The following is a discussion and analysis of our financial position and results of operations and should be read in conjunction with the information set forth under "Item 1A Risks Factors," "General" in Item 7A, Quantitative and Qualitative Disclosures about Market Risk, and our consolidated financial statements and notes thereto appearing under Item 8 of this report.

Overview

We had net income of $67.1 million for the year ended December 31, 2006 compared to $64.8 million for the year ended December 31, 2005, an increase of $2.4 million, or 3.6%. Fully diluted earnings per share for 2006 decreased 5.4% to $2.12 compared to $2.24 per share in 2005.

The profitability of our operations depends primarily on our net interest income after provision for loan losses, which is the difference between total interest earned on interest earning assets and total interest paid on interest bearing liabilities less provision for loan losses. Additionally, our net income is affected by other income and other expenses. The provision for loan losses reflects the amount that we believe is adequate to cover potential credit losses in the loan portfolio. Non-interest income or other income consists of loan service fees, deposit service fees, net lease financing income, brokerage fees, trust and asset management fees, net gains on the sale of investment securities available for sale, increase in cash surrender value of life insurance, net gains on sale of other assets, merchant card processing fees and other operating income. Other expenses include salaries and employee benefits, occupancy and equipment expense, computer services expense, advertising and marketing expense, professional and legal expense, brokerage fee expense, telecommunication expense, other intangibles amortization expense, merchant card processing expense and other operating expenses.

Net interest income is affected by changes in the volume and mix of interest earning assets, the level of interest rates earned on those assets, the volume and mix of interest bearing liabilities and the level of interest rates paid on those interest bearing liabilities. The provision for loan losses is dependent on changes in the loan portfolio and management's assessment of the collectibility of the loan portfolio, as well as economic and market conditions. Other income and other expenses are impacted by growth of operations and growth in the number of loan and deposit accounts through both acquisitions and core banking business growth. Growth in operations affects other expenses primarily as a result of additional employees, branch facilities and promotional marketing expense. Growth in the number of loan and deposit accounts affects other income, including service fees as well as other expenses such as computer services, supplies, postage, telecommunications and other miscellaneous expenses.

As noted under "Item 6. Selected Financial Data," we adopted Statement of Financial Accounting Standards No. 123R, "Share-Based Payment" (Statement 123R) in the quarter ended March 31, 2006. Statement 123R requires that the grant date fair value of equity awards to employees be recognized as compensation expense over the period during which an employee is required to provide service in exchange for such award. Because we elected to adopt Statement 123R using modified retrospective application, the financial information prior to 2006 in this Item 7 and elsewhere in this report has been restated to reflect the impact of adoption. See Note 19, "Stock-Based Compensation" in the notes to consolidated financial statements contained under "Item 8. Financial Statements and Supplementary Data."

Critical Accounting Policies

Our consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America and follow general practices within the industries in which we operate. This preparation requires management to make estimates, assumptions, and judgments that affect the amounts reported in the financial statements and accompanying notes. These estimates, assumptions, and judgments are based on information available as of the date of the financial statements; accordingly, as this information changes, actual results could differ from the estimates, assumptions, and judgments reflected in the financial statements. Certain policies inherently have a greater reliance on the use of estimates, assumptions, and judgments and, as such, have a greater possibility of producing results that could be materially different than originally reported. Management believes the following policies are both important to the portrayal of our financial condition and results of operations and require subjective or

Allowance for Loan Losses. Subject to the use of estimates, assumptions, and judgments is management's evaluation process used to determine the adequacy of the allowance for loan losses which combines several factors: management's ongoing review and grading of the loan portfolio, consideration of past loan loss experience, trends in past due and nonperforming loans, risk characteristics of the various classifications of loans, existing economic conditions, the fair value of underlying collateral, and other qualitative and quantitative factors which could affect probable credit losses. FOBB's loans were reviewed and risk rated in accordance with the Company's policies and procedures at the time of the acquisition. Because current economic conditions can change and future events are inherently difficult to predict, the anticipated amount of estimated loan losses, and therefore the adequacy of the allowance, could change significantly. As an integral part of their examination process, various regulatory agencies also review the allowance for loan losses. Such agencies may require that certain loan balances be charged off when their credit evaluations differ from those of management or require that adjustments be made to the allowance for loan losses, based on their judgments about information available to them at the time of their examination. We believe the allowance for loan losses is adequate and properly recorded in the financial statements. See "Allowance for Loan Losses" section below for further analysis.

Residual Value of Our Direct Finance, Leveraged, and Operating Leases. Lease residual value represents the present value of the estimated fair value of the leased equipment at the termination date of the lease. Realization of these residual values depends on many factors, including management's use of estimates, assumptions, and judgment to determine such values. Several other factors outside of management's control may reduce the residual values realized, including general market conditions at the time of expiration of the lease, whether there has been technological or economic obsolescence or unusual wear and tear on, or use of, the equipment and the cost of comparable equipment. If, upon the expiration of a lease, we sell the equipment and the amount realized is less than the recorded value of the residual interest in the equipment, we will recognize a loss reflecting the difference. On a quarterly basis, management reviews the lease residuals for potential impairment. If we fail to realize our aggregate recorded residual values, our financial condition and profitability could be adversely affected. At December 31, 2006, the aggregate residual value of the equipment leased under our direct finance, leveraged, and operating leases totaled $33.9 million. See Note 1 and Note 6 of the notes to our audited consolidated financial statements for additional information.

Income Tax Accounting. Income tax expense recorded in the consolidated income statement involves interpretation and application of certain accounting pronouncements and federal and state tax codes, and is, therefore, considered a critical accounting policy. We undergo examination by various regulatory taxing authorities. Such agencies may require that changes in the amount of tax expense or valuation allowance be recognized when their interpretations differ from those of management, based on their judgments about information available to them at the time of their examinations. There can be no assurance that future events, such as court decisions or positions of federal and state taxing authorities, will not differ from management's current assessment of tax liabilities, the impact of which could be significant to the consolidated results of operations and reported earnings. We believe the tax liabilities are adequately and properly recorded in the consolidated financial statements. See "Income Taxes" section below for further discussion.

Recent Accounting Pronouncements. Refer to Note 1 of the Consolidated Financial Statements for a description of recent accounting pronouncements including the respective dates of adoption and effects on results of operations and financial condition.

Net Interest Income

The following table presents, for the periods indicated, the total dollar amount of interest income from average interest earning assets and the related yields, as well as the interest expense on average interest bearing liabilities, and the related costs, expressed both in dollars and rates (dollars in thousands). The table below and the discussion that follows contain presentations of net interest income and net interest margin on a tax-equivalent basis, which is adjusted for the tax-favored status of income from certain loans and investments. Net interest margin also is presented on a tax-equivalent basis in "Item 6. Selected Financial Data." We believe this measure to be the preferred industry measurement of net interest income, as it provides a relevant comparison between taxable and non-taxable amounts. Reconciliations of net interest income and net interest margin on a tax-equivalent basis to net interest income and net interest margin in accordance with accounting principles generally accepted in the United States of America are provided in the table.

                                                                       Year Ended December 31,
                                           2006                                 2005                                 2004
                               Average                 Yield/       Average                 Yield/       Average                 Yield/
                               Balance     Interest     Rate        Balance     Interest     Rate        Balance     Interest     Rate

Interest Earning Assets:
Loans (1) (2)                $ 4,372,156   $ 330,195      7.55 %  $ 3,571,083   $ 235,965      6.61 %  $ 3,076,077   $ 178,005      5.79 %
Loans exempt from federal
income taxes (3)                   5,027         373      7.32          2,939         190      6.38          3,164         206      6.40
Taxable investment
securities                     1,185,267      55,141      4.65      1,132,716      47,305      4.18      1,036,372      43,061      4.15
Investment securities
exempt
from federal income taxes
(3)                              321,528      18,220      5.59        275,012      15,479      5.55        220,148      12,563      5.61
Federal funds sold                12,848         669      5.14          2,243          84      3.69          5,008          48      0.94
Other interest bearing
deposits                          11,545         470      4.07         13,179         365      2.77          9,463         100      1.06
Total interest earning
assets                         5,908,371     405,068      6.86      4,997,172     299,388      5.99      4,350,232     233,983      5.38
Non-interest earning
assets                           693,699                              520,965                              450,929
Total assets                 $ 6,602,070                          $ 5,518,137                          $ 4,801,161

Interest Bearing
Liabilities:
Deposits:
NOW and money market
deposit                      $   868,373   $  20,320      2.34    $   760,673   $   9,853      1.30    $   741,912   $   5,835      0.79
Savings deposit                  470,113       3,438      0.73        508,470       3,299      0.65        506,737       2,957      0.58
Time deposits                  2,843,122     126,381      4.45      2,165,721      69,104      3.19      1,801,494      44,582      2.47
Short-term borrowings            662,039      29,165      4.41        680,820      19,982      2.93        472,541       6,754      1.43
Long-term borrowings and
junior
subordinated notes               306,462      17,844      5.74        179,606      10,280      5.65        169,019       8,986      5.23
Total interest bearing
liabilities                    5,150,109     197,148      3.83      4,295,290     112,518      2.62      3,691,703      69,114      1.87

Non-interest bearing
deposits                         758,832                              674,353                              623,650
Other non-interest bearing
liabilities                       66,060                               55,981                               50,389
Stockholders' equity             627,069                              492,513                              435,419
Total liabilities and
stockholders' equity         $ 6,602,070                          $ 5,518,137                          $ 4,801,161
Net interest
income/interest rate
spread (4)                                 $ 207,920      3.03 %                $ 186,870      3.37 %                $ 164,869      3.51 %
Taxable equivalent
adjustment                                     6,508                                5,484                                4,469
Net interest income, as
reported                                   $ 201,412                            $ 181,386                            $ 160,400

Net interest margin (5)                                   3.41 %                               3.63 %                               3.69 %
Tax equivalent effect                                     0.11 %                               0.11 %                               0.10 %
Net interest margin on a
fully tax
equivalent basis (5)                                      3.52 %                               3.74 %                               3.79 %

(1) Non-accrual loans are included in average loans.

(2) Interest income includes loan origination fees of $7.2 million, $7.4 million and $7.7 million for the years ended December 31, 2006, 2005 and 2004, respectively.

(3) Non-taxable loan and investment income is presented on a fully tax equivalent basis assuming a 35% tax rate.

(4) Interest rate spread represents the difference between the average yield on interest earning assets and the average cost of interest bearing liabilities and is presented on a fully tax equivalent basis.

(5) Net interest margin represents net interest income as a percentage of average interest earning assets.

Net interest income on a tax equivalent basis increased $21.1 million, or 11.3% to $207.9 million for the year ended December 31, 2006 from $186.9 million for the year ended December 31, 2005. Tax-equivalent interest income increased by $105.7 million due to a $911.2 million, or 18.2% increase in average interest earning assets. The increase was comprised of a $803.2 million, or 22.5% increase in average loans and a $99.1 million, or 7.0% increase in average investment securities. The acquisition of FOBB increased the average loan balance and the average investment securities balance by approximately $375.6 million and $157.1 million, respectively. The increase in average investment securities due to the FOBB acquisition was partially off set by a overall decrease in our investment securities portfolio balance, net of the FOBB acquisition, throughout the year as cash from the investment portfolio was used to pay-down wholesale borrowings. The yield on average interest earning assets increased 87 basis points to 6.86% due to the increase in overall short-term interest rates. Interest expense increased by $84.6 million as average interest bearing liabilities increased by $854.8 million, while their cost increased by 121 basis points to 3.83%, also due to the increase in short-term interest rates. Approximately $566.6 million of the increase in average interest bearing liabilities was due to our acquisition of FOBB, with the remainder resulting from organic growth. The net interest margin decreased primarily due to the inverted yield curve, continued tight credit spreads on loans and the FOBB merger. We estimate that approximately 8 basis points of the decline in net interest margin from 2005 to 2006 was due to the acquisition of FOBB. Assuming no significant changes in interest rates, we estimate that our net interest margin on a fully tax equivalent basis will be in the range of 3.35% to 3.41% in the first quarter of 2007.

Net interest income on a tax equivalent basis increased $22.0 million, or 13.3% to $186.9 million for the year ended December 31, 2005 from $164.9 million for the year ended December 31, 2004. Tax-equivalent interest income increased by $65.4 million due to a $646.9 million, or 14.9% increase in average interest earning assets. Interest income also increased due to a 61 basis point increase in the yield on average interest earning assets to 5.99% due to higher short-term and intermediate interest rates in 2005. Interest expense increased by $43.4 million, due to a $603.6 million, or 16.3% increase in average interest bearing liabilities. Interest expense increased additionally due to a 75 basis point increase in the cost of interest bearing liabilities due to higher short-term and intermediate interest rates in 2005. Approximately $154 million of the increase in average interest earning assets and $167 million of the increase in average interest bearing liabilities was due to our acquisition of First SecurityFed in the second quarter of 2004, with the reminder resulting from organic growth. The net interest margin decreased due to competitive pricing on both loans and deposits, the flattening yield curve and a shift in the funding mix towards higher cost deposits and borrowings. The increase in short-term borrowings and brokered deposits was primarily due to the Company's strong loan growth and its long term goal of migrating to a less interest sensitive deposit base. In the short run, this resulted in a decline in deposits related to the most interest sensitive customers. This decline, as well as the Company's loan growth, has been funded with short term borrowings and brokered deposits.

Volume and Rate Analysis of Net Interest Income

The following table presents the extent to which changes in volume and interest rates of interest earning assets and interest bearing liabilities have affected our interest income and interest expense during the periods indicated. Information is provided in each category with respect to (i) changes attributable to changes in volume (changes in volume multiplied by prior period rate), (ii) changes attributable to changes in rates (changes in rates multiplied by prior period volume) and (iii) change attributable to a combination of changes in rate and volume (change in rates multiplied by the changes in volume) (in thousands). Changes attributable to the combined impact of volume and rate have been allocated proportionately to the changes due to volume and the changes due to rate.

                                          Year Ended December 31,
                           2006 Compared to 2005            2005 Compared to 2004
                       Change      Change                Change     Change
                       Due to      Due to      Total     Due to     Due to     Total
                       Volume       Rate      Change     Volume      Rate     Change
Interest Earning
Assets:
Loans                 $  57,555 $   36,675 $   94,230   $  30,806 $   27,154 $  57,960
Loans exempt from
federal income taxes        152         31        183        (15)        (1)      (16)
(1)
Taxable investment        2,267      5,569      7,836       4,023        221     4,244
securities
Investment securities
exempt from federal
income taxes (1)          2,635        106      2,741       3,090      (174)     2,916
Federal funds sold          540         45        585        (39)         75        36
Other interest             (50)        155        105          51        214       265
bearing deposits
Total increase
(decrease) in            63,099     42,581    105,680      37,916     27,489    65,405
interest income

Interest Bearing
Liabilities:
NOW and money market      1,563      8,904     10,467         152      3,866     4,018
deposit accounts
Savings deposits          (261)        400        139          10        332       342
Time deposits            25,379     31,898     57,277      10,087     14,435    24,522
Short-term borrowings     (565)      9,748      9,183       3,902      9,326    13,228
Long-term borrowings
and junior
subordinated notes        7,383        181      7,564         582        712     1,294
Total increase
(decrease) in            33,499     51,131     84,630      14,733     28,671    43,404
interest expense
Increase (decrease)
in net interest       $  29,600 $  (8,550) $   21,050   $  23,183 $  (1,182) $  22,001
income

(1) Non-taxable loan and investment income is presented on a fully tax equivalent basis assuming a 35% rate.

Other Income

Other income increased $10.5 million, or 16.8% to $72.9 million for the year ended December 31, 2006 from $62.4 million for the year ended December 31, 2005. Merchant card processing income increased by $4.6 million mostly due to the acquisition of FOBB and an increase in transactions processed during the year ended December 31, 2006 compared to the same period in 2005. Brokerage fee income increased $1.4 million due to increased investment representative production in 2006 compared to 2005. Net loss on securities sold decreased $1.1 million to $445 thousand compared to $1.5 million for the year ended December 31, 2006. Trust and asset management fees increased by $1.1 million primarily due to the acquisition of FOBB. Net gain on sale of other assets increased by $840 thousand primarily due to the sale of excess real estate in 2006. Other operating income and deposit service fees increased by $969 thousand, and $775 thousand, respectively, primarily due to the acquisition of FOBB. Offsetting the increases above, net lease financing declined by $863 thousand primarily due to lower residual realizations in 2006 compared with 2005.

Other income decreased $2.9 million, or 4.4% to $62.4 million for the year ended December 31, 2005 from $65.3 million for the year ended December 31, 2004. There were $20 thousand in net gains recognized on the sale of other assets for the year ended December 31, 2005 compared to $3.1 million in net gains for the year ended December 31, 2004. The net gain recognized for the year ended December 31, 2004 was primarily comprised of a $4.2 million

Other Expenses

Other expense increased by $26.0 million, or 18.4% to $167.7 million for the year ended December 31, 2006 from $141.6 million for the year ended December 31, 2005. Salaries and employee benefits increased by $16.9 million primarily due to the acquisition of FOBB and organic growth. We estimate that approximately $8.6 million of the increase in salaries and employee benefits expense was due to the acquisition of FOBB. Merchant card processing expense increased by $4.2 million mostly due to the acquisition of FOBB and an increase in transactions processed during the year ended December 31, 2006 compared to the same period in 2005. Occupancy and equipment expense increased by $2.1 million. Approximately $1.6 million of the increase in occupancy and equipment expense was due to the acquisition of FOBB. The remaining increase was primarily due to additional branch office locations. Other operating expenses increased by $1.9 million partially due to the acquisition of FOBB and partially due to increases in filing and other loan expense, and stationary, printing and supplies expense of $310 thousand and $701 thousand, respectively. Printing expense increased from 2005 as a result of outsourcing processes that were previously done in-house. Computer services expense increased by $1.2 million, primarily due to system upgrades during 2006 and the acquisition of FOBB. Brokerage fee expense increased by $1.1 million, which is directly related to the increase in brokerage income.

Other expense increased by $14.5 million, or 11.4% to $141.6 million for the year ended December 31, 2005 from $127.1 million for the year ended December 31, 2004. Salaries and employee benefits and advertising and marketing expense increased by $6.5 million and $741 thousand, respectively. The increase in salaries was primarily due to organic growth, a full year of First SecurityFed salaries, and a new deposit gathering strategy implemented in the second half of 2005 which necessitated the hiring of additional branch personnel. The increase in advertising and marketing expense was primarily due to the new deposit strategy. Occupancy and equipment expense increased by $2.2 million, primarily due to a $1.6 million increase in depreciation expense, as well as a $1.2 million decline in building rental income, offset by a decline of $552 thousand in property taxes. Depreciation expense increased due to computer and telecommunication equipment purchased in the second half of 2004 and placed in service at MB Financial Center and remodeling at several branches. Rental income declined due to the departure of tenants at the MB Financial Center as a result of our occupancy of the space in the fourth quarter of 2004. Brokerage fee expense decreased by $794 thousand primarily due to lower investment sales activity at Vision during 2005. Computer service expense increased by $872 thousand due to organic growth and acquisition of First SecurityFed, as well as system upgrades. Professional and legal expense increased by $777 thousand. . . .