Guaranty Bancorp 10-Q 2006 Q1 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2006

OR

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

For the transition period from                    to                    

Commission File Number: 000-51556

CENTENNIAL BANK HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

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

303-296-9600

(Registrant’s telephone number, including area code)

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

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

Large Accelerated Filer  ¨                Accelerated Filer  ¨                Non-accelerated Filer  x

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

As of May 8, 2006 there were 59,039,674 shares of the registrant’s common stock outstanding, including 1,448,141 shares of unvested restricted stock.

1

Table of Contents

TABLE OF CONTENTS

		Page
	Forward-Looking Statements and Factors that Could Affect Future Results	3
PART I—FINANCIAL INFORMATION		4
ITEM 1.	Unaudited Consolidated Financial Statements	4
	Unaudited Consolidated Balance Sheets	4
	Unaudited Consolidated Statements of Income	5
	Unaudited Consolidated Statements of Comprehensive Income	6
	Unaudited Consolidated Statements of Cash Flows	7
	Notes to Unaudited Condensed Consolidated Financial Statements	9
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	28
ITEM 4.	Controls and Procedures	29
PART II—OTHER INFORMATION		30
ITEM 1.	Legal Proceedings	30
ITEM 1A.	Risk Factors	30
ITEM 2.	Unregistered Sale of Equity Securities and Use of Proceeds	31
ITEM 3.	Defaults Upon Senior Securities	31
ITEM 4.	Submission of Matters to a Vote of Security Holders	31
ITEM 5.	Other Information	31
ITEM 6.	Exhibits	32

2

Forward-Looking Statements and Factors that Could Affect Future Results

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

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

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

• Changes in the level of non-performing assets and charge-offs.

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

• Inflation, interest rate, securities market and monetary fluctuations.

• Political instability, acts of war or terrorism and natural disasters.

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

• Changes in consumer spending, borrowings and savings habits.

• Changes in the financial performance and/or condition of our borrowers.

• Technological changes.

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

• The ability to increase market share and control expenses.

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

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

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

• Changes in our organization, compensation and benefit plans.

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

• Our success at managing the risks involved in the foregoing items.

Forward-looking statements speak only as of the date on which such statements are made. We undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made, or to reflect the occurrence of unanticipated events.

3

PART I—FINANCIAL INFORMATION

ITEM 1. Unaudited Consolidated Financial Statements

CENTENNIAL BANK HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Balance Sheets (In thousands, except for share data)

	March 31, 2006			December 31, 2005
	(Unaudited)
Assets
Cash and due from banks	$	78,089		88,815
Interest bearing deposits at banks		67		37
Federal funds sold		36,555		10,090
Cash and cash equivalents		114,711		98,942
Securities available for sale, at fair value		135,746		143,081
Securities held to maturity (fair value of $5,633 and $5,686 at March 31, 2006 and December 31, 2005)		5,782		5,798
Bank stocks, at cost		30,135		26,874
Total investments		171,663		175,753
Loans held for sale		5,730		6,820
Loans, net of unearned discount		2,005,151		2,067,593
Less allowance for loan losses		(26,999	)	(27,475	)
Net loans		1,983,882		2,046,938
Premises and equipment, net		76,619		73,429
Goodwill		391,346		392,507
Other intangible assets, net		50,415		54,922
Other assets		36,880		39,996
Assets held for sale		90,994		98,270
Total assets	$	2,916,510		2,980,757
Liabilities and Stockholders’ Equity
Liabilities:
Deposits:
Noninterest-bearing demand	$	592,509		593,811
Interest-bearing demand		806,721		722,030
Savings		98,379		99,496
Time		579,467		633,015
Total deposits		2,077,076		2,048,352
Securities sold under agreements to repurchase and federal fund purchases		26,158		44,399
Borrowings		57,213		130,198
Subordinated debentures		41,239		41,275
Interest payable and other liabilities		38,337		37,368
Liabilities associated with assets held for sale		73,103		80,417
Total liabilities		2,313,126		2,382,009
Stockholders’ equity:
Common stock—$.001 par value; 100,000,000 shares authorized, 63,407,492 shares issued, 60,300,464 shares outstanding at March 31, 2006 (includes 1,463,931 shares of unvested restricted stock); 63,159,692 shares outstanding at December 31, 2005 (includes 1,278,631 shares of unvested restricted stock)		63		63
Additional paid-in capital		612,790		612,089
Retained earnings		25,907		18,478
Accumulated other comprehensive income (loss)		(53	)	93
Treasury stock, at cost		(35,323	)	(31,975	)
Total stockholders’ equity		603,384		598,748
Total liabilities and stockholders’ equity	$	2,916,510		2,980,757

See “Notes to Unaudited Condensed Consolidated Financial Statements.”

4

CENTENNIAL BANK HOLDINGS, INC.

AND SUBSIDIARIES

Consolidated Statements of Income

Unaudited

	Three Months Ended March 31,
	2006			2005
	(In thousands, except share data)
Interest income:
Loans, including fees	$	40,521		28,497
Investment securities:
Taxable		776		300
Tax-exempt		911		492
Dividends		427		170
Federal funds sold and other		75		584
Total interest income		42,710		30,043
Interest expense:
Deposits		10,147		3,628
Federal funds purchased and repurchase agreements		261		177
Subordinated debentures		847		574
Borrowings		1,548		336
Total interest expense		12,803		4,715
Net interest income		29,907		25,328
Provision for loan losses		—		1,700
Net interest income, after provision for loan losses		29,907		23,628
Noninterest income:
Customer service and other fees		1,871		1,929
Gain (loss) on sale of securities		(5	)	23
Other		1,246		626
Total noninterest income		3,112		2,578
Noninterest expense:
Salaries and employee benefits		11,435		10,308
Occupancy expense		2,052		1,628
Furniture and equipment		1,165		785
Amortization of intangible assets		2,998		3,094
Merger, acquisition and transition expenses		88		4,922
Other general and administrative		4,002		4,246
Total noninterest expense		21,740		24,983
Income before income taxes		11,279		1,223
Income tax expense		3,990		303
Income from continuing operations		7,289		920
Income from discontinued operations, net of tax		140		177
Net income	$	7,429		1,097
Earnings per share—basic:
Income from continuing operations	$	0.13		0.02
Income from discontinued operations, net of tax		—		—
Net income		0.13		0.02
Earnings per share—diluted:
Income from continuing operations	$	0.13		0.02
Income from discontinued operations, net of tax		—		—
Net income		0.13		0.02
Weighted average shares outstanding—basic		59,057,264		52,332,996
Weighted average shares outstanding—diluted		59,240,780		52,332,996

See “Notes to Unaudited Condensed Consolidated Financial Statements.”

5

CENTENNIAL BANK HOLDINGS, INC.

AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income

Unaudited

	Three Months Ended March 31,
	2006			2005
	(In thousands)
Net income	$	7,429		1,097
Other comprehensive income (loss), net of tax
Change in net unrealized gain on securities available for sale		(146	)	287
Comprehensive income	$	7,283		1,384

See “Notes to Unaudited Condensed Consolidated Financial Statements.”

6

CENTENNIAL BANK HOLDINGS, INC.

AND SUBSIDIARIES

Consolidated Statements of Cash Flows

Unaudited

	Three Months Ended March 31,
	2006			2005
	(In thousands)
Cash flows from operating activities:
Net income	$	7,429		$	1,097
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		8			1,700
Stock compensation		700			—
Depreciation and amortization		4,460			4,037
(Gain) loss on sale of securities		5			(23	)
Gain on sale of loans		(314	)		(370	)
(Gain) loss on sale of real estate owned and assets		122			(250	)
Loss on dispositions		201			—
Other		(63	)		(90	)
Proceeds from sales of loans held for sale		21,991			28,305
Originations of loans held for sale		(20,586	)		(24,817	)
Net change in:
Accrued interest receivable and other assets		8,905			(11,289	)
Accrued interest payable and other liabilities		2,213			4,436
Net cash provided by operating activities		25,071			2,736
Cash flows from investing activities:
Activity in available-for-sale securities:
Maturities, prepayments, and calls		9,956			54,599
Purchases		(6,569	)		(63,681	)
Activity in held-to-maturity securities:
Maturities, prepayments, and calls		—			3
Loan originations and principal collections, net		63,918			(18,939	)
Proceeds from sales of foreclosed assets		453			3,178
Proceeds from sales of premises and equipment		115			52
Additions to premises and equipment		(4,730	)		(2,569	)
Proceeds from sale of subsidiary		1,835			—
Net cash provided (used) by investing activities		64,978			(27,357	)

7

CENTENNIAL BANK HOLDINGS, INC.

AND SUBSIDIARIES

Consolidated Statements of Cash Flows

Unaudited

	Three months Ended March 31,
	2006			2005
	(In thousands)
Cash flows from financing activities:
Net change in deposits		20,791			(11,337	)
Net change in short-term borrowings		(72,985	)		7,974
Net change in federal funds purchased and repurchase agreements		(18,483	)		12,181
Repurchase of common stock		(3,603	)		(319	)
Net cash provided (used) by financing activities		(74,280	)		8,499
Net change in cash and cash equivalents		15,769			(16,122	)
Cash and cash equivalents, beginning of period		98,942			90,927
Cash and cash equivalents, end of period	$	114,711		$	74,805
Supplemental disclosure of cash flow activity:
Interest paid on deposits and borrowed funds	$	14,077		$	5,383
Income taxes paid		—			1,097
Supplemental disclosure of noncash activities:
Note receivable from sale of subsidiary	$	1,175,000		$	—
Loans transferred to other real estate owned		162			79

See “Notes to Unaudited Condensed Consolidated Financial Statements.”

8

CENTENNIAL BANK HOLDINGS, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

(1) Organization, Operations and Basis of Presentation

Centennial Bank Holdings, Inc. is a financial holding company and a bank holding company registered under the Bank Holding Company Act of 1956, as amended. Our principal business is to serve as a holding company for our subsidiaries. As of March 31, 2006, those subsidiaries were Guaranty Bank and Trust Company, Centennial Bank of the West, and Collegiate Peaks Bank, referred to as Guaranty Bank, CBW, and Collegiate Peaks, respectively. Collegiate Peaks was held for sale as of March 31, 2006. Reference to “Banks” means Guaranty Bank and CBW, “Company” means Centennial Bank Holdings, Inc. on a consolidated basis with the Banks, Collegiate Peaks and First MainStreet Insurance, which was sold on March 1, 2006.

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

(a) Basis of Presentation

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

(b) Use of Estimates

The preparation of the consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the dates of the consolidated balance sheet and income and expense for the periods. Actual results could differ significantly from those estimates. Material estimates that are particularly susceptible to significant changes include the allowance for loan losses, deferred tax assets and liabilities, goodwill and other intangible assets.

(c) Allowance for Credit Losses

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

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

9

(d) Goodwill and Other Intangible Assets

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

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

(e) Impairment of Long-Lived Assets

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

(f) Stock Incentive Plan

The Company’s 2005 Stock Incentive Plan (“Plan”) provides for grants of stock options, restricted stock awards, restricted stock units awards, performance stock awards, stock appreciation rights, and other equity-based awards to key employees, nonemployee directors, consultants and prospective employees. The Company accounts for the equity-based compensation using the provisions of SFAS No. 123R,Share-Based Payment. The Company recognizes services received in a share-based payment transaction as services are received. The cost of employee services received in exchange for an award of equity instruments is based on the grant-date fair value (as determined by quoted market prices) of the award. That cost is recognized over the period during which an employee is required to provide service in exchange for the award. The stock compensation expense recognized reflects estimated forfeitures, as adjusted based on actual forfeitures. The Company recognized $700,000 in compensation expense for services rendered for the three months ended March 31, 2006. The Company had no equity-based awards for the three months ended March 31, 2005. As of March 31, 2006, the Company had a total of 1,463,931 unvested restricted shares of stock outstanding. As of March 31, 2006, there was $9,072,000 of total unrecognized compensation costs related to nonvested share-based compensation arrangements granted under the Plan. That cost is expected to be recognized over a weighted-average period of 5.7 years.

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

	Shares		Weighted Average Fair Value on Award Date
Outstanding at December 31, 2005	1,278,631		$	10.88
Awarded	247,800			12.02
Forfeited	(62,500	)		11.04
Outstanding at March 31, 2006	1,463,931			11.06

(g) Reclassifications

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

10

(2) Securities

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

	March 31, 2006
	Amortized Cost		Gross Unrealized Gains	Gross Unrealized Losses		Fair Value
	(In thousands)
Securities available for sale:
U.S. treasuries	$	10,093	—	(67	)	10,026
U.S. government agencies		5,400	—	(39	)	5,361
State and municipal		71,889	924	(169	)	72,644
Mortgage-backed		47,017	47	(1,052	)	46,012
Marketable equity securities		1,697	6	—		1,703
Securities available for sale	$	136,096	977	(1,327	)	135,746
Securities held to maturity:
Mortgage-backed	$	5,782	—	(149	)	5,633

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

(3) Loans

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

	March 31, 2006			December 31, 2005
	(In thousands)
Loans on real estate:
Residential and commercial mortgage	$	878,918		863,658
Construction		221,368		251,648
Equity lines of credit		67,284		70,386
Commercial loans		702,556		724,929
Agricultural loans		57,054		71,707
Lease financing		615		677
Installment loans to individuals		56,986		63,121
Overdrafts		760		2,006
SBA and other		24,339		24,321
		2,009,880		2,072,453
Less:
Allowance for loan losses		(26,999	)	(27,475	)
Net of unearned discount		(4,729	)	(4,860	)
	$	1,978,152		2,040,118

11

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

	Three Months Ended March 31, 2006
	(In thousands)
Balance, beginning of period	$	27,475
Provision for loan losses		—
Loans charged off		(1,091	)
Recoveries on loans previously charged-off		615
Balance, end of period	$	26,999

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

	March 31, 2006		December 31, 2005
	(In thousands)
Impaired loans with a specific valuation allowance	$	28,034	44,267
Impaired loans without a specific valuation allowance		12,554	6,023
Total impaired loans	$	40,588	50,290
Valuation allowance related to impaired loans	$	9,296	10,360
Average investment in impaired loans	$	45,439	38,425

Interest income of $935,000 was recognized on impaired loans during the three months ended March 31, 2006. At March 31, 2006 and December 31, 2005, the total investment in loans on nonaccrual was approximately $28,746,000 and $29,608,000, respectively.

(4) Goodwill and Other Intangible Assets

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

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

The changes in the carrying amount of goodwill for the periods ended March 31, 2006 and December 31, 2005 are as follows:

	Three Months Ended March 31, 2006			Year Ended December 31, 2005
	(In thousands)
Balance, beginning of period	$	392,507		328,185
Goodwill acquired on October 1, 2005		—		46,258
Goodwill acquired on November 1, 2005		—		14,623
Goodwill associated with disposal of subsidiary (Note 9)		(1,161	)	—
Adjustment to goodwill-increase related to income taxes		—		3,441
Balance, end of period	$	391,346		392,507

The Company revised its estimated value for its discontinued operations in the second quarter of 2005 based on additional information available related to the sale of Collegiate Peaks. The Company determined that, upon consummation of the sale, it would have an estimated tax liability associated with the sale of Collegiate Peaks, resulting in additional goodwill of $3,441,000.

12

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

	Useful life	March 31, 2006			December 31, 2005
		(In thousands)
Non-compete employment agreements	2 years	$	3,606		3,706
Core deposit intangible assets	7 –15 years		62,975		62,975
Expirations – First MainStreet Insurance	7 years		—		1,477
			66,581		68,158
Accumulated amortization			(16,166	)	(13,236	)
		$	50,415		54,922

Amortization expense for intangible assets for the three months ended March 31, 2006 and 2005 was $2,998,000 and $3,094,000, respectively.

(5) Borrowings

Borrowed funds include Treasury Tax and Loan notes, Federal Home Loan Bank (“FHLB”) borrowings, and a line of credit with U.S. Bank National Association. The Company had $57,213,000 and $130,198,000 outstanding under these borrowings at March 31, 2006 and December 31, 2005, with a total commitment of $387,846,000 at March 31, 2006.

At March 31, 2006, borrowings were $57,213,000 and consisted of $33,100,000 and $14,867,000 on a line of credit and term notes at the Federal Home Loan Bank, respectively, $8,234,000 on the U.S. Bank revolving credit agreement, and a $1,012,000 Treasury Tax and Loan note balance.

Our maximum credit allowance for total borrowings at the Federal Home Loan Bank as of March 31, 2006 was $316,846,000. The interest rate on the line of credit varies with the federal funds rate. The term notes have fixed interest rates that range from 2.52% to 6.22%. We have a blanket pledge and security agreement with the Federal Home Loan Bank, which encompasses certain loans and securities as collateral for these borrowings.

We have a $70,000,000 revolving credit agreement, as amended, with U.S. Bank National Association that contains financial covenants, including maintaining a minimum return on average assets, a maximum nonperforming assets to total loans ratio, and regulatory capital ratios that permit the Company to qualify as well-capitalized. As of March 31, 2006, the Company had $8.2 million drawn on this line at a rate of 6.05% and was in compliance with all debt covenants, as amended. The interest rate varies based on a spread over the federal funds rate. The line of credit is secured by stock of Guaranty Bank.

(6) Subordinated Debentures and Trust Preferred Securities

The Company had a $41,239,000 aggregate principal balance of subordinated debentures outstanding with a weighted average cost of 8.6% at March 31, 2006. The subordinated debentures were issued in four separate series. Each issuance has a maturity of thirty years from its date of issue. The subordinated debentures were issued to trusts established by us, which in turn issued $40 million of trust preferred securities. Generally and with certain limitations, the Company is permitted to call the debentures subsequent to the first five or ten years, as applicable, after issue if certain conditions are met, or at any time upon the occurrence and continuation of certain changes in either the tax treatment or the capital treatment of the trusts, the debentures or the preferred securities.

13

The following table summarizes the terms of each subordinated debenture issuance at March 31, 2006 (dollars in thousands):

Series	Date Issued	Principal Amount		Maturity Date	Call Date*	Fixed or Variable Rate	Rate Adjuster	Rate at March 31, 2006		Next Rate Reset Date
CenBank Trust I	9/7/2000	$	10,310	9/7/2030	9/7/2010	Fixed	N/A	10.60	%	N/A
CenBank Trust II	2/22/2001		5,155	2/22/2031	2/22/2011	Fixed	N/A	10.20	%	N/A
CenBank Trust III	4/15/2004		15,464	4/15/2034	4/15/2009	Variable	LIBOR + 2.65 %	7.30	%	4/15/2006
Guaranty Capital Trust III	7/7/2003		10,310	7/7/2033	7/7/2008	Variable	LIBOR + 3.10 %	7.70	%	4/15/2006

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

(7) Commitments

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

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

At the dates indicated, the following financial instruments were outstanding whose contract amounts represented credit risk:

	March 31, 2006		December 31, 2005
	(In thousands)
Commitments to extend credit	$	590,321	634,737
Standby letters of credit		35,780	37,952
Commercial letters of credit		378	472

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

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

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

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

(8) Capital Ratios

At March 31, 2006 and December 31, 2005, the Company had leverage ratios of 8.45% and 7.97%, Tier 1 risk-weighted capital ratios of 9.38% and 8.83%, and total risk-weighted capital ratios of 10.63% and 10.08%, respectively. The Company actively monitors its regulatory capital ratios to ensure that the Company and its bank subsidiaries are well capitalized under the applicable regulatory framework.

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(9) Business Disposition

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

(10) Assets Held for Sale and Discontinued Operations

Pursuant to the Company’s 2005 decision to sell its Collegiate Peaks subsidiary, the Company classified Collegiate Peaks’ assets and liabilities as held for sale at the lower of cost or fair value as of March 31, 2006 and December 31, 2005. The following tables present the assets and liabilities of Collegiate Peaks that are presented as held for sale in the consolidated balance sheets at March 31, 2006 and December 31, 2005, and the results of operations that are presented in discontinued operations for the three months ended March 31, 2006.

	March 31, 2006		December 31, 2005
	(In thousands)
Assets held for sale:
Cash and cash equivalents	$	12,870	$	19,869
Investments		17,157		16,647
Loans and leases, net		47,634		48,150
Other intangible assets		3,504		3,528
Goodwill		8,922		8,922
Other assets		907		1,154
Total assets held for sale	$	90,994	$	98,270
Liabilities associated with assets held for sale:
Deposits	$	66,866	$	74,069
Securities sold under repurchase agreements		4,440		4,682
Other liabilities		1,797		1,666
Total liabilities associated with assets held for sale	$	73,103	$	80,417

	Three months Ended March 31,
	2006		2005
	(In thousands)
Interest income	$	1,059	$	1,081
Noninterest income		91		156
Income from discontinued operations, net of tax		325		177

The Company had a net tax benefit of $123,000 from discontinued operations for the three months ended March 31, 2006.

(11) Subsequent Event

On August 25, 2005, the Company executed a definitive agreement for the sale of Collegiate Peaks. On April 25, 2006, the Company terminated the definitive agreement. In connection with the termination of the agreement, management of the Company decided to retain Collegiate Peaks as a separately operating bank subsidiary. Beginning in the 2006 second quarter, Collegiate Peaks will not be reflected as discontinued operations, with its assets and liabilities no longer classified as available for sale.

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

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

Overview

We are a financial holding company and a bank holding company providing banking and other financial services throughout our targeted Colorado markets to consumers and to small and medium-sized businesses, including the owners and employees of those businesses through our bank subsidiaries. At March 31, 2006, those subsidiaries included Guaranty Bank and Trust Company, Centennial Bank of the West, and Collegiate Peaks Bank, which was held for sale at March 31, 2006. Unless the context requires otherwise, the terms “Company,” “us,” “we,” and “our” refers to Centennial Bank Holdings, Inc. on a consolidated basis. We refer to Guaranty Bank and Trust Company as Guaranty Bank, Centennial Bank of the West as CBW, and Collegiate Peaks Bank as Collegiate Peaks. We refer to Guaranty Bank and CBW as the Banks.

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

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

On April 25, 2006, we terminated the definitive agreement to sell Collegiate Peaks. The Company intends to retain Collegiate Peaks as a separately operating bank subsidiary.

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Results of Operations

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

	Three Months Ended March 31,
	2006		2005		Change - Favorable (Unfavorable)
	(In thousands, except share data)
Results of Operations:
Interest income	$	42,710	$	30,043	$	12,667
Interest expense		12,803		4,715		(8,088	)
Net interest income		29,907		25,328		4,579
Provision for loan losses		—		1,700		1,700
Net interest income after provision for loan losses		29,907		23,628		6,279
Noninterest income		3,112		2,578		534
Noninterest expense		21,740		24,983		3,243
Income before income taxes		11,279		1,223		10,056
Income tax expense		3,990		303		(3,687	)
Income from continuing operations		7,289		920		6,369
Income from discontinued operations (net of tax)		140		177		(37	)
Net income	$	7,429	$	1,097	$	6,332
Share Data:
Basic earnings per share	$	0.13	$	0.02	$	0.11
Diluted earnings per share	$	0.13	$	0.02	$	0.11
Average shares outstanding		59,057,264		52,332,996		6,724,268
Diluted average shares outstanding		59,240,780		52,332,996		6,907,784

Net income increased to $7.4 million for the three months ended March 31, 2006 from $1.1 million for the three months ended March 31, 2005. Several factors significantly contributed to this change in net income. In the first three months of 2005, we incurred a charge of $4.9 million for change of control and retention bonuses related to the December 31, 2004 acquisition of Guaranty Corporation. We recorded a provision for loan losses of $1.7 million in the 2005 first quarter. No provision was taken in the 2006 first quarter based on management’s assessment of the adequacy of the allowance. Our 2006 first quarter net interest income, noninterest income, and noninterest expense categories, when compared to the 2005 first quarter, have all been impacted by the 2005 fourth quarter acquisitions of First MainStreet and Foothills Bank.

Net Interest Income and Net Interest Margin

The three months ended March 31, 2006 resulted in net interest income of $29.9 million, an increase of $4.6 million from the three months ended March 31, 2005. Interest income and interest expense increased due to the rising rate environment and the acquisitions of First MainStreet and Foothills Bank during the 2005 fourth quarter.

Interest income increased $12.7 million, while interest expense increased $8.1 million from the 2005 first quarter. Average interest-earning assets increased by $0.4 billion from March 31, 2005 to $2.2 billion as of March 31, 2006. The acquisitions of First MainStreet and Foothills Bank during the 2005 fourth quarter contributed significantly to increases in interest income, interest expense, and average interest-earning assets.

Our net interest margin declined from 5.6% for the three months ended March 31, 2005 to 5.4% for the three months ended March 31, 2006. The rising interest rate environment led to an increased yield on earning assets and the cost of interest-bearing liabilities. The increase in the cost of funding was greater than the increased yield on

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earning assets for the three months ended March 31, 2006 compared to the three months ended March 31, 2005, resulting in the decline in our net interest margin.

The average yield on our interest-earning assets increased to 7.8 % for the first quarter 2006 from 6.7% for the 2005 first quarter. The increase in the average yield on the loan portfolio accounts for the majority of this increase, contributing 98 basis points to this ratio.

The average cost on our interest-bearing liabilities increased to 3.1% during the 2006 first quarter from 1.5% during the 2005 first quarter. Interest-bearing deposit costs increased 1.5% from March 31, 2005 to March 31, 2006. Our average cost of interest bearing deposits increased due to the effect of the rising interest rate environment. The rising interest rate environment has also affected the cost of our borrowings, which increased from 3.7% for the three months ended March 31, 2005 to 5.7% for the three months ended March 31, 2006.

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

	Three Months Ended March 31, 2006						Three Months Ended March 31, 2005
	Average Balance		Interest Income or Expense		Average Yield or Cost		Average Balance		Interest Income or Expense		Average Yield or Cost
	(Dollars in thousands)
ASSETS:
Interest-earning assets:
Gross loans, net of unearned fees(1)(2)(3)	$	2,048,380	$	40,521	8.02	%	$	1,642,497	$	28,497	7.04	%
Investment securities(1):
Taxable		72,893		776	4.32	%		98,676		299	1.23	%
Tax-exempt		72,933		911	5.07	%		37,286		491	5.34	%
Equity Securities (4)		28,733		427	6.03	%		14,180		171	4.89	%
Other earning assets		6,044		75	5.03	%		31,280		585	7.58	%
Total interest-earning assets		2,228,983		42,710	7.77	%		1,823,919		30,043	6.68	%
Nonearning assets:
Cash and due from banks		78,425						54,764
Other assets		622,304						513,172
Total assets	$	2,929,712					$	2,391,855
LIABILITIES AND STOCKHOLDERS’ EQUITY:
Interest-bearing liabilities:
Deposits:
Interest-bearing demand	$	173,758	$	152	0.35	%	$	115,491	$	90	0.32	%
Money Market		587,737		4,215	2.91	%		532,462		1,718	1.31	%
Savings		99,187		184	0.75	%		84,134		146	0.70	%
Time certificates of deposit		612,721		5,603	3.71	%		454,302		1,674	1.49	%
Total interest-bearing deposits		1,473,403		10,154	2.79	%		1,186,389		3,628	1.25	%
Borrowings:
Repurchase agreements		23,359		239	4.15	%		28,156		150	2.16	%
Federal funds purchased		1,436		22	6.21	%		3,630		27	3.02	%
Subordinated debentures		41,256		847	8.33	%		41,945		553	5.35	%
Borrowings		136,059		1,541	4.59	%		45,196		357	3.20	%
Total interest-bearing liabilities		1,675,513		12,803	3.10	%		1,305,316		4,715	1.46	%
Noninterest bearing liabilities:
Demand deposits		540,189						475,412
Other liabilities		112,620						93,487
Total liabilities		2,328,322						1,874,215
Stockholders’ equity		601,390						517,640
Total liabilities and stockholders’ equity	$	2,929,712					$	2,391,855
Net interest income			$	29,907					$	25,328
Net interest margin					5.44	%					5.63	%

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

⁽²⁾ Includes average nonaccrual loans of $17.7 million and $11.6 million for the three months ended March 31, 2006 and 2005, respectively.

⁽³⁾ Net loan fees of $2.0 million and $2.3 million for the three months ended March 31, 2006 and 2005 are included in the yield computation.

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

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The following table presents the dollar amount of changes in interest income and interest expense for the major categories of our interest-earning assets and interest-bearing liabilities. Information is provided for each category of interest-earning assets and interest-bearing liabilities with respect to (i) changes attributable to changes in volume (i.e., changes in average balances multiplied by the prior-period average rate) and (ii) changes attributable to rate (i.e., changes in average rate multiplied by prior-period average balances). For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately to the change due to volume and the change due to rate.

	Three Months Ended March 31, 2006 Compared to Three Months Ended March 31, 2005
	Net Change			Rate			Volume
	(In thousands)
Interest income:
Loans held for investment	$	12,024		$	4,352		$	7,672
Investment securities:
Taxable		477			532			(55	)
Tax-exempt		420			(24	)		444
Equity Securities		256			47			209
Other earning assets		(510	)		(150	)		(360	)
Total interest income		12,667			4,757			7,910
Interest expense:
Deposits:
Interest-bearing demand		62			12			50
Money Market		2,497			2,302			195
Savings		38			11			27
Time certificates of deposit		3,929			3,180			749
Repurchase agreements		89			109			(20	)
Federal funds purchased		(5	)		(12	)		7
Subordinated debentures		294			303			(9	)
Borrowings		1,184			210			974
Total interest expense		8,088			6,115			1,973
Net interest income	$	4,579		$	(1,358	)	$	5,937

Provision for Loan Losses

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

During the 2005 first quarter, we recorded a provision for loan loss of $1.7 million. During the same period of 2006, no provision was recorded. The provision taken in 2005 was primarily due to the deterioration of a commercial loan, requiring a provision of $0.9 million. In addition, in 2005 we recorded an additional provision of $0.4 million for conditions affecting our residential real estate portfolio.

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Noninterest Income

The following table presents the major categories of noninterest income:

	Three months Ended March 31,
	2006			2005		Increase (Decrease)
				(In thousands)
Customer service and other fees	$	2,632		$	1,929	$	703
Gain (loss) on sale of securities		(5	)		23		(28	)
Gain on sale of loans		314			370		(56	)
Gain (loss) on sale of assets		(91	)		246		(337	)
Other		262			10		252
Total noninterest income	$	3,112		$	2,578	$	534

For the three months ended March 31, 2006, noninterest income was $3.1 million compared to $2.6 million for the three months ended March 31, 2005.

Service charges and fees related to deposits contributed $0.7 million to the increase from the 2005 first quarter, with $0.3 million reflecting the result of the 2006 implementation of a new service charge program. The primary driver of the remaining service charges and fees increase was the 2005 fourth quarter acquisitions of First MainStreet and Foothills Bank. Other noninterest income increased primarily as the result of the $0.2 million sale of our CBW merchant credit card servicing rights during the 2006 first quarter. Partially offsetting these increases to noninterest income was a net reduction in the gain on sale of assets of $0.3 million. During the 2005 first quarter, we recorded a gain on sale of assets of $0.2 million and during the 2006 first quarter, we incurred a loss on sale of assets of $0.1 million.

Noninterest Expense

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

	Three months Ended March 31,
	2006		2005		Increase (Decrease)
			(In thousands)
Salaries and employee benefits	$	11,435	$	10,308	$	1,127
Occupancy expense		2,052		1,628		424
Furniture and equipment		1,165		785		380
Amortization of intangible assets		2,998		3,094		(96	)
Merger, acquisition and transition expenses		88		4,922		(4,834	)
Other general and administrative		4,002		4,246		(244	)
Total noninterest expense	$	21,740	$	24,983	$	(3,243	)

Noninterest expense declined $3.2 million from the three months ended March 31, 2005 to $21.7 million for the three months ended March 31, 2006. The primary cause of this decrease was merger, acquisition and transition expenses of $4.9 million incurred in the 2005 first quarter. The 2005 first quarter merger, acquisition and transition expenses reflected the acquisition and transition costs associated with the 2004 purchases of our predecessor and Guaranty Corporation, including the payment of severance and retention bonuses. The 2006 first quarter expenses reflected the remaining integrations associated with the First MainStreet and Foothills Bank acquisitions. Salaries and employee benefits, occupancy expense, and furniture and equipment expense increased by $1.9 million, primarily due to the additional employees and facilities acquired in the First MainStreet and Foothills Bank acquisitions.

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Financial Condition

The following sets forth certain key consolidated balance sheet data:

	At March 31, 2006		At December 31, 2005		Increase (Decrease)
	(In thousands)
Net loans (including loans held for sale)	$	1,983,882	$	2,046,938	$	(63,056	)
Total assets		2,916,510		2,980,757		(64,247	)
Deposits		2,077,076		2,048,352		28,724

Loans

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

	March 31, 2006			December 31, 2005			Increase (Decrease)			% Change
	(In thousands)
Real estate - mortgage	$	946,202		$	934,044		$	12,158		1.3	%
Real estate - construction		221,368			251,648			(30,280	)	(12.0	)%
Commercial		702,556			724,929			(22,373	)	(3.1	)%
Agricultural		57,054			71,707			(14,653	)	(20.4	)%
Consumer		56,986			63,121			(6,135	)	(9.7	)%
Leases receivable and other		25,714			27,004			(1,290	)	(4.8	)%
Total gross loans		2,009,880			2,072,453			(62,573	)	(3.0	)%
Less: allowance for loan losses		(26,999	)		(27,475	)		476		(1.7	)%
Unearned discount		(4,729	)		(4,860	)		131		(2.7	)%
Net Loans	$	1,978,152		$	2,040,118		$	(61,966	)	(3.0	)%
Loans held for sale at lower of cost or market	$	5,730		$	6,820		$	(1,090	)	(16.0	)%

As of March 31, 2006, our loan portfolio held for investment was $2.0 billion, reflecting a $62.0 million decrease from December 31, 2005. This decline in the loan portfolio was primarily due to the increased pace of loan repayments in our commercial and construction real estate portfolio. Our agricultural loan portfolio has declined due to increased competition. In addition to the loans balances listed above, we had $20.0 million of loans structured as a security and recorded as a security on the balance sheet at March 31, 2006 and December 31, 2005.

Our loans held for sale decreased slightly from $6.8 million at December 31, 2005 to $5.7 million as of March 31, 2006. Our portfolio of loans held for sale is made up of residential mortgage loans. The majority of this decrease is the result of increasing mortgage rates. The increasing rate environment put downward pressure on the demand for residential mortgage, reducing the mortgage originations.

Nonperforming Assets

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

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

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

	At or for the:
	Three Months Ended March 31, 2006			Year Ended December 31, 2005			Change from December 31, 2005
Nonaccrual loans	$	28,746		$	29,608		$	(862	)
Accruing loans past due 90 days or more		1			131			(130	)
Other real estate owned		1,267			1,465			(198	)
Total nonperforming assets	$	30,014		$	31,204		$	(1,190	)
Nonperforming loans	$	28,747		$	29,739		$	(992	)
Other impaired loans		11,841			20,551			(8,710	)
Total impaired loans	$	40,588		$	50,290		$	(9,702	)
Allocated allowance for loan losses		(9,296	)		(10,360	)		1,064
Net investment in impaired loans	$	31,292		$	39,930			(8,638	)
Charged-off loans	$	(1,091	)	$	(5,541	)	$	4,450
Recoveries		615			1,457			(842	)
Net charge-off loans	$	(476	)	$	(4,084	)	$	3,608
Allowance for loan losses to loans, net of deferred fees and costs		1.35	%		1.33	%		0.02	%
Allowance for credit losses to loans, net of deferred fees and costs		1.38	%		1.36	%		0.02	%
Allowance for loan losses to nonaccrual loans		93.92	%		92.80	%		1.13	%
Allowance for credit losses to nonaccrual loans		96.42	%		95.22	%		1.20	%
Allowance for loan losses to nonperforming assets		89.95	%		88.05	%		1.91	%
Allowance for loan losses to impaired loans		66.52	%		54.63	%		11.89	%
Allowance for credit losses to nonperforming assets		92.35	%		90.35	%		2.00	%
Nonperforming assets to loans, net of deferred fees and costs, and other real estate owned		1.50	%		1.51	%		(0.01	)%
Annualized net charge-offs to average loans		(0.09	)%		(0.23	)%		0.14	%
Nonaccrual loans to loans, net of deferred fees and costs		1.43	%		1.43	%		0.00	%

Nonaccrual loans decreased by $0.9 million to $28.7 million at March 31, 2006 from $29.6 million at December 31, 2005, primarily due to pay-downs on three loans during the 2006 first quarter. Additionally, several nonaccrual loans were charged off during the first quarter for $0.8 million. These decreases in nonaccrual balances were offset by the downgrade of several smaller loans during the first quarter. The largest loan transferred to nonaccrual status was a $0.8 million real estate loan that was acquired with the purchase of Foothills Bank. In addition, $3.3 million of commercial and real estate loans were transferred to nonaccrual status during the quarter, each with a balance of $0.5 million or less.

Compared to December 31, 2005, other real estate owned decreased $0.2 million from $1.5 million to $1.3 million as of March 31, 2006. However, as the Company goes through the process of working out its existing nonaccrual loans, it expects other real estate owned to increase.

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Allowance for Loan Losses

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

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

	Three Months Ended March 31, 2006
	(In thousands)
Balance, December 31, 2005	$	27,475
Loan charge-offs:
Real estate - mortgage		523
Real estate - construction		10
Commercial		442
Agricultural		21
Consumer		23
Lease receivable and other		72
Total loan charge offs		1,091
Recoveries:
Real estate - mortgage		44
Real estate - construction		34
Commercial		483
Agricultural		—
Consumer		53
Lease receivable and other		1
Total loan recoveries		615
Net loan charge-offs		(476	)
Provision for loan losses		—
Balance, March 31, 2006	$	26,999

The allowance for loan losses of $27.0 million at March 31, 2006 represented 1.4% of total loans and 93.9% of nonperforming loans as of that date. At December 31, 2005, the allowance for loan losses of $27.5 million was 1.3% of the 2005 average loans held for investment and 92.4% of nonperforming loans. The expected loss on our loan portfolio is influenced by the collateral value associated with our loans. Nonperforming loans with high collateral value to loan value require a relatively smaller reserve than uncollateralized loans or loans with minimal collateral coverage. At March 31, 2006, our nonperforming loans continued to have estimated collateral values in relation to loan values that allow for an allowance to nonperforming loan ratio of less than 100%.

Investment Securities

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

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

	March 31, 2006		December 31, 2005		Increase (Decrease)			% Change
	(In thousands)
Securities available-for-sale:
U.S. Treasury securities	$	10,026	$	13,076	$	(3,050	)	(30.4	)%
U.S. Government agencies		5,361		5,367		(6	)	(0.1	)%
Obligations of states and political subdivisions		72,644		72,893		(249	)	(0.3	)%
Mortgage backed securities		46,012		50,043		(4,031	)	(8.8	)%
Marketable equity securities		1,703		1,702		1		0.1	%
Total securities available-for-sale	$	135,746	$	143,081	$	(7,335	)	(5.4	)%
Securities held-to-maturity:
Mortgage-backed	$	5,782	$	5,798	$	(16	)	(0.3	)%
Bank stocks, at cost	$	30,135	$	26,874	$	3,261		10.8	%

The carrying value of our investment securities at March 31, 2006 was $171.7 million, compared to December 31, 2005 of $175.8 million. The decrease in the portfolio is due to the maturity of several U.S. Treasury securities with a principal balance of $3.0 million and $4.0 million of maturities and paydowns on mortgage backed securities. These maturities were offset by an increase of $3.3 million in bank stocks. Additional Federal Reserve Bank stock was purchased based on the increase in capital and surplus at Centennial Bank of the West after the acquisition of First MainStreet. At March 31, 2006 and December 31, 2005, $20.0 million of loans structured as a security were reflected as securities available-for-sale.

Deposits

At the end of the 2006 first quarter, deposits were $2.1 billion, which reflects an increase of $28.7 million from December 31, 2005. As of March 31, 2006, deposits increased $410.3 million, or 25%, over the 2005 first quarter. The acquisitions of First MainStreet and Foothills Bank contributed $447.0 million in deposits.

	At March 31, 2006				At December 31, 2005
	Balance		% of Total		Balance		% of Total
	(Dollars in thousands)
Noninterest bearing deposits	$	592,509	28.53	%	$	593,811	28.99	%
Interest bearing demand		186,493	8.98	%		160,283	7.82	%
Money market		620,228	29.86	%		561,747	27.42	%
Savings		98,379	4.74	%		99,496	4.86	%
Time		579,467	27.89	%		633,015	30.91	%
	$	2,077,076	100.00	%	$	2,048,352	100.00	%

Borrowings and Subordinated Debentures

At March 31, 2006, our outstanding borrowings were $57.2 million. These borrowings consisted of $33.1 million and $14.9 million on a line of credit and term notes at the Federal Home Loan Bank, respectively, $8.2 million on a U.S. Bank revolving credit agreement, and a $1.0 million Treasury Tax and Loan balance.

Our maximum credit allowance for total borrowings at the Federal Home Loan Bank as of March 31, 2006 was $316.8 million. The interest rate on the line of credit varies with the federal funds rate. The term notes have

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fixed interest rates that range from 2.52% to 6.22%. We have a blanket pledge and security agreement with the Federal Home Loan Bank, which encompasses certain loans and securities as collateral for these borrowings.

We have a $70 million revolving credit agreement, as amended, with U.S. Bank National Association that contains financial covenants, including maintaining a minimum return on average assets, a maximum nonperforming assets to total loans ratio and regulatory capital ratios that permit the Company to qualify as well-capitalized. As of March 31, 2006, the Company had $8.2 million drawn on this line at a rate of 6.05% and was in compliance with all debt covenants, as amended. The interest rate varies based on a spread over the federal funds rate. The line of credit is secured by stock of Guaranty Bank. U.S. Bank performs various banking services for the Company for which they receive usual and customary fees.

At March 31, 2006, we had a $41,239,000 aggregate principal balance of subordinated debentures outstanding with a weighted average cost of 8.6%. The subordinated debentures were issued in four separate series. Each issuance has a maturity of thirty years from its date of issue. The subordinated debentures were issued to trusts established by us, which in turn issued $40 million of trust preferred securities. Generally and with certain limitations, the Company is permitted to call the debentures subsequent to the first five or ten years, as applicable, after issue if certain conditions are met, or at any time upon the occurrence and continuation of certain changes in either the tax treatment or the capital treatment of the trusts, the debentures or the preferred securities.

Capital Resources

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

At March 31, 2006, the Company had a leverage ratio of 8.45%, Tier 1 risk-weighted capital ratio of 9.38% and total risk-weighted capital ratio of 10.63%. The Company actively monitors its regulatory capital ratios to ensure that the Company and its bank subsidiaries are well capitalized under the applicable regulatory framework.

Contractual Obligations and Off-Balance Sheet Arrangements

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

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

At the dates indicated, the following financial instruments were outstanding whose contract amounts represented credit risk:

	March 31, 2006		December 31, 2005
	(In thousands)
Commitments to extend credit	$	590,321	$	634,737
Standby letters of credit		35,780		37,952
Commercial letters of credit		378		472
Totals	$	626,479	$	673,161

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Liquidity

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

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

The Banks rely on deposits as their principal source of funds and, therefore, must be in a position to service depositors’ needs as they arise. Our deposits tend to be cyclical, decreasing at the beginning of the year and ramping up during the balance of the year. In addition, while fluctuations in the balances of a few large depositors may cause temporary increases and decreases in liquidity from time to time, we have not experienced difficulty in dealing with such fluctuations from existing liquidity sources.

Liquid assets represented approximately 8.6% of total assets at March 31, 2006. We believe that if the level of liquid assets (our primary liquidity) does not meet our liquidity needs, other available sources of liquid assets (our secondary liquidity), including the purchase of federal funds, sales of securities under agreements to repurchase, sales of loans, discount window borrowings from the Federal Reserve Bank and our lines of credit with the Federal Home Loan Bank of Topeka and U.S. Bank, could be employed to meet those current and presently anticipated funding needs.

Application of Critical Accounting Policies and Accounting Estimates

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

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

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

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

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result, changes in the appropriate level of the allowance for different segments may offset one another. Adjustments to the allowance represent the impact from the analysis of all loan segments.

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

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

This discussion has highlighted those accounting policies that we consider to be critical to our financial reporting process. However, all the accounting policies are important, and therefore you are encouraged to review each of the policies included in Note 1 to our unaudited condensed consolidated financial statements to gain a better understanding of how our financial performance is measured and reported.

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ITEM 3. Quantitative and Qualitative Disclosure about Market Risk

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

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

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

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

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

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At March 31, 2006, we had a negative gap of $7.5 million, or (0.3)% of our total assets, that would be subject to repricing within one year, with a total positive gap of $572.4 million, or 19.6% of our total assets. The following table sets forth information concerning repricing opportunities for our interest-earning assets and interest-bearing liabilities as of March 31, 2006. The amount of assets and liabilities shown within a particular period were determined in accordance with their contractual maturities, except that adjustable rate products are included in the period in which they are first scheduled to adjust and not in the period in which they mature. Such assets and liabilities are classified by the earlier of their maturity or repricing date:

	Less Than 3 Months			3 Months to 1 Year			1 to 5 Years			Over 5 Years			Nonrate Sensitive			Total
	(Dollars in thousands)
Interest-bearing cash and cash equivalents	$	36,622		$	—		$	—		$	—		$	—		$	36,622
Investment securities		27,120			21,761			28,933			63,714			30,135			171,663
Loans, gross		1,177,929			237,260			454,856			112,743			28,093			2,010,881
All other assets		37,860			9,330			20,928			7,314			621,912			697,344
Totals	$	1,279,531		$	268,351		$	504,717		$	183,771		$	680,140		$	2,916,510
Deposits	$	1,070,227		$	346,449		$	66,916		$	—		$	593,484		$	2,077,076
Assets under repurchase agreements and federal funds purchases		26,158			—			—			—			—			26,158
Borrowings		48,979			8,234			—			—			—			57,213
Subordinated debentures		—			—			—			41,239			—			41,239
All other liabilities		46,049			9,266			410			—			55,715			111,440
Stockholders’ equity		—			—			—			—			603,384			603,384
Totals	$	1,191,413		$	363,949		$	67,326		$	41,239		$	1,252,583		$	2,916,510
Period gap		88,118			(95,598	)		437,392			142,532			(572,443	)
Cumulative gap		88,118			(7,480	)		429,912			572,444
Cumulative rate sensitive gap %		3.0	%		-0.3	%		14.7	%		19.6	%

ITEM 4. Controls and Procedures

As of the end of the period covered by this report, an evaluation was carried out by the Company’s management, with the participation of the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 15d-15(e) under the Securities Exchange Act of 1934). The Company’s disclosure controls were designed to provide a reasonable assurance that information required to be disclosed in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. It should be noted that the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote. However, the controls have been designed to provide reasonable assurance of achieving the controls’ stated goals. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer, have concluded that the Company’s disclosure controls and procedures are effective at March 31, 2006 to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934 was (i) accumulated and communicated to management, including the Company’s Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure and (ii) recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission.

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

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PART II—OTHER INFORMATION

ITEM 1. Legal Proceedings

On December 31, 2004, an adversary proceeding was filed against Guaranty Bank in the United States Bankruptcy Court for the District of Colorado, by the trustees of the Will Hoover Company, or the Hoover Company, and William Gordon Hoover, Jr., or Hoover, seeking to avoid certain transfers that occurred over a four-year period commencing in 1999 under the United States Bankruptcy Code. The trustees allege that certain transfers were made by the Hoover Company and Hoover with actual fraudulent intent, that the transfers were made for less than reasonably equivalent value and occurred at a time when the Hoover Company and Hoover were insolvent, or were rendered insolvent by the transfers, and that certain other transfers were preferential as to other creditors, were made for less than reasonably equivalent value or were made by the Hoover Company or Hoover with actual fraudulent intent. On September 7, 2005, the Bankruptcy Court granted in part our motion for summary judgment and dismissed $8.5 million of the claims relating to alleged transfers for payment of items credited in the check collection process. On November 10, 2005, the trustees filed a motion in District Court requesting reconsideration of the Bankruptcy Court’s order dismissing those claims. On November 21, 2005, the District Court summarily denied the trustees’ motion. We continue to vigorously contest the remaining claims, which amount to approximately $2.5 million. In the fourth quarter of 2005, we established a reserve that, after consultation with our counsel, we have determined is appropriate for this litigation.

On July 22, 2005 and August 18, 2005, two separate but similar actions were filed against Guaranty Bank and a former officer in the Denver District Court, Denver, Colorado by investors who provided funds to Hoover, the Hoover Company or related entities. The investors allege that certain activities of Guaranty Bank and its former officer with respect to the customer relationship with Hoover, the Hoover Company and related entities aided and abetted Hoover and the Hoover Company in securities violations and violations of the Colorado Organized Crime Control Act and amounted to a civil conspiracy, causing the investors to incur damages. The investors are seeking actual and statutory treble damages against Guaranty Bank and its former officer. The alleged actual losses claimed in connection with such activities are in excess of $13.1 million. In a series of preliminary rulings in April 2006, the District Court dismissed a number of the claims representing alleged damages in excess of $1.0 million. We intend to file dispositive motions to address both liability and damage aspects of the investors’ complaints. We will continue to vigorously defend these actions.

At this time, we cannot determine whether the outcome of the above matters will have a material adverse impact on our consolidated financial position or results of operations.

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

ITEM 1A. Risk Factors

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

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

(a) None.

(b) None.

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

Period	Total Number of Shares Purchased(1)	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans(2)	Maximum Number of Shares that May Yet Be Purchased Under the Plans at the End of the Period
January 1 to January 31, 2006	N/A		N/A	N/A	N/A
February 1 to February 28, 2006	N/A		N/A	N/A	N/A
March 1 to March 31, 2006	288,600	$	11.60	288,600	2,711,400
Total	288,600	$	11.60	288,600	2,711,400

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

⁽²⁾ On March 2, 2006, we announced a stock repurchase program to repurchase up to 3,000,000 shares of our common stock from time to time over a one-year period in the open market or through private transactions.

ITEM 3. Defaults Upon Senior Securities

None.

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

None.

ITEM 5. Other Information

On April 25, 2006, the Company amended its 2005 Stock Incentive Plan to not allow option or award repricing unless the Company obtains stockholder approval.

On May 11, 2006, the Company entered into Amendment No. 2 to the Revolving Credit Agreement with U.S. Bank National Association to eliminate the loan loss reserve financial covenant.

David C. Boyles, President and Chief Operating Officer and director of the Company, has stated that he intends to retire by December 31, 2006, the end of the term of his employment agreement. The Company is in the process of planning an orderly management transition.

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ITEM 6. Exhibits

Exhibit Number	Description
10.1	Amended and Restated 2005 Stock Incentive Plan.
10.2	Amendment No. 2 to Revolving Credit Agreement, dated as of May 11, 2006, between U.S. Bank National Association and the Registrant.
31.1	Section 302 Certification of Chief Executive Officer.
31.2	Section 302 Certification of Chief Financial Officer.
32.1	Section 906 Certification of Chief Executive Officer.
32.2	Section 906 Certification of Chief Financial Officer.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: May 12, 2006	CENTENNIAL BANK HOLDINGS, INC.
	/s/ PAUL W. TAYLOR
	Paul W. Taylor
	Executive Vice President and Chief Financial Officer

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