UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C.  20549




FORM 10-Q




(Mark
One)




x
            Quarterly
      Report Pursuant to Section 13 or 15(d) of the Securities
      Exchange Act of 1934 for the quarterly period ended March 31,
      2008oro
            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: 333-141453




BELVEDERE
SOCAL


(Exact
name of registrant as specified in its charter)




California
            20-8356735(State
      of incorporation)
            (I.R.S.
      Employer Identification No.)




One
      Maritime Plaza, Suite 825 San Francisco, CA
            94111(Address
      of principal executive offices)
            (Zip
      Code)




(415)
434 - 1236


(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
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
       o




Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See the definitions of “large accelerated filer,” “accelerated
filer” and “smaller reporting company” in Rule 12b-2 of the Exchange
Act.




Large
      accelerated filer o
            
            Accelerated
      filer oNon-accelerated
      filer o (Do not
      check if a smaller reporting company)
            
            Smaller
      reporting company x




Indicate
by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).


Yes
       o
            
            No 
      x




Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practicable date.




As of May
6, 2008, there were 3,328,361 shares of common stock, no par value,
outstanding.










BELVEDERE
SoCAL


TABLE
OF CONTENTS





PagePART I
      – FINANCIAL INFORMATIONITEM 1.
            FINANCIAL
      STATEMENTS
            F-1ITEM 2.
            MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS
            3ITEM 3.
            QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
            13ITEM 4T.
            CONTROLS
      AND PROCEDURES
            14PART
      II – OTHER INFORMATIONITEM 1.
            LEGAL
      PROCEEDINGS
            15ITEM 1A.
            RISK
      FACTORS
            15ITEM 2.
            UNREGISTERED
      SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
            15ITEM 3.
            DEFAULTS
      UPON SENIOR SECURITIES
            15ITEM 4.
            SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY HOLDERS
            15ITEM
      5.
            OTHER
      INFORMATION
            15ITEM 6.
            EXHIBITS
            15SIGNATURES
            16CERTIFICATIONS







PART
I – FINANCIAL INFORMATION





Item
1.  Financial Statements (Unaudited)




BELVEDERE SoCAL AND
SUBSIDIARIES CONSOLIDATED
BALANCE SHEETS (UNAUDITED)
 March
      31,
                2008
              
              
              December
      31, 2007Cash
      and due from banks
              
              $
              11,300,153
              
              
              $
              4,401,632Federal
      Funds sold
              
              
              27,610,000
              
              
              
              9,130,000Total
      cash and cash equivalents
              
              
              38,910,153
              
              
              
              13,531,632Interest-bearing
      deposits in other financialinstitutions
              
              
              1,711,000
              
              
              
              100,000Investment
      securities available for sale
              
              
              38,699,255
              
              
              
              8,786,293Loans,
      net of allowance for loan losses of $6,254,874 at March 31,
      2008
                and
      $4,077,213 at December 31, 2007
              
              
              306,073,019
              
              
              
              210,257,162Premises
      and equipment, net
              
              
              5,291,911
              
              
              
              461,760Goodwill
              
              
              57,167,011
              
              
              
              29,459,783Other
      intangible assets, net
              
              
              2,979,311
              
              
              
              2,368,172Federal
      Home Loan Bank stock, at cost
              
              
              2,435,200
              
              
              
              916,300Other
      real estate owned
              
              
              782,000
              
              
              
              -Accrued
      interest and other assets
              
              
              13,312,540
              
              
              
              4,198,740Total
      assets
              
              $
              467,361,400
              
              
              $
              270,079,842DepositsNoninterest
      bearing demand
              
              $
              120,481,211
              
              
              $
              73,358,729NOW,
      savings and money market accounts
              
              
              77,984,076
              
              
              
              49,514,411Time
      deposits under $100,000
              
              
              91,443,984
              
              
              
              45,460,646Time
      deposits over $100,000
              
              
              66,046,580
              
              
              
              25,715,811Total
      deposits
              
              
              355,955,851
              
              
              
              194,049,597Federal
      Home Loan Bank advances
              
              
              7,000,000
              
              
              
              18,000,000Notes
      payable
              
              
              8,000,000
              
              
              
              -Junior
      subordinated debentures
              
              
              15,464,000
              
              
              
              -Accrued
      interest and other liabilities
              
              
              4,417,010
              
              
              
              3,044,416Total
      liabilities
              
              
              390,836,861
              
              
              
              215,094,013Commitments
      and ContingenciesShareholders’
      equity:Preferred
      Stock - non-cumulative, perpetual, no par value;authorized
      20,000,000 shares; 836,915 and 806,666 shares issuedand
      outstanding at March 31, 2008 and December 31, 2007,
      respectively
              
              
              20,522,875
              
              
              
              19,766,650Common
      Stock - no par value; authorized 20,000,000 shares;3,327,929
      and 2,011,343 shares issued and outstanding atMarch
      31, 2008 and December 31, 2007, respectively
              
              
              57,841,491
              
              
              
              35,749,587Accumulated
      deficit
              
              
              (1,858,032
              )
              
              
              (540,408
              )Accumulated
      other comprehensive income, net of taxes
              
              
              18,205
              
              
              
              10,000Total
      shareholders’ equity
              
              
              76,524,539
              
              
              
              54,985,829Total
      liabilities and shareholders' equity
              
              $
              467,361,400
              
              
              $
              270,079,842
  See notes
to unaudited consolidated financial statements
 F-1
  BELVEDERE
SoCAL AND SUBSIDIARIES
 AND
ITS PREDECESSOR BUSINESS PROFESSIONAL BUSINESS BANK
 CONSOLIDATED
STATEMENTS OF OPERATIONS (UNAUDITED)
 THREE-MONTH
PERIODS ENDED MARCH 31, 2008 AND 2007
 Belvedere
      SoCal and Subsidiaries
                
                
                Professional
      Business Bank2008
                
                
                2007Interest
      income:Interest
      and fees on loans
                
                $
                5,384,552
                
                
                $
                3,189,878Interest
      on investment securities
                
                
                409,671
                
                
                
                247,330Other
      interest income
                
                
                45,147
                
                
                
                189,934Total
      interest income
                
                
                5,839,370
                
                
                
                3,627,142Interest
      expense:Deposits
                
                
                1,381,684
                
                
                
                1,107,541Junior
      subordinated debentures
                
                
                201,891
                
                
                
                -Other
      borrowings
                
                
                265,827
                
                
                
                46,208Total
      interest expense
                
                
                1,849,402
                
                
                
                1,153,749Net
      interest income before provision for loan losses
                
                
                3,989,968
                
                
                
                2,473,393Provision
      for loan losses
                
                
                957,294
                
                
                
                157,000Net
      interest income after provision for loan losses
                
                
                3,032,674
                
                
                
                2,316,393Non-interest
      incomeService
      charges and fees
                
                
                269,675
                
                
                
                131,980Other
      income
                
                
                57,200
                
                
                
                1,369Total
      non-interest income
                
                
                326,875
                
                
                
                133,349Non-interest
      expenseSalaries
      and employee benefits
                
                
                2,468,783
                
                
                
                1,303,085Occupancy
      and equipment
                
                
                325,102
                
                
                
                147,374Professional
      fees
                
                
                586,097
                
                
                
                383,927Data
      processing
                
                
                267,659
                
                
                
                134,855Marketing
      and business promotion
                
                
                48,863
                
                
                
                32,378Office
      and administrative expenses
                
                
                241,927
                
                
                
                162,443Other
      expenses
                
                
                426,393
                
                
                
                115,641Total
      non-interest expense
                
                
                4,364,824
                
                
                
                2,279,703(Loss)
      income before income taxes
                
                
                (1,005,275
                )
                
                
                170,039Provision
      for income tax (benefit) expense
                
                
                (443,876
                )
                
                
                141,314Net
      (loss) income
                
                $
                (561,399
                )
                
                $
                28,725Net
      (loss) income per share - basic
                
                $
                (0.46
                )
                
                $
                0.01Net
      (loss) income per share - diluted
                
                $
                (0.46
                )
                
                $
                0.01Weighted
      average shares:Basic
                
                
                2,878,876
                
                
                
                1,991,960Diluted
                
                
                2,878,876
                
                
                
                2,084,703
 F-2
  BELVEDERE
SoCAL AND SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED)
 FOR
THE PERIOD FROM JANUARY 17, 2007 (INCEPTION) TO MARCH 31, 2008
 Preferred
      Stock
              
              
              Common
      Stock
              
              
              
              
              
              
              
              
              AccumulatedNumber
                of
      Shares
              
              
              Amount
              
              
              Number
                of
      Shares
              
              
              Amount
              
              
              Comprehensive
      Loss
              
              
              Accumulated
                Deficit
              
              
              Other
      Comprehensive IncomeCommon
      stock issued
              
              
              
              
              
              
              
              
              1,125,539
              
              
              $
              11,500,000Series
      A non-cumulative perpetualpreferred
      stock issued, net of issuance cots
              
              
              800,000
              
              
              $
              19,600,000Common
      stock issued foracquisition
      of Professional Business Bank, net of issuance
      costs
              
              
              
              
              
              
              
              
              
              
              885,804
              
              
              
              24,249,587Comprehensive
      loss:Net
      loss
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              $
              (373,758
              )
              
              $
              (373,758
              )Unrealized
      gain on available-for-sale securities, net of tax
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              10,000
              
              
              
              
              
              
              $
              10,000Total
      comprehensive loss
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              $
              (363,758
              )Series
      A preferred stock dividend declared
              
              
              6,666
              
              
              
              166,650
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (166,650
              )Balance
      December 31, 2007
              
              
              806,666
              
              
              
              19,766,650
              
              
              
              2,011,343
              
              
              
              35,749,587
              
              
              
              
              
              
              
              (540,408
              )
              
              
              10,000Warrants
      exercised
              
              
              
              
              
              
              
              
              
              
              3,154
              
              
              
              31Stock-based
      compensation
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              91,924Common
      stock issued
              
              
              
              
              
              
              
              
              
              
              1,313,432
              
              
              
              22,000,000Cash
      payments for fractional shares
              
              
              
              
              
              
              
              
              
              
              
              (51
              )Comprehensive
      loss:Net
      loss
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (561,399
              )
              
              
              (561,399
              )Change
      in unrealized gain on available-for-sale securities, net
      of tax
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              8,205
              
              
              
              
              
              
              
              8,205Total
      comprehensive loss
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              $
              (553,194
              )Series
      A preferred stock dividend declared
              
              
              30,249
              
              
              
              756,225
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (756,225
              )Balance
      March 31, 2008
              
              
              836,915
              
              
              $
              20,522,875
              
              
              
              3,327,929
              
              
              $
              57,841,491
              
              
              
              
              
              
              $
              (1,858,032
              )
              
              $
              18,205




F-3
 
 BELVEDERE
SoCAL AND SUBSIDIARIES
 AND
ITS PREDECESSOR BUSINESS PROFESSIONAL BUSINESS BANK
 CONSOLIDATED
STATEMENTS OF CASH FLOWS (UNAUDITED)
 THREE-MONTH
PERIODS ENDED MARCH 31, 2008 AND 2007
 Belvedere
                SoCal
      and Subsidiaries
              
              
              Professional Business
    Bank2008
              
              
              2007Operating
      activities:Net
      (loss) income
              
              $
              (561,399
              )
              
              $
              28,725Adjustments
      to reconcile net (loss) income to net cash (used in) provided by operating
      activities:Depreciation
      and amortization expense
              
              
              207,310
              
              
              
              34,472Provision
      for loan losses
              
              
              957,294
              
              
              
              157,000Stock-based
      compensation
              
              
              91,924
              
              
              
              64,846Net
      decrease in accrued interest and other assets
              
              
              365,834
              
              
              
              232,772Net
      decrease in accrued interest and other liabilities
              
              
              (7,617,376
              )
              
              
              (221,675
              )Net
      cash (used in) provided by operating activities
              
              
              (6,556,413
              )
              
              
              296,140Investing
      activities:Proceeds
      from maturities and principal paydowns of available-for-sale investment
      securities
              
              
              11,592,872
              
              
              
              1,286,089Proceeds
      from issuance of junior subordinated debentures
              
              
              464,000
              
              
              
              -Investment
      in Belvedere Statutory Trust I
              
              
              (464,000
              )
              
              
              -Net
      increase in interest-bearing deposits in other financial
      institutions
              
              
              997,000
              
              
              
              -Increase
      in loans, net
              
              
              (18,159,570
              )
              
              
              (9,792,662
              )Purchases
      of premises and equipment
              
              
              -
              
              
              
              (53,438
              )Purchase
      of FHLB stock
              
              
              (1,518,900
              )
              
              
              (10,200
              )Cash
      received in connection with the acquisition of Spectrum Bank, net
      of cash paid
              
              
              127,811
              
              
              
              -Net
      cash (used in) investing activities
              
              
              (6,960,787
              )
              
              
              (8,570,211
              )Financing
      activities:Net
      increase in deposits
              
              
              19,895,741
              
              
              
              31,922,537Net
      (decrease) in other borrowings
              
              
              (3,000,000
              )
              
              
              (8,000,000
              )Proceeds
      from exercise of stock options
              
              
              -
              
              
              
              12,321Proceeds
      from sale of stock
              
              
              22,000,000
              
              
              
              -Cash
      payments for fractional shares
              
              
              (51
              )
              
              
              -Proceeds
      from exercise of warrants
              
              
              31
              
              
              
              -Net
      cash provided by financing activities
              
              
              38,895,721
              
              
              
              23,934,858Increase in
      cash and cash equivalents
              
              
              25,378,521
              
              
              
              15,660,787Cash
      and cash equivalents, beginning of period
              
              
              13,531,632
              
              
              
              9,683,852Cash
      and cash equivalents, end of period
              
              $
              38,910,153
              
              
              $
              25,344,639Noncash
      financing activitiesLoan
      transferred to other real estate owned
              
              $
              782,000
              
              
              $
              -Preferred
      stock dividend declared
              
              $
              756,225
              
              
              $
              -Supplemental
      cash flow informationInterest
      paid
              
              $
              1,849,401
              
              
              $
              1,169,350Taxes
      paid
              
              $
              800
              
              
              $
              150,000
   F-4
  BELVEDERE
SoCAL AND SUBSIDIARIES
 Notes
to Consolidated Financial Statements
 (Unaudited)
  1.
              Nature
      of Business and Basis of
Presentation
  Belvedere
SoCal ("SoCal") is a bank holding company incorporated in 2007 in the state of
California.  SoCal was formed by its majority shareholder, Belvedere
Capital Fund II L.P. (the “Fund”), a Delaware limited partnership formed in
2002, specifically to acquire Professional Business Bank (“PBB"), which occurred
on November 23, 2007, and to be the platform for acquiring other banks in
southern California.  SoCal closed the acquisition of Spectrum Bank
(“Spectrum”) on January 31, 2008, further expanding its market
presence.  Collectively, PBB and Spectrum are referred to as the
“Subsidiary Banks.”  SoCal issued an additional 1,313,432 shares of common
stock to the Fund for proceeds of $22 million to fund the Spectrum acquisition.
After sale of the shares, the Fund now owns approximately 72% of SoCal's common
stock on a fully diluted basis.
  Prior to
November 23, 2007 SoCal had no significant operations. The consolidated balance
sheet at March 31, 2008 and the results of operations for the three-month period
ended March 31, 2008 include the operations of Spectrum subsequent to January
31, 2008. The results of operations for the three-month period ended March 31,
2007 are for Professional Business Bank only. Securities
and Exchange Commission rules require the presentation of certain prior period
comparative financial statements of the acquired business when the acquiring
company succeeds to substantially all of the business and the registrant’s own
operations prior to the acquisition appear insignificant relative to the
business acquired.
  The
March 31, 2008 unaudited consolidated financial statements include the accounts
of SoCal and the Subsidiary Banks.  SoCal has one other wholly-owned
subsidiary, Belvedere SoCal Statutory Trust I (the “Trust”), which was formed in
2008, to issue trust preferred securities. FIN 46R does not allow the
consolidation of the Trust into SoCal's consolidated financial statements.
As a result, the accompanying consolidated balance sheets include the
investment in the Trust of $464 thousand in other assets.
  The
financial statements reflect all adjustments which are, in the opinion of
management, necessary for a fair presentation, in all material respects, of the
financial position and operating results for the interim
periods.   The results of operations for the
three-month period ended March 31, 2008 are not necessarily indicative
of the results of operations that may be expected for any other interim period
or for the year ending December 31, 2008.  The year-end balance
sheet data at December 31, 2007 was derived from the audited financial
statements.
  This information should be read in conjunction with
the audited financial statements and notes thereto included in SoCal's Form
10-KSB for the fiscal year ended December 31, 2007.
 
 2.
              Recent
      Accounting Pronouncements
  In
December 2007, the FASB issued Statement of Financial Accounting Standards
No. 141 (revised 2007), Business Combinations (“SFAS No. 141(R)”). SFAS
No. 141(R), among other things, establishes principles and requirements for
how the acquirer in a business combination (i) recognizes and measures in
its financial statements the identifiable assets acquired, the liabilities
assumed, and any noncontrolling interest in the acquired business,
(ii) recognizes and measures the goodwill acquired in the business
combination or a gain from a bargain purchase, and (iii) determines what
information to disclose to enable users of the financial statements to evaluate
the nature and financial effects of the business combination. SoCal is required
to adopt SFAS No. 141(R) for all business combinations for which the
acquisition date is on or after January 1, 2009. Earlier adoption is
prohibited. This standard will change the accounting treatment for business
combinations on a prospective basis.
  Effective January 1, 2008, SoCal
adopted SFAS No. 157, "Fair Value
Measurements", which among
other things, requires enhanced disclosures about financial instruments carried at fair
value. SFAS No. 157 establishes a hierarchical disclosure framework
associated with the level of observable pricing scenarios utilized in measuring
financial instruments at fair value. The degree of judgment utilized in
measuring the fair value of financial instruments generally correlates to the level of
the observable pricing scenario. Financial instruments with readily available
active quoted prices or for which fair value can be measured from actively quoted
prices generally will have a higher degree of observable pricing and a lesser
degree of judgment utilized in measuring fair value. Conversely, financial
instruments rarely traded or not quoted will generally have little or no observable
pricing and a higher degree of judgment utilized in measuring fair value.
Observable pricing scenarios are impacted by a number of factors, including the type
of financial instrument, whether the financial instrument is new to the
market and not yet established and the characteristics specific to the
transaction.
  In
February 2007, the FASB issued SFAS No. 159,The Fair Value Option for Financial Assets and
Financial Liabilities—Including an Amendment of FASB Statement
No. 115, which permits entities to choose to measure
financial instruments and certain warranty and insurance contracts at fair
value.  SFAS No. 159 applies to all reporting entities, including
not-for-profit organizations, and contains financial statement presentation and
disclosure requirements for assets and liabilities reported at fair value. SFAS
No. 159 is effective as of the beginning of an entity’s first fiscal year
that begins after November 15, 2007. SoCal adopted SFAS No. 159 on
January 1, 2008. SoCal chose not to elect the option to
measure eligible financial assets and liabilities at fair
value.
 
 F-5
 3.
                  Commitments
      and Contingencies
 In the
normal course of business there are outstanding various commitments to extend
credit which are not reflected in the financial statements, including loan
commitments of approximately $81.6 million at March 31, 2008 and $62.5 million
at December 31, 2007. Such loans relate primarily to real estate
construction loans and revolving lines of credit and other commercial loans.
However, all such commitments will not necessarily culminate in actual extensions
of credit by SoCal as some of these are expected to expire without
being fully drawn upon.
  Standby
letters of credit are conditional commitments issued to guarantee the performance
or financial obligation of a client to a third party. These guarantees
are issued primarily relating to purchases of inventory or as security
for real estate rents by commercial clients and are typically short-term
in nature. Credit risk is similar to that involved in extending loan commitments
to clients and accordingly, evaluation and collateral requirements similar
to those for loan commitments are used. The majority of all such commitments
are collateralized. Standby letters of credit totaled $1.4 million and $769
thousand at March 31, 2008 and December 31, 2007, respectively.


4.
                Comprehensive
      Income
  Comprehensive income (loss) is reported
in addition to net income (loss) for all periods presented. Comprehensive income (loss)
is comprised of net income (loss) plus other comprehensive income (loss). Other
comprehensive income (loss), net of taxes, was comprised of the unrealized gains on
available-for-sale investment securities of $8 thousand for the three-month period
ended March 31, 2008 and ($23) thousand for the three-month period ended March 31,
2007. Comprehensive income (loss) was ($553) thousand for the three-month period ended March 31,
2008 and $52 thousand for the three-month period ended March 31,
2007.
  5.
                Stock-Based
      Compensation
 
 SoCal has
adopted SFAS No. 123(R), Shared-Based
Payment.  This Statement requires entities to recognize the
cost of employee services received in exchange for awards of stock options, or
other equity instruments, based on the grant-date fair value of those
awards.  This cost is recognized over the period which an employee is
required to provide services in exchange for the award, generally the vesting
period.  Stock-based compensation expense totaled $92 thousand and $65
thousand for the three-month periods ended March 31, 2008 and 2007,
respectively. A tax benefit of $38 thousand was recognized on the stock-based
compensation expense for the three-month period ended March 31, 2008. There was
no tax benefit related to the stock-based compensation expense recognized in the
three-month period ended March 31, 2007.
 
 SoCal has
one stock-based compensation plan, the Belvedere SoCal 2007 Equity Incentive
Plan (the "Plan"), which, among other things, permits the grant of stock options
and stock purchase rights.  The Plan is designed primarily to attract
and retain personnel and provide additional incentives to employees, directors
and consultants to promote the success of SoCal's business.  The
maximum aggregate number of shares that may be issued under the Plan is
1,500,000.  The amount, frequency and terms of share-based awards are
subject to all applicable terms and conditions of the Plan and such other terms
and conditions as prescribed by a Committee of the Board of
Directors.  New shares are issued upon the exercise of
options.
  The Plan
requires that the option or share price may not be less than the fair market
value of the stock on the grant date, except for options granted in substitution
for options outstanding under the Professional Business Bank Stock Option Plan,
and that the stock be paid in full at the time the option is
exercised.  All options vest on a date determined by the Committee,
but not later than ten years from the date of grant.
  Management
estimates the fair value of each option award as of the date of grant using a
Black-Scholes-Merton option pricing model.  Expected volatility is
based on historical volatility of similar entities over a preceding period
commensurate with the expected term of the option because the Company's common
stock has been publicly traded for a shorter period than the expected term of
the options.  The expected term represents the period that the
stock-based awards are expected to be outstanding.  The risk free
interest rate for the expected term of the option is based on the U.S. Treasury
yield curve in effect at the time of grant.  Expected dividend yield
was not considered in the option pricing formula because SoCal has not paid cash
dividends historically.  In addition to these assumptions, management
makes estimates regarding pre-vesting forfeitures that will impact total
compensation expense recognized under the Plan.
  Two types
of options were granted in 2008; one grant of 175,402 options
with performance conditions that vest based on certain qualifying events,
or cliff vest at the 7th anniversary of the grant date if no qualifying event
occurs, and the second grant of 175,409 options with a time-based condition that
cliff vest at the 5th anniversary of the grant date.
  The
following assumptions were utilized in the calculation of the fair value of
options granted during the three-month period ended March 31, 2008:
 Risk-free
      interest rate
                    3.21%Expected
      life
                    6
      yearsExpected
      volatility
                    28%Expected
      dividend yield
                    N/AWeighted
      average grant date fair value
                    $5.10
  F-6
 A summary
of stock option activity and related information for the three-month period
ended March 31, 2008 follows:
 Shares
                  
                  
                  Weighted
      Average Exercise Price
                  
                  Weighted
      Average Remaining Contractual Term
                  
                  Aggregate
      Intrinsic ValueOutstanding
      December 31, 2007
                  
                  
                  135,041
                  
                  
                  $
                  15.21Options
      granted
                  
                  
                  350,811
                  
                  
                  $
                  15.00Options
      forfeited
                  
                  
                  (19,955
                  )
                  
                  $
                  15.00Options
      exercised
                  
                  
                  -Outstanding
      at March 31, 2008
                  
                  
                  465,897
                  
                  
                  $
                  15.06
                  
                  8.7
      years
                  
                  $
                  -Options
      exercisable, March 31, 2008
                  
                  
                  135,041
                  
                  
                  $
                  15.21
                  
                  5.8
      years
                  
                  $
                  -Options
      expected to vest after March 31, 2008
                  
                  
                  323,210
                  
                  
                  $
                  15.00
                  
                  8.7
      years
                  
                  $
                  -
  All
options granted in 2008 allow for early exercise into shares of restricted
common stock of SoCal under identical vesting terms as the original
options.  Such options are not shown as exercisable in the above
table.
 At March
31, 2008, there was $1.6 million in unrecognized compensation costs related to
the outstanding options that will be recognized over a weighted average period
of 6 years.
  6.
                    Earnings
      Per Share
 Basic
earnings per share for each of the periods presented was computed by dividing
net (loss) earnings adjusted for stock dividends paid or declared on
non-cumulative perpetual preferred stock by the weighted average number of
shares outstanding during each such period.
 Basic
and diluted earnings per share for the three-month periods ended March 31, 2008
and 2007 are computed as follows (dollars in thousands):
 SoCal
                        Three-month
      period ended March 31, 2008
                      
                      Net
      Loss
                      
                      
                      Weighted
      Average Number of Shares Outstanding
                      
                      Per
      Share
                        AmountBasic
      loss per share:Net
      loss
                      
                      $
                      (561
                      )Preferred
      stock dividend
                      
                      
                      (756
                      )Net
      loss available to common shareholders
                      
                      $
                      (1,317
                      )
                      
                      
                      2,878,876
                      
                      
                      $
                      (0.46
                      )Professional
      Business Bank
                        Three-month
      period ended March 31, 2007
                      
                      Net
      Earnings
                      
                      
                      Weighted
      Average Number of Shares Outstanding
                      
                      Per
      Share
                        AmountBasic
      earnings per shareNet
      earnings available to common shareholders
                      
                      $
                      29
                      
                      
                      
                      1,991,960
                      
                      
                      $
                      0.01Diluted
      earnings per shareEffect
      of exercise of options
                      
                      
                      
                      
                      
                      
                      92,743Net
      earnings available to common shareholders
                      
                      $
                      29
                      
                      
                      
                      2,084,703
                      
                      
                      $
                      0.01
   F-7
 7.
                    Allowance
      for Loan
Losses
 The
following table presents the changes in the allowance for loan losses as of the
dates indicated (dollars in thousands):
  Three
      months ended March 31,Belvedere
      SoCal and Subsidiaries
                      
                      
                      Professional
      Busines Bank2008
                      
                      
                      2007Balance
      at beginning of period
                      
                      $
                      4,077
                      
                      
                      $
                      1,869Allowance
      acquired at acquisition of Spectrum
                      
                      
                      1,436
                      
                      
                      
                      -Additional
      provision
                      
                      
                      957
                      
                      
                      
                      157Charge-offs
                      
                      
                      (232
                      )
                      
                      
                      -Recoveries
                      
                      
                      16
                      
                      
                      
                      -Total
                      
                      $
                      6,254
                      
                      
                      $
                      2,026
 8.
                    Acquisition
      of Spectrum Bank
  Effective January 31, 2008,
SoCal acquired all of the common stock of Spectrum, a California state-chartered
bank headquartered in Irvine, California with branch offices in Huntington Beach
and Montebello, California.  All the outstanding Spectrum shares were
exchanged for $20.2 million in cash and $15 million in trust preferred
securities.  The acquisition was accounted for in accordance with
SFAS No. 141, Business
Combinations.  Accordingly, the net assets were recorded
at their estimated fair values, and the operating results were included in the
financial statements from the date of
acquisition.  Goodwill totaled $27.7 million (none of which is
deductible for tax purposes) and a core deposit intangible of $722 thousand was
recorded and is being amortized over approximately seven
years.  Capitalized direct transaction costs were approximately $1
million including $740,000 paid to the Fund.  The preliminary
allocation of the purchase price to the assets and liabilities acquired will be
finalized no later than fourth quarter 2008, as SoCal obtains more information
regarding asset valuations, liabilities assumed and revisions of preliminary
estimates of fair values made at the date of purchase.  The purchase
price has been allocated on a preliminary basis, using information currently
available as presented below (dollars in thousands):
  Assets
      acquired:Cash
      and due from banks
                  
                  $
                  4,283Federal
      funds sold
                  
                  
                  17,080Interest-bearing
      deposits in other financial institutions
                  
                  
                  2,608Investment
      securities available for sale
                  
                  
                  41,475Loans,
      net
                  
                  
                  79,452Premises
      and equipment
                  
                  
                  4,947Goodwill
                  
                  
                  27,708Other
      intangible assets, net
                  
                  
                  722Accrued
      interest and other assets
                  
                  
                  8,956Total
      assets acquired
                  
                  
                  187,231Liabilities
      assumed:Total
      deposits
                  
                  
                  142,011Accrued
      interest and other liabilities
                  
                  
                  8,985Total
      liabilities assumed
                  
                  
                  150,996Total
      consideration paid
                  
                  $
                  36,235
  9.
                    
                    Junior
      Subordinated Interest Debentures
  In
January 2008, SoCal issued $15.5 million of junior subordinated debentures to
Belvedere SoCal Statutory Trust I, a Delaware business trust that was formed for
the exclusive purpose of issuing trust preferred securities. The Trust
purchased debentures with: (1) the proceeds of the sale of its common trust
securities to SoCal for $464 thousand, and (2) certain shares of common stock in
Spectrum Bank valued at $15 million that the Trust received from certain
shareholders of Spectrum Bank in exchange for the Trust’s trust preferred
securities. The subordinated debentures and trust preferred securities
have generally identical terms, including that they mature in 2038, are
redeemable at SoCal’s option at par, and require monthly distributions/interest
payments at a rate of 10%.   SoCal has unconditionally guaranteed
distributions on, and payments on liquidation and redemption of, the trust
preferred securities.
  Interest
expense recognized by SoCal for the three-month period ended March 31, 2008
related to the subordinated debentures was $202 thousand.
  F-8
  10.      Note
Payable
 
 In March
2008, SoCal borrowed $8 million through a loan secured by the stock of the
Subsidiary Banks.  The loan bears interest at three-month LIBOR plus
3.1% (5.98% at March 31, 2008) with quarterly interest payments through
September 2009, followed by principal and interest payments through the maturity
date of March 2018.
 11.      Other Real Estate
Owned
 
 SoCal’s
investment in other real estate owned, all of which were related to real estate
acquired in full or partial settlement of loan obligations, totaled $782
thousand at March 31, 2008. SoCal had no other real estate owned and
no investment in real estate acquired in full or partial settlement of loan
obligations at December 31, 2007. When property is acquired, any excess of
SoCal’s recorded investment in the loan balance and accrued interest income over
the estimated fair market value of the property less costs to sell is charged
against the allowance for loan losses.
 12.
                    Pro
      forma financial
information
  The March
31, 2008 consolidated financial statements include the accounts of Spectrum
since February 1, 2008. The following supplemental proforma information
discloses selected financial information for the three-month period ended March
31, 2008 as though the Spectrum merger had been completed as of the beginning of
the period. The proforma information for the three-month period ended
March 31, 2007 combines Professional Business Bank, as the predecessor business
to SoCal, and Spectrum.  The unaudited proforma income for the three-month
period ended March 31, 2008 includes nonrecurring merger expenses incurred by
Spectrum for cancellation of all outstanding options of Spectrum per the terms
of the merger agreement, severance payments to Spectrum executives under
change of control agreements and cash settlements of deferred compensation
programs totaling $4.0 million, net of tax. Dollars are in thousands except per
share data.
 March
      31, 2008
                  
                  
                  March
      31, 2007Revenue
      (net interest income plus non-interest income)
                  
                  $
                  4,848
                  
                  
                  $
                  4,630Net
      (loss) income
                  
                  $
                  (4,370
                  )
                  
                  $
                  403Basic
      (loss) earnings per share
                  
                  $
                  (0.40
                  )
                  
                  $
                  0.12Diluted
      (loss) earnings per share
                  
                  $
                  (0.40
                  )
                  
                  $
                  0.12
 13.      Fair
Value Measurements
 In
September 2006, the FASB issued SFAS No. 157,Fair Value Measurements, which provides
enhanced guidance for using fair value to measure assets and liabilities. The
standard applies whenever other standards require or permit assets or
liabilities to be measured at fair value. The standard does not expand the use
of fair value in any new circumstances. SFAS No. 157 is effective for
financial statements issued for fiscal years beginning after November 15,
2007 and interim periods within those fiscal years. SoCal adopted SFAS
No. 157 as of January 1, 2008 and the adoption did not have a material
impact on the consolidated financial statements or results of operations of
SoCal. The
valuation hierarchy is based upon the transparency of inputs to the valuation of
an asset or liability as of the measurement date. The three levels are defined
as follow:
 ·Level
      1
                    inputs
      to the valuation methodology are quoted prices (unadjusted) for identical
      assets or liabilities in active markets.·Level
      2
                    inputs
      to the valuation methodology include quoted prices for similar assets and
      liabilities in active markets, and inputs that are observable for the
      asset or liability, either directly or indirectly, for substantially the
      full term of the financial instrument.·Level
      3
                    inputs
      to the valuation methodology are unobservable and significant to the fair
      value measurement.
  Following
is a description of the valuation methodologies used for instruments measured at
fair value, as well as the general classification of such instruments pursuant
to the valuation hierarchy:
  F-9
 Assets
 
 Securities
 
 Where
quoted prices are available in an active market, securities are classified
within Level 1 of the valuation hierarchy. Level 1 inputs include securities
that have quoted prices in active markets for identical assets. If quoted market
prices are not available, then fair values are estimated by using pricing
models, quoted prices of securities with similar characteristics, or discounted
cash flow. Examples of such instruments, which would generally be classified
within Level 2 of the valuation hierarchy, included certain collateralized
mortgage and debt obligations and certain high-yield debt securities. In certain
cases where there is limited activity or less transparency around inputs to the
valuation, securities are classified within Level 3 of the valuation hierarchy.
SoCal’s current portfolio does not have securities that are valued using Level 3
inputs as of March 31, 2008. When measuring fair value, the valuation
techniques available under the market approach, income approach and/or cost
approach are used. SoCal’s evaluations are based on market data and SoCal
employs combinations of these approaches for its valuation methods depending on
the asset class.
  Impaired
loans
 
 SFAS No.
157 applies to loans measured for impairment using the practical expedients
permitted by SFAS No. 114,Accounting by Creditors for Impairment of a Loan , including impaired
loans measured at an observable market price (if available), or at the fair
value of the loan’s collateral (if the loan is collateral dependent). Fair value
of the loan’s collateral, when the loan is dependent on collateral, is
determined by appraisals or independent valuation which is then adjusted for the
cost related to liquidation of the collateral. Fair value of loans that are not
collateral dependent is calculated based on the present value of future cash
flows. For impaired loans that are collateral dependent, either a Level 2 or
Level 3 valuation methodology is used. The fair value of loans that are not
collateral dependent is measured using a Level 3 methodology.
 
 Other Real Estate
Owned
 
 Other
real estate owned ("OREO") is measured at fair value less cost to sell
which is a Level 2 valuation methodology based on quoted prices for similiar
assets or a Level 3 valuation methodology when an income approach is
used. SoCal believes that the fair value component in its valuation follows
the provisions of SFAS No. 157. Fair value of OREO at March 31, 2008 was
determined by an independent appraised value less estimated costs to
sell.
 Assets Measured on a
Recurring Basis
 
 Assets
measured at fair value on a recurring basis are summarized below (dollars in
thousands):
 Fair
      Value Measurements at March 31, 2008 UsingQuoted
      Prices inActive
      Markets for
                  
                  Significant
      Other
                  
                  SignificantIdentical
      Assets
                  
                  Observable
      Inputs
                  
                  Unobservable
      Inputs(in
      000’s)
                  
                  March
      31, 2008
                  
                  (Level
      1)
                  
                  (Level
      2)
                  
                  (Level
      3)Assets:Available-for-sale
      investment securities
                  
                  $
                  38,699
                  
                  
                  $
                  —
                  
                  
                  $
                  38,699
                  
                  
                  $
                  —
  Assets
measured at fair value on a non-recurring basis are summarized below (dollars in
thousands):
 Fair
      Value Measurements at March 31, 2008 Using(in
      000's)
                    
                    March
      31, 2008
                    
                    Quoted
      Prices in Active Markets for Identical Assets
                      (Level
      1)
                    
                    Significant
      Other Observable Inputs
                      (Level
      2)
                    
                    Significant
      Unobservable Inputs
                      (Level
      3)Assets:Impaired
      loans
                    
                    $
                    2,565
                    
                    
                    $
                    —
                    
                    
                    $
                    2,565
                    
                    
                    $
                    —OREO
                    
                    $
                    782
                    
                    
                    $
                    —
                    
                    
                    $
                    782
                    
                    
                    $
                    —
 
 Impaired loans, which are measured for
impairment using the fair value of the collateral for collateral dependent
loans, had a carrying amount of $2.6 million, with a valuation allowance
included in the allowance for loan losses of $686thousand.
  OREO
consists of one commercial property valued by an independent appraisal, net of
estimated selling costs.
  F-10
  ITEM 2.MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
  Background
  SoCal acquired Professional
Business Bank on November 23, 2007 and Spectrum Bank on January 31,
2008.  Prior to November 23, 2007, SoCal had no significant
operations.  Accordingly, the discussion and results of operations and
financial condition for the three-month perod ended March 31, 2008 are
for SoCal. The results of operations and financial condition for the three-month
period ended March 31, 2007 are for Professional Business Bank only. Securities
and Exchange Commission rules require the presentation of certain prior period
comparative financial statements of the acquired business when the acquiring
company succeeds to substantially all of the business and the registrant’s own
operations prior to the acquisition appear insignificant relative to the
business acquired.
  Forward-Looking
Information
  The
statements contained herein that are not historical facts are forward-looking
statements based on management’s current expectations and beliefs concerning
future developments and their potential effects on SoCal. These
forward looking statements involve risks and uncertainties, including the risks
and uncertainties described in our annual report on Form 10-KSB in the
discussion under the caption, “Business - Factors That May Affect Future
Operating Results,” which was filed with the Securities and Exchange Commission
on March 31, 2008. There can be no assurance that future developments
affecting SoCal will be the same as those anticipated by management, and actual
results may differ from those projected in the forward-looking statements.
Statements regarding policies and procedures are not intended, and should not be
interpreted to mean, that such policies and procedures will not be amended,
modified or repealed at any time in the future.
  Critical
Accounting Policies
  This
discussion and analysis is based upon SoCal’s financial statements, which have
been prepared in accordance with accounting principles generally accepted in the
United States of America. The preparation of these financial statements requires
SoCal’s management to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues, and expenses and related disclosure of
contingencies.
  Our
accounting policies are integral to understanding the results
reported.  Our most complex accounting policies require management’s
judgment to ascertain the valuation of assets, liabilities, commitments and
contingencies.  SoCal has established detailed policies and control
procedures that are intended to ensure valuation methods are well controlled and
applied consistently 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 the significant accounting policies involving significant
management valuation judgments.
  Allowance for Loan
Losses.The allowance for loan losses represents
management’s 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. The
provision for loan losses is determined based on management’s assessment of
several factors: reviews and evaluation of specific loans, changes in the nature
and volume of the loan portfolio, current economic conditions and the related
impact on specific borrowers and industry groups, historical loan loss
experiences, the level of classified and nonperforming loans and the results of
regulatory examinations.
  Loans
are considered impaired if, based on current information and events, it is
probable that SoCal will be unable to collect the scheduled payments of
principal or interest when due according to the contractual terms of the loan
agreement. The measurement of impaired loans is generally based on the present
value of expected future cash flows discounted at the historical effective
interest rate stipulated in the loan agreement, except that all
collateral-dependent loans are measured for impairment based on the fair value
of the collateral. In measuring the fair value of the collateral, management
uses assumptions and methodologies consistent with those that would be utilized
by unrelated third parties.
  Changes
in the financial condition of individual borrowers, in economic conditions, in
historical loss experience and in the condition of the various markets in which
collateral may be sold may all affect the required level of the allowance for
loan losses and the associated provision for loan losses.
  Goodwill and
Other Intangibles.  Net assets of entities acquired in
purchase transactions are recorded at fair value at the date of acquisition. The
historical cost basis of individual assets and liabilities are adjusted to
reflect their fair value. Identified intangibles are amortized on a
straight-line basis over the period benefited. Goodwill is not amortized for
book purposes, although it will be reviewed for potential impairment on an
annual basis, or if events or circumstances indicate a potential impairment. The
impairment test is performed in two phases. The first step of the goodwill
impairment test compares the fair value of the reporting unit with its carrying
amount, including goodwill. If the fair value of the reporting unit exceeds its
carrying amount, goodwill of the reporting unit is considered not impaired;
however, if the carrying amount of the reporting unit exceeds its fair value, an
additional procedure must be performed. That additional procedure compares the
implied fair value of the reporting unit’s goodwill (as defined in
SFAS No. 142, Goodwill and Other
Intangible Assets) with the carrying amount of that goodwill. An
impairment loss is recorded to the extent that the carrying amount of goodwill
exceeds its implied fair value.
  3
  Other
intangible assets subject to amortization are evaluated for impairment in
accordance with SFAS No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets. An impairment loss will be recognized if the carrying
amount of the intangible asset is not recoverable and exceeds fair value. The
carrying amount of the intangible is considered “not recoverable” if it exceeds
the sum of the undiscounted cash flows expected to result from the use of the
asset.
  Fair Value. Effective
January 1, 2008, SoCal adopted SFAS No. 157, "Fair Value Measurements",
which among other things, requires enhanced disclosures about financial
instruments carried at fair value. SFAS No. 157 establishes a hierarchical
disclosure framework associated with the level of observable pricing
scenarios utilized in measuring financial instruments at fair value. The degree of
judgment utilized in measuring the fair value of financial instruments generally
correlates to the level of the observable pricing scenario. Financial instruments
with readily available active quoted prices or for which fair value can be
measured from actively quoted prices generally will have a higher degree of
observable pricing and a lesser degree of judgment utilized in measuring fair value.
Conversely, financial instruments rarely traded or not quoted will generally
have little or no observable pricing and a higher degree of judgment utilized
in measuring fair value. Observable pricing scenarios are impacted by a number of
factors, including the type of financial instrument, whether the financial
instrument is new to the market and not yet established and the characteristics
specific to the transaction.
  Overview
  The
following discussion reviews and analyzes the operating results of SoCal for the
three-month period ended March 31, 2008 and Professional Business Bank for the
three-month period ended March 31, 2007 and the financial condition of
SoCal at March 31, 2008 and December 31, 2007.  It should be read in
conjunction with the financial statements and the other financial data presented
elsewhere in this quarterly report.
  SoCal
recorded a net loss of $561 thousand, ($0.46) basic and diluted loss per share,
for the three-month period ended March 31, 2008 as compared to Professional
Business Bank’s $29 thousand in earnings, $0.01 basic and diluted earnings per
share, for the three-month period ended March 31, 2007. The decrease in net
earnings was primarily due to a $2.1 million increase in non-interest expenses
and a $0.8 million increase in provision for loan losses offset by a $1.5
million increase in net interest income, a $0.2 million increase in non-interest
income and a $0.6 thousand decrease in income tax expense.
  Total
assets increased from $270.1 million at December 31, 2007 to $467.4 million
at March 31, 2008, an increase of $197.3 million, or 73.0%, of which $186.7
million, or 94.7%, related to Spectrum. Net loans grew from $210.3 million at
December 31, 2007 to $306.1 million at March 31, 2008, an increase of $95.8
million, or 45.6%, of which $84.1 million, or 87.8%, related to Spectrum.
Deposits grew from $194.0 million at December 31, 2007 to $356.0 million at
March 31, 2008, an increase of $161.9 million, or 83.4%, of which $145.4
million, or 89.8% related to Spectrum.
  Set
forth below are certain key financial performance ratios for the periods
indicated:
  March
      312008
                  
                  
                  2007Return
      on Average Assets (1)
                  
                  
                  (0.14%)
                  
                  
                  
                  0.06%Return
      on Average Equity (1)
                  
                  
                  (0.77%)
                  
                  
                  
                  0.57%(1)
      Annualized
  Net
Interest Income
  Net
interest income was $4.0 million and $2.5 million, respectively, for the
three-month periods ended March 31, 2008 and 2007, respectively.  Interest
income totaled $5.8 million and $3.6 million, respectively, for the three-month
periods ended March 31, 2008 and 2007.  Interest expense totaled $1.9
million and $1.2 million, respectively, for the three-month periods ended March
31, 2008 and 2007.  The increase in interest income was due to a
$151.2 million, or 86.0%, increase in average interest-earning assets during the
respective periods of which $92.2 million, or 61.0%, related to the acquisition
of Spectrum. The increase in interest expense was due to a $125.4 million, or
115.8%, increase in average interest-bearing liabilities during the respective
periods, of which $68.5 million, or 54.6%, related to the acquisition of
Spectrum.  The decrease in net interest margin from 5.71% at March 31,
2007 to 4.91% at March 31, 2008 is primarily due to declines in market interest
rates and Spectrum's lower net interest margin as compared to Professional
Business Bank.
  The
increase in average interest-earning assets and average interest-bearing
liabilities is primarily the result of the acquisition of Spectrum
Bank.  Average loans increased $135.5 million, or 95.9%, to $276.8
million at March 31, 2008 compared to $141.3 million at March 31, 2007, of which
$54.4 million, or 40.1%, related to the acquisition of
Spectrum.  Average interest-bearing deposits increased $86.4 million,
or 82.7%, to $190.9 million at March 31, 2008 compared to March 31, 2007, of
which $68.5 million, or 79.3%, relates to the acquisition of
Spectrum.
  4
  The
following table presents the weighted average yield on each specified category
of interest-earning assets, the weighted average rate paid on each specified
category of interest-bearing liabilities, and the resulting interest rate spread
and net interest margin for the periods indicated.  Loan fees, which are
not material, are included in interest earned on loans (dollars in
thousands).
  Three-month
      periods ended March 31,Belvedere
      SoCal
                    2008
                  
                  
                  Professional
      Business Bank
                    2007Average
                  
                  
                  
                  
                  
                  
                  
                  
                  AverageInterest
                  
                  
                  Yield
      or
                  
                  
                  
                  
                  
                  Interest
                  
                  
                  Yield
      orAverage
                  
                  
                  Earned
                  
                  
                  Rate
                  
                  
                  Average
                  
                  
                  Earned
                  
                  
                  RateBalance
                  
                  
                  or
      Paid
                  
                  
                  Paid
                  
                  
                  Balance
                  
                  
                  or
      Paid
                  
                  
                  PaidAssetsInterest-Earning
      Assets:Investment
      Securities-taxable
                  
                  $
                  24,889
                  
                  
                  $
                  254
                  
                  
                  
                  4.10%
                  
                  
                  $
                  14,714
                  
                  
                  $
                  172
                  
                  
                  
                  4.74%Investment
      Securities-nontaxable
                  
                  
                  5,966
                  
                  
                  
                  61
                  
                  
                  
                  4.11%
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Interest-Bearing
      Deposits in Other Financial Institutions
                  
                  
                  1,299
                  
                  
                  
                  16
                  
                  
                  
                  4.95%
                  
                  
                  
                  4,893
                  
                  
                  
                  75
                  
                  
                  
                  6.22%Federal
      Funds Sold
                  
                  
                  17,977
                  
                  
                  
                  124
                  
                  
                  
                  2.77%
                  
                  
                  
                  14,792
                  
                  
                  
                  190
                  
                  
                  
                  5.21%Loans
                  
                  
                  276,781
                  
                  
                  
                  5,384
                  
                  
                  
                  7.82%
                  
                  
                  
                  141,315
                  
                  
                  
                  3,190
                  
                  
                  
                  9.15%Total
      Interest-EarningAssets
                  
                  
                  326,913
                  
                  
                  
                  5,839
                  
                  
                  
                  7.18%
                  
                  
                  
                  175,714
                  
                  
                  
                  3,627
                  
                  
                  
                  8.37%Cash
      and Due from Banks
                  
                  
                  7,814
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  6,283Premises
      and Equipment
                  
                  
                  3,674
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  407Goodwill
                  
                  
                  48,902
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  -Other
      Intangibles Assets, net
                  
                  
                  2,787
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  -Accrued
      Interest andOther
      Assets
                  
                  
                  15,149
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  2,889Allowance
      for LoanLosses
                  
                  
                  (5,378
                  )
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  (1,776
                  )Total
      Assets
                  
                  $
                  399,860
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  $
                  183,517
 Liabilities
      andShareholders'
      EquityInterest-Bearing
      Liabilities:Money
      Market,Savings
      and NOW
                  
                  $
                  73,266
                  
                  
                  
                  277
                  
                  
                  
                  1.52%
                  
                  
                  $
                  73,183
                  
                  
                  
                  698
                  
                  
                  
                  3.87%Time
      Deposits under$100,000
                  
                  
                  64,496
                  
                  
                  
                  648
                  
                  
                  
                  4.04%
                  
                  
                  
                  21,076
                  
                  
                  
                  284
                  
                  
                  
                  5.46%Time
      Deposits of$100,000 or
      More
                  
                  
                  53,106
                  
                  
                  
                  457
                  
                  
                  
                  3.46%
                  
                  
                  
                  10,204
                  
                  
                  
                  126
                  
                  
                  
                  5.01%Short-Term
      Borrowings
                  
                  
                  29,582
                  
                  
                  
                  241
                  
                  
                  
                  3.28%
                  
                  
                  
                  3,822
                  
                  
                  
                  46
                  
                  
                  
                  4.88%Note
      Payable
                  
                  
                  2,000
                  
                  
                  
                  25
                  
                  
                  
                  5.03%
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Subordinated
      Debentures
                  
                  
                  11,250
                  
                  
                  
                  202
                  
                  
                  
                  7.22%
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Total
      Interest-BearingLiabilities
                  
                  
                  233,699
                  
                  
                  
                  1,850
                  
                  
                  
                  3.18%
                  
                  
                  
                  108,285
                  
                  
                  
                  1,154
                  
                  
                  
                  4.32%Noninterest-BearingLiabilities:Demand
      Deposits
                  
                  
                  88,673
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  54,055Other
      Liabilities
                  
                  
                  4,542
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  994Shareholders'
      Equity
                  
                  
                  72,945
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  20,183Total
      Liabilities andShareholders'
      Equity
                  
                  $
                  399,860
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  $
                  183,517Net
      Interest Income
                  
                  
                  
                  
                  
                  $
                  3,989
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  $
                  2,473Net
      Yield on Interest-Earning
      Assets(NetInterest Margin)
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  4.91%
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  5.71%
  Yields
are computed on a tax equivalent basis resulting in an adjustment of $25
thousand to interest earned on municipal bonds for the three-month
period ended March 31, 2008.
 5
  Rate and Volume Analysis
  The
following tables show the increase or decrease in interest income, interest
expense and net interest income, resulting from the changes in rates and volumes
for the periods indicated (dollars in thousands):
 Three-Month
      Period Ended March 31, 2008versusThree-Month
      Period Ended March 31, 2007Increase
      (Decrease) DueTo
      Change inVolume
                  
                  
                  Rate
                  
                  
                  TotalInterest-Earning
      Assets:Investment
      Securities-taxable
                  
                  $
                  122
                  
                  
                  $
                  (40
                  )
                  
                  $
                  82Investment
      Securities-nontaxable
                  
                  
                  -
                  
                  
                  
                  61
                  
                  
                  
                  61Interest-Bearing
      Deposits in Other Financial Institutions
                  
                  
                  (55
                  )
                  
                  
                  (4
                  )
                  
                  
                  (59
                  )Federal
      Funds Sold
                  
                  
                  40
                  
                  
                  
                  (106
                  )
                  
                  
                  ( 66
                  )Loans
                  
                  
                  3,122
                  
                  
                  
                  (928
                  )
                  
                  
                  2,194Total
      Interest Income
                  
                  
                  3,229
                  
                  
                  
                  (1,017
                  )
                  
                  
                  2,212Interest-Bearing
      Liabilities:Money
      Market, Savings and NOW
                  
                  
                  1
                  
                  
                  
                  (422
                  )
                  
                  
                  (421
                  )Time
      Deposits under $100,000
                  
                  
                  594
                  
                  
                  
                  (230
                  )
                  
                  
                  364Time
      Deposits of $100,000 or More
                  
                  
                  536
                  
                  
                  
                  (205
                  )
                  
                  
                  331Short
      Term Borrowings
                  
                  
                  313
                  
                  
                  
                  (118
                  )
                  
                  
                  195Subordinated
      Debentures
                  
                  
                  202
                  
                  
                  
                  -
                  
                  
                  
                  202Note
      Payable
                  
                  
                  25
                  
                  
                  
                  -
                  
                  
                  
                  25Total
      Interest Expense
                  
                  
                  1,671
                  
                  
                  
                  (975
                  )
                  
                  
                  696Net
      Interest Income
                  
                  $
                  1,558
                  
                  
                  $
                  (42
                  )
                  
                  $
                  1,516
   Provision
for Loan Losses
  SoCal
made provisions for loan losses of $957 thousand and Professional Business Bank
made provisions of $157 thousand for the three-month periods ended
March 31, 2008 and 2007, respectively.  The
increase was due to the organic growth in loans along with an increase in loans
categorized at higher risk ratings.  Additionally, one real estate
construction loan was allocated a specific reserve of $510 thousand based on
currently available information.  A pending updated appraisal could
result in an additional specific reserve related to this
loan.
  Management
believes that the allowance for loan losses is adequate. Quarterly detailed
reviews are performed to identify the risks inherent in the loan portfolio,
assess the overall quality of the loan portfolio and to determine the adequacy
of the allowance for loan losses and the related provision for loan losses to be
charged to expense. These systematic reviews follow the methodology set forth by
the FDIC in its 2006 policy statement on the allowance for loan
losses.
  A
key element of the methodology is the credit classification process. Significant
loans identified as less than “acceptable” are reviewed individually to estimate
the amount of probable losses that need to be included in the allowance. These
reviews include analysis of financial information as well as evaluation of
collateral securing the loan. Additionally considered is the inherent risk
present in the “acceptable” portion of the loan portfolio taking into account
the relative financial strength of each borrower, market conditions and other
relevant factors that may affect repayment of the loans in these categories. All
loans are risk rated on a scale of “1” to “10” with “10” being a loss. A loss
factor is assigned to each risk rating based on various factors, including
management’s experience, consultation with outside consultants and peer group
analysis. The sum of the products of the loss factors and the outstanding
balance of loans in each category is considered the “quantitative” portion of
the allowance for loan losses. On a quarterly basis, the appropriateness of the
loss factors is reviewed. When the loss factors are adjusted or the dollar
amount of loans in each risk category change, the allowance and provision for
loan losses are adjusted accordingly.
  SoCal
has also elected to take external, subjective (so-called qualitative) factors
into consideration when assessing the adequacy of the allowance for loan losses.
These qualitative factors take into account and weight by risk, among other
things, the growth and nature of the loan portfolio, concentration of credits,
lending policies, economic trends, competition and legal and regulatory
requirements. The total qualitative reserve requirement is determined by
applying the risk weights of the qualitative factors to the total amount of
loans outstanding.
  6
  The
credit quality of our loans will be influenced by underlying trends in the
economic cycle, particularly in Southern California, and other factors, which
are beyond management’s control. Accordingly, no assurance can be given that we
will not sustain loan losses that in any particular period will be sizable in
relation to the allowance. Additionally, subsequent evaluation of the loan
portfolio by us and by our regulators, in light of factors then prevailing, may
require increases in the allowance through charges to the provision for loan
losses.
 Non-Interest
Income
  Non-interest
income consists primarily of service charges on deposit accounts. Non-interest
income for SoCal was $327 thousand for the three-month period ended March 31,
2008 compared to $133 thousand  for Professional Business Bank for the
three-month period ended March 31, 2007, of which virtually all of the increase
is attributable to the acquisition of Spectrum.
 The $194
thousand, or 145.1%, increase in non-interest income for the three-month period
ended March 31, 2008 compared to the three-month period ended March 31,
2007 was primarily due to the overall increase in deposit accounts of $162.0
million, or 83.4%, to $356.0 million at March 31, 2008 from $194.0 million at
March 31, 2007, along with an increase in the amount charged deposit customers
for negative account balances and for checks that were not honored due to
insufficient funds in customer account balances.
 
 Non-Interest
Expense
 
 Salary
and employee benefits increased by $1.2 million, or 89.5%, for the three-month
period ended March 31, 2008 compared to the three-month period ended March
31, 2007. This increase was due primarily to an increase in the number of
employees due to the acquisition of Spectrum, which added 33 full-time and two
part-time employees, resulting in $460 thousand of the increase in costs. The
remainder of the increase was the result of increased stock-based compensation
costs and salary adjustments.
  Occupancy
and equipment expenses increased by $178 thousand, or 120.6%, for the
three-month period ended March 31, 2008 compared to the three-month period ended
March 31, 2007. This increase was due to the acquisition of Spectrum, which
added three branch offices to the existing branches of Professional Business
Bank.
 
 Professional
fees of SoCal increased $202 thousand, or 52.7%, for the three-month period
ended March 31, 2008 compared to professional fees incurred by Professional
Business Bank during the three-month period ended March 31, 2007 due to
professional fees incurred by Spectrum and accounting and audit fees incurred by
the holding company.
 
 Data
processing expenses increased $133 thousand, or 98.5%, for the three-month
period ended March 31, 2008 compared to the three-month period ended March 31,
2007 due to the increased volume of activity subsequent to the acquisition of
Spectrum Bank.
 
 Office
and administrative expenses increased $79 thousand, or 48.9%, for the
three-month period ended March 31, 2008 compared to the three-month period ended
March 31, 2007 primarily due to $43 thousand in administrative costs
incurred by Spectrum.
 
 Other
expenses increased $311 thousand, or 268.7%, for the three-month period ended
March 31, 2008 compared to the three-month period ended March 31, 2007 primarily
due to amortization of the core deposit intangibles.
 
 The
income tax benefit for the three-month period ended March 31, 2008 totaled
$444 thousand, an effective tax rate of 44.2%.  The income tax
provision for the three-month period ended March 31, 2007 totaled $141 thousand,
an effective rate of 83.1%.  The high effective rate (compared to a
statutory rate of 41.2%) for the first quarter of 2007 was due to nondeductible
merger-related costs incurred by Professional Business Bank during the
period. No valuation allowance is considered necessary based on the earnings
history of the Subsidiary Banks.
 
 The
income tax rates used in determining the income tax provision or benefit were
34.00% for federal income tax purposes and 7.20% for state income taxes, net of
federal income tax benefit.  Generally, the current tax expense is the
result of applying the current tax rate to taxable income.  The
deferred portion is intended to account for the fact that (losses) income on
which taxes are recognized differs from financial statement pre-tax (loss)
income because some items of income and expense are recognized in different
years for income tax purposes than in the financial statements.  These
recognition anomalies cause “temporary differences”; eventually, all taxes are
paid.
 Regulatory
Capital
  At
March 31, 2008, Tier 1 capital of Professional Business Bank and Spectrum Bank,
which is comprised of shareholders’ equity as modified by certain regulatory
adjustments, was $23.7 million and $11.8 million, respectively.
  7
  Under
regulatory capital adequacy guidelines, capital adequacy is measured as a
percentage of risk-adjusted assets in which risk percentages are applied to
assets and certain off-balance-sheet items, such as unused loan commitments and
standby letters of credit. The guidelines require that a portion of total
capital be core, or Tier 1, capital consisting of common shareholders’ equity
and preferred stock, less goodwill and certain deductions. Tier 2 capital
consists of other elements, primarily some types of non-perpetual preferred
stock, subordinated debt and mandatory convertible debt, plus the allowance for
loan losses, subject to certain limitations. Under regulatory guidelines, the
$15 million in trust preferred securities outstanding qualify as Tier 1
capital up to 25%. The guidelines also evaluate the leverage ratio, which
is Tier 1 capital divided by average tangible assets.
  The
following table sets forth the regulatory standards for well-capitalized and
adequately capitalized institutions and the capital ratios for SoCal,
Professional Business Bank and Spectrum Bank as of the dates indicated (dollars
in thousands):
  March 31,
      2008:
                
                Actual
                
                For
      Capital Adequacy
                  Purposes
                
                To
      Be Well CapitalizedSoCal
                
                Amount
                
                Ratio
                
                Amount
                
                Ratio
                
                Amount
                
                
                RatioTotal
      Capital (to risk-weighted assets)
                
                
                37,151
                
                
                10.17%
                
                
                29,226
                
                >=+
      8%
                
                
                N/A
                
                
                
                N/ATier
      1 Capital (to risk-weighted assets)
                
                
                32,563
                
                
                8.91%
                
                
                14,613
                
                >=+
      4%
                
                
                N/A
                
                
                
                N/ATier
      1 Capital (to average assets)
                
                
                32,563
                
                
                8.17%
                
                
                15,938
                
                >=+
      4%
                
                
                N/A
                
                
                
                N/AProfessional
      Business BankTotal
      Capital (to risk-weighted assets)
                
                
                26,944
                
                
                10.58%
                
                
                20,375
                
                >=+
      8%
                
                
                25,469
                
                
                >=+ 10%Tier
      1 Capital (to risk-weighted assets)
                
                
                23,738
                
                
                9.32%
                
                
                10,187
                
                >=+
      4%
                
                
                15,281
                
                
                >=+
      6%Tier
      1 Capital (to average assets)
                
                
                23,738
                
                
                9.84%
                
                
                9,649
                
                >=+
      4%
                
                
                12,061
                
                
                >=+
      5%Spectrum
      BankTotal
      Capital (to risk-weighted assets)
                
                
                13,165
                
                
                11.90%
                
                
                8,851
                
                >=+
      8%
                
                
                25,469
                
                
                >=+ 10%Tier
      1 Capital (to risk-weighted assets)
                
                
                11,783
                
                
                10.65%
                
                
                4,425
                
                >=+
      4%
                
                
                15,281
                
                
                >=+
      6%Tier
      1 Capital (to average assets)
                
                
                11,783
                
                
                7.49%
                
                
                15,938
                
                >=+
      4%
                
                
                12,061
                
                
                >=+
      5%
  December 31,
      2007:
                
                Actual
                
                For
      Capital Adequacy Purposes
                
                To
      Be Well CapitalizedSoCal
                
                Amount
                
                Ratio
                
                Amount
                
                Ratio
                
                Amount
                
                
                RatioTotal
      Capital (to risk-weighted assets)
                
                
                27,219
                
                
                11.27%
                
                
                19,321
                
                >=+
      8%
                
                
                N/A
                
                
                
                N/ATier
      1 Capital (to risk-weighted assets)
                
                
                24,200
                
                
                10.02%
                
                
                9,660
                
                >=+
      4%
                
                
                N/A
                
                
                
                N/ATier
      1 Capital (to average assets)
                
                
                24,200
                
                
                10.53%
                
                
                9,190
                
                >=+
      4%
                
                
                N/A
                
                
                
                N/AProfessional
      Business BankTotal
      Capital (to risk-weighted assets)
                
                
                22,940
                
                
                9.55%
                
                
                19,225
                
                >=+
      8%
                
                
                24,031
                
                
                >=+
      10%Tier
      1 Capital (to risk-weighted assets)
                
                
                19,921
                
                
                8.29%
                
                
                9,613
                
                >=+
      4%
                
                
                14,419
                
                
                >=+
      6%Tier
      1 Capital (to average assets)
                
                
                19,921
                
                
                8.82%
                
                
                9,030
                
                >=+
      4%
                
                
                11,288
                
                
                >=+
      5%
 Deposits
  Average
deposits for the three-month period ended March 31, 2008 were $279.5
million, an increase of $121.0 million, or 76.3%, compared to the
three-month period ended March 31, 2007 of which $94.5 million, or 78.1%,
was related to the acquisition of Spectrum Bank.  Average certificates
of deposit totaled 42.1% of average deposits for the three-month period ended
March 31, 2008 compared to 19.7% for the three-month period ended March
31, 2007.  Average interest-bearing checking, money market and
savings accounts as a group were 26.2% of average deposits for the three-month
period ended March 31, 2008 compared with 46.2% for the three-month period
ended March 31, 2007.  Average demand deposits represented 31.7%
of average deposits for the three-month period ended March 31, 2008
compared with 34.1% for the three-month period ended March
31, 2007.
  At
March 31, 2008 the deposit portfolio consisted of $45.2 million in brokered
deposits, which are defined to include not only deposits received through
deposit brokers, but also deposits bearing interest in excess of 75 basis points
over market rates.  There were no brokered deposits at March 31,
2007.
  The
following table sets forth the scheduled maturities of time deposits in
denominations of $100,000 or greater at March 31, 2008 (dollars in
thousands):
 Three Months or
      less
                  
                  $
                  16,768Over Three Months to
      One Year
                  
                  
                  36,154Over One Year to
      Three Years
                  
                  
                  8,054Over
      Three Years
                  
                  
                  5,070$
                  66,046
  
 8
  Liquidity
and Borrowings
  Liquidity
management for banks requires that funds always be available to pay anticipated
deposit withdrawals and maturing financial obligations promptly and fully in
accordance with their terms. The balance of the funds required is generally
provided by payments on loans, liquidation of assets and the acquisition of
additional deposit liabilities.
  Liquidity
may be enhanced, if necessary, through short-term borrowings. As of March 31,
2008, SoCal had short-term borrowing facilities available totaling approximately
$92.5 million. This consisted of $32.5 million in unsecured federal funds lines
of credit with correspondent banks and approximately $60 million in a
secured line of credit with the Federal Home Loan Bank.
  SoCal has
from time to time borrowed funds on a short-term basis from the Federal Home
Loan Bank and other financial institutions.  Outstanding borrowings
totaled $7.0 million and $18.0 million at March 31, 2008 and December 31, 2007,
respectively.  The interest rate was 2.54% and 3.80% on these
outstanding borrowings at March 31, 2008 and December 31, 2007,
respectively.  The average amounts outstanding totaled $29.7 million
and $7.8 million and the weighted average interest rates were 3.24% and 4.90%
for the three-month period ended March 31, 2008 and the year ended December 31,
2007, respectively.  The maximum outstanding at any month-end during
the three-month period ended March 31, 2008 and the year ended December 31, 2007
was $39.0 million and $18.0 million, respectively.
  In
March 2008, SoCal borrowed $8.0 million through a loan secured by the stock of
the Subsidiary Banks.  The loan bears interest at three-month LIBOR
plus 3.1% (5.98% at March 31, 2008) with quarterly interest payments through
September 2009, followed by principal and interest payments through the maturity
date of March 2018.  The
promissory note and related loan agreements contain certain customary
restrictions, including a potential limitation on the ability of the Subsidiary
Banks to pay dividends to SoCal for purposes other than to allow SoCal to
service the loan.
  In
January 2008, SoCal issued $15.5 in junior subordinated debentures to
Belvedere SoCal Statutory Trust I, a Delaware business trust that was formed for
the exclusive purpose of issuing trust preferred securities. The Trust
purchased debentures with: (1) the proceeds of the sale of its common trust
securities to SoCal for $464 thousand, and (2) certain shares of common stock in
Spectrum Bank valued at $15 million that the Trust received from certain
shareholders of Spectrum Bank in exchange for the Trust’s trust preferred
securities.The junior subordinated debentures and trust preferred
securities have generally identical terms, including that they mature in January
2038 and require monthly interest payments at 10%. The trust
preferred securities and corresponding junior subordinated deferrable interest
debentures contain provisions limiting our ability to declare and pay dividends
on our common stock in certain events.
  Loan
Portfolio
 
 SoCal’s
lending strategy is to attract small to mid-sized business borrowers by offering
a variety of commercial and real estate loan products and a full range of other
banking services coupled with highly personalized service. We offer commercial
loans, lines of credit, certain consumer and installment loans, commercial and
residential construction loans, as well as specialized products such as SBA and
CalCAP loans.
  9
 The
following table sets forth the components of total net loans outstanding in each
category at the date indicated (dollars in thousands):
  March
      31, 2008
                  
                  
                  December
      31, 2007Amount
                  
                  
                  Percent
      of
                  
                  
                  Amount
                  
                  
                  Percent
      ofOutstanding
                  
                  
                  Total
                  
                  
                  Outstanding
                  
                  
                  TotalLoansCommercial
                  
                  $
                  82,463
                  
                  
                  
                  26.4%
                  
                  
                  $
                  56,791
                  
                  
                  
                  26.5%Real
      Estate - Construction
                  
                  
                  44,901
                  
                  
                  
                  14.4%
                  
                  
                  
                  37,566
                  
                  
                  
                  17.5%Real
      Estate - Other
                  
                  
                  177,685
                  
                  
                  
                  56.8%
                  
                  
                  
                  113,123
                  
                  
                  
                  52.7%Consumer
                  
                  
                  7,737
                  
                  
                  
                  2.4%
                  
                  
                  
                  7,127
                  
                  
                  
                  3.3%Total
      Loans
                  
                  
                  312,786
                  
                  
                  
                  100.0%
                  
                  
                  
                  214,607
                  
                  
                  
                  100.0%Net
      Deferred Loan Fees
                  
                  
                  (458
                  )
                  
                  
                  
                  
                  
                  
                  (273
                  )Allowance
      for Loan Losses
                  
                  
                  (6,255
                  )
                  
                  
                  
                  
                  
                  
                  (4,077
                  )Net
      Loans
                  
                  $
                  306,073
                  
                  
                  
                  
                  
                  
                  $
                  210,257CommitmentsLetters
      of Credit
                  
                  $
                  1,358
                  
                  
                  
                  
                  
                  
                  $
                  769Undisbursed
      Loans andCommitments
      to Grant Loans
                  
                  
                  81,551
                  
                  
                  
                  
                  
                  
                  
                  62,459Total
      Commitments
                  
                  $
                  82,909
                  
                  
                  
                  
                  
                  
                  $
                  63,228
  Nonperforming
Assets
  Nonaccrual
loans are those loans for which SoCal has discontinued accrual of interest
because reasonable doubt exists as to the full and timely collection of either
principal or interest.  Loans past due 90 days will continue to accrue
interest only when the loan is both well secured and in the process of
collection.  Other real estate owned consists of real properties that
secured loans on which we have taken title in partial or complete satisfaction
of the loan.
  When
a loan is placed on nonaccrual status, all interest previously accrued but
uncollected is reversed against current period operating
results.  Income on such loans is then recognized only to the extent
that cash is received and, where the ultimate collection of the carrying amount
of the loan is probable, after giving consideration to the borrower’s current
financial condition, historical repayment performance and other
factors.  Accrual of interest is resumed only when (i) principal and
interest are brought fully current, and (ii) such loan is either considered, in
management’s judgment, to be fully collectible or otherwise well secured and in
the process of collection.
  The
following table sets forth information about non-performing assets at the dates
indicated (dollars in thousands):
  March
      31, 2008
                    
                    
                    December
      31, 2007Loans
      90 Days Past Due and StillAccruing
      Interest
                    
                    $
                    -
                    
                    
                    $
                    -Impaired
      Loans
                    
                    
                    2,565
                    
                    
                    
                    -Nonaccrual
      Loans
                    
                    
                    307
                    
                    
                    
                    920Total
      Nonperforming Loans
                    
                    
                    2,872
                    
                    
                    
                    920Other
      Real Estate Owned
                    
                    
                    782
                    
                    
                    
                    -Total
      Nonperforming Assets
                    
                    $
                    3,654
                    
                    
                    $
                    920Nonperforming
      Loans as aPercentage
      of Total Loans
                    
                    
                    0.92%
                    
                    
                    
                    0.43%Allowance
      for Loan Losses as a Percentageof
      Nonperforming Loans
                    
                    
                    171.18%
                    
                    
                    
                    443.15%Nonperforming
      Assets as aPercentage
      of Total Assets
                    
                    
                    0.78%
                    
                    
                    
                    0.34%
  The increase in
nonperforming assets resulted primarily from the impairment of one real estate
construction
loan.
 10
  There
were no cash collections on non-performing loans during the three-month period
ended March 31, 2008.  Interest income not recognized on non-accrual
loans totaled $25 thousand during the period ended March 31, 2008 and $71
thousand during the year ended December 31, 2007.
  Provision and Changes in Allowance
for Loan
Losses
  The
following table summarizes the allocation of the allowance for loan losses by
loan type as of the indicated date and the percent of loans in each category to
total loans (dollars in thousands):
 March
      31, 2008
                
                
                December
      31, 2007Amount
                
                
                Loan
                  Percent
                
                
                Amount
                
                
                Loan
                  PercentCommercial
                
                $
                2,459
                
                
                
                26.4%
                
                
                $
                1,286
                
                
                
                26.5%Real
      Estate - Construction
                
                
                790
                
                
                
                14.4%
                
                
                
                1,163
                
                
                
                17.5%Real
      Estate - Other
                
                
                2,682
                
                
                
                56.8%
                
                
                
                1,468
                
                
                
                52.7%Consumer
                
                
                193
                
                
                
                2.4%
                
                
                
                152
                
                
                
                3.3%Unallocated
                
                
                130
                
                
                
                n/a
                
                
                
                8
                
                
                
                n/a$
                6,254
                
                
                
                100.0%
                
                
                $
                4,077
                
                
                
                100.0%
 The
following table presents an analysis of changes in the allowance for loan losses
during the periods indicated (dollars in thousands):
  Three-month
      periods ended
                    March
      31,Belvedere
      SoCal
                  
                  
                  Professional
      Business Bank2008
                  
                  
                  2007Balance
      at beginning of period
                  
                  $
                  4,077
                  
                  
                  $
                  1,869Allowance
      acquired at acquisition of Spectrum
                  
                  
                  1,436Charge-offs:Commercial
                  
                  
                  (138
                  )
                  
                  
                  -Real
      Estate - Construction
                  
                  
                  -
                  
                  
                  
                  -Real
      Estate - Other
                  
                  
                  -
                  
                  
                  
                  -Consumer
                  
                  
                  (94
                  )
                  
                  
                  -Total
      charge-offs
                  
                  
                  (232
                  )
                  
                  
                  -RecoveriesCommercial
                  
                  
                  -
                  
                  
                  
                  -Real
      Estate - Construction
                  
                  
                  -
                  
                  
                  
                  -Real
      Estate - Other
                  
                  
                  -
                  
                  
                  
                  -Consumer
                  
                  
                  16
                  
                  
                  
                  -Total
      recoveries
                  
                  
                  16
                  
                  
                  
                  -Additional
      provision
                  
                  
                  957
                  
                  
                  
                  157Balance
      at end of period
                  
                  $
                  6,254
                  
                  
                  $
                  2,026
  At
March 31, 2008 and 2007, the allowance for loan losses was 2.0% and 1.16%,
respectively, of total loans.
  11
  In
the ordinary course of business, SoCal has entered into off-balance sheet
financial instruments consisting of commitments to extend credit, commercial
letters of credit, and standby letters of credit. Such financial instruments are
recorded in the financial statement when they are funded or related fees are
incurred or received.
  Investment
Portfolio
 
 All
investment securities are classified as available-for-sale. The following table
summarizes the amounts and distribution of investment securities held as of the
dates indicated (dollars in thousands):
  March
      31, 2008
                  
                  
                  December
      31, 2007Weighted
                  
                  
                  
                  
                  
                  
                  
                  
                  WeightedAmortized
                  
                  
                  Market
                  
                  
                  Average
                  
                  
                  Amortized
                  
                  
                  Market
                  
                  
                  AverageCost
                  
                  
                  Value
                  
                  
                  Yield
                  
                  
                  Cost
                  
                  
                  Value
                  
                  
                  YieldAvailable-for-Sale
      SecuritiesU.S.
      Government AgenciesWithin
      One Year
                  
                  $
                  12,041
                  
                  
                  $
                  12,081
                  
                  
                  
                  3.98%
                  
                  
                  $
                  2,004
                  
                  
                  $
                  2,002
                  
                  
                  
                  4.24%One
      to Five Years
                  
                  
                  4,726
                  
                  
                  
                  4,739
                  
                  
                  
                  4.11%
                  
                  
                  
                  2,024
                  
                  
                  
                  2,024
                  
                  
                  
                  5.42%16,767
                  
                  
                  
                  16,820
                  
                  
                  
                  
                  
                  
                  
                  4,028
                  
                  
                  
                  4,026Government
      Guaranteed Collateralized Mortgage ObligationsAfter
      Five Years to Ten Years
                  
                  
                  993
                  
                  
                  
                  998
                  
                  
                  
                  4.25%
                  
                  
                  
                  -
                  
                  
                  
                  -993
                  
                  
                  
                  998
                  
                  
                  
                  
                  
                  
                  
                  -
                  
                  
                  
                  -States
      and Political SubdivisionsOne
      to Five Years
                  
                  
                  338
                  
                  
                  
                  338
                  
                  
                  
                  3.39%
                  
                  
                  
                  -
                  
                  
                  
                  -After
      Five Years to Ten Years
                  
                  
                  1,091
                  
                  
                  
                  1,099
                  
                  
                  
                  3.62%
                  
                  
                  
                  -
                  
                  
                  
                  -Over
      Ten Years
                  
                  
                  7,621
                  
                  
                  
                  7,486
                  
                  
                  
                  2.67%
                  
                  
                  
                  -
                  
                  
                  
                  -9,050
                  
                  
                  
                  8,923
                  
                  
                  
                  
                  
                  
                  
                  -
                  
                  
                  
                  -Mortgage-Backed
      SecuritiesWithin
      One Year
                  
                  
                  2,204
                  
                  
                  
                  2,222
                  
                  
                  
                  5.71%
                  
                  
                  
                  -
                  
                  
                  
                  -One
      to Five Years
                  
                  
                  2,576
                  
                  
                  
                  2,590
                  
                  
                  
                  4.14%
                  
                  
                  
                  1,230
                  
                  
                  
                  1,231
                  
                  
                  
                  4.16%After
      Five Years to Ten Years
                  
                  
                  2,212
                  
                  
                  
                  2,269
                  
                  
                  
                  4.76%
                  
                  
                  
                  558
                  
                  
                  
                  559
                  
                  
                  
                  4.98%Over
      Ten Years
                  
                  
                  4,867
                  
                  
                  
                  4,883
                  
                  
                  
                  4.30%
                  
                  
                  
                  2,953
                  
                  
                  
                  2,970
                  
                  
                  
                  4.78%11,859
                  
                  
                  
                  11,964
                  
                  
                  
                  
                  
                  
                  
                  4,741
                  
                  
                  
                  4,760$
                  38,669
                  
                  
                  $
                  38,705
                  
                  
                  
                  
                  
                  
                  $
                  8,769
                  
                  
                  $
                  8,786




12




Item
3.  Quantitative and Qualitative Disclosures About Market
Risk
 
 Market
risk is the risk of loss in a financial instrument arising from adverse changes
in market prices, interest rates, foreign currency exchange rates, commodity
prices and equity prices. SoCal's market risk arises primarily from interest
rate risk inherent in its lending and deposit taking activities. Management
uses various asset/liability strategies to manage the re-pricing characteristics
of SoCal's earning assets and funding liabilities to ensure that exposure
to interest rate fluctuations is within its guidelines of acceptable
risk-taking. Hedging strategies, including the terms and pricing of loans and
deposits, and managing the deployment of SoCal's securities are used to reduce
mismatches in interest rate re-pricing opportunities of portfolio assets and
their funding sources.
 
 Interest
rate risk is addressed by SoCal's Asset Liability Management Committee (“ALCO”)
which is comprised of executive officers of SoCal. The ALCO monitors interest
rate risk by analyzing the potential impact on the net 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 SoCal's balance sheet in part to maintain, within acceptable
ranges, the potential impact on net equity value and net interest income despite
fluctuations in market interest rates.
 
 Exposure
to interest rate risk is reviewed on at least a quarterly basis by the ALCO and
the Board of Directors. Interest rate risk exposure is measured using interest
rate sensitivity analysis to determine the change in net portfolio value in the
event of hypothetical changes in interest rates. If potential changes to net
equity value and net interest income resulting from hypothetical interest rate
changes are not within the limits established by the Board of Directors,
management may adjust the asset and liability mix to bring interest rate risk
within approved limits.
  There
have been no significant changes in SoCal's exposure to interest
rate risk previously disclosed in SoCal's 10-KSB filed with the
Securities and Exchange Commission on March 31, 2008.
  13
 Item
4.  Controls and Procedures
 
 Evaluation
of Controls and Procedures
 
 With the
participation of management, including our Chief Executive Officer and Chief
Financial Officer, the effectiveness of SoCal's disclosure controls and
procedures (as defined in Rule 15d-15(e) under the Securities Exchange Act
of 1934, as amended (the “Exchange Act”)) were evaluated as of the end of the
period covered by this Quarterly Report on Form 10-Q. Based upon that
evaluation, SoCal's Chief Executive Officer and Chief Financial Officer have
concluded that:
 
 (a)           information
required to be disclosed by SoCal in this Quarterly Report on Form 10-Q and the
other reports which SoCal files or submits under the Exchange Act would be
accumulated and communicated to SoCal's management, including its Chief
Executive Officer and Chief Financial Officer, as appropriate, to allow timely
decisions regarding required disclosure;
 
 (b)           information
required to be disclosed by SoCal in this Quarterly Report on Form 10-Q and the
other reports which SoCal files or submits under the Exchange Act would be
recorded, processed, summarized and reported within the time periods specified
in the SEC’s rules and forms; and
 
 (c)           SoCal's
disclosure controls and procedures are effective as of the end of the period
covered by this Quarterly Report on Form 10-Q to ensure that material
information relating to SoCal and its consolidated subsidiary is made known to
them, particularly during the period for which periodic reports, including this
Quarterly Report on Form 10-Q, are being prepared.
 
 Changes
in Internal Control over Financial Reporting
 
 There
were no changes during the period covered by this Quarterly Report on Form 10-Q
in SoCal's internal control over financial reporting (as defined in
Rule 15d-15(f) under the Exchange Act) that have materially affected, or
are reasonably likely to materially affect, internal control over financial
reporting.
   14
 PART
II – OTHER INFORMATION
 
 Item
1.  Legal Proceedings
 
 There
have been no material changes in legal proceedings as described in the Company’s
Annual Report on Form 10-KSB for the year ended December 31, 2007.
 
 Item
1A.  Risk Factors
 
 There
have been no material changes in the discussion pertaining to risk factors found
in “Business – Factors that may Affect our Performance” that was provided in the
December 31, 2007 Form 10-KSB.
 
 Item
2.  Unregistered Sales of Equity Securities and Use of
Proceeds
 
 SoCal, on
January 31, 2008, also completed its sale of  $22 million of its
common stock at a price of $16.75 per share to Belvedere Capital Fund II L.P.
(the “Fund”) for cash to fund the cash portion of the Spectrum
acquisition.  The sale of common stock to the Fund was exempt from
registration under the Securities Act of 1933 pursuant to section 4(2) as it did
not involve any public offering.  The purchase price per share was
calculated as the average closing bid price of SoCal’s common stock on the OTC
Bulletin Board over the five trading days preceding the closing of the
transaction.  The price was within the range of fair prices as
determined by a financial advisor hired by SoCal.  After the sale of
the shares, the Fund now owns approximately 72% of SoCal’s common stock on a
fully diluted basis.  The stock purchase agreement also provided for a
transaction fee of $740,000 payable by SoCal to the Fund in consideration for
the services provided by the Fund to SoCal in connection with the Spectrum Bank
acquisition.


Item
3.  Defaults Upon Senior Securities
 
 None.
 
 Item
4.  Submission of Matters to a Vote of Security Holders
 
 None.
 
 Item
5.  Other Information
 
 None.
 
 Item
6.  Exhibits
  31.1
              Rule
      15d-14(a) Certification by Chief Executive Officer31.2
              Rule
      15d-14(a) Certification by Chief Financial Officer32.1
              Section
      1350 Certifications
 ______________________
  15
  SIGNATURES
  Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act
of 1934, the Company has caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
 
 BELVEDERE
      SOCALBy:
              /s/    WILLIAM
      BARIBAULTWilliam
      Baribault
                President
      and Chief Executive Officer
                (Principal
      Executive Officer)Dated:
      May 15, 2008BELVEDERE
      SOCALBy:
              /s/    MICHAEL
      McCALLMichael
      McCall
                Chief
      Financial Officer
                (Principal
      Financial Officer)Dated:
      May 15, 2008






16