This discussion should be read in conjunction with our condensed consolidated financial statements and notes thereto included in this Form 10-Q. Certain terms used in this discussion are defined in the notes to these financial statements. For a description of our accounting policies, see Note 1 of the Notes to Consolidated Financial Statements included in our Form 10-K for the year ended December 31, 2007. For a discussion of the segments included in our principal activities, see Note 10 to the Notes of the Condensed Consolidated Financial Statements.

Executive Summary

The Company is a financial holding company that offers a broad array of financial service products to its target market of small and medium-sized businesses and high-net-worth individuals. Our operating segments consist of Commercial Banking, Investment Banking, Investment Advisory and Trust, Insurance and Corporate Support and Other.

Earnings are derived primarily from our net interest income, which is interest income less interest expense, and noninterest income earned from our fee-based business lines and banking service fees, offset by noninterest

expense. As the majority of our assets are interest-earning and our liabilities are interest-bearing, changes in interest rates impact our net interest margin, the largest component of our operating revenue (which is defined as net interest income plus noninterest income). We manage our interest-earning assets and interest-bearing liabilities to reduce the impact of interest rate changes on our operating results. We have also focused on reducing our dependency on our net interest margin by increasing noninterest income.

Our Company has focused on developing an organization with personnel, management systems and products that will allow us to compete effectively and position us for growth. The cost of this process relative to our size has been high. In addition, we have operated with excess capacity during the start-up phases of various projects. As a result, relatively high levels of noninterest expense have adversely affected our earnings over the past several years. Salaries and employee benefits comprised most of this overhead category. However, we believe that our compensation levels have allowed us to recruit and retain a highly qualified management team capable of implementing our business strategies. We believe our compensation policies, which include the granting of options to purchase common stock and restricted stock to many employees and the offering of an employee stock purchase plan, have highly motivated our employees and enhanced our ability to maintain customer loyalty and generate earnings.

Industry Overview

The U.S. commercial banking industry has been significantly impacted in 2008 by decreased values in real estate related assets, a downturn in the financial markets and a significant tightening in the credit market. The weakened U.S. housing market has caused the industry to realize significant losses on write-downs of investment securities securitized by real estate and higher credit costs for write-downs of loans issued for investment. During 2008, 16 banks have failed and gone into receivership with the FDIC compared to 10 bank failures in the previous five years. In September 2008, the Federal Housing Finance Authority placed Fannie Mae and Freddie Mac, who collectively guarantee more than half of the outstanding mortgages in the U.S., into conservatorship. The FDIC reported that net income of insured commercial banks and savings institutions for the second quarter of 2008 fell to the second-lowest quarterly total since 1991.

The overall market conditions led to the issuance of the Emergency Economic Stabilization Act of 2008 (EESA) that was signed into law on October 3, 2008. The EESA authorized the Troubled Asset Relief Plan (TARP) with an objective to ease the downturn in the credit cycle. The TARP provides up to $700 billion to the Department of the Treasury to buy mortgages and other troubled assets, to provide guarantees and to inject capital into financial institutions. As part of the $700 billion TARP, the Department of the Treasury established a Capital Purchase Program (CPP), which allows the Treasury to purchase up to $250 billion of senior preferred shares issued by U.S. financial institutions. The EESA also temporarily raised the basic limit on federal deposit insurance coverage from $100,000 to $250,000 per depositor until December 31, 2009 and accelerated the date on which the Federal Reserve will begin paying interest on required and excess reserve balances. The Company is currently in the process of completing the application to participate in the CPP.

On October 14, 2008, the FDIC announced the enactment of the Temporary Liquidity Guarantee Program to strengthen confidence and encourage liquidity in the banking system. Pursuant to the program, the FDIC will guarantee certain senior unsecured debt issued by participating financial institutions issued on or after October 14, 2008 and before June 30, 2009; and provide full FDIC deposit insurance coverage for non-interest bearing transaction accounts at participating FDIC-insured institutions through December 31, 2009. All FDIC insured institutions are covered under the program until December 5, 2008 at no cost. After December 5, 2008, the cost for institutions electing to participate is a 10-basis-point surcharge applied to balances covered by the noninterest-bearing deposit transaction account guarantee and 75-basis-points of the eligible senior unsecured debt guaranteed under the program. The Company intends to continue to participate in the Temporary Liquidity Guarantee Program with respect to the unlimited coverage for noninterest-bearing transaction accounts.

Financial and Operational Highlights

† Net income for the three and nine months ended September 30, 2008, was $4.2 million and $9.9 million, respectively, compared to $6.0 million and $17.6 million for the same periods in 2007.

† Diluted earnings per share for the three and nine months ended September 30, 2008, were $0.18 and $0.43, respectively, compared to $0.25 and $0.72 for the same periods in 2007.

† Net interest income on a tax-equivalent basis for the three and nine months ended September 30, 2008 increased to $24.4 million and $70.2 million, respectively, compared to $22.4 million and $65.4 million for the same periods in 2007.

† The net interest margin on a tax-equivalent basis was 4.13% and 4.09% for the three and nine months ended September 30, 2008, respectively, compared to 4.26% and 4.32% for the same periods in 2007.

† Gross loans increased $155.4 million from December 31, 2007, or 11.2% on an annualized basis.

† Provision for loan and credit losses for the three and nine months ended September 30, 2008, was $5.4 million and $16.0 million, respectively, compared to $1.4 million and $2.5 million for the comparable periods in 2007.

† Net loan charge-offs totaled $8.7 million for the nine months ended September 30, 2008, or 0.45% of average loans during the period, compared to 0.11% for the same period in 2007.

† Nonperforming assets increased to $30.9 million or 1.19% of total assets at September 30, 2008, compared to $3.5 million or 0.15% of total assets at December 31, 2007.

† Allowance for loan and credit losses increased to 1.40% of total loans at September 30, 2008, compared to 1.10% for the same period in 2007.

† Noninterest income increased by $8.4 million to $28.4 million for the nine months ended September 30, 2008, a 42.0% increase from the year-earlier period in 2007.

† Earnings for the third quarter of 2008 were negatively impacted by a $1.1 million loss related to a valuation adjustment on OREO and an other-than-temporary impairment (OTTI) on a FNMA perpetual preferred security.

† The Company issued $20.4 million of subordinated debt through a private placement offering to support future growth and reinforce regulatory capital.

Critical Accounting Policies

The Company's discussion and analysis of its financial condition and results of operations are based upon the Company's condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the instructions to Form 10-Q. The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. In making those critical accounting estimates, we are required to make assumptions about matters that may be highly uncertain at the time of the estimate. Different estimates we could reasonably have used, or changes in the assumptions that could occur, could have a material effect on our financial condition or results of operations. A description of our critical accounting policies was provided in the Management's Discussion and Analysis of Financial Condition and Results of Operation section of our Annual Report on Form 10-K for the year ended December 31, 2007. With the exception of the adoption of SFAS 157 (see discussion below and in Note 11 of the Notes to Condensed Consolidated Financial Statements included in this Form 10-Q), there have been no changes in our critical accounting policies and no other significant changes to the assumptions and estimates related to them.

The Company measures or monitors certain assets and liabilities on a fair value basis in accordance with SFAS 157. SFAS 157 emphasizes that fair value is a market-based measurement, not an entity-specific measurement. Therefore, a fair value measurement should be determined based on the assumptions that market participants would use in pricing an asset or liability. As a basis for considering market participant assumptions in fair value measurements, SFAS 157 establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity's own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy). Fair value may be used on a recurring basis for certain assets and liabilities such as available for sale securities and derivatives in which fair value is the primary basis of accounting. Similarly, fair value may be used on a nonrecurring basis to evaluate certain assets or liabilities such as impaired loans and other real estate owned. Depending on the nature of the

asset or liability, the Company uses various valuation techniques and assumptions in accordance with SFAS 157 to determine the instrument's fair value. At September 30, 2008, 16.2% or $422.2 million of total assets, consisting of $393.4 million in MBS and $3.6 million in derivative instruments, represented assets recorded at fair value on a recurring basis. At September 30, 2008, 0.1% or $1.8 million of total liabilities represented derivative instruments recorded at fair value on a recurring basis. Assets recorded at fair value on a nonrecurring basis consisting of impaired loans and other real estate owned represented 0.6% or $15.0 million of total assets.

At September 30, 2008, the Company holds, as part of its investment portfolio, available for sale securities reported at fair value consisting of MBS, obligations of states and political subdivisions, and trust preferred securities. The fair value of the majority of MBS and obligations of states and political subdivisions are determined using widely accepted valuation techniques, including matrix pricing and broker-quote based applications, considered Level 2 inputs. The Company also holds trust preferred securities that are recorded at fair value based on quoted market prices, considered by the Company Level 1 inputs. The fair value of available for sale securities at September 30, 2008, using Level 1 and 2 inputs was $413.6 million. Certain private label MBS valued using broker-dealer quotes based on proprietary broker models, which are considered by the Company an unobservable input (Level 3), totaled $5.0 million at September 30, 2008. At September 30, 2008, investments incorporating Level 3 inputs as part of their valuation represent 0.19% of total assets. In previous quarters, private label MBS were categorized by the Company as Level 2 inputs. However, considering these securities are often valued based on modeling techniques utilizing unobservable inputs due to the lack of liquidity in the private label MBS market, the company reassessed the input level and transferred private level MBS to a Level 3 category during the third quarter of 2008. The Company recognized no gains or losses in relation to the private label MBS for the three and nine months ended September 30, 2008. Unrealized losses of $1.8 million and $3.3 million were recorded in other comprehensive income relating to private label MBS for the three and nine months ended September 30, 2008, respectively.

Currently, the Company uses interest rate swaps as part of its cash flow strategy to manage its interest rate risk. The valuation of these instruments is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative. To comply with the provisions of SFAS 157, credit valuation adjustments are incorporated into the valuation to appropriately reflect both the Company's own nonperformance risk and the respective counterparty's nonperformance risk in the fair value measurements. Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs (i.e. estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties). However, at September 30, 2008, the Company has concluded that the impact of the credit valuation adjustments on the overall valuation of its derivative positions is not significant. Therefore, the Company has determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.

Certain collateral-dependent impaired loans are reported at the fair value of the underlying collateral. Impairment is measured based on the fair value of the collateral, which is typically derived from appraisals that take into consideration prices in observed transactions involving similar assets and similar locations, in accordance with SFAS 114. The fair value of other impaired loans is measured using a discounted cash flow analysis.

OREO represents real property taken by the Bank either through foreclosure or through a deed in lieu thereof from the borrower. OREO is measured at the lower of cost or fair value, less selling costs. Fair value of OREO is based on property appraisals, considered a Level 2 input by the Company.

Financial Condition

Total assets were $2.6 billion at September 30, 2008, an increase of $215.1 million since December 31, 2007, relating primarily to growth in the loan and investment portfolios.

Investments. Investments increased $46.8 million from $395.7 million at December 31, 2007, to $442.5 million at September 30, 2008. The increase resulted from purchases of $141.5 million offset by $96.4 million of maturities and calls. Purchased and maturing investments were largely high-grade government-backed mortgage-backed securities. The Company manages its investment portfolio to provide interest income and to meet the collateral requirements for public deposits, our customer repurchase program and wholesale borrowings. Investments comprised 17.0% of total assets at September 30, 2008, a slight increase from 16.5% at December 31, 2007.

Loans. Gross loans increased by $155.4 million to $2.0 billion at September 30, 2008, from $1.85 billion at December 31, 2007. The increase in loans is primarily due to growth of $104.1 million in the real estate portfolios

and growth of $44.2 million in the commercial portfolio. Approximately 76% of the year-to-date loan growth has come from the Colorado market, our largest market with $1.3 billion in loans or approximately 63% of total loans.

                          September 30, 2008          December 31, 2007           September 30, 2007
                                        % of                        % of                        % of
(in thousands)           Amount       Portfolio      Amount       Portfolio      Amount       Portfolio
LOANS
Commercial             $   621,128         31.4 %  $   576,959         31.6 %  $   537,447         31.1 %
Real Estate -
mortgage                   982,084         49.8 %      874,226         47.9 %      834,416         48.2 %
Real Estate -
construction               305,819         15.5 %      309,568         17.0 %      299,069         17.3 %
Consumer                    80,336          4.1 %       71,422          3.9 %       62,414          3.6 %
Other                       12,318          0.6 %       14,151          0.8 %       14,987          0.9 %
Gross loans              2,001,685        101.4 %    1,846,326        101.1 %    1,748,333        101.1 %
Less allowance for
loan losses                (27,703 )       (1.4 )%     (20,043 )       (1.1 )%     (18,583 )       (1.1 )%
Net loans              $ 1,973,982        100.0 %  $ 1,826,283        100.0 %  $ 1,729,750        100.0 %

Goodwill. Goodwill increased by $2.4 million to $45.8 million at September 30, 2008, from $43.4 million at December 31, 2007. Goodwill was increased by $3.5 million related to the BDA asset acquisition and offset by a decrease of $1.1 million in adjustments related to the reclassification of intangible assets on the Wagner acquisition. Goodwill is subject to purchase price allocation adjustments for one year following an acquisition.

Accrued Interest Receivable. Accrued interest receivable decreased by $1.2 million to $9.0 million at September 30, 2008, from $10.2 million at December 31, 2007. The decrease is related primarily to a drop in the yield on the overall loan portfolio due to the declining rate environment in 2008.

Deferred Income Taxes. Deferred income taxes increased $4.8 million to $12.5 million at September 30, 2008, from $7.7 million at December 31, 2007. The increase was primarily related to the $2.8 million tax effect of the provision for loan and credit losses (net of charge-offs and recoveries), the $1.4 million tax effect of net unrealized losses recognized in other comprehensive income and $0.4 million tax effect of share-based compensation expense.

Other Real Estate Owned. OREO increased to $7.0 million at September 30, 2008. There was no OREO at December 31, 2007. The balance at September 30, 2008 consists of $6.0 million of land acquisition and development and $1.0 million of residential properties.

Other Assets. Other Assets increased $1.9 million to $19.6 million at September 30, 2008, from $17.7 million at December 31, 2007. Contributing to the increase was a $1.0 million increase in the fair market value of interest rate swaps and a $0.6 million increase in the value of equity method investments.

Deposits. Total deposits of $1.74 billion at September 30, 2008 were relatively steady with total deposits at December 31, 2007. There was a notable shift in the mix of deposits in recent months as customers reacting to national economic news and events surrounding the financial community sought to guard their deposits and bring more of their accounts under FDIC protection. The Company offers FDIC-insured certificates of deposit through the Certificate of Deposit Account Registry Serviceฎ (CDARS), a program designed to achieve full insurance protection for the customer while protecting the deposit relationship of the banking institution. Under the program, depositors' funds in excess of the FDIC insurance limit are broken into smaller amounts (generally less than $100,000) and placed with other member banks who reciprocate the action by placing small deposits with the Company, thus achieving fully insured balances for the customer. The following table shows that NOW and money market accounts decreased by $103.1 million to $528.3 million at September 30, 2008, while the Bank's reciprocal CDARS increased by $111.8 million from $14.2 million at December 31, 2007. The Eurodollar deposits, first introduced in the third quarter of 2007, continues to be an attractive deposit solution for the Bank's customers, increasing by $24.3 million to $101.7 million at September 30, 2008, compared to $77.4 million at December 31, 2007. Much of the increase in Eurodollars is offset by declines in customer repurchase agreements. Core deposit growth continues to be a challenge due to competition from other banks and financial service providers as well as current economic conditions. However, the Company believes the action by the FDIC subsequent to September 30, 2008, to increase the maximum insured balance, even if temporary, will be well received by depositors and serve to stabilize deposit relationships.

                          September 30, 2008          December 31, 2007           September 30, 2007
                                        % of                        % of                        % of
(in thousands)           Amount       Portfolio      Amount       Portfolio      Amount       Portfolio
DEPOSITS AND
CUSTOMER REPURCHASE
AGREEMENTS
NOW and money
market                 $   528,272         28.1 %  $   631,391         33.0 %  $   584,890         31.3 %
Savings                     10,617          0.6 %       11,546          0.6 %       11,028          0.6 %
Eurodollar                 101,723          5.4 %       77,444          4.1 %       68,544          3.7 %
Certificates of
deposits under
$100,000                    97,017          5.2 %      112,125          5.9 %      112,930          6.1 %
Certificates of
deposits $100,000
and over                   312,053         16.6 %      308,867         16.2 %      281,004         15.1 %
Reciprocal CDARS           125,951          6.7 %       14,159          0.7 %       16,091          0.9 %
Brokered deposits          122,093          6.5 %      148,081          7.7 %      125,792          6.7 %
Total
interest-bearing
deposits                 1,297,726         69.1 %    1,303,613         68.2 %    1,200,279         64.3 %
Noninterest-bearing
demand deposits            439,536         23.4 %      439,076         23.0 %      458,752         24.6 %
Customer repurchase
agreements                 140,264          7.5 %      168,336          8.8 %      206,973         11.1 %
Total deposits and
customer repurchase
agreements             $ 1,877,526        100.0 %  $ 1,911,025        100.0 %  $ 1,866,004        100.0 %

Securities Sold Under Agreements to Repurchase. Securities sold under agreement to repurchase are transacted with customers as a way to enhance our customers' interest-earning ability. Management does not consider customer repurchase agreements to be a wholesale funding source, but rather an additional treasury management service provided to our customer base. Our customer repurchase agreements are based on an overnight investment sweep that can fluctuate based on our customers' operating account balances. Securities sold under agreements to repurchase decreased $28.1 million since December 31, 2007, partially due to the migration of funds to the Eurodollar sweep product that offers a higher interest rate.

Other Short-Term Borrowings. Other short-term borrowings increased $223.7 million to $421.1 million at September 30, 2008, from $197.4 million at December 31, 2007. Other short-term borrowings consist of federal funds purchased, overnight and term borrowings from the Federal Home Loan Bank (FHLB), advances on a revolving line of credit and short-term borrowings from the U.S. Treasury. The increase in other short-term borrowings is primarily due to growth in the loan and investment portfolios while deposit growth has remained flat. Other short-term borrowings are used as part of our liquidity management strategy and fluctuate based on the Company's cash position. The Company's wholesale funding needs are largely dependent on core deposit levels, which have proven to be volatile due to increased competition and uncertain economic conditions. If we are unable to maintain deposit balances at a level sufficient to fund our asset growth, our composition of interest-bearing liabilities will shift toward additional wholesale funds, which typically have a higher interest cost than our core deposits.

Accrued Interest and Other Liabilities. Accrued interest and other liabilities decreased $0.7 million to $20.4 million at September 30, 2008, from $21.1 million at December 31, 2007. The decrease relates primarily to a decrease in interest rates paid on interest-bearing liabilities.

Subordinated Debentures. Subordinated debentures increased $20.4 million to $92.6 million at September 30, 2008, from $72.2 million at December 31, 2007. During the quarter ended September 30, 2008, the Company issued $20.4 million of subordinated debt in a private placement offering (see Note 8 of the Notes to the Condensed Consolidated Financial Statements).

Results of Operations



Overview


The following table presents the condensed statements of income for the three
and nine months ended September 30, 2008 and 2007.



                                    Three months ended September 30,                    Nine months ended September 30,
                                                       Increase/(decrease)                                Increase/(decrease)
(in thousands)                 2008         2007        Amount          %         2008        2007         Amount          %
Interest Income             $   36,052    $ 39,703   $     (3,651 )      -9.2 % $ 109,088   $ 114,346   $     (5,258 )      -4.6 %
Interest Expense                11,814      17,413         (5,599 )     -32.2 %    39,376      49,336         (9,960 )     -20.2 %
NET INTEREST INCOME
BEFORE PROVISION                24,238      22,290          1,948         8.7 %    69,712      65,010          4,702         7.2 %
Provision for loan losses        5,335       1,430          3,905       273.1 %    16,352       2,467         13,885       562.8 %
NET INTEREST INCOME AFTER
PROVISION                       18,903      20,860         (1,957 )      -9.4 %    53,360      62,543         (9,183 )     -14.7 %
Noninterest Income               9,385       7,024          2,361        33.6 %    28,378      19,981          8,397        42.0 %
Noninterest Expense             21,703      18,273          3,430        18.8 %    66,085      54,663         11,422        20.9 %
INCOME BEFORE INCOME
TAXES                            6,585       9,611         (3,026 )     -31.5 %    15,653      27,861        (12,208 )     -43.8 %
Provision for income
taxes                            2,422       3,604         (1,182 )     -32.8 %     5,712      10,311         (4,599 )     -44.6 %
NET INCOME                  $    4,163    $  6,007   $     (1,844 )     -30.7 % $   9,941   $  17,550   $     (7,609 )     -43.4 %

Annualized return on average assets for the three and nine months ended September 30, 2008 was 0.65% and 0.54%, respectively, compared to 1.06% and . . .