,122 | ) |
| Net                loans                                                                                                                                    |   |                             | 4,621,946         |                             |   | 4,586,136 |   |
| Federal                Home Loan Bank stock, at cost                                                                                                        |   |                             | 79,406            |                             |   | 80,525 |   |
| Premises                and equipment                                                                                                                       |   |                             | 25,538            |                             |   | 26,586 |   |
| Bank                owned life insurance                                                                                                                    |   |                             | 118,423           |                             |   | 116,519 |   |
| Other                assets                                                                                                                                 |   |                             | 98,472            |                             |   | 92,329 |   |
| Total                assets                                                                                                                                 |   | $                                | 6,208,248         |                             | $      | 6,081,766 |   |
|                                                                                                                                                        |   |                             |              |                             |   |   |   |
| **LIABILITIES**                                                                                                                                             |   |                             |              |                             |   |   |   |
| Noninterest-bearing                deposits                                                                                                                 |   | $                                | 267,223           |                             | $      | 284,932 |   |
| Interest-bearing                deposits:                                                                                                                   |   |                             |              |                             |   |   |   |
| NOW                accounts                                                                                                                                 |   |                             | 175,271           |                             |   | 187,190 |   |
| Savings                and money market accounts                                                                                                            |   |                             | 771,625           |                             |   | 932,048 |   |
| Retail                certificates of deposit                                                                                                               |   |                             | 1,204,849         |                             |   | 1,102,188 |   |
| Wholesale                deposits                                                                                                                           |   |                             | 615,851           |                             |   | 636,585 |   |
| Total                interest-bearing deposits                                                                                                              |   |                             | 2,767,596         |                             |   | 2,858,011 |   |
| Total                deposits                                                                                                                               |   |                             | 3,034,819         |                             |   | 3,142,943 |   |
| Federal                funds purchased and other short-term borrowings                                                                                      |   |                             | 763,803           |                             |   | 709,300 |   |
| Short-term                FHLB advances                                                                                                                     |   |                             | 300,000           |                             |   | 218,000 |   |
| Long-term                FHLB advances and security repurchase agreements                                                                                   |   |                             | 1,576,439         |                             |   | 1,489,432 |   |
| Accrued                expenses and other liabilities                                                                                                       |   |                             | 56,208            |                             |   | 67,632 |   |
| Long-term                debt                                                                                                                               |   |                             | 50,000            |                             |   | 50,000 |   |
| Total                liabilities                                                                                                                            |   |                             | 5,781,269         |                             |   | 5,677,307 |   |
|                                                                                                                                                        |   |                             |              |                             |   |   |   |
| **SHAREHOLDERS’                EQUITY**                                                                                                               |   |                             |              |                             |   |   |   |
| Preferred                stock, $25 stated value: $2.25 cumulative and convertible; 5,000,000                shares authorized, none issued and outstanding |   |                             | -                 |                             |   | - |   |
| Common                stock, $5 par value, 100,000,000 shares authorized; 74,631,000 and                74,976,000 issued and outstanding, respectively     |   |                             | 373,156           |                             |   | 374,882 |   |
| Capital                surplus                                                                                                                              |   |                             | 34,819            |                             |   | 36,721 |   |
| Retained                earnings                                                                                                                            |   |                             | 27,520            |                             |   | 3,114 |   |
| Accumulated                other comprehensive loss                                                                                                         |   |                             | (8,516            | )                                |   | (10,258 | ) |
| Total                shareholders’ equity                                                                                                             |   |                             | 426,979           |                             |   | 404,459 |   |
| Total                liabilities and shareholders’ equity                                                                                             |   | $                                | 6,208,248         |                             | $      | 6,081,766 |   |

----

**REPUBLIC      BANCORP INC. AND SUBSIDIARIES**

|                                                                      |   | Three                Months Ended |   | Nine                Months Ended |   |
|---------------------------------------------------------------------------|--------|-----------------------------------|--------|----------------------------------|--------|
|                                                                      |   | September                30,      |   | September                30,     |   |
| (In                thousands, except per share data)                      |   | 2006                              |   | 2005                             |   | 2006 |   | 2005 |   |
| **Interest                Income:**                                       |   |                              |   |                             |   |   |   |   |   |   |   |   |   |
| Interest                and fees on loans                                 |   | $                                 | 81,160 |                             | $      | 70,556 |   | $ | 233,524 |   | $ | 202,477 |   |
| Interest                on investment securities and FHLB stock dividends |   |                              | 13,794 |                             |   | 12,795 |   |   | 42,444 |   |   | 37,452 |   |
| Total                interest income                                      |   |                              | 94,954 |                             |   | 83,351 |   |   | 275,968 |   |   | 239,929 |   |
|                                                                      |   |                              |   |                             |   |   |   |   |   |   |   |   |   |
| **Interest                Expense:**                                      |   |                              |   |                             |   |   |   |   |   |   |   |   |   |
| Deposits                                                                  |   |                              | 25,876 |                             |   | 19,118 |   |   | 70,038 |   |   | 50,973 |   |
| Short-term                borrowings                                      |   |                              | 15,257 |                             |   | 9,147 |   |   | 40,826 |   |   | 23,092 |   |
| Long-term                FHLB advances and security repurchase agreements |   |                              | 17,444 |                             |   | 15,931 |   |   | 50,428 |   |   | 47,480 |   |
| Long-term                debt                                             |   |                              | 1,075  |                             |   | 1,075 |   |   | 3,225 |   |   | 3,225 |   |
| Total                interest expense                                     |   |                              | 59,652 |                             |   | 45,271 |   |   | 164,517 |   |   | 124,770 |   |
| Net                interest income                                        |   |                              | 35,302 |                             |   | 38,080 |   |   | 111,451 |   |   | 115,159 |   |
| Provision                for loan losses                                  |   |                              | 2,450  |                             |   | 1,400 |   |   | 5,600 |   |   | 4,300 |   |
| Net                interest income after provision for loan losses        |   |                              | 32,852 |                             |   | 36,680 |   |   | 105,851 |   |   | 110,859 |   |
|                                                                      |   |                              |   |                             |   |   |   |   |   |   |   |   |   |
| **Noninterest                Income:**                                    |   |                              |   |                             |   |   |   |   |   |   |   |   |   |
| Service                charges                                            |   |                              | 3,230  |                             |   | 3,318 |   |   | 9,538 |   |   | 9,007 |   |
| Mortgage                banking income                                    |   |                              | 3,093  |                             |   | 4,760 |   |   | 7,112 |   |   | 13,817 |   |
| Gain                on sale of securities                                 |   |                              | 41     |                             |   | 447 |   |   | 109 |   |   | 1,174 |   |
| Gain                on sale of SBA loans                                  |   |                              | 559    |                             |   | 628 |   |   | 1,376 |   |   | 1,581 |   |
| Income                from bank owned life insurance                      |   |                              | 1,023  |                             |   | 1,083 |   |   | 2,983 |   |   | 3,176 |   |
| Other                noninterest income                                   |   |                              | 638    |                             |   | 775 |   |   | 2,704 |   |   | 2,180 |   |
| Total                noninterest income                                   |   |                              | 8,584  |                             |   | 11,011 |   |   | 23,822 |   |   | 30,935 |   |
|                                                                      |   |                              |   |                             |   |   |   |   |   |   |   |   |   |
| **Noninterest                Expense:**                                   |   |                              |   |                             |   |   |   |   |   |   |   |   |   |
| Salaries                and employee benefits                             |   |                              | 10,994 |                             |   | 15,337 |   |   | 34,720 |   |   | 41,103 |   |
| Occupancy                expense of premises                              |   |                              | 2,415  |                             |   | 2,603 |   |   | 7,539 |   |   | 7,799 |   |
| Equipment                expense                                          |   |                              | 1,347  |                             |   | 1,565 |   |   | 4,200 |   |   | 4,788 |   |
| Other                noninterest expense                                  |   |                              | 3,520  |                             |   | 4,393 |   |   | 12,866 |   |   | 14,339 |   |
| Merger                related expense                                     |   |                              | 105    |                             |   | - |   |   | 105 |   |   | - |   |
| Total                noninterest expense                                  |   |                              | 18,381 |                             |   | 23,898 |   |   | 59,430 |   |   | 68,029 |   |
| Income                before income taxes                                 |   |                              | 23,055 |                             |   | 23,793 |   |   | 70,243 |   |   | 73,765 |   |
| Provision                for income taxes                                 |   |                              | 6,847  |                             |   | 6,571 |   |   | 21,222 |   |   | 21,761 |   |
| **Net                Income**                                             |   | $                                 | 16,208 |                             | $      | 17,222 |   | $ | 49,021 |   | $ | 52,004 |   |
|                                                                      |   |                              |   |                             |   |   |   |   |   |   |   |   |   |
|                                                                      |   |                              |   |                             |   |   |   |   |   |   |   |   |   |
| Basic                earnings per share                                   |   | $                                 | .22    |                             | $      | .23 |   | $ | .66 |   | $ | .68 |   |
|                                                                      |   |                              |   |                             |   |   |   |   |   |   |   |   |   |
| Diluted                earnings per share                                 |   | $                                 | .22    |                             | $      | .22 |   | $ | .65 |   | $ | .67 |   |
|                                                                      |   |                              |   |                             |   |   |   |   |   |   |   |   |   |
| Average                common shares outstanding - diluted                |   |                              | 75,251 |                             |   | 76,577 |   |   | 75,305 |   |   | 77,486 |   |
|                                                                      |   |                              |   |                             |   |   |   |   |   |   |   |   |   |
| Cash                dividends declared per common share                   |   | $                                 | .11    |                             | $      | .10 |   | $ | .33 |   | $ | .30 |   |

----

**REPUBLIC      BANCORP INC. AND SUBSIDIARIES**

|                                                                                                                      |   | Nine                Months Ended |     |
|---------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------|----------|
|                                                                                                                      |   | September                30,     |     |
| (In                thousands)                                                                                             |   | 2006                             |     | 2005 |   |
| **Cash                Flows From Operating Activities:**                                                                  |   |                             |     |   |   |   |   |
| Net                income                                                                                                 |   | $                                | 49,021   |   | $ | 52,004 |   |
| Adjustments                to reconcile net income to net cash provided by (used in) operating                activities: |   |                             |     |   |   |   |   |
| Depreciation                and amortization                                                                              |   |                             | 5,513    |   |   | 7,139 |   |
| Stock-based                compensation expense                                                                           |   |                             | 1,532    |   |   | 1,859 |   |
| Net                gains on sale of securities available for sale                                                         |   |                             | (109     | ) |   | (1,174 | ) |
| Net                gains on sale of commercial and residential real estate                loans                           |   |                             | (2,081   | ) |   | (4,725 | ) |
| Proceeds                from sale of mortgage loans held for sale                                                         |   |                             | 328,507  |   |   | 542,411 |   |
| Origination                of mortgage loans held for sale                                                                |   |                             | (397,907 | ) |   | (528,937 | ) |
| Net                decrease in other assets                                                                               |   |                             | (6,774   | ) |   | (23,258 | ) |
| Net                (decrease) increase in other liabilities                                                               |   |                             | (11,424  | ) |   | 620 |   |
| Other,                net                                                                                                 |   |                             | 2,181    |   |   | 129 |   |
| Total                adjustments                                                                                          |   |                             | (80,562  | ) |   | (5,936 | ) |
| Net                cash (used in) provided by operating activities                                                        |   |                             | (31,541  | ) |   | 46,068 |   |
|                                                                                                                      |   |                             |     |   |   |   |   |
| **Cash                Flows From Investing Activities:**                                                                  |   |                             |     |   |   |   |   |
| Proceeds                from sale of securities available for sale                                                        |   |                             | 15,431   |   |   | 198,159 |   |
| Proceeds                from calls and principal payments of securities available for                sale                 |   |                             | 49,629   |   |   | 89,843 |   |
| Proceeds                from principal payments of securities held to maturity                                            |   |                             | 19,944   |   |   | 36,459 |   |
| Purchases                of securities available for sale                                                                 |   |                             | (98,035  | ) |   | (473,354 | ) |
| Purchases                of securities held to maturity                                                                   |   |                             | -        |   |   | (50,921 | ) |
| Proceeds                from sale of commercial and residential real estate loans                                         |   |                             | 119,359  |   |   | 259,952 |   |
| Net                increase in loans made to customers                                                                    |   |                             | (155,876 | ) |   | (406,415 | ) |
| Purchases                of premises and equipment                                                                        |   |                             | (2,622   | ) |   | (4,556 | ) |
| Net                cash used in investing activities                                                                      |   |                             | (52,170  | ) |   | (350,833 | ) |
|                                                                                                                      |   |                             |     |   |   |   |   |
| **Cash                Flows From Financing Activities:**                                                                  |   |                             |     |   |   |   |   |
| Net                (decrease) increase in total deposits                                                                  |   |                             | (108,124 | ) |   | 168,396 |   |
| Net                increase in short-term borrowings                                                                      |   |                             | 54,503   |   |   | 180,475 |   |
| Net                increase (decrease) in short-term FHLB advances                                                        |   |                             | 82,000   |   |   | (25,000 | ) |
| Proceeds                from long-term FHLB advances and security repurchase                agreements                    |   |                             | 214,485  |   |   | 113,250 |   |
| Payments                on long-term FHLB advances and security repurchase                agreements                      |   |                             | (127,931 | ) |   | (64,612 | ) |
| Net                proceeds from issuance of common shares                                                                |   |                             | 1,905    |   |   | 7,282 |   |
| Excess                tax benefits of stock-based awards                                                                  |   |                             | 603      |   |   | - |   |
| Repurchase                of common shares                                                                                |   |                             | (8,507   | ) |   | (37,235 | ) |
| Dividends                paid on common shares                                                                            |   |                             | (24,631  | ) |   | (23,067 | ) |
| Net                cash provided by financing activities                                                                  |   |                             | 84,303   |   |   | 319,489 |   |
|                                                                                                                      |   |                             |     |   |   |   |   |
| Net                increase in cash and cash equivalents                                                                  |   |                             | 592      |   |   | 14,724 |   |
| Cash                and cash equivalents at beginning of period                                                           |   |                             | 52,527   |   |   | 53,671 |   |
| Cash                and cash equivalents at end of period                                                                 |   | $                                | 53,119   |   | $ | 68,395 |   |

----

**REPUBLIC      BANCORP INC. AND SUBSIDIARIES**

**Note      1 - **
**Basis      of Presentation**

**Note      2 - **
**Principles      of Consolidation**

**Note      3 - **
**Pending      Transaction**

**Note      4 - **
**Consolidated      Statements of Cash Flows**

| (In                thousands)                               |   | 2006   |    | 2005   |   |
|-------------------------------------------------------------|--------|--------|---------|--------|--------|
| Cash                paid during the period for:             |   |   |    |   |   |   |   |
| Interest                                                    |   | $      | 164,049 |   | $      | 123,874 |   |
| Income                taxes                                 |   | $      | 24,700  |   | $      | 22,229 |   |
|                                                        |   |   |    |   |   |   |   |
| Non-cash                investing activities:               |   |   |    |   |   |   |   |
| Loan                charge-offs                             |   | $      | 4,377   |   | $      | 5,442 |   |
| Loans                transferred to other real estate owned |   | $      | 15,599  |   | $      | 16,540 |   |

----

**Note      5 - **
**Comprehensive      Income**

|                                                                                                                                                           |   | Three                Months EndedSeptember                30, |   | Nine                Months EndedSeptember                30, |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------|--------|--------------------------------------------------------------|--------|
| (In                thousands)                                                                                                                                  |   | 2006                                                          |   | 2005                                                         |   | 2006 |   | 2005 |   |
|                                                                                                                                                           |   |                                                          |   |                                                         |   |   |   |   |   |   |   |   |   |
| Net                income                                                                                                                                      |   | $                                                             | 16,208 |                                                         | $      | 17,222 |   | $ | 49,021 |   | $ | 52,004 |   |
|                                                                                                                                                           |   |                                                          |   |                                                         |   |   |   |   |   |   |   |   |   |
| Unrealized                holding gains (losses) on securities, net of tax (credit) of $5,320,                ($1,464), $976 and ($649), respectively          |   |                                                          | 9,880  |                                                         |   | (2,719 | ) |   | 1,813 |   |   | (1,206 | ) |
| Reclassification                adjustment for gains included in net income, net of tax of $14, $156,                $38                and $411, respectively |   |                                                          | (27    | )                                                            |   | (291 | ) |   | (71 | ) |   | (763 | ) |
| Net                unrealized gains (losses) on securities, net of tax                                                                                         |   |                                                          | 9,853  |                                                         |   | (3,010 | ) |   | 1,742 |   |   | (1,969 | ) |
| Comprehensive                income                                                                                                                            |   | $                                                             | 26,061 |                                                         | $      | 14,212 |   | $ | 50,763 |   | $ | 50,035 |   |

**Note      6 - **
**Intangible      Assets**

| (In                thousands)                 |   | September                30, 2006 |   | December                31, 2005 |   |
|-----------------------------------------------|--------|-----------------------------------|--------|----------------------------------|--------|
| Core                Deposit Intangible Asset: |   |                              |   |                             |   |   |   |
| Gross                carrying amount          |   | $                                 | 10,883 |                             | $      | 10,883 |   |
| Accumulated                amortization       |   |                              | 8,523  |                             |   | 7,880 |   |
| Net                book value                 |   | $                                 | 2,360  |                             | $      | 3,003 |   |

**Note      7 - **
**Earnings      Per Share**

|                                                                                                                                    |   | Three                Months Ended September                30, |   | Nine                Months EndedSeptember                30, |   |
|-----------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------|--------|--------------------------------------------------------------|--------|
| (In                thousands, except per share data)                                                                                    |   | 2006                                                           |   | 2005(1)                                                      |   | 2006 |   | 2005(1) |   |
| Numerator                for basic and diluted earnings per share:                                                                      |   |                                                           |   |                                                         |   |   |   |   |   |   |   |   |   |
| Net                income                                                                                                               |   | $                                                              | 16,208 |                                                         | $      | 17,222 |   | $ | 49,021 |   | $ | 52,004 |   |
|                                                                                                                                    |   |                                                           |   |                                                         |   |   |   |   |   |   |   |   |   |
| Denominator                for basic earnings per share - weighted-average shares                                                       |   |                                                           | 74,570 |                                                         |   | 75,740 |   |   | 74,653 |   |   | 76,630 |   |
| Effect                of dilutive securities:                                                                                           |   |                                                           |   |                                                         |   |   |   |   |   |   |   |   |   |
| Stock                options                                                                                                            |   |                                                           | 642    |                                                         |   | 778 |   |   | 611 |   |   | 795 |   |
| Warrants                                                                                                                                |   |                                                           | 39     |                                                         |   | 59 |   |   | 41 |   |   | 61 |   |
| Dilutive                potential common shares                                                                                         |   |                                                           | 681    |                                                         |   | 837 |   |   | 652 |   |   | 856 |   |
| Denominator                for diluted earnings per share—adjusted weighted-average shares for                assumed conversions |   |                                                           | 75,251 |                                                         |   | 76,577 |   |   | 75,305 |   |   | 77,486 |   |
|                                                                                                                                    |   |                                                           |   |                                                         |   |   |   |   |   |   |   |   |   |
| Basic                earnings per share                                                                                                 |   | $                                                              | .22    |                                                         | $      | .23 |   | $ | .66 |   | $ | .68 |   |
| Diluted                earnings per share                                                                                               |   | $                                                              | .22    |                                                         | $      | .22 |   | $ | .65 |   | $ | .67 |   |
|                                                                                                                                    |   |                                                           |   |                                                         |   |   |   |   |   |   |   |   |   |

----

**Note      8 - **
**Segment      Information**

|                                                             |   |       |    |   |   |     |   |                                             |   |         |   |
|------------------------------------------------------------------|--------|------------|---------|--------|--------|----------|--------|--------------------------------------------------|--------|--------------|--------|
| (In                thousands)                                    |   | Commercial |    | Retail |   | Mortgage |   | Treasury                and                Other |   | Consolidated |   |
| **For                the Three Months Ended September 30, 2006** |   |       |    |   |   |     |   |                                             |   |         |   |   |   |   |   |   |
| Net                interest income from external customers       |   | $          | 33,856  |   | $      | (10,920  | )      | $                                                | 2,920  |         | $      | 9,446 |   | $ | 35,302 |   |
| Internal                funding                                  |   |       | (16,204 | )      |   | 34,565   |   |                                             | (1,794 | )            |   | (16,567 | ) |   | - |   |
| Net                interest income                               |   |       | 17,652  |   |   | 23,645   |   |                                             | 1,126  |         |   | (7,121 | ) |   | 35,302 |   |
| Provision                for loan losses(1)                      |   |       | 982     |   |   | -        |   |                                             | 23     |         |   | 1,445 |   |   | 2,450 |   |
| Noninterest                income                                |   |       | 989     |   |   | 3,285    |   |                                             | 3,141  |         |   | 1,169 |   |   | 8,584 |   |
| Noninterest                expense                               |   |       | 2,294   |   |   | 7,424    |   |                                             | 3,289  |         |   | 5,374 |   |   | 18,381 |   |
| Income                before taxes                               |   |       | 15,365  |   |   | 19,506   |   |                                             | 955    |         |   | (12,771 | ) |   | 23,055 |   |
| Income                taxes                                      |   |       | 5,378   |   |   | 6,827    |   |                                             | 334    |         |   | (5,692 | ) |   | 6,847 |   |
| Net                income                                        |   | $          | 9,987   |   | $      | 12,679   |   | $                                                | 621    |         | $      | (7,079 | ) | $ | 16,208 |   |
|                                                             |   |       |    |   |   |     |   |                                             |   |         |   |   |   |   |   |   |
| Depreciation                and amortization                     |   | $          | 20      |   | $      | 680      |   | $                                                | 212    |         | $      | 991 |   | $ | 1,903 |   |
| Capital                expenditures                              |   | $          | -       |   | $      | 57       |   | $                                                | 2      |         | $      | 62 |   | $ | 121 |   |
| Net                identifiable assets (in millions)             |   | $          | 1,772   |   | $      | 2,718    |   | $                                                | 184    |         | $      | 1,534 |   | $ | 6,208 |   |
| Return                on equity(2)                               |   |       | 22.62   | %      |   | 39.08    | %      |                                             | 25.50  | %            |   | n/m |   |   | 15.48 | % |
| Return                on assets                                  |   |       | 2.26    | %      |   | 1.86     | %      |                                             | 1.27   | %            |   | n/m |   |   | 1.03 | % |
| Efficiency                ratio                                  |   |       | 12.31   | %      |   | 27.57    | %      |                                             | 77.08  | %            |   | n/m |   |   | 41.09 | % |

| (In                thousands)                                    |   | Commercial |    | Retail |   | Mortgage |   | Treasury                and                Other |   | Consolidated |   |
|------------------------------------------------------------------|--------|------------|---------|--------|--------|----------|--------|--------------------------------------------------|--------|--------------|--------|
| **For                the Three Months Ended September 30, 2005** |   |       |    |   |   |     |   |                                             |   |         |   |   |   |   |   |   |
| Net                interest income from external customers       |   | $          | 28,041  |   | $      | (7,920   | )      | $                                                | 3,881  |         | $      | 14,078 |   | $ | 38,080 |   |
| Internal                funding                                  |   |       | (11,950 | )      |   | 34,512   |   |                                             | (1,993 | )            |   | (20,569 | ) |   | - |   |
| Net                interest income                               |   |       | 16,091  |   |   | 26,592   |   |                                             | 1,888  |         |   | (6,491 | ) |   | 38,080 |   |
| Provision                for loan losses(1)                      |   |       | 1,155   |   |   | 195      |   |                                             | 162    |         |   | (112 | ) |   | 1,400 |   |
| Noninterest                income                                |   |       | 1,020   |   |   | 3,385    |   |                                             | 5,563  |         |   | 1,043 |   |   | 11,011 |   |
| Noninterest                expense                               |   |       | 3,055   |   |   | 8,293    |   |                                             | 4,972  |         |   | 7,578 |   |   | 23,898 |   |
| Income                before taxes                               |   |       | 12,901  |   |   | 21,489   |   |                                             | 2,317  |         |   | (12,914 | ) |   | 23,793 |   |
| Income                taxes                                      |   |       | 4,516   |   |   | 7,521    |   |                                             | 811    |         |   | (6,277 | ) |   | 6,571 |   |
| Net                income                                        |   | $          | 8,385   |   | $      | 13,968   |   | $                                                | 1,506  |         | $      | (6,637 | ) | $ | 17,222 |   |
|                                                             |   |       |    |   |   |     |   |                                             |   |         |   |   |   |   |   |   |
| Depreciation                and amortization                     |   | $          | 25      |   | $      | 714      |   | $                                                | 488    |         | $      | 1,398 |   | $ | 2,625 |   |
| Capital                expenditures                              |   | $          | 4       |   | $      | 2,152    |   | $                                                | 19     |         | $      | 218 |   | $ | 2,393 |   |
| Net                identifiable assets (in millions)             |   | $          | 1,659   |   | $      | 2,940    |   | $                                                | 240    |         | $      | 1,242 |   | $ | 6,081 |   |
| Return                on equity(2)                               |   |       | 20.38   | %      |   | 40.08    | %      |                                             | 44.23  | %            |   | n/m |   |   | 16.87 | % |
| Return                on assets                                  |   |       | 2.04    | %      |   | 1.91     | %      |                                             | 2.21   | %            |   | n/m |   |   | 1.14 | % |
| Efficiency                ratio                                  |   |       | 17.85   | %      |   | 27.66    | %      |                                             | 66.73  | %            |   | n/m |   |   | 48.26 | % |

| (1)  | The                provision for loan losses for each segment reflects net charge-offs                in                each segment and the maintenance of a fixed allowance for loan losses                to                loans ratio.         |
|-----------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2)  | Capital                is allocated as a percentage of assets of 10% and 5% for the commercial                and mortgage banking segments, respectively and is allocated as a                percentage of deposits of 5% for the retail segment. |
| n/m  | -- Not                meaningful                                                                                                                                                                                                               |

----

**Note      8 - **
**Segment      Information (Continued)**

|                                                            |   |       |    |   |   |     |   |                                             |   |         |   |
|-----------------------------------------------------------------|--------|------------|---------|--------|--------|----------|--------|--------------------------------------------------|--------|--------------|--------|
| (In                thousands)                                   |   | Commercial |    | Retail |   | Mortgage |   | Treasury                and                Other |   | Consolidated |   |
| **For                the Nine Months Ended September 30, 2006** |   |       |    |   |   |     |   |                                             |   |         |   |   |   |   |   |   |
| Net                interest income from external customers      |   | $          | 97,078  |   | $      | (28,669  | )      | $                                                | 7,803  |         | $      | 35,239 |   | $ | 111,451 |   |
| Internal                funding                                 |   |       | (44,359 | )      |   | 102,287  |   |                                             | (4,689 | )            |   | (53,239 | ) |   | - |   |
| Net                interest income                              |   |       | 52,719  |   |   | 73,618   |   |                                             | 3,114  |         |   | (18,000 | ) |   | 111,451 |   |
| Provision                for loan losses(1)                     |   |       | 2,290   |   |   | 100      |   |                                             | 277    |         |   | 2,933 |   |   | 5,600 |   |
| Noninterest                income                               |   |       | 3,297   |   |   | 9,738    |   |                                             | 9,354  |         |   | 1,433 |   |   | 23,822 |   |
| Noninterest                expense                              |   |       | 7,723   |   |   | 22,904   |   |                                             | 11,251 |         |   | 17,552 |   |   | 59,430 |   |
| Income                before taxes                              |   |       | 46,003  |   |   | 60,352   |   |                                             | 940    |         |   | (37,052 | ) |   | 70,243 |   |
| Income                taxes                                     |   |       | 16,101  |   |   | 21,123   |   |                                             | 329    |         |   | (16,331 | ) |   | 21,222 |   |
| Net                income                                       |   | $          | 29,902  |   | $      | 39,229   |   | $                                                | 611    |         | $      | (20,721 | ) | $ | 49,021 |   |
|                                                            |   |       |    |   |   |     |   |                                             |   |         |   |   |   |   |   |   |
| Depreciation                and amortization                    |   | $          | 56      |   | $      | 2,052    |   | $                                                | 663    |         | $      | 2,742 |   | $ | 5,513 |   |
| Capital                expenditures                             |   | $          | 1       |   | $      | 1,969    |   | $                                                | 134    |         | $      | 518 |   | $ | 2,622 |   |
| Net                identifiable assets (in millions)            |   | $          | 1,772   |   | $      | 2,718    |   | $                                                | 184    |         | $      | 1,534 |   | $ | 6,208 |   |
| Return                on equity(2)                              |   |       | 22.89   | %      |   | 39.77    | %      |                                             | 8.87   | %            |   | n/m |   |   | 15.85 | % |
| Return                on assets                                 |   |       | 2.29    | %      |   | 1.89     | %      |                                             | 0.44   | %            |   | n/m |   |   | 1.05 | % |
| Efficiency                ratio                                 |   |       | 13.79   | %      |   | 27.48    | %      |                                             | 90.24  | %            |   | n/m |   |   | 43.13 | % |

| (In                thousands)                                   |   | Commercial |    | Retail |   | Mortgage |   | Treasury                and                Other |   | Consolidated |   |
|-----------------------------------------------------------------|--------|------------|---------|--------|--------|----------|--------|--------------------------------------------------|--------|--------------|--------|
| **For                the Nine Months Ended September 30, 2005** |   |       |    |   |   |     |   |                                             |   |         |   |   |   |   |   |   |
| Net                interest income from external customers      |   | $          | 78,165  |   | $      | (20,762  | )      | $                                                | 10,149 |         | $      | 47,607 |   | $ | 115,159 |   |
| Internal                funding                                 |   |       | (32,511 | )      |   | 98,624   |   |                                             | (5,085 | )            |   | (61,028 | ) |   | - |   |
| Net                interest income                              |   |       | 45,654  |   |   | 77,862   |   |                                             | 5,064  |         |   | (13,421 | ) |   | 115,159 |   |
| Provision                for loan losses(1)                     |   |       | 3,063   |   |   | 732      |   |                                             | 400    |         |   | 105 |   |   | 4,300 |   |
| Noninterest                income                               |   |       | 2,610   |   |   | 9,241    |   |                                             | 14,687 |         |   | 4,397 |   |   | 30,935 |   |
| Noninterest                expense                              |   |       | 8,999   |   |   | 24,362   |   |                                             | 14,894 |         |   | 19,774 |   |   | 68,029 |   |
| Income                before taxes                              |   |       | 36,202  |   |   | 62,009   |   |                                             | 4,457  |         |   | (28,903 | ) |   | 73,765 |   |
| Income                taxes                                     |   |       | 12,671  |   |   | 21,703   |   |                                             | 1,560  |         |   | (14,173 | ) |   | 21,761 |   |
| Net                income                                       |   | $          | 23,531  |   | $      | 40,306   |   | $                                                | 2,897  |         | $      | (14,730 | ) | $ | 52,004 |   |
|                                                            |   |       |    |   |   |     |   |                                             |   |         |   |   |   |   |   |   |
| Depreciation                and amortization                    |   | $          | 79      |   | $      | 2,181    |   | $                                                | 1,353  |         | $      | 3,526 |   | $ | 7,139 |   |
| Capital                expenditures                             |   | $          | 20      |   | $      | 2,736    |   | $                                                | 82     |         | $      | 1,718 |   | $ | 4,556 |   |
| Net                identifiable assets (in millions)            |   | $          | 1,659   |   | $      | 2,940    |   | $                                                | 240    |         | $      | 1,242 |   | $ | 6,081 |   |
| Return                on equity(2)                              |   |       | 19.57   | %      |   | 38.81    | %      |                                             | 31.15  | %            |   | n/m |   |   | 16.88 | % |
| Return                on assets                                 |   |       | 1.96    | %      |   | 1.85     | %      |                                             | 1.56   | %            |   | n/m |   |   | 1.16 | % |
| Efficiency                ratio                                 |   |       | 18.65   | %      |   | 27.97    | %      |                                             | 75.41  | %            |   | n/m |   |   | 46.09 | % |

| (1)  | The                provision for loan losses for each segment reflects net charge-offs                in                each segment and the maintenance of a fixed allowance for loan losses                to                loans ratio.         |
|-----------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2)  | Capital                is allocated as a percentage of assets of 10% and 5% for the commercial                and mortgage banking segments, respectively and is allocated as a                percentage of deposits of 5% for the retail segment. |
| n/m  | -- Not                meaningful                                                                                                                                                                                                               |

----

**Note      9 - **
**Stock      Based Compensation**

*Accounting      for Stock-Based Compensation*
*Accounting      for Stock-Based Compensation - Transition and Disclosure,*
*Share-Based      Payment *

*“Transition      Election Related to Accounting for Tax Effects of Share-Based Payment      Awards”*

----

**Note      9 - **
**Stock      Based Compensation (Continued)**

|                                                                                                                                                                                                    |   | Three                Months Ended |   | Nine                Months Ended |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------|--------|----------------------------------|--------|
|                                                                                                                                                                                                    |   | September                30,      |   | September                30,     |   |
| (Dollars                in thousands, except per share data)                                                                                                                                            |   | 2005                              |   | 2005                             |   |
|                                                                                                                                                                                                    |   |                              |   |                             |   |   |   |
| Net                income (as reported)                                                                                                                                                                 |   | $                                 | 17,222 |                             | $      | 52,004 |   |
| Add:                Stock-based employee compensation expense included in reported net                income,                net of related tax effects                                                 |   |                              | 452    |                             |   | 1,208 |   |
| Deduct:                Total stock-based employee compensation expense determined under                fair                value based method for all awards, net of related tax                effects |   |                              | (505   | )                                |   | (1,396 | ) |
| Net                income (pro forma)                                                                                                                                                                   |   | $                                 | 17,169 |                             | $      | 51,816 |   |
|                                                                                                                                                                                                    |   |                              |   |                             |   |   |   |
| Basic                earnings per share (as reported)                                                                                                                                                   |   | $                                 | .23    |                             | $      | .68 |   |
| Basic                earnings per share (pro forma)                                                                                                                                                     |   |                              | .23    |                             |   | .68 |   |
|                                                                                                                                                                                                    |   |                              |   |                             |   |   |   |
| Diluted                earnings per share (as reported)                                                                                                                                                 |   | $                                 | .22    |                             | $      | .67 |   |
| Diluted                earnings per share (pro forma)                                                                                                                                                   |   |                              | .22    |                             |   | .67 |   |
|                                                                                                                                                                                                    |   |                              |   |                             |   |   |   |

*Stock      Options*

|                                             |   |                     |      |      |   |
|--------------------------------------------------|--------|--------------------------|-----------|-----------|--------|
|                                             |   |                     |      |      |   | Weighted |   |   |   |
|                                             |   |                     |      | Weighted- |   | Average |   | Aggregate |   |
|                                             |   |                     |      | Average   |   | Remaining |   | Intrinsic |   |
|                                             |   | Number                of |      | Exercise  |   | Contractual |   | Value |   |
|                                             |   | Options                  |      | Price     |   | Term |   | (in                thousands) |   |
| Outstanding                at January 1, 2006    |   |                     | 2,367,472 |      | $      | 7.05 |   |   |   |   |   |   |   |
| Granted                                          |   |                     | 3,600     |      |   | 12.40 |   |   |   |   |   |   |   |
| Exercised                                        |   |                     | (272,197  | )         |   | 5.74 |   |   |   |   |   |   |   |
| Forfeited,                cancelled and expired  |   |                     | (7,550    | )         |   | 8.91 |   |   |   |   |   |   |   |
| Outstanding                at September 30, 2006 |   |                     | 2,091,325 |      | $      | 7.23 |   |   | 3.3 |   | $ | 12,767 |   |
| Exercisable                at September 30, 2006 |   |                     | 2,083,893 |      | $      | 7.21 |   |   | 3.3 |   | $ | 12,756 |   |

----

**Note      9 - **
**Stock      Based Compensation (Continued)**

*Stock      Warrants*

*Incentive      Stock Plan*

|                                           |   |   |     |                      |   |
|------------------------------------------------|--------|--------|----------|---------------------------|--------|
|                                           |   |   |     | Weighted-Average          |   |
|                                           |   |   |     | Grant                Date |   |
|                                           |   | Shares |     | Fair                Value |   |
| Nonvested                at January 1, 2006    |   |   | 795,998  |                      | $      | 11.811 |   |
| Granted                                        |   |   | 91,144   |                      |   | 12.270 |   |
| Vested                                         |   |   | (120,726 | )                         |   | 12.776 |   |
| Forfeited                                      |   |   | (46,751  | )                         |   | 11.747 |   |
| Nonvested                at September 30, 2006 |   |   | 719,665  |                      | $      | 11.711 |   |

*Stock      Repurchases*

**Note      10 - **
**Off-Balance      Sheet Instruments**

----

**Note      10 - Off-Balance Sheet Instruments (Continued)**

|                                                                                                            |   |                             |    |                            |   |
|-----------------------------------------------------------------------------------------------------------------|--------|----------------------------------|---------|---------------------------------|--------|
| (In                thousands)                                                                                   |   | September                30,2006 |    | December                31,2005 |   |
| Financial                instruments whose contract amounts represent credit risk:                              |   |                             |    |                            |   |   |   |
| Commitments                to fund residential real estate loans                                                |   | $                                | 141,216 |                            | $      | 201,846 |   |
| Commitments                to fund commercial real estate construction loans and lines of                credit |   |                             | 344,526 |                            |   | 375,054 |   |
| Commitments                to fund the pipeline of commercial real estate loans                                 |   |                             | 164,542 |                            |   | 225,878 |   |
| Other                unused commitments to extend credit                                                        |   |                             | 400,888 |                            |   | 418,158 |   |
| Standby                letters of credit                                                                        |   |                             | 108,548 |                            |   | 125,338 |   |

**Note      11 - **
**Legal      Proceedings**

**Note      12 - **
**Pending      Accounting Pronouncements**

*Accounting      for Uncertainty in Income Taxes - an interpretation of FASB Statement No.      109*
* *

----

**ITEM      2: Management’s Discussion and Analysis of Financial Condition and Results of      Operations**

**PENDING      TRANSACTION**

**EARNINGS      PERFORMANCE**

**RESULTS      OF OPERATIONS**

**Net      Interest Income**

----

**Net      Interest Income (Continued**
**)**

|                                                                      |   | Three                Months EndedSeptember                30, 2006 |      | Three                Months EndedSeptember                30, 2005 |   |
|---------------------------------------------------------------------------|--------|--------------------------------------------------------------------|-----------|--------------------------------------------------------------------|--------|
| (Dollars                in thousands)                                     |   | Average                Balance                                     |      | Interest                                                           |   | Average                Rate |   | Average                Balance |   | Interest |   | Average                Rate |   |
| **Average                Assets:**                                        |   |                                                               |      |                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Short-term                investments                                     |   | $                                                                  | 1,454     |                                                               | $      | 12 |   |   | 3.53 | % | $ | 1,125 |   | $ | 9 |   |   | 3.26 | % |
| Mortgage                loans held for sale                               |   |                                                               | 62,634    |                                                               |   | 1,025 |   |   | 6.55 |   |   | 123,039 |   |   | 1,811 |   |   | 5.89 |   |
| Securities                available for sale: (1)                    |   |                                                               |      |                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Taxable                                                                   |   |                                                               | 681,533   |                                                               |   | 8,566 |   |   | 5.03 |   |   | 620,465 |   |   | 7,142 |   |   | 4.60 |   |
| Tax-exempt                                                                |   |                                                               | 218,541   |                                                               |   | 2,900 |   |   | 5.26 |   |   | 203,673 |   |   | 2,762 |   |   | 5.38 |   |
| Securities                held to maturity                                |   |                                                               | 211,498   |                                                               |   | 2,399 |   |   | 4.54 |   |   | 246,915 |   |   | 2,795 |   |   | 4.53 |   |
| Portfolio                loans:                (2)                        |   |                                                               |      |                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial                loans                                           |   |                                                               | 1,785,509 |                                                               |   | 34,103 |   |   | 7.47 |   |   | 1,662,161 |   |   | 28,295 |   |   | 6.66 |   |
| Residential                real estate mortgage loans                     |   |                                                               | 2,284,742 |                                                               |   | 32,025 |   |   | 5.61 |   |   | 2,138,468 |   |   | 28,017 |   |   | 5.24 |   |
| Installment                loans                                          |   |                                                               | 715,830   |                                                               |   | 14,007 |   |   | 7.76 |   |   | 752,278 |   |   | 12,433 |   |   | 6.56 |   |
| Total                loans, net of unearned income                        |   |                                                               | 4,786,081 |                                                               |   | 80,135 |   |   | 6.63 |   |   | 4,552,907 |   |   | 68,745 |   |   | 5.98 |   |
| Federal                Home Loan Bank stock (at cost)                     |   |                                                               | 79,717    |                                                               |   | 805 |   |   | 4.01 |   |   | 80,518 |   |   | 965 |   |   | 4.75 |   |
| Total                interest-earning assets                              |   |                                                               | 6,041,458 |                                                               |   | 95,842 |   |   | 6.29 |   |   | 5,828,642 |   |   | 84,229 |   |   | 5.73 |   |
| Allowance                for loan losses                                  |   |                                                               | (43,543   | )                                                                  |   |   |   |   |   |   |   | (42,098 | ) |   |   |   |   |   |   |
| Cash                and due from banks                                    |   |                                                               | 44,338    |                                                               |   |   |   |   |   |   |   | 51,647 |   |   |   |   |   |   |   |
| Other                assets                                               |   |                                                               | 239,668   |                                                               |   |   |   |   |   |   |   | 212,929 |   |   |   |   |   |   |   |
| Total                assets                                               |   | $                                                                  | 6,281,921 |                                                               |   |   |   |   |   |   | $ | 6,051,120 |   |   |   |   |   |   |   |
|                                                                      |   |                                                               |      |                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Average                Liabilities and Shareholders’ Equity:**    |   |                                                               |      |                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing                demand deposits                           |   | $                                                                  | 179,763   |                                                               | $      | 379 |   |   | 0.84 | % | $ | 193,258 |   | $ | 266 |   |   | 0.55 | % |
| Savings                and money market accounts                          |   |                                                               | 797,106   |                                                               |   | 5,019 |   |   | 2.50 |   |   | 998,537 |   |   | 4,738 |   |   | 1.88 |   |
| Retail                certificates of deposit                             |   |                                                               | 1,197,760 |                                                               |   | 12,836 |   |   | 4.25 |   |   | 1,031,360 |   |   | 8,693 |   |   | 3.34 |   |
| Wholesale                deposits                                         |   |                                                               | 590,560   |                                                               |   | 7,642 |   |   | 5.13 |   |   | 584,836 |   |   | 5,421 |   |   | 3.68 |   |
| Total                interest-bearing deposits                            |   |                                                               | 2,765,189 |                                                               |   | 25,876 |   |   | 3.71 |   |   | 2,807,991 |   |   | 19,118 |   |   | 2.70 |   |
| Short-term                borrowings                                      |   |                                                               | 1,159,512 |                                                               |   | 15,257 |   |   | 5.15 |   |   | 1,022,939 |   |   | 9,147 |   |   | 3.50 |   |
| Long-term                FHLB advances and security repurchase agreements |   |                                                               | 1,577,589 |                                                               |   | 17,444 |   |   | 4.33 |   |   | 1,425,914 |   |   | 15,931 |   |   | 4.37 |   |
| Long-term                debt                                             |   |                                                               | 50,000    |                                                               |   | 1,075 |   |   | 8.60 |   |   | 50,000 |   |   | 1,075 |   |   | 8.60 |   |
| Total                interest-bearing liabilities                         |   |                                                               | 5,552,290 |                                                               |   | 59,652 |   |   | 4.23 |   |   | 5,306,844 |   |   | 45,271 |   |   | 3.36 |   |
| Noninterest-bearing                deposits                               |   |                                                               | 273,060   |                                                               |   |   |   |   |   |   |   | 292,012 |   |   |   |   |   |   |   |
| Other                liabilities                                          |   |                                                               | 37,865    |                                                               |   |   |   |   |   |   |   | 43,931 |   |   |   |   |   |   |   |
| Total                liabilities                                          |   |                                                               | 5,863,215 |                                                               |   |   |   |   |   |   |   | 5,642,787 |   |   |   |   |   |   |   |
| Shareholders’                equity                                 |   |                                                               | 418,706   |                                                               |   |   |   |   |   |   |   | 408,333 |   |   |   |   |   |   |   |
| Total                liabilities and shareholders’ equity           |   | $                                                                  | 6,281,921 |                                                               |   |   |   |   |   |   | $ | 6,051,120 |   |   |   |   |   |   |   |
|                                                                      |   |                                                               |      |                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                interest income/rate spread (FTE)                      |   |                                                               |      |                                                               | $      | 36,190 |   |   | 2.06 | % |   |   |   | $ | 38,958 |   |   | 2.37 | % |
|                                                                      |   |                                                               |      |                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| FTE                adjustment                                             |   |                                                               |      |                                                               | $      | 888 |   |   |   |   |   |   |   | $ | 878 |   |   |   |   |
|                                                                      |   |                                                               |      |                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Impact                of noninterest-                                     |   |                                                               |      |                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| bearing                sources of funds                                   |   |                                                               |      |                                                               |   |   |   |   | 0.34 | % |   |   |   |   |   |   |   | 0.30 | % |
|                                                                      |   |                                                               |      |                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                interest margin (FTE)                                  |   |                                                               |      |                                                               |   |   |   |   | 2.40 | % |   |   |   |   |   |   |   | 2.67 | % |
|                                                                      |   |                                                               |      |                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

| (1)                  | To                compare the tax-exempt asset yields to taxable yields, amounts are                adjusted to pretax equivalents based on the marginal corporate Federal                tax                rate of 35%. |
|---------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2)                  | Non-accrual                loans and overdrafts are included in average                balances.                                                                                                                          |

----

**Net      Interest Income (Continued**
**)**

|                                                                      |   |      |   |    |   |                      |   |
|---------------------------------------------------------------------------|--------|-----------|--------|---------|--------|---------------------------|--------|
| Increase                (decrease) due to change in:                      |   | Volume(1) |   | Rate(1) |   | Net                Change |   |
|                                                                      |   |      |   |    |   |                      |   |
| **Interest                Income:**                                       |   |      |   |    |   |                      |   |   |   |   |
| Short-term                investments                                     |   | $         | 2      |    | $      | 1                         |   | $ | 3 |   |
| Mortgage                loans held for sale                               |   |      | (970   | )       |   | 184                       |   |   | (786 | ) |
| Securities                available for sale:                             |   |      |   |    |   |                      |   |   |   |   |
| Taxable                                                                   |   |      | 730    |    |   | 694                       |   |   | 1,424 |   |
| Tax-exempt                                                                |   |      | 199    |    |   | (61                       | )      |   | 138 |   |
| Securities                held to maturity                                |   |      | (402   | )       |   | 6                         |   |   | (396 | ) |
| Portfolio                loans:                (2)                        |   |      |   |    |   |                      |   |   |   |   |
| Commercial                loans                                           |   |      | 2,201  |    |   | 3,607                     |   |   | 5,808 |   |
| Residential                real estate mortgage loans                     |   |      | 1,972  |    |   | 2,036                     |   |   | 4,008 |   |
| Installment                loans                                          |   |      | (616   | )       |   | 2,190                     |   |   | 1,574 |   |
| Total                loans, net of unearned income                        |   |      | 3,557  |    |   | 7,833                     |   |   | 11,390 |   |
| Federal                Home Loan Bank stock (at cost)                     |   |      | (10    | )       |   | (150                      | )      |   | (160 | ) |
| Total                interest income                                      |   |      | 3,106  |    |   | 8,507                     |   |   | 11,613 |   |
|                                                                      |   |      |   |    |   |                      |   |   |   |   |
| **Interest                Expense:**                                      |   |      |   |    |   |                      |   |   |   |   |
| Interest-bearing                demand deposits                           |   |      | (20    | )       |   | 133                       |   |   | 113 |   |
| Savings                and money market                                   |   |      | (1,068 | )       |   | 1,349                     |   |   | 281 |   |
| Retail                certificates of deposit                             |   |      | 1,541  |    |   | 2,602                     |   |   | 4,143 |   |
| Wholesale                deposits                                         |   |      | 54     |    |   | 2,167                     |   |   | 2,221 |   |
| Total                interest-bearing deposits                            |   |      | 507    |    |   | 6,251                     |   |   | 6,758 |   |
| Short-term                borrowings                                      |   |      | 1,348  |    |   | 4,762                     |   |   | 6,110 |   |
| Long-term                FHLB advances and security repurchase agreements |   |      | 1,656  |    |   | (143                      | )      |   | 1,513 |   |
| Long-term                debt                                             |   |      | -      |    |   | -                         |   |   | - |   |
| Total                interest expense                                     |   |      | 3,511  |    |   | 10,870                    |   |   | 14,381 |   |
| Net                interest income (FTE)                                  |   | $         | (405   | )       | $      | (2,363                    | )      | $ | (2,768 | ) |

| (1) | Variances                attributable jointly to volume and rate changes are allocated to                volume                and rate in proportion to the relationship of the absolute dollar                amount                of the change in each. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) | Non-accrual                loans and overdrafts are included in average                balances.                                                                                                                                                             |

----

**Net      Interest Income (Continued**
**)**

|                                                                      |   | Nine                Months EndedSeptember                30, 2006 |      | Nine                Months EndedSeptember                30, 2005 |   |
|---------------------------------------------------------------------------|--------|-------------------------------------------------------------------|-----------|-------------------------------------------------------------------|--------|
| (Dollars                in thousands)                                     |   | Average                Balance                                    |      | Interest                                                          |   | Average                Rate |   | Average                Balance |   | Interest |   | Average                Rate |   |
| **Average                Assets:**                                        |   |                                                              |      |                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Short-term                investments                                     |   | $                                                                 | 1,120     |                                                              | $      | 34 |   |   | 4.53 | % | $ | 1,321 |   | $ | 22 |   |   | 2.20 | % |
| Mortgage                loans held for sale                               |   |                                                              | 41,237    |                                                              |   | 1,992 |   |   | 6.44 |   |   | 104,960 |   |   | 4,630 |   |   | 5.88 |   |
| Securities                available for sale: (1)                    |   |                                                              |      |                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Taxable                                                                   |   |                                                              | 689,243   |                                                              |   | 25,858 |   |   | 5.00 |   |   | 595,373 |   |   | 20,458 |   |   | 4.53 |   |
| Tax-exempt                                                                |   |                                                              | 218,269   |                                                              |   | 8,661 |   |   | 5.31 |   |   | 209,717 |   |   | 8,543 |   |   | 5.45 |   |
| Securities                held to maturity                                |   |                                                              | 218,595   |                                                              |   | 7,606 |   |   | 4.64 |   |   | 246,429 |   |   | 8,457 |   |   | 4.58 |   |
| Portfolio                loans:                (2)                        |   |                                                              |      |                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial                loans                                           |   |                                                              | 1,761,263 |                                                              |   | 97,818 |   |   | 7.32 |   |   | 1,620,991 |   |   | 78,879 |   |   | 6.42 |   |
| Residential                real estate mortgage loans                     |   |                                                              | 2,265,865 |                                                              |   | 93,354 |   |   | 5.49 |   |   | 2,143,661 |   |   | 83,982 |   |   | 5.22 |   |
| Installment                loans                                          |   |                                                              | 722,374   |                                                              |   | 40,360 |   |   | 7.47 |   |   | 745,385 |   |   | 34,986 |   |   | 6.28 |   |
| Total                loans, net of unearned income                        |   |                                                              | 4,749,502 |                                                              |   | 231,532 |   |   | 6.47 |   |   | 4,510,037 |   |   | 197,847 |   |   | 5.83 |   |
| Federal                Home Loan Bank stock (at cost)                     |   |                                                              | 80,231    |                                                              |   | 2,903 |   |   | 4.84 |   |   | 80,645 |   |   | 2,646 |   |   | 4.39 |   |
| Total                interest-earning assets                              |   |                                                              | 5,998,197 |                                                              |   | 278,586 |   |   | 6.17 |   |   | 5,748,482 |   |   | 242,603 |   |   | 5.60 |   |
| Allowance                for loan losses                                  |   |                                                              | (42,989   | )                                                                 |   |   |   |   |   |   |   | (41,950 | ) |   |   |   |   |   |   |
| Cash                and due from banks                                    |   |                                                              | 43,826    |                                                              |   |   |   |   |   |   |   | 49,922 |   |   |   |   |   |   |   |
| Other                assets                                               |   |                                                              | 235,414   |                                                              |   |   |   |   |   |   |   | 210,018 |   |   |   |   |   |   |   |
| Total                assets                                               |   | $                                                                 | 6,234,448 |                                                              |   |   |   |   |   |   | $ | 5,966,472 |   |   |   |   |   |   |   |
|                                                                      |   |                                                              |      |                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Average                Liabilities and Shareholders’ Equity:**    |   |                                                              |      |                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing                demand deposits                           |   | $                                                                 | 181,177   |                                                              | $      | 972 |   |   | 0.72 | % | $ | 197,853 |   | $ | 718 |   |   | 0.49 | % |
| Savings                and money market accounts                          |   |                                                              | 834,997   |                                                              |   | 14,009 |   |   | 2.24 |   |   | 1,019,600 |   |   | 12,837 |   |   | 1.68 |   |
| Retail                certificates of deposit                             |   |                                                              | 1,171,433 |                                                              |   | 34,514 |   |   | 3.94 |   |   | 977,798 |   |   | 23,600 |   |   | 3.23 |   |
| Wholesale                deposits                                         |   |                                                              | 580,587   |                                                              |   | 20,543 |   |   | 4.73 |   |   | 564,508 |   |   | 13,818 |   |   | 3.27 |   |
| Total                interest-bearing deposits                            |   |                                                              | 2,768,194 |                                                              |   | 70,038 |   |   | 3.38 |   |   | 2,759,759 |   |   | 50,973 |   |   | 2.47 |   |
| Short-term                borrowings                                      |   |                                                              | 1,131,765 |                                                              |   | 40,826 |   |   | 4.76 |   |   | 997,970 |   |   | 23,092 |   |   | 3.05 |   |
| Long-term                FHLB advances and security repurchase agreements |   |                                                              | 1,559,322 |                                                              |   | 50,428 |   |   | 4.26 |   |   | 1,422,232 |   |   | 47,480 |   |   | 4.40 |   |
| Long-term                debt                                             |   |                                                              | 50,000    |                                                              |   | 3,225 |   |   | 8.60 |   |   | 50,000 |   |   | 3,225 |   |   | 8.60 |   |
| Total                interest-bearing liabilities                         |   |                                                              | 5,509,281 |                                                              |   | 164,517 |   |   | 3.96 |   |   | 5,229,961 |   |   | 124,770 |   |   | 3.16 |   |
| Noninterest-bearing                deposits                               |   |                                                              | 269,958   |                                                              |   |   |   |   |   |   |   | 282,875 |   |   |   |   |   |   |   |
| Other                liabilities                                          |   |                                                              | 42,931    |                                                              |   |   |   |   |   |   |   | 42,783 |   |   |   |   |   |   |   |
| Total                liabilities                                          |   |                                                              | 5,822,170 |                                                              |   |   |   |   |   |   |   | 5,555,619 |   |   |   |   |   |   |   |
| Shareholders’                equity                                 |   |                                                              | 412,278   |                                                              |   |   |   |   |   |   |   | 410,853 |   |   |   |   |   |   |   |
| Total                liabilities and shareholders’ equity           |   | $                                                                 | 6,234,448 |                                                              |   |   |   |   |   |   | $ | 5,966,472 |   |   |   |   |   |   |   |
|                                                                      |   |                                                              |      |                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                interest income/rate spread (FTE)                      |   |                                                              |      |                                                              | $      | 114,069 |   |   | 2.21 | % |   |   |   | $ | 117,833 |   |   | 2.44 | % |
|                                                                      |   |                                                              |      |                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| FTE                adjustment                                             |   |                                                              |      |                                                              | $      | 2,618 |   |   |   |   |   |   |   | $ | 2,674 |   |   |   |   |
|                                                                      |   |                                                              |      |                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Impact                of noninterest-                                     |   |                                                              |      |                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| bearing                sources of funds                                   |   |                                                              |      |                                                              |   |   |   |   | 0.32 | % |   |   |   |   |   |   |   | 0.29 | % |
|                                                                      |   |                                                              |      |                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                interest margin (FTE)                                  |   |                                                              |      |                                                              |   |   |   |   | 2.53 | % |   |   |   |   |   |   |   | 2.73 | % |
|                                                                      |   |                                                              |      |                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

| (1)                  | To                compare the tax-exempt asset yields to taxable yields, amounts are                adjusted to pretax equivalents based on the marginal corporate Federal                tax                rate of 35%. |
|---------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2)                  | Non-accrual                loans and overdrafts are included in average                balances.                                                                                                                          |

----

**Net      Interest Income (Continued**
**)**

|                                                                      |   |      |   |    |   |                      |   |
|---------------------------------------------------------------------------|--------|-----------|--------|---------|--------|---------------------------|--------|
| Increase                (decrease) due to change in:                      |   | Volume(1) |   | Rate(1) |   | Net                Change |   |
|                                                                      |   |      |   |    |   |                      |   |
| **Interest                Income:**                                       |   |      |   |    |   |                      |   |   |   |   |
| Short-term                investments                                     |   | $         | (4     | )       | $      | 16                        |   | $ | 12 |   |
| Mortgage                loans held for sale                               |   |      | (3,043 | )       |   | 405                       |   |   | (2,638 | ) |
| Securities                available for sale:                             |   |      |   |    |   |                      |   |   |   |   |
| Taxable                                                                   |   |      | 3,257  |    |   | 2,143                     |   |   | 5,400 |   |
| Tax-exempt                                                                |   |      | 343    |    |   | (225                      | )      |   | 118 |   |
| Securities                held to maturity                                |   |      | (961   | )       |   | 110                       |   |   | (851 | ) |
| Portfolio                loans:                (2)                        |   |      |   |    |   |                      |   |   |   |   |
| Commercial                loans                                           |   |      | 7,228  |    |   | 11,711                    |   |   | 18,939 |   |
| Residential                real estate mortgage loans                     |   |      | 4,913  |    |   | 4,459                     |   |   | 9,372 |   |
| Installment                loans                                          |   |      | (1,111 | )       |   | 6,485                     |   |   | 5,374 |   |
| Total                loans, net of unearned income                        |   |      | 11,030 |    |   | 22,655                    |   |   | 33,685 |   |
| Federal                Home Loan Bank stock (at cost)                     |   |      | (14    | )       |   | 271                       |   |   | 257 |   |
| Total                interest income                                      |   |      | 10,608 |    |   | 25,375                    |   |   | 35,983 |   |
|                                                                      |   |      |   |    |   |                      |   |   |   |   |
| **Interest                Expense:**                                      |   |      |   |    |   |                      |   |   |   |   |
| Interest-bearing                demand deposits                           |   |      | (65    | )       |   | 319                       |   |   | 254 |   |
| Savings                and money market                                   |   |      | (2,602 | )       |   | 3,774                     |   |   | 1,172 |   |
| Retail                certificates of deposit                             |   |      | 5,173  |    |   | 5,741                     |   |   | 10,914 |   |
| Wholesale                deposits                                         |   |      | 403    |    |   | 6,322                     |   |   | 6,725 |   |
| Total                interest-bearing deposits                            |   |      | 2,909  |    |   | 16,156                    |   |   | 19,065 |   |
| Short-term                borrowings                                      |   |      | 3,423  |    |   | 14,311                    |   |   | 17,734 |   |
| Long-term                FHLB advances and security repurchase agreements |   |      | 4,462  |    |   | (1,514                    | )      |   | 2,948 |   |
| Long-term                debt                                             |   |      | -      |    |   | -                         |   |   | - |   |
| Total                interest expense                                     |   |      | 10,794 |    |   | 28,953                    |   |   | 39,747 |   |
| Net                interest income (FTE)                                  |   | $         | (186   | )       | $      | (3,578                    | )      | $ | (3,764 | ) |

| (1)  | Variances                attributable jointly to volume and rate changes are allocated to                volume                and rate in proportion to the relationship of the absolute dollar                amount                of the change in each. |
|-----------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2)  | Non-accrual                loans and overdrafts are included in average                balances.                                                                                                                                                             |

----

**Noninterest      Income**

**Mortgage      Banking Income**

*Accounting      for Nonrefundable Fees and Costs Associated with Originating or*
*Acquiring      Loans and Initial Direct Costs of Leases*

----

**Noninterest      Expense**

**BALANCE      SHEET ANALYSIS**

**ASSETS**

**Investment      Securities**

|                                                                 |   | Investment                Securities |    |
|----------------------------------------------------------------------|--------|--------------------------------------|---------|
| (In                thousands)                                        |   | Gross                Amortized Cost  |    | Gross                Unrealized Gains |   | Gross                Unrealized Losses |   | Fair                Value |   |
| Securities                Available For Sale (Estimated Fair Value): |   |                                 |    |   |   |   |   |   |   |   |   |   |   |
| U.S.                Government agency securities                     |   | $                                    | 351,765 |   | $ | 21 |   | $ | 5,734 |   | $ | 346,052 |   |
| Collateralized                mortgage obligations                   |   |                                 | 250,233 |   |   | 330 |   |   | 4,603 |   |   | 245,960 |   |
| Mortgage-backed                securities                            |   |                                 | 93,206  |   |   | 2 |   |   | 2,001 |   |   | 91,207 |   |
| Municipal                and other securities                        |   |                                 | 214,343 |   |   | 321 |   |   | 1,437 |   |   | 213,227 |   |
| Total                securities available for sale                   |   | $                                    | 909,547 |   | $ | 674 |   | $ | 13,775 |   | $ | 896,446 |   |
|                                                                 |   |                                 |    |   |   |   |   |   |   |   |   |   |   |
| Securities                Held To Maturity (At Cost):                |   |                                 |    |   |   |   |   |   |   |   |   |   |   |
| Collateralized                mortgage obligations                   |   | $                                    | 177,380 |   | $ | - |   | $ | 5,564 |   | $ | 171,816 |   |
| Mortgage-backed                securities                            |   |                                 | 29,859  |   |   | - |   |   | 846 |   |   | 29,013 |   |
| Total                securities held to maturity                     |   | $                                    | 207,239 |   | $ | - |   | $ | 6,410 |   | $ | 200,829 |   |

----

**Investment      Securities (continued) **

**Federal      Home Loan Bank Stock**

**Mortgage      Loans Held for Sale**

**Portfolio      Loans **

|                                             |   | September                30, 2006 |      | December                31, 2005 |   |
|--------------------------------------------------|--------|-----------------------------------|-----------|----------------------------------|--------|
| (Dollars                in thousands)            |   | Amount                            |      | Percent                          |   | Amount |   | Percent |   |
| Commercial                loans:                 |   |                              |      |                             |   |   |   |   |   |   |   |   |   |
| Commercial                and industrial         |   | $                                 | 28,588    |                             |   | 0.6 | % | $ | 28,314 |   |   | 0.6 | % |
| Real                estate construction          |   |                              | 436,392   |                             |   | 9.4 |   |   | 360,999 |   |   | 7.8 |   |
| Commercial                real estate mortgage   |   |                              | 1,326,769 |                             |   | 28.4 |   |   | 1,308,557 |   |   | 28.3 |   |
| Total                commercial loans            |   |                              | 1,791,749 |                             |   | 38.4 |   |   | 1,697,870 |   |   | 36.7 |   |
| Residential                real estate mortgages |   |                              | 2,163,438 |                             |   | 46.4 |   |   | 2,193,128 |   |   | 47.4 |   |
| Installment                loans:                |   |                              |      |                             |   |   |   |   |   |   |   |   |   |
| Home                equity lines of credit       |   |                              | 329,530   |                             |   | 7.1 |   |   | 390,373 |   |   | 8.4 |   |
| Home                equity term loans            |   |                              | 214,710   |                             |   | 4.6 |   |   | 170,352 |   |   | 3.7 |   |
| Other                consumer loans              |   |                              | 166,803   |                             |   | 3.5 |   |   | 176,535 |   |   | 3.8 |   |
| Total                installment loans           |   |                              | 711,043   |                             |   | 15.2 |   |   | 737,260 |   |   | 15.9 |   |
| Total                portfolio loans             |   | $                                 | 4,666,230 |                             |   | 100.0 | % | $ | 4,628,258 |   |   | 100.0 | % |

----

**Credit      Quality**

**Non-Performing      Assets**

|                                                     |   | September                30, |   | December                31, |   |
|----------------------------------------------------------|--------|------------------------------|--------|-----------------------------|--------|
| (Dollars                in thousands)                    |   | 2006                         |   | 2005                        |   |
| Non-Performing                Assets:                    |   |                         |   |                        |   |   |   |
| Non-accrual                loans:                        |   |                         |   |                        |   |   |   |
| Commercial                                               |   | $                            | 42,293 |                        | $      | 27,344 |   |
| Residential                real estate mortgages         |   |                         | 16,602 |                        |   | 19,026 |   |
| Installment                                              |   |                         | 2,500  |                        |   | 2,413 |   |
| Total                non-accrual loans                   |   |                         | 61,395 |                        |   | 48,783 |   |
| Other                real estate owned:                  |   |                         |   |                        |   |   |   |
| Commercial                                               |   |                         | 6,431  |                        |   | 8,575 |   |
| Residential                real estate mortgages         |   |                         | 8,146  |                        |   | 3,029 |   |
| Installment                                              |   |                         | 890    |                        |   | 712 |   |
| Total                other real estate owned             |   |                         | 15,467 |                        |   | 12,316 |   |
| Total                non-performing assets               |   | $                            | 76,862 |                        | $      | 61,099 |   |
|                                                     |   |                         |   |                        |   |   |   |
| Non-performing                assets as a percentage of: |   |                         |   |                        |   |   |   |
| Portfolio                loans and OREO                  |   |                         | 1.64   | %                           |   | 1.32 | % |
| Total                assets                              |   |                         | 1.24   | %                           |   | 1.00 | % |

----

**Non-Performing      Assets (Continued)**

**Allowance      for Loan Losses and Impaired Loans**

*Accounting      for Contingencies, *
*Accounting      By Creditors for Impairment of a Loan*

|                                                                                                                                      |   | Nine                Months Ended September                30, |   |
|-------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------|--------|
| (Dollars                in thousands)                                                                                                     |   | 2006                                                          |   | 2005 |   |
| Allowance                for loan losses:                                                                                                 |   |                                                          |   |   |   |   |   |
| Balance                at January 1                                                                                                       |   | $                                                             | 42,122 |   | $ | 41,818 |   |
| Loans                charged off                                                                                                          |   |                                                          | (4,377 | ) |   | (5,442 | ) |
| Recoveries                of loans previously charged off                                                                                 |   |                                                          | 939    |   |   | 1,270 |   |
| Net                charge-offs                                                                                                            |   |                                                          | (3,438 | ) |   | (4,172 | ) |
| Provision                charged to expense                                                                                               |   |                                                          | 5,600  |   |   | 4,300 |   |
| Balance                at September 30                                                                                                    |   | $                                                             | 44,284 |   | $ | 41,946 |   |
|                                                                                                                                      |   |                                                          |   |   |   |   |   |
| Annualized                net charge-offs as a percentage of average loans                                                                |   |                                                          | .10    | % |   | .12 | % |
| Allowance                for loan losses as a percentage of total portfolio loans outstanding                at                period-end |   |                                                          | .95    | % |   | .91 | % |
| Allowance                for loan losses as a percentage of non-performing loans                                                          |   |                                                          | 72.13  | % |   | 105.10 | % |

----

**Allowance      for Loan Losses and Impaired Loans (Continued**
**)**

|                                                                    |   |                         |   |                        |   |
|-------------------------------------------------------------------------|--------|------------------------------|--------|-----------------------------|--------|
|                                                                    |   | September                30, |   | December                31, |   |
| (In                thousands)                                           |   | 2006                         |   | 2005                        |   |
|                                                                    |   |                         |   |                        |   |   |   |
| Gross                recorded investment in impaired loans (period-end) |   | $                            | 42,293 |                        | $      | 27,344 |   |
| Impaired                loans requiring a specific allocated allowance  |   |                         | 34,206 |                        |   | 21,625 |   |
| Specific                impairment allowance                            |   |                         | 8,995  |                        |   | 5,332 |   |
|                                                                    |   |                         |   |                        |   |   |   |

**Bank      Owned Life Insurance**

**LIABILITIES**

**Deposits**

**Short-Term      Borrowings**

|                                          |   | September                30, 2006 |          | December                31, 2005 |   |
|-----------------------------------------------|--------|-----------------------------------|---------------|----------------------------------|--------|
| (Dollars                in thousands)         |   |                              | EndingBalance |                             |   | AverageBalance |   |   | AverageRate                DuringPeriod |   |   | EndingBalance |   |   | AverageBalance |   |   | AverageRate                DuringYear |   |
| Federal                funds purchased        |   | $                                 | 643,000       |                             | $      | 569,265 |   |   | 4.97 | % | $ | 472,000 |   | $ | 457,625 |   |   | 3.41 | % |
| Security                repurchase agreements |   |                              | 120,803       |                             |   | 177,592 |   |   | 3.44 |   |   | 237,300 |   |   | 268,056 |   |   | 3.11 |   |
| Total                short-term borrowings    |   | $                                 | 763,803       |                             | $      | 746,857 |   |   | 4.61 | % | $ | 709,300 |   | $ | 725,681 |   |   | 3.30 | % |

----

**Short-Term      FHLB Advances**

|                                    |   | September                30, 2006 |          | December                31, 2005 |   |
|-----------------------------------------|--------|-----------------------------------|---------------|----------------------------------|--------|
| (Dollars                in thousands)   |   |                              | EndingBalance |                             |   | AverageBalance |   |   | AverageRate                DuringPeriod |   |   | EndingBalance |   |   | AverageBalance |   |   | AverageRate                DuringYear |   |
| Short-term                FHLB advances |   | $                                 | 300,000       |                             | $      | 384,908 |   |   | 5.04 | % | $ | 218,000 |   | $ | 234,930 |   |   | 3.40 | % |

**Long-term      FHLB Advances and Security Repurchase Agreements**

|                                                      |   | September                30, 2006 |      | December                31, 2005        |   |
|-----------------------------------------------------------|--------|-----------------------------------|-----------|-----------------------------------------|--------|
| (Dollars                in thousands)                     |   | EndingBalance                     |      | AverageRate                AtPeriod-End |   | EndingBalance |   | AverageRate                AtYear-End |   |
| Long-term                FHLB advances:                   |   |                              |      |                                    |   |   |   |   |   |   |   |   |   |
| Bullet                advances                            |   | $                                 | 201,111   |                                    |   | 3.85 | % | $ | 226,748 |   |   | 3.77 | % |
| Putable                advances                           |   |                              | 720,000   |                                    |   | 4.86 |   |   | 750,000 |   |   | 4.85 |   |
| Total                long-term FHLB advances              |   |                              | 921,111   |                                    |   | 4.64 |   |   | 976,748 |   |   | 4.59 |   |
| Long-term                security repurchase agreements   |   |                              | 655,328   |                                    |   | 3.73 |   |   | 512,684 |   |   | 3.10 |   |
| Total                long-term FHLB advances and security |   |                              |      |                                    |   |   |   |   |   |   |   |   |   |
| repurchase                agreements                      |   | $                                 | 1,576,439 |                                    |   | 4.26 | % | $ | 1,489,432 |   |   | 4.08 | % |

**CAPITAL**

----

**CAPITAL      (Continued)**

|                                                      |   | September                30,2006 |   | December                31,2005 |   |
|-----------------------------------------------------------|--------|----------------------------------|--------|---------------------------------|--------|
| Total                capital to risk-weighted assets (1)  |   |                             | 12.50  | %                               |   | 12.32 | % |
| Tier                1 capital to risk-weighted assets (1) |   |                             | 11.41  |                            |   | 11.24 |   |
| Tier                1 capital to average assets (1)       |   |                             | 7.68   |                            |   | 7.57 |   |

| (1) | As                defined by the regulations. |
|-----|-----------------------------------------------|

**ACCOUNTING      AND FINANCIAL REPORTING**

----

**FORWARD-LOOKING      STATEMENTS**

| · | significantly                increased competition from banking and non-banking                institutions;                                                                                                                                                                                                                                                                                                                                                                |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | inflation                and changes in the interest rate environment that reduce our margins                or                reduce the fair value of financial instruments;                                                                                                                                                                                                                                                                                              |
| · | general                political, industry and economic conditions, either domestically                or                internationally, that are different than expected;                                                                                                                                                                                                                                                                                                 |
| · | adverse                developments concerning credit quality in our business segments that                may                result in increases in our provisions for loan losses, nonperforming                assets, potential problem loans, net charge-offs and reserve for                credit                losses could cause earnings to decline;                                                                                                             |
| · | instruments,                systems and strategies that are used to hedge or otherwise manage                our                exposure to various types of market, credit, operational and                enterprise-wide risk could be less effective than anticipated, and                we may                not be able to effectively mitigate risk exposures in particular                market                environments or against particular types of risk; |
| · | customer                borrowing, repayment, investment and deposit practices generally                may be                less favorable than anticipated;                                                                                                                                                                                                                                                                                                              |
| · | the                mix of interest rates and maturities of our interest earning assets                and                interest-bearing liabilities (primarily loans and deposits) may be                less                favorable than expected;                                                                                                                                                                                                                     |
| · | interest                rate margin compression may be greater than expected;                                                                                                                                                                                                                                                                                                                                                                                               |
| · | adverse                changes in the securities markets;                                                                                                                                                                                                                                                                                                                                                                                                                   |
| · | legislative                or regulatory changes, actions or reinterpretations that adversely                affect                our business;                                                                                                                                                                                                                                                                                                                            |
| · | the                ability to enter new markets successfully and capitalize on growth                opportunities;                                                                                                                                                                                                                                                                                                                                                         |
| · | effects                of and changes in trade, monetary and fiscal policies and laws, including                interest rate policies of the Federal Reserve Board;                                                                                                                                                                                                                                                                                                        |
| · | timely                development of and acceptance of new products and                services;                                                                                                                                                                                                                                                                                                                                                                            |
| · | changes                in consumer spending, borrowing and savings habits;                                                                                                                                                                                                                                                                                                                                                                                                  |
| · | effect                of changes in accounting policies and practices, as may be adopted                by the                bank regulatory agencies, the Financial Accounting Standards Board                or                other regulatory agencies;                                                                                                                                                                                                                |
| · | changes                in our organization, compensation and benefit plans;                                                                                                                                                                                                                                                                                                                                                                                                 |
| · | costs                and effects of new litigation or changes in existing litigation and                unexpected or adverse outcomes in such litigation; and                                                                                                                                                                                                                                                                                                              |
| · | our                success in managing the foregoing factors and the risks associated                with or                inherent in the foregoing.                                                                                                                                                                                                                                                                                                                      |

----

| **ITEM                3:** | **Quantitative                and Qualitative Disclosures About Market                Risk** |
|----------------------------|----------------------------------------------------------------------------------------------|

**MARKET      RISK MANAGEMENT**

**Asset      and Liability Management**

*Static      Gap Analysis:*

*Earnings      Simulation:*

| Change                in market interest rates in basis points                 |   |   | +200  |   |   | +100  |   |   | +50   |   |   | -50  |   |   | -100 |   |   | -200 |   |
|--------------------------------------------------------------------------------|--------|--------|-------|--------|--------|-------|--------|--------|-------|--------|--------|------|--------|--------|------|--------|--------|------|--------|
| Projected                change in net interest income over next twelve months |   |   | -8.00 | %      |   | -3.52 | %      |   | -1.65 | %      |   | 2.06 | %      |   | 3.16 | %      |   | 2.33 | %      |

----

*Accounting      for Derivative Instruments and Hedging Activities, *

----

|                                                |   | Year                of Maturity |   |
|-----------------------------------------------------|--------|---------------------------------|--------|
| (Dollars                in thousands)               |   | 2006                            |   | 2007 |   | 2008 |   | Total |   |
| Receive                fixed/pay floating swaps:(1) |   |                            |   |   |   |   |   |   |   |   |   |   |   |
| Notional                amount                      |   | $                               | -      |   | $ | 36,300 |   | $ | 37,000 |   | $ | 73,300 |   |
| Fair                value gain/(loss)               |   |                            | -      |   |   | (744 | ) |   | (1,046 | ) |   | (1,790 | ) |
| Weighted                average:                    |   |                            |   |   |   |   |   |   |   |   |   |   |   |
| Receive                rate                         |   |                            | -      | % |   | 2.92 | % |   | 3.24 | % |   | 3.08 | % |
| Pay                rate                             |   |                            | -      | % |   | 4.99 | % |   | 5.60 | % |   | 5.30 | % |
|                                                |   |                            |   |   |   |   |   |   |   |   |   |   |   |

| (1)  | Variable                interest rates - which generally are based on the one-month and                three-month LIBOR in effect on the date of                repricing. |
|-----------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **ITEM                4:** | **Controls                and Procedures** |
|----------------------------|--------------------------------------------|

**Internal      Controls**

**Disclosure      Controls And Procedures**

----

| **PART                II -** | **OTHER                INFORMATION** |
|------------------------------|--------------------------------------|

| Item                1. | Legal                Proceedings |
|------------------------|----------------------------------|

| Item                2. | Purchases                of Equity Securities by the Issuer and Affiliated                Purchasers |
|------------------------|------------------------------------------------------------------------------------------------------|

| Item                6. | Exhibits |
|------------------------|----------|

|   | (12) | Computations                of ratios of earnings to fixed                charges.* |
|--------|------|-------------------------------------------------------------------------------------|

|   | (31)(a) | Certification                of Principal Executive Officer of Republic Bancorp Inc. Pursuant                to 15                U.S.C. 78m(a) or 78o(d) (Section 302 of the Sarbanes-Oxley Act of                2002)* |
|--------|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (31)(b) | Certification                of Principal Financial Officer of Republic Bancorp Inc. Pursuant                to 15                U.S.C. 78m(a) or 78o(d) (Section 302 of the Sarbanes-Oxley Act of                2002)* |
|--------|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (32)(a) | Certification                of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350                (Section                906 of the Sarbanes-Oxley Act of                2002).* |
|--------|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (32)(b) | Certification                of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350                (Section                906 of the Sarbanes-Oxley Act 0f                2002)* |
|--------|---------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**SIGNATURE**

|                                  |   | REPUBLIC                BANCORP INC. |                                                                                                                                                                       |
|---------------------------------------|--------|--------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                  |   | (Registrant)                         |                                                                                                                                                                       |
|                                  |   |                                 |                                                                                                                                                                       |   |
|                                  |   |                                 |                                                                                                                                                                       |   |
| Date:                November 8, 2006 |   | BY:                                  | /s/                Thomas F. Menacher                                                                                                                                      |   |
|                                  |   |                                 | Thomas                F. MenacherExecutive                Vice President, Treasurer and Chief Financial Officer(Principal                Financial and Accounting Officer) |   |

----