|  California(State      of other jurisdiction ofincorporation      or organization)                  |   |  33-0309110(IRS      EmployerIdentification      Number) |
|----------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------|
|                                                                                                     |   |                                                          |
|  1260      Corona Pointe Court,Corona,      California(Address      of principal executive offices) |   |  92879(Zip      Code)                                    |

| Title of Each      Class                         | Name of Exchange on      Which Registered |
|--------------------------------------------------|-------------------------------------------|
| Common      stock, no par value                  | The      NASDAQ Stock Market LLC          |
| 7.5%      Series D Noncumulative Preferred Stock | American      Stock Exchange              |

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TABLE OF CONTENTS

| PART      I   |                                                                           | PAGE   |
|---------------|--------------------------------------------------------------------------------|--------|
|          |                                                                           |   |
| ITEM      1.  | Business                                                                       | 5      |
|          |                                                                           |   |
| ITEM      1A. | Risk Factors                                                                   | 35     |
|          |                                                                           |   |
| ITEM      1B. | Unresolved Staff Comments                                                      | 44     |
|          |                                                                           |   |
| ITEM      2.  | Properties                                                                     | 44     |
|          |                                                                           |   |
| ITEM      3.  | Legal Proceedings                                                              | 46     |
|          |                                                                           |   |
| ITEM      4.  | Submission of Matters to a Vote of Security      Holders                       | 46     |
|          |                                                                           |   |
| PART      II  |                                                                           |   |
|          |                                                                           |   |
| ITEM      5.  | Market for Registrant’s Common Equity, Related      Stockholder          |   |
|          | Matters and Issuer Purchases of Equity      Securities                         | 46     |
|          |                                                                           |   |
| ITEM      6.  | Selected Financial Data                                                        | 48     |
|          |                                                                           |   |
| ITEM      7.  | Management’s Discussion and Analysis of Financial      Condition         |   |
|          | and Results of Operations                                                      | 49     |
|          |                                                                           |   |
| ITEM7A.       | Quantitative and Qualitative Disclosures About Market      Risk                | 65     |
|          |                                                                           |   |
| ITEM      8.  | Financial Statements and Supplementary    Data                                 | 66     |
|          |                                                                           |   |
| ITEM      9.  | Changes in and Disagreements With Accountants on      Accounting               |   |
|          | and Financial Disclosure                                                       | 112    |
|          |                                                                           |   |
| ITEM      9A. | Controls and Procedures                                                        | 112    |
|          |                                                                           |   |
| ITEM      9B. | Other Information                                                              | 118    |
|          |                                                                           |   |
| PART      III |                                                                           |   |
|          |                                                                           |   |
| ITEM      10. | Directors, Executive Officers and Corporate      Governance                    | 118    |
|          |                                                                           |   |
| ITEM      11. | Executive Compensation                                                         | 121    |
|          |                                                                           |   |
| ITEM      12. | Security Ownership of Certain Beneficial Owners and      Management            |   |
|          | and Related Stockholder Matters                                                | 137    |
|          |                                                                           |   |
| ITEM      13. | Certain Relationships and Related Transactions, and      Director Independence | 141    |
|          |                                                                           |   |
| ITEM      14. | Principal Accountant Fees and Services                                         | 141    |
|          |                                                                           |   |
| PART      IV  |                                                                           |   |
|          |                                                                           |   |
| ITEM      15. | Exhibits and Financial Statement    Schedules                                  | 143    |
|          |                                                                           |   |
| Signatures    |                                                                           |   |

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ITEM1.  Business

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| ·   | Luxury      Home Construction Lending:  The Bank      originates single family residential (“SFR”) luxury home construction      loans (consisting of attached and detached homes generally priced at $2.0      million and above) primarily within Los Angeles’ “south bay” coastal      communities (including Manhattan Beach, Hermosa Beach, El Segundo, Redondo      Beach, and the Palos Verdes Peninsula area), Los Angeles’ “west side”      (including Beverly Hills, Brentwood, Bel Air and Malibu) and Orange County      regions where we believe the Bank has a competitive advantage based on      established builder and customer relationships and expertise in the      construction market.  The Bank established its Los Altos RFC in      February 2007 primarily to generate SFR luxury home construction      loans.  Although the general California real estate market has      slowed considerably, and the selling time for luxury homes has increased      as of year end 2007, the median price of these homes has not deteriorated      significantly.  Therefore, we continue to believe there is      relative strength in the demand for this loan product within the luxury      housing market along the California coast and in other established      affluent regions of California.  However, we have moderated      production in this business line given the current softness and      uncertainties in the general real estate market. We believe the high      employment level, strong incomes, wealth accumulation and good schools in      these luxury regions contribute to a continued confidence and stability in      these markets.  These types of construction loans typically      range from $1.0 million to $5.0million. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| ·   | Commercial      Construction Lending: The Bank originates commercial construction      loans, which primarily include loans for the construction of office      buildings, retail space, churches, and multifamily/apartment      projects.  The majority of commercial construction loans are      used for the construction of low-rise office buildings and medical      offices.  This product is mainly originated throughout Southern      California, with 27% of projects in the Inland Empire, followed by 24% and      22% of projects in Los Angeles and Orange counties of Southern California,      respectively.  Commercial construction loans generated from this      division typically range from $2.0 million to $25.0      million.  The Bank had a balance of $198.2 million and $134.4      million of commercial construction loans at December 31, 2007 and 2006,      respectively, net of unfunded commitments of $115.9 million and $119.1      million for the same periods, respectively.  As of December 31,      2007, 80% of such loans will mature within one year, 18% will mature in      one to three years, and 2% will mature after three years.  Due      to the current softness and uncertainties in the general real estate      market, we have moderated production in this business  line. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Tract      Construction Lending:  The      Bank has SFR tract construction loans, primarily secured by      newly-constructed, entry to mid-level detached and attached homes.       The majority of these loans were originated within the Inland Empire of      Southern California, and the remainder were originated throughout      California. This division has experienced a significant slowdown in the      last few quarters, as home sales decline, inventory levels build, and      housing prices in the Inland Empire region continue to soften. As of      December 31, 2007, the Bank had outstanding commitments on 32 SFR tract      construction projects within Southern California, with the average      commitment amount of $6.3 million. The majority of the Bank’s builder      clients continue to offer various buyer incentives to complete projects      and move inventory in the face of declining absorption rates. Although we      cannot control many economic and market driven factors impacting this      business segment, we have completed an analysis of our tract construction      portfolio and we believe we are taking proactive steps to address      identified risk factors in our control.  Among other risk      reduction measures, the Bank has substantially exited the origination of      this loan type until our analysis indicates the housing market in these      regions has stabilized and economic conditions support the resumption of      this business line. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Income      Property Lending:  The Bank has an income property      lending division to service the lending needs in growing markets for      commercial real estate and multi-family/apartments in California and      neighboring states. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| o   | Commercial      Real Estate:  The Bank’s commercial real estate loan      portfolio includes loans secured by office buildings, retail outlets and      industrial properties, the majority of which are located in Los Angeles      county, Orange county, and the Inland Empire region in Southern      California.  Keeping in line with our risk reduction efforts, we      continue to focus on loans with strong sponsorship and properties in      established markets.  During 2007, the Bank allocated      significant personnel and resources to support its commercial income      property lending operation. |
|---------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| o   | Residential      Real Estate:  The Bank’s residential income property loan      portfolio consists primarily of multi-family/apartment      loans.  These loans are originated primarily in Los Angeles and      Orange counties, with some lending in the Inland Empire      region.  This portfolio is currently benefiting from low home      affordability as potential home buyers are choosing to remain in rental      housing. |
|---------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Branching      System:  Several of the Bank’s full-service banking      centers have recently been redesigned to offer a high-tech, high-service      environment.  Along with the Bank’s traditional teller lines, it      has also incorporated client service desks that integrate both traditional      teller and new account operations with state-of-the-art cash      machines.  To further the reach of each of the Bank’s banking      centers, its RFCs operate exclusively to generate deposits and/or      loans.  The Bank also offers courier services, internet-based      banking, and ATMs and kiosks to make banking more convenient to our      customers. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Cash      Management: To      offer expedient banking with new and emerging technologies, the Bank      offers various cash management services to its customers.  These      services facilitate business customers’ cash flow and aid in maximizing      their investment potential by aligning products and services to a      customer’s needs. The Bank’s cash management services include the      following: |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| o   | Remote      Item Capture: This      technology, also known as “electronic deposit”, allows clients to scan      items for deposit and electronically send images of the items securely to      the Bank’s processor.  This service also provides customers with      the convenience to perform banking activities from within their place of      business and after traditional bankinghours. |
|---------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| o   | Online      Banking:       The Bank’s online banking includes services such as automated wire      processing, electronic tax payments, electronic transfers, loan payments,      bill payments, and accountreconciliation. |
|---------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| o   | Lockbox      Processing:       The Bank’s lockbox services aid customers in expediting the processing of      their deposits and increasing their float value for investment      purposes.  This product also provides same-day reporting of      deposits. |
|---------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| o   | Positive      Pay: This      service provides business customers with increased efficiency and security      by allowing them to review checks presented against their accounts prior      to disbursing funds while helping clients to identify potentially      fraudulent activity in theiraccount. |
|---------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| 1)   | Reduce our Overall Risk      Profile: This objective includes the significant reduction of      single family residential tract construction lending and related land      development projects, enhanced borrower sponsorship requirements,      increased and expanded core deposit growth, expanded business and      commercial real estate lending in supportive sub-markets, and enhanced      balance sheet management; |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 2)   | Loan Portfolio      Management:  In order to produce a base of stabilized      long-term earnings, we will seek to proactively rebalance the existing      loan portfolio and pursue new and diversified business generation to      reduce our risk profile, meet our targeted concentration ranges within      sub-markets and sub-portfolios, and maintain an overall portfolio yield      consistent with quality and sustainablereturns; |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 3)   | Liquidity Enhancement and      Funding Cost Reduction: We will seek to reduce our funding costs by      an intensified focus on lower cost core deposits, cash management driven      business relationships, the effective repricing of our time deposit      portfolio in a decreasing interest rate environment, and reduction of our      reliance on higher costing liabilities;and |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 4)   | Corporate Reallocation and      Reorganization: To improve our operating efficiencies, we will      continually review our resource allocation to ensure the optimum      allocation of talent among functions. We seek to continue to deploy and      redeploy resources, both personnel and other operating costs, toward      achievement of our objectives. |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| (i)   | the      coastal communities of Los Angeles, Orange and San Diego      counties; |
|-----------------|----------------------------------------------------------------------------------|

| (ii)   | the      San Gabriel Valley and San Fernando Valley regions of Los Angeles      county; |
|------------------|-----------------------------------------------------------------------------------------|

| (iii)   | the      Inland Empire region, which primarily includes San Bernardino and      Riverside counties; and |
|-------------------|---------------------------------------------------------------------------------------------------------|

| (iv)   | the      northern communities of Marin, Monterey, and Santa Clara      counties. |
|------------------|----------------------------------------------------------------------------------|

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| (Dollars      in thousands)                     |   | December      31, |      |
|-------------------------------------------------|--------|-------------------|-----------|
|                                            |   | 2007              |      |   | 2006 |   |   | 2005 |   |   | 2004 |   |   | 2003 |   |
|                                            |   | Amount            |      |   | Percent |   |   | Amount |   |   | Percent |   |   | Amount |   |   | Percent |   |   | Amount |   |   | Percent |   |   | Amount |   |   | Percent |   |
| Commercial      and industrial                  |   | $                 | 156,966   |   |   |   | 7.8 | % |   | $ | 122,257 |   |   |   | 6.4 | % |   | $ | 54,757 |   |   |   | 4.0 | % |   | $ | 36,095 |   |   |   | 3.5 | % |   | $ | 26,827 |   |   |   | 4.5 | % |
| Real      estate construction and land:         |   |              |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Single-family      luxury                       |   |              | 582,962   |   |   |   | 29.0 | % |   |   | 514,385 |   |   |   | 27.0 | % |   |   | 392,183 |   |   |   | 28.5 | % |   |   | 298,984 |   |   |   | 29.1 | % |   |   | 212,727 |   |   |   | 35.5 | % |
| Single-family      tract                        |   |              | 146,627   |   |   |   | 7.3 | % |   |   | 152,060 |   |   |   | 8.0 | % |   |   | 129,706 |   |   |   | 9.4 | % |   |   | 129,900 |   |   |   | 12.6 | % |   |   | 104,511 |   |   |   | 17.4 | % |
| Commercial                                      |   |              | 198,186   |   |   |   | 9.9 | % |   |   | 134,404 |   |   |   | 7.0 | % |   |   | 61,392 |   |   |   | 4.4 | % |   |   | 36,215 |   |   |   | 3.5 | % |   |   | 20,947 |   |   |   | 3.5 | % |
| Land                                            |   |              | 103,684   |   |   |   | 5.2 | % |   |   | 112,418 |   |   |   | 5.9 | % |   |   | 91,035 |   |   |   | 6.6 | % |   |   | 61,979 |   |   |   | 6.0 | % |   |   | 15,030 |   |   |   | 2.5 | % |
| Real      estate mortgage:                      |   |              |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial                                      |   |              | 553,531   |   |   |   | 27.6 | % |   |   | 531,159 |   |   |   | 27.9 | % |   |   | 321,821 |   |   |   | 23.4 | % |   |   | 216,609 |   |   |   | 21.0 | % |   |   | 153,632 |   |   |   | 25.6 | % |
| Multifamily      residential                    |   |              | 93,662    |   |   |   | 4.7 | % |   |   | 222,470 |   |   |   | 11.7 | % |   |   | 246,597 |   |   |   | 17.9 | % |   |   | 189,912 |   |   |   | 18.4 | % |   |   | 27,986 |   |   |   | 4.7 | % |
| Other      residential                          |   |              | 56,257    |   |   |   | 2.8 | % |   |   | 49,353 |   |   |   | 2.6 | % |   |   | 64,426 |   |   |   | 4.7 | % |   |   | 56,983 |   |   |   | 5.6 | % |   |   | 32,856 |   |   |   | 5.5 | % |
| Consumer      loans                             |   |              | 115,702   |   |   |   | 5.7 | % |   |   | 65,914 |   |   |   | 3.5 | % |   |   | 15,205 |   |   |   | 1.1 | % |   |   | 2,905 |   |   |   | 0.3 | % |   |   | 4,887 |   |   |   | 0.8 | % |
| All      other loans (including overdrafts)     |   |              | 264       |   |   |   | 0.0 | % |   |   | 98 |   |   |   | 0.0 | % |   |   | 207 |   |   |   | 0.0 | % |   |   | 137 |   |   |   | 0.0 | % |   |   | 29 |   |   |   | 0.0 | % |
|                                            |   |              | 2,007,841 |   |   |   | 100.0 | % |   |   | 1,904,518 |   |   |   | 100.0 | % |   |   | 1,377,329 |   |   |   | 100.0 | % |   |   | 1,029,719 |   |   |   | 100.0 | % |   |   | 599,432 |   |   |   | 100.0 | % |
| Less:                                           |   |              |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      unearned income and deferred loan fees |   |              | 230       |   |   |   |   |   |   |   | (2,274 | ) |   |   |   |   |   |   | (4,230 | ) |   |   |   |   |   |   | (2,682 | ) |   |   |   |   |   |   | (2,425 | ) |   |   |   |   |
| Allowance      for loan losses                  |   |              | (48,849   | ) |   |   |   |   |   |   | (19,689 | ) |   |   |   |   |   |   | (13,762 | ) |   |   |   |   |   |   | (11,969 | ) |   |   |   |   |   |   | (7,358 | ) |   |   |   |   |
| Total      Net Loans                            |   | $                 | 1,959,222 |   |   |   |   |   |   | $ | 1,882,555 |   |   |   |   |   |   | $ | 1,359,337 |   |   |   |   |   |   | $ | 1,015,068 |   |   |   |   |   |   | $ | 589,649 |   |   |   |   |   |
| Loans      held-for-sale                        |   | $                 | 119,427   |   |   |   |   |   |   | $ | - |   |   |   |   |   |   | $ | - |   |   |   |   |   |   | $ | - |   |   |   |   |   |   | $ | - |   |   |   |   |   |

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| (Dollars      in thousands)             |   | December      31, |    |
|-----------------------------------------|--------|-------------------|---------|
|                                    |   | 2007              |    |   | 2006 |   |   | 2005 |   |   | 2004 |   |   | 2003 |   |
|                                    |   | Amount            |    |   | Percent |   |   | Amount |   |   | Percent |   |   | Amount |   |   | Percent |   |   | Amount |   |   | Percent |   |   | Amount |   |   | Percent |   |
| Unfunded Loan      Commitments          |   |              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial      and industrial          |   | $                 | 151,584 |   |   |   | 24.5 | % |   | $ | 97,655 |   |   |   | 14.3 | % |   | $ | 66,094 |   |   |   | 11.1 | % |   | $ | 26,623 |   |   |   | 6.1 | % |   | $ | 9,125 |   |   |   | 2.5 | % |
| Real      estate construction and land: |   |              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Single-family      luxury               |   |              | 243,739 |   |   |   | 39.4 | % |   |   | 264,967 |   |   |   | 38.7 | % |   |   | 294,996 |   |   |   | 49.5 | % |   |   | 215,346 |   |   |   | 49.0 | % |   |   | 174,640 |   |   |   | 48.3 | % |
| Single-family      tract                |   |              | 57,239  |   |   |   | 9.3 | % |   |   | 150,702 |   |   |   | 22.0 | % |   |   | 153,121 |   |   |   | 25.7 | % |   |   | 153,394 |   |   |   | 35.0 | % |   |   | 141,884 |   |   |   | 39.3 | % |
| Commercial                              |   |              | 115,919 |   |   |   | 18.7 | % |   |   | 119,134 |   |   |   | 17.4 | % |   |   | 52,574 |   |   |   | 8.8 | % |   |   | 21,727 |   |   |   | 4.9 | % |   |   | 21,994 |   |   |   | 6.1 | % |
| Land                                    |   |              | 8,930   |   |   |   | 1.5 | % |   |   | 16,336 |   |   |   | 2.4 | % |   |   | 4,134 |   |   |   | 0.7 | % |   |   | 8,133 |   |   |   | 1.9 | % |   |   | - |   |   |   | 0.0 | % |
| Real      estate mortgage:              |   |              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial                              |   |              | 8,780   |   |   |   | 1.4 | % |   |   | 14,221 |   |   |   | 2.1 | % |   |   | 9,060 |   |   |   | 1.5 | % |   |   | 3,705 |   |   |   | 0.8 | % |   |   | 4,054 |   |   |   | 1.1 | % |
| Multi-family      residential           |   |              | 1,662   |   |   |   | 0.3 | % |   |   | 1,194 |   |   |   | 0.1 | % |   |   | 1,530 |   |   |   | 0.3 | % |   |   | 100 |   |   |   | 0.0 | % |   |   | 4 |   |   |   | 0.0 | % |
| All      other residential              |   |              | 20,684  |   |   |   | 3.3 | % |   |   | 16,496 |   |   |   | 2.4 | % |   |   | 9,913 |   |   |   | 1.7 | % |   |   | 7,972 |   |   |   | 1.8 | % |   |   | 7,893 |   |   |   | 2.2 | % |
| Consumer      loans                     |   |              | 9,799   |   |   |   | 1.6 | % |   |   | 4,089 |   |   |   | 0.6 | % |   |   | 3,879 |   |   |   | 0.7 | % |   |   | 2,404 |   |   |   | 0.5 | % |   |   | 1,817 |   |   |   | 0.5 | % |
| Total      Unfunded Loan Commitments    |   | $                 | 618,336 |   |   |   | 100.0 | % |   | $ | 684,794 |   |   |   | 100.0 | % |   | $ | 595,301 |   |   |   | 100.0 | % |   | $ | 439,404 |   |   |   | 100.0 | % |   | $ | 361,411 |   |   |   | 100.0 | % |

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| ·   | trends      in past due and impaired loans; |
|--------------------|---------------------------------------------|

| ·   | trends      in charge-offs and recoveries; |
|--------------------|--------------------------------------------|

| ·   | trends      in loan volume and loan terms; |
|--------------------|--------------------------------------------|

| ·   | changes      in credit policies andunderwriting; |
|--------------------|--------------------------------------------------|

| ·   | experience      and ability of lending management andstaff; |
|--------------------|-------------------------------------------------------------|

| ·   | external      factors including national and local economic trends and conditions,      duration of the current business cycle, competition, legal and regulatory      requirements, as well as reasonably foreseeable events that may affect      collectibility of loans; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | industry      conditions; and |
|--------------------|-------------------------------|

| ·   | concentration      of credit risk. |
|--------------------|------------------------------------|

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| (Dollars      in thousands)                                  |   | December      31, |   |
|--------------------------------------------------------------|--------|-------------------|--------|
|                                                         |   | 2007              |   |   | 2006 |   |   | 2005 |   |   | 2004 |   |   | 2003 |   |
| Allowance      for loan losses, beginning of year            |   | $                 | 19,689 |   |   | $ | 13,762 |   |   | $ | 11,969 |   |   | $ | 7,358 |   |   | $ | 2,937 |   |
| Charge-offs                                                  |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial      and industrial                               |   |              | 360    |   |   |   | 333 |   |   |   | 123 |   |   |   | 67 |   |   |   | 123 |   |
| Real      estate                                             |   |              | 8,601  |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Consumer      loans                                          |   |              | 364    |   |   |   | 33 |   |   |   | 37 |   |   |   | 325 |   |   |   | 20 |   |
|                                                         |   |              | 9,325  |   |   |   | 366 |   |   |   | 160 |   |   |   | 392 |   |   |   | 143 |   |
| Recoveries                                                   |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial      and industrial                               |   |              | 62     |   |   |   | 8 |   |   |   | 56 |   |   |   | 95 |   |   |   | 44 |   |
| Real      estate                                             |   |              | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Consumer      loans                                          |   |              | 23     |   |   |   | 63 |   |   |   | 11 |   |   |   | 27 |   |   |   | 28 |   |
|                                                         |   |              | 85     |   |   |   | 71 |   |   |   | 67 |   |   |   | 122 |   |   |   | 72 |   |
| Net      charge-offs                                         |   |              | 9,240  |   |   |   | 295 |   |   |   | 93 |   |   |   | 270 |   |   |   | 71 |   |
| Provision      for loan losses                               |   |              | 38,400 |   |   |   | 4,125 |   |   |   | 1,886 |   |   |   | 4,881 |   |   |   | 3,597 |   |
| Allowance      relating to acquired loan portfolio           |   |              | -      |   |   |   | 2,097 |   |   |   | - |   |   |   | - |   |   |   | 895 |   |
| Allowance      for loan losses, end of year                  |   | $                 | 48,849 |   |   | $ | 19,689 |   |   | $ | 13,762 |   |   | $ | 11,969 |   |   | $ | 7,358 |   |
|                                                         |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Ratio      of net charge-offs during the year to average     |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| loans      outstanding during the year                       |   |              | 0.5    | % |   |   | 0.0 | % |   |   | 0.0 | % |   |   | 0.0 | % |   |   | 0.0 | % |
| Ratio      of allowance for loan losses to loans at year-end |   |              | 2.4    | % |   |   | 1.0 | % |   |   | 1.0 | % |   |   | 1.2 | % |   |   | 1.2 | % |

| (Dollars      in thousands)                    |   | As      of December 31, |   |
|------------------------------------------------|--------|-------------------------|--------|
|                                           |   | 2007                    |   |   | 2006 |   |   | 2005 |   |   | 2004 |   |   | 2003 |   |
|                                           |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Accruing      Loans More than 90 Days Past Due |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Aggregate      loan amounts                    |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial      and industrial                 |   | $                       | 29     |   |   | $ | 2,315 |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |
| Real      estate                               |   |                    | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Consumer      loans                            |   |                    | 25     |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Total      loans past due more than 90 days    |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| and      still accruing                        |   | $                       | 54     |   |   | $ | 2,315 |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |
|                                           |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Renegotiated      loans                        |   | $                       | -      |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |
|                                           |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-accrual      loans                         |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Aggregate      loan amounts                    |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial      and industrial                 |   | $                       | 892    |   |   | $ | - |   |   | $ | 477 |   |   | $ | - |   |   | $ | 173 |   |
| Real      estate                               |   |                    | 74,330 |   |   |   | 14,400 |   |   |   | 480 |   |   |   | - |   |   |   | - |   |
| Consumer      loans                            |   |                    | 140    |   |   |   | - |   |   |   | 7 |   |   |   | - |   |   |   | - |   |
| Total      non-accrual loans                   |   |                    | 75,362 |   |   |   | 14,400 |   |   |   | 964 |   |   |   | - |   |   |   | 173 |   |
|                                           |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total      non-performing loans                |   | $                       | 75,416 |   |   | $ | 16,715 |   |   | $ | 964 |   |   | $ | - |   |   | $ | 173 |   |
|                                           |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other      Real Estate Owned                   |   | $                       | 17,375 |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | 111 |   |

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Table of Contents

| (Dollars      in thousands)             |   | As      of December 31, |   |
|-----------------------------------------|--------|------------------------------|--------|
|                                    |   | 2007                         |   |   | 2006 |   |   | 2005 |   |   | 2004 |   |   | 2003 |   |
|                                    |   |                         |   |   | Percent      of |   |   |   |   |   | Percent      of |   |   |   |   |   | Percent      of |   |   |   |   |   | Percent      of |   |   |   |   |   | Percent      of |   |
|                                    |   |                         |   |   | Loans      in |   |   |   |   |   | Loans      in |   |   |   |   |   | Loans      in |   |   |   |   |   | Loans      in |   |   |   |   |   | Loans      in |   |
|                                    |   | Allowance                    |   |   | Each |   |   | Allowance |   |   | Each |   |   | Allowance |   |   | Each |   |   | Allowance |   |   | Each |   |   | Allowance |   |   | Each |   |
|                                    |   | for                          |   |   | Category      to |   |   | for |   |   | Category      to |   |   | for |   |   | Category      to |   |   | for |   |   | Category      to |   |   | for |   |   | Category      to |   |
|                                    |   | Loan      Losses             |   |   | Total      Loans |   |   | Loan      Losses |   |   | Total      Loans |   |   | Loan      Losses |   |   | Total      Loans |   |   | Loan      Losses |   |   | Total      Loans |   |   | Loan      Losses |   |   | Total      Loans |   |
|                                    |   |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial      and industrial          |   | $                            | 2,100  |   |   |   | 7.8 | % |   | $ | 1,352 |   |   |   | 6.4 | % |   | $ | 717 |   |   |   | 4.0 | % |   | $ | 919 |   |   |   | 3.5 | % |   | $ | 791 |   |   |   | 4.5 | % |
| Real      estate construction and land: |   |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Single-family      luxury               |   |                         | 10,416 |   |   |   | 29.0 | % |   |   | 7,044 |   |   |   | 27.0 | % |   |   | 5,190 |   |   |   | 28.5 | % |   |   | 4,079 |   |   |   | 29.1 | % |   |   | 2,479 |   |   |   | 35.5 | % |
| Single-family      tract                |   |                         | 24,487 |   |   |   | 7.3 | % |   |   | 1,596 |   |   |   | 8.0 | % |   |   | 1,656 |   |   |   | 9.4 | % |   |   | 1,838 |   |   |   | 12.6 | % |   |   | 1,407 |   |   |   | 17.4 | % |
| Commercial                              |   |                         | 1,967  |   |   |   | 9.9 | % |   |   | 1,198 |   |   |   | 7.0 | % |   |   | 497 |   |   |   | 4.4 | % |   |   | 367 |   |   |   | 3.5 | % |   |   | 255 |   |   |   | 3.5 | % |
| Land                                    |   |                         | 2,175  |   |   |   | 5.2 | % |   |   | 2,998 |   |   |   | 5.9 | % |   |   | 2,234 |   |   |   | 6.6 | % |   |   | 854 |   |   |   | 6.0 | % |   |   | - |   |   |   | 2.5 | % |
| Real      estate mortgage:              |   |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial                              |   |                         | 4,117  |   |   |   | 27.6 | % |   |   | 3,105 |   |   |   | 27.9 | % |   |   | 1,987 |   |   |   | 23.4 | % |   |   | 1,275 |   |   |   | 21.0 | % |   |   | 964 |   |   |   | 25.6 | % |
| Residential                             |   |                         | 1,383  |   |   |   | 7.5 | % |   |   | 1,185 |   |   |   | 14.3 | % |   |   | 1,076 |   |   |   | 22.6 | % |   |   | 1,286 |   |   |   | 24.0 | % |   |   | 490 |   |   |   | 10.2 | % |
| Consumer      and other loans           |   |                         | 2,069  |   |   |   | 5.7 | % |   |   | 1,153 |   |   |   | 3.5 | % |   |   | 292 |   |   |   | 1.1 | % |   |   | 127 |   |   |   | 0.3 | % |   |   | 33 |   |   |   | 0.8 | % |
| Other      risks                        |   |                         | 135    |   |   |   | 0.0 | % |   |   | 58 |   |   |   | 0.0 | % |   |   | 113 |   |   |   | 0.0 | % |   |   | 1,224 |   |   |   | 0.0 | % |   |   | 939 |   |   |   | 0.0 | % |
| Total                                   |   | $                            | 48,849 |   |   |   | 100.0 | % |   | $ | 19,689 |   |   |   | 100.0 | % |   | $ | 13,762 |   |   |   | 100.0 | % |   | $ | 11,969 |   |   |   | 100.0 | % |   | $ | 7,358 |   |   |   | 100.0 | % |

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| (Dollars      in thousands)                           |   | Maturing        |      |   |             |   |
|-------------------------------------------------------|--------|-----------------|-----------|--------|------------------|--------|
|                                                  |   | Within      One |      |   | One      to Five |   |   | After      Five |   |   |   |   |
|                                                  |   | Year            |      |   | Years            |   |   | Years |   |   | Total |   |
| Commercial      and industrial                        |   | $               | 89,610    |   |             | $      | 45,701 |   |   | $ | 21,655 |   |   | $ | 156,966 |   |
| Real      estate construction and land:               |   |            |      |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Single-family      luxury                             |   |            | 516,830   |   |             |   | 66,132 |   |   |   | - |   |   |   | 582,962 |   |
| Single-family      tract                              |   |            | 141,787   |   |             |   | 4,840 |   |   |   | - |   |   |   | 146,627 |   |
| Commercial                                            |   |            | 159,031   |   |             |   | 34,704 |   |   |   | 4,451 |   |   |   | 198,186 |   |
| Land                                                  |   |            | 97,432    |   |             |   | 5,408 |   |   |   | 844 |   |   |   | 103,684 |   |
| Real      estate mortgage:                            |   |            |      |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Commercial                                            |   |            | 79,577    |   |             |   | 84,703 |   |   |   | 435,035 |   |   |   | 599,315 |   |
| Residential                                           |   |            | 40,539    |   |             |   | 38,460 |   |   |   | 144,563 |   |   |   | 223,562 |   |
| Consumer      loans                                   |   |            | 6,265     |   |             |   | 3,037 |   |   |   | 106,400 |   |   |   | 115,702 |   |
| All      other loans (including overdrafts)           |   |            | 264       |   |             |   | - |   |   |   | - |   |   |   | 264 |   |
| Total                                                 |   | $               | 1,131,335 |   |             | $      | 282,985 |   |   | $ | 712,948 |   |   | $ | 2,127,268 |   |
|                                                  |   |            |      |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Loans      with predetermined interest rates          |   | $               | 36,060    |   |             | $      | 112,281 |   |   | $ | 199,330 |   |   | $ | 347,671 |   |
| Loans      with floating or adjustable interest rates |   |            | 1,095,275 |   |             |   | 170,704 |   |   |   | 513,618 |   |   |   | 1,779,597 |   |
| Total                                                 |   | $               | 1,131,335 |   |             | $      | 282,985 |   |   | $ | 712,948 |   |   | $ | 2,127,268 |   |

| (Dollars      in thousands)              |   | December      31,   |    |
|------------------------------------------|--------|---------------------|---------|
|                                     |   | 2007                |    |   | 2006 |   |   | 2005 |   |
|                                     |   | Amortized      Cost |    |   | Fair      Value |   |   | Amortized      Cost |   |   | Fair      Value |   |   | Amortized      Cost |   |   | Fair      Value |   |
| Trading      securities:                 |   | $                   | 5,516   |   |   | $ | 5,784 |   |   | $ | 4,707 |   |   | $ | 4,707 |   |   | $ | 3,491 |   |   | $ | 3,491 |   |
|                                     |   |                |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Available-for-sale:                      |   |                |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| U.S.      agency securities              |   | $                   | 13,328  |   |   | $ | 13,135 |   |   | $ | 12,515 |   |   | $ | 12,334 |   |   | $ | 11,751 |   |   | $ | 11,625 |   |
| Mortgage-backed      securities          |   |                | 160,214 |   |   |   | 156,112 |   |   |   | 205,139 |   |   |   | 198,702 |   |   |   | 243,786 |   |   |   | 234,980 |   |
| Mutual      funds                        |   |                | 2,310   |   |   |   | 2,290 |   |   |   | 2,213 |   |   |   | 2,164 |   |   |   | 2,121 |   |   |   | 2,089 |   |
| Total      available-for-sale securities |   | $                   | 175,852 |   |   | $ | 171,537 |   |   | $ | 219,867 |   |   | $ | 213,200 |   |   | $ | 257,658 |   |   | $ | 248,694 |   |
| Total      Investment Securities         |   | $                   | 181,368 |   |   | $ | 177,321 |   |   | $ | 224,574 |   |   | $ | 217,907 |   |   | $ | 261,149 |   |   | $ | 252,185 |   |

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| (Dollars      in thousands)     |   | Maturing       |    |   |         |   |
|---------------------------------|--------|----------------|---------|--------|--------------|--------|
|                            |   | After          |    |   | Weighted     |   |   | Total      Balance as of |   |
|                            |   | Ten      Years |    |   | AverageYield |   |   | December      31, 2007 |   |
| U.S      agency securities      |   | $              | 13,135  |   |         |   | 6.49 | % |   | $ | 13,135 |   |
| Mortgage-backed      securities |   |           | 156,112 |   |         |   | 4.65 | % |   |   | 156,112 |   |
| Total                           |   | $              | 169,247 |   |         |   | 4.80 | % |   | $ | 169,247 |   |

| (Dollars      in thousands)     |   | Less      than 12 months |   |   | 12      months or Longer |   |   | Total           |   |
|---------------------------------|--------|--------------------------|--------|--------|--------------------------|--------|--------|-----------------|--------|
|                            |   |                     |   |   | Gross                    |   |   |            |   |   | Gross |   |   |   |   |   | Gross |   |
|                            |   |                     |   |   | Unrealized               |   |   |            |   |   | Unrealized |   |   |   |   |   | Unrealized |   |
|                            |   |                     |   |   | Holding                  |   |   |            |   |   | Holding |   |   |   |   |   | Holding |   |
|                            |   | Fair      Value          |   |   | Losses                   |   |   | Fair      Value |   |   | Losses |   |   | Fair      Value |   |   | Losses |   |
|                            |   |                     |   |   |                     |   |   |            |   |   |   |   |   |   |   |   |   |   |
| U.S.      agency securities     |   | $                        | 13,135 |   |                     | $      | (193   | )               |   | $ | - |   |   | $ | - |   |   | $ | 13,135 |   |   | $ | (193 | ) |
| Mortgage-backed      securities |   |                     | 21,308 |   |                     |   | (241   | )               |   |   | 129,955 |   |   |   | (3,870 | ) |   |   | 151,263 |   |   |   | (4,111 | ) |
| Mutual      funds               |   |                     | 2,290  |   |                     |   | (20    | )               |   |   | - |   |   |   | - |   |   |   | 2,290 |   |   |   | (20 | ) |
| Total                           |   | $                        | 36,733 |   |                     | $      | (454   | )               |   | $ | 129,955 |   |   | $ | (3,870 | ) |   | $ | 166,688 |   |   | $ | (4,324 | ) |

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| (Dollars in thousands)                                     |   |              |      |   | Over      Three |   |     |              |   |   |           |   |   |     |    |   |   |   |
|------------------------------------------------------------|--------|-------------------|-----------|--------|-----------------|--------|----------|-------------------|--------|--------|----------------|--------|--------|----------|---------|--------|--------|--------|
|                                                       |   |              |      |   | Through         |   |     | Over      One     |   |   |           |   |   | Non-     |    |   |   |   |
|                                                       |   | Three      Months |      |   | Twelve          |   |     | Through      Five |   |   | Over      Five |   |   | interest |    |   |   |   |
|                                                       |   | or      Less      |      |   | Months          |   |     | Years             |   |   | Years          |   |   | Bearing  |    |   | Total  |   |
| Assets                                                     |   |              |      |   |            |   |     |              |   |   |           |   |   |     |    |   |   |   |
| Investment      securities                                 |   | $                 | 8,074     |   |            |   |     |              | $      | 26,157 |           |   | $      | 143,090  |    |   |   |   |   | $ | 177,321 |   |
| Other      investments                                     |   |              |      |   |            |   |     |              |   |   |           |   |   | 25,066   |    |   |   |   |   |   | 25,066 |   |
| Gross      loans                                           |   |              | 887,129   |   |            | $      | 397,517  |              |   |   | 260,522        |   |   |     | 582,100 |   |   |   |   |   |   | 2,127,268 |   |
| Noninterest-earning      assets                            |   |              |      |   |            |   |     |              |   |   |           |   |   |     |    |   |   | $      | 153,624 |   |   |   | 153,624 |   |
| Total      assets                                          |   | $                 | 895,203   |   |            | $      | 397,517  |              |   | $      | 286,679        |   |   | $        | 750,256 |   |   | $      | 153,624 |   |   | $ | 2,483,279 |   |
|                                                       |   |              |      |   |            |   |     |              |   |   |           |   |   |     |    |   |   |   |   |   |   |   |   |   |
| Liabilities      and stockholders' equity                  |   |              |      |   |            |   |     |              |   |   |           |   |   |     |    |   |   |   |   |   |   |   |   |   |
| Non      interest-bearing deposits                         |   |              |      |   |            |   |     |              |   |   |           |   |   |     |    |   |   | $      | 316,905 |   |   | $ | 316,905 |   |
| Interest-bearing      deposits                             |   | $                 | 928,789   |   |            | $      | 601,085  |              |   | $      | 88,873         |   |   |     |    |   |   |   |   |   |   |   | 1,618,747 |   |
| Exchange      balances                                     |   |              | 23,757    |   |            |   | 23,758   |              |   |   |           |   |   |     |    |   |   |   |   |   |   |   | 47,515 |   |
| FHLB      advances and other borrowings                    |   |              | 45,250    |   |            |   | 40,000   |              |   |   | 135,000        |   |   |     |    |   |   |   |   |   |   |   | 220,250 |   |
| Subordinated      debt                                     |   |              | 5,000     |   |            |   |     |              |   |   |           |   |   |     |    |   |   |   |   |   |   |   | 5,000 |   |
| Junior      subordinated debentures                        |   |              | 115,470   |   |            |   |     |              |   |   |           |   |   |     |    |   |   |   |   |   |   |   | 115,470 |   |
| Other      liabilities                                     |   |              |      |   |            |   |     |              |   |   |           |   |   |     |    |   |   |   | 46,367 |   |   |   | 46,367 |   |
| Stockholders'      equity                                  |   |              |      |   |            |   |     |              |   |   |           |   |   |     |    |   |   |   | 113,025 |   |   |   | 113,025 |   |
| Total  liabilities      and stockholders' equity |   | $                 | 1,118,266 |   |            | $      | 664,843  |              |   | $      | 223,873        |   |   | $        | -       |   |   | $      | 476,297 |   |   | $ | 2,483,279 |   |
| Interest      rate sensitivity gap                         |   | $                 | (223,063  | )      |            | $      | (267,326 | )                 |   | $      | 62,806         |   |   | $        | 750,256 |   |   | $      | (322,673 | ) |   |   |   |   |
| Cumulative      interest rate sensitivity gap              |   | $                 | (223,063  | )      |            | $      | (490,389 | )                 |   | $      | (427,583       | )      |   | $        | 322,673 |   |   | $      | - |   |   |   |   |   |

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| (Dollars      in thousands) |   |                          |   |   |                   |   |   |               |   |   |                   |   |
|-----------------------------|--------|-------------------------------|--------|--------|------------------------|--------|--------|--------------------|--------|--------|------------------------|--------|
|                        |   | Economic      Value of Equity |   |   | Earnings      at Risk  |   |
| Simulated                   |   | Cumulative                    |   |   | Cumulative             |   |   | Cumulative         |   |   | Cumulative             |   |
| Rate      Changes           |   | Dollar      Change            |   |   | Percentage      Change |   |   | Dollar      Change |   |   | Percentage      Change |   |
| +200      Basis Points      |   | $                             | (8,193 | )      |                   |   | -4.5   | %                  |   | $      | 5,015                  |   |   |   | 5.5 | % |
| +100      Basis Points      |   | $                             | (2,986 | )      |                   |   | -1.6   | %                  |   | $      | 1,916                  |   |   |   | 2.1 | % |
| -100      Basis Points      |   | $                             | 1,282  |   |                   |   | 0.7    | %                  |   | $      | (1,353                 | )      |   |   | -1.5 | % |
| -200      Basis Points      |   | $                             | (3,059 | )      |                   |   | -1.7   | %                  |   | $      | (2,887                 | )      |   |   | -3.2 | % |

| (Dollars      in thousands)               |   | Years      Ended December 31, |      |
|-------------------------------------------|--------|------------------------------------|-----------|
|                                      |   | 2007                               |      |   | 2006 |   |   | 2005 |   |
|                                      |   | Average                            |      |   | Average |   |   | Average |   |   | Average |   |   | Average |   |   | Average |   |
|                                      |   | Balance                            |      |   | Rate |   |   | Balance |   |   | Rate |   |   | Balance |   |   | Rate |   |
| Non-interest      bearing demand deposits |   | $                                  | 289,036   |   |   |   | 0.0 | % |   | $ | 206,782 |   |   |   | 0.0 | % |   | $ | 141,380 |   |   |   | 0.0 | % |
| Savings      deposits (1)                 |   |                               | 667,588   |   |   |   | 4.1 | % |   |   | 540,654 |   |   |   | 3.7 | % |   |   | 447,424 |   |   |   | 2.7 | % |
| Time      deposits                        |   |                               | 865,587   |   |   |   | 5.2 | % |   |   | 801,113 |   |   |   | 4.7 | % |   |   | 486,938 |   |   |   | 3.2 | % |
| Total      Deposits                       |   | $                                  | 1,822,211 |   |   |   | 4.0 | % |   | $ | 1,548,549 |   |   |   | 3.7 | % |   | $ | 1,075,742 |   |   |   | 2.6 | % |

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Table of Contents

| (Dollars      in thousands)         |   | As      of December 31, 2007 |    |
|-------------------------------------|--------|------------------------------|---------|
|                                |   |                         |    |
| Three      months or less           |   | $                            | 147,981 |   |
| Over      three through six months  |   |                         | 166,870 |   |
| Over      six through twelve months |   |                         | 185,410 |   |
| Over      one through five years    |   |                         | 52,542  |   |
|                                |   | $                            | 552,803 |   |

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| (Dollars      in thousands)      |   | December      31, |   |
|----------------------------------|--------|-------------------|--------|
|                             |   | 2007              |   |   | 2006 |   |   | 2005 |   |
| Federal      funds purchased     |   | $                 | -      |   |   | $ | - |   |   | $ | - |   |
| FHLB      advances               |   |              | 40,000 |   |   |   | 66,000 |   |   |   | 164,000 |   |
| Line      of credit              |   |              | 45,250 |   |   |   | 40,000 |   |   |   | 10,000 |   |
| Total      Short-Term Borrowings |   | $                 | 85,250 |   |   | $ | 106,000 |   |   | $ | 174,000 |   |

| (Dollars      in thousands)                |   | For      the year ended December 31, |    |
|--------------------------------------------|--------|--------------------------------------|---------|
|                                       |   | 2007                                 |    |   | 2006 |   |   | 2005 |   |
| FHLB      Advances                         |   |                                 |    |   |   |   |   |   |   |
| Average      balance during the year       |   | $                                    | 85,667  |   |   | $ | 104,000 |   |   | $ | 282,642 |   |
| Maximum      balance outstanding           |   | $                                    | 165,000 |   |   | $ | 241,000 |   |   | $ | 395,000 |   |
| Balance      at December 31,               |   | $                                    | 40,000  |   |   | $ | 66,000 |   |   | $ | 164,000 |   |
| Interest      rate, end of year            |   |                                 | 5.08    | % |   |   | 5.12 | % |   |   | 4.04 | % |
| Weighted      average rate during the year |   |                                 | 4.94    | % |   |   | 4.70 | % |   |   | 3.31 | % |
| Line      of Credit                        |   |                                 |    |   |   |   |   |   |   |   |   |   |
| Average      balance during the year       |   | $                                    | 25,336  |   |   | $ | 14,696 |   |   | $ | 356 |   |
| Maximum      balance outstanding           |   | $                                    | 46,700  |   |   | $ | 40,000 |   |   | $ | 10,000 |   |
| Balance      at December 31,               |   | $                                    | 45,250  |   |   | $ | 40,000 |   |   | $ | 10,000 |   |
| Interest      rate, end of year            |   |                                 | 7.31    | % |   |   | 7.60 | % |   |   | 6.75 | % |
| Weighted      average rate during the year |   |                                 | 7.70    | % |   |   | 7.47 | % |   |   | 6.75 | % |

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|                                                              |   | 2007   |   |   | 2006   |   |   | 2005 |   |
|-------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|------|--------|
| Return      on average assets                                     |   |   | -1.67  | %      |   |   | 1.00   | %    |   |   | 1.21 | % |
| Return      on average tangible assets (1)                        |   |   | -1.67  | %      |   |   | 1.03   | %    |   |   | 1.21 | % |
| Return      on average total equity                               |   |   | -25.21 | %      |   |   | 16.18  | %    |   |   | 19.60 | % |
| Return      on average common equity  (2)               |   |   | -30.32 | %      |   |   | 16.77  | %    |   |   | 20.50 | % |
| Return      on average common tangible equity  (3)      |   |   | -43.36 | %      |   |   | 20.54  | %    |   |   | 20.58 | % |
| Cash      dividend payout ratio                                   |   |   | -7.83  | %      |   |   | 16.41  | %    |   |   | 13.20 | % |
| Total  stockholders'      equity to asset ratio         |   |   | 6.61   | %      |   |   | 6.18   | %    |   |   | 6.18 | % |
| Common      stockholders' equity to asset ratio  (4)    |   |   | 5.73   | %      |   |   | 5.69   | %    |   |   | 5.74 | % |
| Common      tangible stockholders' equity to asset ratio      (5) |   |   | 3.94   | %      |   |   | 4.72   | %    |   |   | 5.72 | % |

| (1)   | Return      on average tangible assets is computed by dividing tangible net income for      the period by average tangible assets.  Tangible net income is      calculated by subtracting core deposit intangible expense from net income      for the period.  Average tangible assets are derived by      subtracting average identifiable intangible assets and goodwill from      average total assets. |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2)   | Return      on average common equity is computed by dividing net income applicable to      common shareholders for the period by average common      equity.  Average common equity is derived by subtracting average      preferred equity from average total stockholders’  equity. |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3)   | Return      on average common tangible equity is computed by dividing tangible net      income applicable to common shareholders for the period by average common      tangible equity.  Tangible net income applicable to common      shareholders can be calculated by subtracting core deposit intangible      expense and preferred dividends from net income for the      period.  Average common tangible equity is derived by      subtracting average preferred equity and average identifiable intangible      assets and goodwill from average total stockholders’    equity. |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4)   | Common      stockholders’ equity to asset ratio is calculated by dividing average      common stockholder’s equity, which equals average total stockholders’      equity less average preferred equity, by average  assets. |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (5)   | Common      tangible stockholders’ equity to asset ratio is calculated by dividing      average common tangible stockholder’s equity, which equals average total      stockholders’ equity less average preferred equity and average      identifiable intangible assets and goodwill, by average      assets. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| ·   | require      periodic reports and such      additional information as the FRB mayrequire. |
|--------------------|------------------------------------------------------------------------------------------------|

| ·   | require      VNB to maintain certain levels of capital.  See “Capital      Requirements.” |
|--------------------|-----------------------------------------------------------------------------------------------------------------|

| ·   | require      that bank holding companies serve as a source of financial and managerial      strength to subsidiary banks and commit resources as necessary to support      each subsidiary bank.  A bank holding company’s failure to meet      its obligations to serve as a source of strength to its subsidiary banks      will generally be considered by the FRB to be an unsafe and unsound      banking practice or a violation of FRB regulations or  both. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | terminate      an activity or terminate control of or liquidate or divest certain      subsidiaries, affiliates or investments if the FRB believes the activity      or the control of the subsidiary or affiliate constitutes a significant      risk to the financial safety, soundness or stability of any bank      subsidiary. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | regulate      provisions of certain bank holding company debt, including the authority      to impose interest ceilings and reserve requirements on such debt and      require prior approval to purchase or redeem our securities in certain      situations. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | approve      acquisitions and mergers with banks and consider certain competitive,      management, financial and other factors in granting these approvals.      Similar California and other state banking agency approvals may also be      required. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| ·   | required      executive certification of financial  presentations; |
|--------------------|--------------------------------------------------------------------|

| ·   | increased      requirements for board audit committees and their  members; |
|--------------------|----------------------------------------------------------------------------|

| ·   | enhanced      disclosure of controls and procedures and internal control over financial      reporting; |
|--------------------|---------------------------------------------------------------------------------------------------------|

| ·   | enhanced      controls on, and reporting of, insider trading;  and |
|--------------------|--------------------------------------------------------------------|

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| ·   | increased      penalties for financial crimes and forfeiture of executive bonuses in      certain circumstances. |
|--------------------|------------------------------------------------------------------------------------------------------------------|

| ·   | require      affirmative action to correct any conditions resulting from any violation      or practice; |
|--------------------|----------------------------------------------------------------------------------------------------------|

| ·   | direct      an increase in capital; |
|--------------------|-------------------------------------|

| ·   | restrict      the Bank’s growth geographically, by products and services or by mergers      and acquisitions; |
|--------------------|---------------------------------------------------------------------------------------------------------------------|

| ·   | enter      into informal nonpublic or formal public memoranda of understanding or      written agreements; |
|--------------------|------------------------------------------------------------------------------------------------------------|

| ·   | enjoin      unsafe and unsound practices and issue cease and desist orders to take      corrective action; |
|--------------------|------------------------------------------------------------------------------------------------------------|

| ·   | remove      officers and directors and assess civil monetary penalties;      and |
|--------------------|----------------------------------------------------------------------------------|

| ·   | take      possession and close and liquidate theBank. |
|--------------------|-------------------------------------------------------|

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  Moreover, higher capital ratios may berequired for any bank holding company if warranted by its particularcircumstances or risk profile. In all cases, bank holding companies should holdcapital commensurate with the level and nature of the risks, including thevolume and severity of problem loans, to which they areexposed.

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| ·   | a      bank or bank holding company’s executive officers, directors and principal      shareholders (i.e., in most cases, those persons who own, control or have      power to vote more than 10% of any class of voting      securities); |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | any      company controlled by any such executive officer, director or shareholder;      or |
|--------------------|---------------------------------------------------------------------------------------------|

| ·   | any      political or campaign committee controlled by such executive officer,      director or principal shareholder. |
|--------------------|------------------------------------------------------------------------------------------------------------------------|

| ·   | must      comply with loan-to-one-borrower limits, require prior full board approval      when aggregate extensions of credit to the person exceed specified      amounts, must be made on substantially the same terms (including interest      rates and collateral) and follow credit-underwriting procedures no less      stringent than those prevailing at the time for comparable transactions      with non-insiders; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | must      not involve more than the normal risk of repayment or present other      unfavorable features; and |
|--------------------|--------------------------------------------------------------------------------------------------------------|

| ·   | in      the aggregate must not exceed the Bank’s unimpaired capital and unimpaired      surplus. |
|--------------------|--------------------------------------------------------------------------------------------------------|

| ·   | prevent      any affiliates from borrowing from the Bank unless the loans are secured      by marketable obligations of designatedamounts; |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | limit      such loans and investments to or in any affiliate individually to 10.0% of      the Bank’s capital and surplus; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------|

| ·   | limit      such loans and investments to or in any affiliate in the aggregate to      20.0% of the Bank’s capital and surplus;and |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------|

| ·   | require      such loans and investments to or in any affiliate to be on terms and under      conditions substantially the same or at least as favorable to the Bank as      those prevailing for comparable transactions with nonaffiliated      parties. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| ·   | The      Home Ownership and Equity Protection Act of 1994, or HOEPA, requires extra      disclosures and consumer protections to borrowers from certain lending      practices, such as practices deemed to be “predatory    lending.” |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Privacy      policies are required by federal and state banking laws regulations which      limit the ability of banks and other financial institutions to disclose      nonpublic information about consumers to nonaffiliated third      parties. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The      Fair Credit Reporting Act, as amended by the Fair and Accurate Credit      Transactions Act, or the FACT Act, requires financial firms to help deter      identity theft, including developing appropriate fraud response programs,      and gives consumers more control of their credit  data. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The      Equal Credit Opportunity Act, or ECOA, generally prohibits discrimination      in any credit transaction, whether for consumer or business purposes, on      the basis of race, color, religion, national origin, sex, marital status,      age (except in limited circumstances), receipt of income from public      assistance programs, or good faith exercise of any rights under the      Consumer Credit Protection Act. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The      Truth in Lending Act (“TILA”) requires that credit terms be disclosed in a      meaningful and consistent way so that consumers may compare credit terms      more readily and knowledgeably. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The      Fair Housing Act regulates many lending practices, including making it      unlawful for any lender to discriminate in its housing-related lending      activities against any person because of race, color, religion, national      origin, sex, handicap or familialstatus. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The      CRA requires insured depository institutions, while operating safely and      soundly, to help meet the credit needs of their communities; directs the      federal regulatory agencies, in examining insured depository institutions,      to assess a bank’s record of helping meet the credit needs of its entire      community, including low- and moderate-income neighborhoods, consistent      with safe and sound banking practices and further requires the agencies to      take a financial institution’s record of meeting its community credit      needs into account when evaluating applications for, among other things,      domestic branches, mergers or acquisitions, or holding company      formations.  In its last examination for CRA compliance, as of      April 2, 2007, the Bank was rated  “satisfactory.” |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The      Home Mortgage Disclosure Act (“HMDA”) includes a “fair lending” aspect      that requires the collection and disclosure of data about applicant and      borrower characteristics as a way of identifying possible discriminatory      lending patterns and enforcing anti-discrimination    statutes. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The      Real Estate Settlement Procedures Act (“RESPA”) requires lenders to      provide borrowers with disclosures regarding the nature and cost of real      estate settlements and prohibits certain abusive practices, such as      kickbacks. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The      National Flood Insurance Act (“NFIA”) requires homes in flood-prone areas      with mortgages from a federally regulated lender to have flood      insurance. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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Item 1A. Risk Factors

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| ·   | cash      flow of the borrower and/or the project being  financed; |
|--------------------|--------------------------------------------------------------------|

| ·   | in      the case of a collateralized loan, the changes and uncertainties as to the      future value of the collateral; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------|

| ·   | the      credit history of a particularborrower; |
|--------------------|--------------------------------------------------|

| ·   | changes      in economic and industry conditions;and |
|--------------------|------------------------------------------------------|

| ·   | the      duration of the loan. |
|--------------------|--------------------------------|

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| ·   | potential      exposure to unknown or contingent liabilities of the acquired banks,      businesses or banking centers weacquire; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------|

| ·   | exposure      to potential asset quality issues of the acquired banks, businesses or      banking centers; |
|--------------------|------------------------------------------------------------------------------------------------------------|

| ·   | difficulty      and expense of integrating the operations and personnel of the acquired      banks, businesses or banking centers weacquire; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | potential      disruption to our business; |
|--------------------|--------------------------------------------|

| ·   | potential      diversion of management’s time andattention; |
|--------------------|-------------------------------------------------------------------|

| ·   | the      possible loss of key employees and customers of the acquired banks,      businesses or banking centers weacquire; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------|

| ·   | difficulty      in estimating the value of the acquired banks, businesses or banking      centers to be acquired; and |
|--------------------|-----------------------------------------------------------------------------------------------------------------------|

| ·   | potential      changes in banking, tax laws, and/or regulations that may affect the      acquired banks or businesses to beacquired. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------|

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| ·   | loan      delinquencies may increase; |
|--------------------|---------------------------------------|

| ·   | problem      assets and foreclosures mayincrease; |
|--------------------|---------------------------------------------------|

| ·   | demand      for our products and services may decline;and |
|--------------------|-----------------------------------------------------------|

| ·   | collateral      for loans made by us, especially real estate, may decline in value, in      turn reducing a client’s borrowing power, and reducing the value of assets      and collateral associated with ourloans. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| ·   | inflation; |
|--------------------|------------|

| ·   | slow      or stagnant economic growth orrecession; |
|--------------------|----------------------------------------------------|

| ·   | unemployment; |
|--------------------|---------------|

| ·   | money      supply and the monetary policies of theFRB; |
|--------------------|--------------------------------------------------------|

| ·   | international      disorders; and |
|--------------------|-----------------------------------|

| ·   | instability      in domestic and foreign financialmarkets. |
|--------------------|------------------------------------------------------------|

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Unresolved Staff Comments

ITEM 2.  Properties

| Office      Location                               |   | Leased/Owned |   | Lease      Expiration Date |
|----------------------------------------------------|--------|--------------|--------|----------------------------|
|                                               |   |         |   |                       |
| 9590      Foothill Boulevard (1)      (6)          |   | Owned        |   | N/A                        |
| Rancho      Cucamonga, California  91730 |   |         |   |                       |
|                                               |   |         |   |                       |
| 5455      Riverside Drive (1)                      |   | Owned        |   | N/A                        |
| Chino,      California  91710            |   |         |   |                       |
|                                               |   |         |   |                       |
| 23840      Lake Drive      (1)                     |   | Owned        |   | N/A                        |
| Crestline,      California  92325        |   |         |   |                       |
|                                               |   |         |   |                       |
| 2009      West Foothill Boulevard      (1)         |   | Owned        |   | N/A                        |
| Upland,      California 91786                      |   |         |   |                       |
|                                               |   |         |   |                       |
| 2225      East Bayshore Road, Suite 200 (8)        |   | Leased       |   | N/A                        |
| Palo      Alto, California 94303                   |   |         |   |                       |
|                                               |   |         |   |                       |
| 303      Webster Street (6)                        |   | Leased       |   | July      2008             |
| Monterey,      California  93940         |   |         |   |                       |
|                                               |   |         |   |                       |
| 2659      Townsgate Road, Suite 102 (3)            |   | Leased       |   | February      2009         |
| Westlake      Village, California 91361            |   |         |   |                       |
|                                               |   |         |   |                       |
| 2100      East Foothill Boulevard (1)              |   | Leased       |   | October      2009          |
| La      Verne, California  91750         |   |         |   |                       |
|                                               |   |         |   |                       |
| 16008      Foothill Boulevard (1)                  |   | Leased       |   | December      2009         |
| Irwindale,      California 91702                   |   |         |   |                       |

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|                                                                     |   |   |   |              |
|--------------------------------------------------------------------------|--------|--------|--------|-------------------|
| 500      North State College Boulevard, Suite 530      (3)               |   | Leased |   | January      2010 |
| Orange,      California 92868                                            |   |   |   |              |
|                                                                     |   |   |   |              |
| 8748      Industrial Lane (5)                                            |   | Leased |   | March      2010   |
| Rancho      Cucamonga, California 91731                                  |   |   |   |              |
|                                                                     |   |   |   |              |
| 8105      Irvine Center Drive, Suite  600 (4)      and 650 (1) |   | Leased |   | April      2010   |
| Irvine,      California 92618                                            |   |   |   |              |
|                                                                     |   |   |   |              |
| 1200      South Diamond Bar Boulevard      (1)                           |   | Leased |   | April      2010   |
| Diamond      Bar, California  91765                            |   |   |   |              |
|                                                                     |   |   |   |              |
| 681      Encinitas Boulevard, Suites 403 and 404 (7)                     |   | Leased |   | August      2010  |
| Encinitas,      California 92024                                         |   |   |   |              |
|                                                                     |   |   |   |              |
| 20      First Street (3)                                                 |   | Leased |   | August      2012  |
| Los      Altos, California 94022                                         |   |   |   |              |

|                                                                           |   |   |   |               |
|--------------------------------------------------------------------------------|--------|--------|--------|--------------------|
| 28200      State Highway 189, Suite K-100      (1)                             |   | Leased |   | July      2013     |
| Lake      Arrowhead, California 92352                                          |   |   |   |               |
|                                                                           |   |   |   |               |
| 1230      Rosecrans Avenue, Suites 120 (1),      600 (4),      and 660 (4)     |   | Leased |   | August      2013   |
| Manhattan      Beach, California 90266                                         |   |   |   |               |
|                                                                           |   |   |   |               |
| 1016      Irwin Street      (1)                                                |   | Leased |   | January      2014  |
| San      Rafael, California 94901                                              |   |   |   |               |
|                                                                           |   |   |   |               |
| 7676      Hazard Center Drive, Suites 200 (1),      201 (6),      and 1540 (6) |   | Leased |   | November      2014 |
| San      Diego, California  92108                                    |   |   |   |               |
|                                                                           |   |   |   |               |
| 576      South Grand Avenue (1)                                                |   | Leased |   | August      2016   |
| Covina,      California 91724                                                  |   |   |   |               |
|                                                                           |   |   |   |               |
| 200      South Main Street, Suite 150, 320, and 130 (1)                        |   | Leased |   | December      2018 |
| Corona,      California 92882                                                  |   |   |   |               |
|                                                                           |   |   |   |               |
| 1260      Corona Pointe Court (6)      (2)                                     |   | Leased |   | January      2018  |
| Corona,      California  92879                                       |   |   |   |               |
|                                                                           |   |   |   |               |
| 20401      East Valley Boulevard (1)                                           |   | Leased |   | March      2020    |
| Walnut,      California 91789                                                  |   |   |   |               |
|                                                                           |   |   |   |               |
| 530      West Bonita Avenue (1)                                                |   | Leased |   | May      2020      |
| San      Dimas, California 91773                                               |   |   |   |               |

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ITEM 3.  Legal Proceedings

ITEM 4.

ITEM 5. Market for the Registrant’s Common Stock, Related StockholderMatters, and Issuer Purchases of Equity Securities

|                |   | Sales      Prices of |   |   | Dividends      per |   |
|---------------------|--------|----------------------|--------|--------|--------------------|--------|
|                |   | Common      Stock    |   |   | Common      Share  |   |
|                |   | High                 |   |   | Low                |   |   |   |   |
| 2007                |   |                 |   |   |               |   |   |   |   |
| First      Quarter  |   | $                    | 24.86  |   |               | $      | 20.42 |   |   | $ | 0.08 |   |
| Second      Quarter |   | $                    | 24.64  |   |               | $      | 20.87 |   |   | $ | 0.08 |   |
| Third      Quarter  |   | $                    | 22.97  |   |               | $      | 16.12 |   |   | $ | 0.08 |   |
| Fourth      Quarter |   | $                    | 17.71  |   |               | $      | 9.28 |   |   | $ | 0.08 |   |
|                |   |                 |   |   |               |   |   |   |   |   |   |   |
| 2006                |   |                 |   |   |               |   |   |   |   |   |   |   |
| First      Quarter  |   | $                    | 29.32  |   |               | $      | 26.88 |   |   | $ | 0.08 |   |
| Second      Quarter |   | $                    | 28.60  |   |               | $      | 23.20 |   |   | $ | 0.08 |   |
| Third      Quarter  |   | $                    | 26.72  |   |               | $      | 24.72 |   |   | $ | 0.08 |   |
| Fourth      Quarter |   | $                    | 23.82  |   |               | $      | 20.17 |   |   | $ | 0.08 |   |

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|                           |   |     |   |   | Period      Ending |   |   |     |   |
|--------------------------------|--------|----------|--------|--------|--------------------|--------|--------|----------|--------|
| Index                          |   | 12/31/02 |   |   | 12/31/03           |   |   | 12/31/04 |   |   | 12/31/05 |   |   | 12/31/06 |   |   | 12/31/07 |   |
| Vineyard      National Bancorp |   |     | 100.00 |   |               |   | 231.15 |     |   |   | 430.61 |   |   |   | 404.66 |   |   |   | 305.86 |   |   |   | 143.58 |   |
| NASDAQ      Composite          |   |     | 100.00 |   |               |   | 150.01 |     |   |   | 162.89 |   |   |   | 165.13 |   |   |   | 180.85 |   |   |   | 198.60 |   |
| SNL      Bank $1B-$5B Index    |   |     | 100.00 |   |               |   | 135.99 |     |   |   | 167.83 |   |   |   | 164.97 |   |   |   | 190.90 |   |   |   | 139.06 |   |

| (Dollars      in thousands, except per share amounts) |   |                                  |    |   |                                  |   |   |                                                                                           |   |   |
|-------------------------------------------------------|--------|---------------------------------------|---------|--------|---------------------------------------|--------|--------|------------------------------------------------------------------------------------------------|--------|--------|
|      Period                  |   | Total      Number of Shares Purchased |    |   | Average      PricePaid      Per Share |   |   | Total      Number of Shares Purchased as Part of Publicly Announced Plans or Programs      (1) |   |   | ApproximateDollar      Value of Shares that May Yet Be Purchased Under the Plans or      Programs |   |
|                                                  |   |                                  |    |   |                                  |   |   |                                                                                           |   |   |   |   |
| October      1 - 31, 2007                             |   |                                  | 305,000 |   |                                  | $      | 15.54  |                                                                                           |   |   | 305,000 |   |   | $ | 22,424 |   |
| November      1 - 30, 2007                            |   |                                  | 238,000 |   |                                  |   | 11.16  |                                                                                           |   |   | 238,000 |   |   | $ | 19,767 |   |
| December      1 - 31, 2007                            |   |                                  | -       |   |                                  |   | -      |                                                                                           |   |   | - |   |   | $ | 19,767 |   |
|   Total                                     |   |                                  | 543,000 |   |                                  | $      | 13.62  |                                                                                           |   |   | 543,000 |   |   |   |   |   |

| (1)   | In July 2002, we      adopted a stock repurchase program in the initial amount of $2.0      million.  In each of December 2003, January 2005 and May 2005,      we announced increases to our stock repurchase program of $5.0      million, and in October 2005 and August 2007, we announced an additional      increase of $20.0 million in our stock repurchase program for a total      amount of $57.0 million.  Under our stock repurchase program, we      have been acquiring our common stock in the open market from time to      time.  Our stock repurchase program does not have an expiration      date. |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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ITEM 6.  Selected Financial Data

| (Dollars      in thousands, except per share data)             |   | Years      Ended December 31, |       |
|----------------------------------------------------------------|--------|------------------------------------|------------|
|                                                           |   | 2007                               |       |   | 2006 |   |   | 2005 |   |   | 2004 |   |   | 2003 |   |
| Income      Statement Data                                     |   |                               |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest      Income                                           |   | $                                  | 189,434    |   |   | $ | 158,320 |   |   | $ | 110,859 |   |   | $ | 75,056 |   |   | $ | 39,537 |   |
| Interest      Expense                                          |   |                               | 95,923     |   |   |   | 75,230 |   |   |   | 43,345 |   |   |   | 22,054 |   |   |   | 11,383 |   |
| Net      Interest Income                                       |   |                               | 93,511     |   |   |   | 83,090 |   |   |   | 67,514 |   |   |   | 53,002 |   |   |   | 28,154 |   |
| Provision      for Loan Losses                                 |   |                               | (38,400    | ) |   |   | (4,125 | ) |   |   | (1,886 | ) |   |   | (4,881 | ) |   |   | (3,597 | ) |
| Other      Income                                              |   |                               | 4,580      |   |   |   | 5,622 |   |   |   | 5,305 |   |   |   | 5,457 |   |   |   | 5,828 |   |
| Other      Expenses      (3)                                   |   |                               | 99,766     |   |   |   | 51,017 |   |   |   | 38,746 |   |   |   | 29,922 |   |   |   | 16,853 |   |
| (Loss)      / Income Before Taxes                              |   |                               | (40,075    | ) |   |   | 33,570 |   |   |   | 32,187 |   |   |   | 23,656 |   |   |   | 13,532 |   |
| Income      Tax Provision                                      |   |                               | 36         |   |   |   | (13,825 | ) |   |   | (13,276 | ) |   |   | (9,669 | ) |   |   | (5,540 | ) |
| Net      (Loss) / Income                                       |   | $                                  | (40,039    | ) |   | $ | 19,745 |   |   | $ | 18,911 |   |   | $ | 13,987 |   |   | $ | 7,992 |   |
| (Loss)      / Earnings Per Share of Common Stock (1)           |   |                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                          |   | $                                  | (3.96      | ) |   | $ | 1.86 |   |   | $ | 1.88 |   |   | $ | 1.64 |   |   | $ | 1.15 |   |
| Diluted                                                        |   | $                                  | (3.96      | ) |   | $ | 1.80 |   |   | $ | 1.80 |   |   | $ | 1.49 |   |   | $ | 1.04 |   |
| Weighted      Average Number of Shares (1)                     |   |                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                          |   |                               | 10,540,928 |   |   |   | 10,153,919 |   |   |   | 9,776,770 |   |   |   | 8,065,209 |   |   |   | 6,401,871 |   |
| Diluted                                                        |   |                               | 10,540,928 |   |   |   | 10,493,968 |   |   |   | 10,231,286 |   |   |   | 9,332,684 |   |   |   | 7,528,833 |   |
| Ratio      of net charge-offs during the year to               |   |                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| average      loans outstanding during the year                 |   |                               | 0.45       | % |   |   | 0.02 | % |   |   | 0.01 | % |   |   | 0.03 | % |   |   | 0.02 | % |
| Return      on average assets                                  |   |                               | -1.67      | % |   |   | 1.00 | % |   |   | 1.21 | % |   |   | 1.20 | % |   |   | 1.29 | % |
| Return      on average tangible assets                         |   |                               | -1.67      | % |   |   | 1.03 | % |   |   | 1.21 | % |   |   | 1.21 | % |   |   | 1.29 | % |
| Return      on average equity                                  |   |                               | -25.21     | % |   |   | 16.18 | % |   |   | 19.60 | % |   |   | 23.47 | % |   |   | 28.06 | % |
| Cash      dividend declared per common share (2)               |   | $                                  | 0.31       |   |   | $ | 0.30 |   |   | $ | 0.25 |   |   | $ | 0.11 |   |   | $ | 0.02 |   |
| Average      stockholders’ equity to average asset ratio |   |                               | 6.61       | % |   |   | 6.18 | % |   |   | 6.18 | % |   |   | 5.13 | % |   |   | 4.58 | % |
|                                                           |   |                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance      Sheet Data                                        |   |                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Assets                                                         |   | $                                  | 2,483,279  |   |   | $ | 2,257,739 |   |   | $ | 1,713,638 |   |   | $ | 1,312,529 |   |   | $ | 887,979 |   |
| Deposits                                                       |   | $                                  | 1,935,652  |   |   | $ | 1,806,413 |   |   | $ | 1,276,701 |   |   | $ | 965,348 |   |   | $ | 603,326 |   |
| Net      Loans                                                 |   | $                                  | 2,078,649  |   |   | $ | 1,882,555 |   |   | $ | 1,359,337 |   |   | $ | 1,015,068 |   |   | $ | 589,649 |   |
| Long      Term Obligations                                     |   | $                                  | 255,470    |   |   | $ | 180,470 |   |   | $ | 151,913 |   |   | $ | 91,139 |   |   | $ | 58,147 |   |
| Redeemable      Preferred Stock                                |   | $                                  | 31,615     |   |   | $ | 9,665 |   |   | $ | 9,665 |   |   | $ | - |   |   | $ | 28,999 |   |
| Stockholders'      Equity                                      |   | $                                  | 113,025    |   |   | $ | 143,060 |   |   | $ | 99,985 |   |   | $ | 85,227 |   |   | $ | 52,175 |   |
| Ratio      of allowance for loan losses                        |   |                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| to      loans at year-end                                      |   |                               | 2.43       | % |   |   | 1.04 | % |   |   | 1.00 | % |   |   | 1.17 | % |   |   | 1.23 | % |

| (1)   | Basic      earnings / (loss) per share excludes dilution and is computed by dividing      income / (loss) available to common stockholders by the weighted-average      number of common shares outstanding for the period.  Diluted      earnings per share reflects the potential dilution that could occur if      securities or other contracts to issue common stock were exercised or      converted into common stock or resulted in the issuance of common stock      that then shared in the earnings of the entity.  In a net loss      scenario, diluted earnings per share equals basic earnings per      share.  The weighted average number of shares and the earnings      per share were adjusted to reflect our two-for-one stock split in August      2004 and the 5% stock dividend issued in June 2007, January 2004, and      January 2003. |
|-----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| (2)   | Cash      dividends declared per common share have been adjusted to reflect the 5%      stock dividends issued in June 2007, January 2004, and January 2003 and      the two-for-one stock split in August2004. |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3)   | Operating      expenses for the year ended December 31, 2007 includes $40.8 million      related to the write-down ofgoodwill. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------|

ITEM 7. 

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|                                      |   | For      the Years Ended December 31, |      |
|-------------------------------------------|--------|---------------------------------------|-----------|
|                                      |   | 2007                                  |      |   | 2006 |   |
| (Dollars      in thousands)               |   | Average                               |      |   |   |   |   | Average |   |   | Average |   |   |   |   |   | Average |   |
|                                      |   | Balance                               |      |   | Interest |   |   | Yield/Cost |   |   | Balance |   |   | Interest |   |   | Yield/Cost |   |
| Assets                                    |   |                                  |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans      (1)                            |   | $                                     | 2,051,107 |   |   | $ | 177,852 |   |   |   | 8.67 | % |   | $ | 1,632,995 |   |   | $ | 146,183 |   |   |   | 8.95 | % |
| Investment      securities      (2)       |   |                                  | 210,120   |   |   |   | 10,137 |   |   |   | 4.82 | % |   |   | 243,401 |   |   |   | 10,886 |   |   |   | 4.47 | % |
| Federal      funds sold                   |   |                                  | 5,839     |   |   |   | 287 |   |   |   | 4.91 | % |   |   | 7,594 |   |   |   | 386 |   |   |   | 5.09 | % |
| Other      investments                    |   |                                  | 21,834    |   |   |   | 1,158 |   |   |   | 5.30 | % |   |   | 16,293 |   |   |   | 865 |   |   |   | 5.31 | % |
| Total      interest-earning assets        |   |                                  | 2,288,900 |   |   |   | 189,434 |   |   |   | 8.28 | % |   |   | 1,900,283 |   |   |   | 158,320 |   |   |   | 8.33 | % |
| Other      assets                         |   |                                  | 136,536   |   |   |   |   |   |   |   |   |   |   |   | 91,397 |   |   |   |   |   |   |   |   |   |
| Less:      allowance for loan losses      |   |                                  | (21,198   | ) |   |   |   |   |   |   |   |   |   |   | (16,390 | ) |   |   |   |   |   |   |   |   |
| Total      average assets                 |   | $                                     | 2,404,238 |   |   |   |   |   |   |   |   |   |   | $ | 1,975,290 |   |   |   |   |   |   |   |   |   |
|                                      |   |                                  |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities      and Stockholders' Equity |   |                                  |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Savings      deposits (3)                 |   | $                                     | 667,588   |   |   |   | 27,087 |   |   |   | 4.06 | % |   | $ | 540,654 |   |   |   | 20,053 |   |   |   | 3.71 | % |
| Time      deposits                        |   |                                  | 865,587   |   |   |   | 44,935 |   |   |   | 5.19 | % |   |   | 801,113 |   |   |   | 37,805 |   |   |   | 4.72 | % |
| Subordinated      debt                    |   |                                  | 5,000     |   |   |   | 436 |   |   |   | 8.60 | % |   |   | 5,000 |   |   |   | 423 |   |   |   | 8.34 | % |
| Junior      subordinated debentures       |   |                                  | 115,470   |   |   |   | 9,244 |   |   |   | 7.90 | % |   |   | 108,606 |   |   |   | 8,477 |   |   |   | 7.70 | % |
| FHLB      advances                        |   |                                  | 239,713   |   |   |   | 11,931 |   |   |   | 4.94 | % |   |   | 156,430 |   |   |   | 7,353 |   |   |   | 4.70 | % |
| Other      borrowings                     |   |                                  | 31,262    |   |   |   | 2,290 |   |   |   | 7.23 | % |   |   | 14,799 |   |   |   | 1,119 |   |   |   | 7.45 | % |
| Total      interest-bearing liabilities   |   |                                  | 1,924,620 |   |   |   | 95,923 |   |   |   | 4.97 | % |   |   | 1,626,602 |   |   |   | 75,230 |   |   |   | 4.62 | % |
| Demand      deposits                      |   |                                  | 289,036   |   |   |   |   |   |   |   |   |   |   |   | 206,782 |   |   |   |   |   |   |   |   |   |
| Exchange      balances                    |   |                                  | 2,586     |   |   |   |   |   |   |   |   |   |   |   | - |   |   |   |   |   |   |   |   |   |
| Other      liabilities                    |   |                                  | 29,145    |   |   |   |   |   |   |   |   |   |   |   | 19,868 |   |   |   |   |   |   |   |   |   |
| Total      average liabilities            |   |                                  | 2,245,387 |   |   |   |   |   |   |   |   |   |   |   | 1,853,252 |   |   |   |   |   |   |   |   |   |
| Stockholders'      equity                 |   |                                  | 158,851   |   |   |   |   |   |   |   |   |   |   |   | 122,038 |   |   |   |   |   |   |   |   |   |
| Total      liabilities and                |   |                                  |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| stockholders'      equity                 |   | $                                     | 2,404,238 |   |   |   |   |   |   |   |   |   |   | $ | 1,975,290 |   |   |   |   |   |   |   |   |   |
|                                      |   |                                  |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      interest spread      (4)         |   |                                  |      |   |   |   |   |   |   |   | 3.31 | % |   |   |   |   |   |   |   |   |   |   | 3.71 | % |
| Net      interest income                  |   |                                  |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| and      net interest margin      (5)     |   |                                  |      |   |   | $ | 93,511 |   |   |   | 4.10 | % |   |   |   |   |   | $ | 83,090 |   |   |   | 4.37 | % |

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|                                                            |   | For      the Year Ended December 31, |      |
|-----------------------------------------------------------------|--------|--------------------------------------|-----------|
|                                                            |   | 2005                                 |      |
| (Dollars      in thousands)                                     |   | Average                              |      |   |   |   |   | Average |   |
|                                                            |   | Balance                              |      |   | Interest |   |   | Yield/Cost |   |
| Assets                                                          |   |                                 |      |   |   |   |   |   |   |
|   Loans      (1)                                      |   | $                                    | 1,210,673 |   |   | $ | 98,303 |   |   |   | 8.12 | % |
|   Investment      securities      (2)                 |   |                                 | 284,416   |   |   |   | 11,838 |   |   |   | 4.16 | % |
|   Federal      funds sold                             |   |                                 | 144       |   |   |   | 4 |   |   |   | 3.07 | % |
|   Other      investments                              |   |                                 | 16,547    |   |   |   | 714 |   |   |   | 4.32 | % |
|     Total      interest-earning assets      |   |                                 | 1,511,780 |   |   |   | 110,859 |   |   |   | 7.33 | % |
| Other      assets                                               |   |                                 | 63,564    |   |   |   |   |   |   |   |   |   |
|    Less:      allowance for loan losses          |   |                                 | (13,737   | ) |   |   |   |   |   |   |   |   |
|     Total      average assets               |   | $                                    | 1,561,607 |   |   |   |   |   |   |   |   |   |
|                                                            |   |                                 |      |   |   |   |   |   |   |   |   |   |
| Liabilities      and Stockholders' Equity                       |   |                                 |      |   |   |   |   |   |   |   |   |   |
|   Savings      deposits (3)                           |   | $                                    | 447,424   |   |   |   | 12,289 |   |   |   | 2.75 | % |
|   Time      deposits                                  |   |                                 | 486,938   |   |   |   | 15,719 |   |   |   | 3.23 | % |
|   Subordinated      debt                              |   |                                 | 5,000     |   |   |   | 333 |   |   |   | 6.66 | % |
|   Junior      subordinated debentures                 |   |                                 | 84,089    |   |   |   | 5,352 |   |   |   | 6.36 | % |
|   FHLB      advances                                  |   |                                 | 290,731   |   |   |   | 9,624 |   |   |   | 3.31 | % |
|   Other      borrowings                               |   |                                 | 447       |   |   |   | 28 |   |   |   | 6.26 | % |
|     Total      interest-bearing liabilities |   |                                 | 1,314,629 |   |   |   | 43,345 |   |   |   | 3.30 | % |
|   Demand      deposits                                |   |                                 | 141,380   |   |   |   |   |   |   |   |   |   |
|   Exchange      balances                              |   |                                 | -         |   |   |   |   |   |   |   |   |   |
|   Other      liabilities                              |   |                                 | 9,122     |   |   |   |   |   |   |   |   |   |
| Total      average liabilities                                  |   |                                 | 1,465,131 |   |   |   |   |   |   |   |   |   |
| Stockholders'      equity                                       |   |                                 | 96,476    |   |   |   |   |   |   |   |   |   |
|    Total      liabilities and                    |   |                                 |      |   |   |   |   |   |   |   |   |   |
|      stockholders'      equity         |   | $                                    | 1,561,607 |   |   |   |   |   |   |   |   |   |
|                                                            |   |                                 |      |   |   |   |   |   |   |   |   |   |
| Net      interest spread      (4)                               |   |                                 |      |   |   |   |   |   |   |   | 4.03 | % |
| Net      interest income                                        |   |                                 |      |   |   |   |   |   |   |   |   |   |
|   and      net interest margin      (5)               |   |                                 |      |   |   | $ | 67,514 |   |   |   | 4.47 | % |

| (1) | Interest      on loans includes loan fees, which totaled $8.9 million, $11.9 million and      $11.2 million for the years ended December 31, 2007, 2006 and 2005,      respectively. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4) | Net      interest spread represents the average yield earned on interest earning      assets less the average rate paid on interest bearing      liabilities. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| (Dollars      in thousands)         |   |   | 2007-2006 |   |   |   | 2006-2005 |   |
|-------------------------------------|--------|--------|-----------|--------|--------|--------|-----------|--------|
|                                |   | Volume |      |   | Rate   |   |      | Total  |   |   | Volume |   |   | Rate |   |   | Total |   |
| Increase      (Decrease) in:        |   |   |      |   |   |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest      income:               |   |   |      |   |   |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans      (1)                      | $      | 37,441 |      |   | $      | (5,772 | )         |   | $ | 31,669 |   |   | $ | 34,031 |   |   | $ | 13,849 |   |   | $ | 47,880 |   |
| Investment      securities          |   |   | (1,571    | )      |   |   | 822       |   |   |   | (749 | ) |   |   | (1,706 | ) |   |   | 754 |   |   |   | (952 | ) |
| Federal      funds sold             |   |   | (89       | )      |   |   | (10       | )      |   |   | (99 | ) |   |   | 229 |   |   |   | 153 |   |   |   | 382 |   |
| Other      investments              |   |   | 294       |   |   |   | (1        | )      |   |   | 293 |   |   |   | (11 | ) |   |   | 162 |   |   |   | 151 |   |
|                                |   |   | 36,075    |   |   |   | (4,961    | )      |   |   | 31,114 |   |   |   | 32,543 |   |   |   | 14,918 |   |   |   | 47,461 |   |
| Increase      (Decrease) in:        |   |   |      |   |   |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest      expense:              |   |   |      |   |   |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Savings      deposits (2)           |   |   | 4,604     |   |   |   | 2,430     |   |   |   | 7,034 |   |   |   | 2,511 |   |   |   | 5,253 |   |   |   | 7,764 |   |
| Time      deposits                  |   |   | 3,043     |   |   |   | 4,087     |   |   |   | 7,130 |   |   |   | 10,142 |   |   |   | 11,944 |   |   |   | 22,086 |   |
| Subordinated      debt              |   |   | -         |   |   |   | 13        |   |   |   | 13 |   |   |   | - |   |   |   | 90 |   |   |   | 90 |   |
| Junior      subordinated debentures |   |   | 536       |   |   |   | 231       |   |   |   | 767 |   |   |   | 1,560 |   |   |   | 1,565 |   |   |   | 3,125 |   |
| FHLB      advances                  |   |   | 3,915     |   |   |   | 663       |   |   |   | 4,578 |   |   |   | (4,446 | ) |   |   | 2,175 |   |   |   | (2,271 | ) |
| Other      borrowings               |   |   | 1,112     |   |   |   | 59        |   |   |   | 1,171 |   |   |   | 982 |   |   |   | 109 |   |   |   | 1,091 |   |
|                                |   |   | 13,210    |   |   |   | 7,483     |   |   |   | 20,693 |   |   |   | 10,749 |   |   |   | 21,136 |   |   |   | 31,885 |   |
| Increase      (Decrease)            |   |   |      |   |   |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| in      Net interest income         |   | $      | 22,865    |   |   | $      | (12,444   | )      |   | $ | 10,421 |   |   | $ | 21,794 |   |   | $ | (6,218 | ) |   | $ | 15,576 |   |

| (1)   | Interest      on loans includes loan fees, which totaled $8.9 million, $11.9 million and      $11.2 million for the years ended December 31, 2007, 2006 and 2005,      respectively. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2)   | Includes      savings, NOW, and money market depositaccounts. |
|-----------------|---------------------------------------------------------------|

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| (i)   | During      2007, we had $43.4 million in write-downs of assets, including a $40.8      million write-down of goodwill, a $2.3 million write-down of other real      estate owned and $0.4 million write down of loans      held-for-sale.  These write-downs occurred, in part, as a result      of market forces impacting the financial sector and the slowdown in      residential tract construction in Southern California.   As      it relates to the other real estate owned, we are actively pursuing      disposition of the related foreclosedassets. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (ii)   | Salaries      and employee benefits, which increased $2.4 million or 8.5% during 2007,      is the second largest component of non-interest expense.  We      believe that seasoned and experienced banking personnel increase the      likelihood of success and significant contributions to our operations, and      our salary and benefit expense reflects the cost of that      talent.  We also believe that performance-based incentive      compensation is instrumental to motivation and success of the employees      and the Company.  In March 2007, we hired a Chief Lending      Officer together with several experienced bankers to support our      commercial real estate lending operations.  These changes have      increased our compensation expense by $2.4 million or 8.5% to $31.2      million for the year ended December 31, 2007 as compared to the same      period in 2006 and by $7.0 million or 31.9% to $28.8 million for the year      ended December 31, 2006 as compared to $21.8 million for the same period      in 2005. |
|------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (iii)   | Occupancy      expense amounted to $5.7 million, $4.9 million and $3.9 million for the      years ended December 31, 2007, 2006 and 2005,      respectively.  This represents an increase of $0.8 million or      17.2% for the year ended December 31, 2007 as compared with the same      period in 2006 and an increase of $1.0 million or 25.8% for the year ended      December 31, 2006 as compared with the same period in 2005.  The      increases in occupancy expense are primarily due to our      expansion.  In February 2007, we opened a RFC in Santa Clara      County.  We also recognized a full year of expense for the      former Rancho Bank banking centers, which we acquired in mid-2006, as      compared to a partial year of occupancy expense in 2006.  In      2006, we established a new RFC in Westlake Village, California and      expanded the RFC in San Rafael, California into a full-service banking      center. |
|-------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (iv)   | With      the expansion of our banking network, expenses related to furniture and      fixtures continued to increase.  We redesigned several of our      banking centers, enhancing the traditional branch design of teller lines      with client service desks, equipped with state-of-the-art cash      machines.  These banking center redesigns were begun in 2004 and      have continued through 2007.  The Bank has not yet redesigned      the banking centers acquired through the Rancho Bank      merger.  Expense related to furniture and fixtures was $4.3      million, $4.4 million and $3.4 million for the years ended December 31,      2007, 2006 and 2005, respectively. |
|------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (v)   | Other      expenses, which include professional services, office supplies, business      development, and other expenses, were $15.1 million, $13.0 million and      $9.7 million for the years ended December 31, 2007, 2006 and 2005,      respectively.  Other expenses increased $2.1 million or 16.2%      for the year ended December 31, 2007 as compared with the same period in      2006 and increased $3.3 million or 34.4% for the year ended December 31,      2006 as compared with the same period in 2005.  Almost all      categories of non-interest expense have increased, including professional      services, insurance, telephone and other  overhead. |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| (Dollars      in thousands)       |   | For      the year ended |    |
|-----------------------------------|--------|-------------------------|---------|
|                              |   | December      31, 2007  |    |
|                              |   |                    |    |   | Efficiency |   |
|                              |   | Balance                 |    |   | Ratio |   |
| GAAP      Operating Expenses      |   | $                       | 99,766  |   |   |   | 102 | % |
| Less:      Write-down of goodwill |   |                    | (40,771 | ) |   |   | 42 | % |
| Non-GAAP      Operating Expenses, |   |                    |    |   |   |   |   |   |
| net      of goodwill write-down   |   | $                       | 58,995  |   |   |   | 60 | % |

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| (Dollars      in thousands) |   | As      of December 31, |    |
|-----------------------------|--------|-------------------------|---------|
|                        |   | 2007                    |    |   | 2006 |   |
| Deposit      Accounts:      |   | Aggregate      Balance  |    |   | Average      Account Balance |   |   | Number      of Accounts |   |   | Aggregate      Balance |   |   | Average      Account Balance |   |   | Number      of Accounts |   |
| Demand                      |   | $                       | 368,653 |   |   | $ | 26.2 |   |   |   | 14,096 |   |   | $ | 306,394 |   |   | $ | 23.7 |   |   |   | 12,923 |   |
| NOW                         |   | $                       | 41,927  |   |   | $ | 14.5 |   |   |   | 2,892 |   |   | $ | 47,759 |   |   | $ | 14.9 |   |   |   | 3,213 |   |
| Money      Market           |   | $                       | 568,713 |   |   | $ | 156.5 |   |   |   | 3,634 |   |   | $ | 562,622 |   |   | $ | 144.2 |   |   |   | 3,901 |   |
| Savings                     |   | $                       | 95,055  |   |   | $ | 21.4 |   |   |   | 4,442 |   |   | $ | 22,982 |   |   | $ | 5.4 |   |   |   | 4,285 |   |
| Time                        |   | $                       | 913,052 |   |   | $ | 73.2 |   |   |   | 12,481 |   |   | $ | 880,133 |   |   | $ | 66.9 |   |   |   | 13,165 |   |

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| (Dollars      in thousands)      |   | Payment      due by period |      |
|----------------------------------|--------|----------------------------|-----------|
| Contractual      Obligations     |   | Total                      |      |   | Less      than 1 year |   |   | 1-3      years |   |   | 3-5      years |   |   | More      than 5 years |   |
| Time      Deposits               |   | $                          | 913,052   |   |   | $ | 824,179 |   |   | $ | 88,873 |   |   | $ | - |   |   | $ | - |   |
| Exchange      liabilities        |   |                       | 47,515    |   |   |   | 47,515 |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Long-Term      Debt Obligations  |   |                       | 295,470   |   |   |   | 40,000 |   |   |   | 135,000 |   |   |   | - |   |   |   | 120,470 |   |
| Capital      Lease Obligations   |   |                       | -         |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Operating      Lease Obligations |   |                       | 31,939    |   |   |   | 4,002 |   |   |   | 7,541 |   |   |   | 6,625 |   |   |   | 13,771 |   |
| Purchase      Obligations        |   |                       | -         |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Total                            |   | $                          | 1,287,976 |   |   | $ | 915,696 |   |   | $ | 231,414 |   |   | $ | 6,625 |   |   | $ | 134,241 |   |

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| (Dollars in thousands)                       |   |                   |    |   |                   |   |   | Capital      Needed    |   |
|----------------------------------------------|--------|------------------------|---------|--------|------------------------|--------|--------|------------------------|--------|
|                                         |   |                   |    |   |                   |   |   |                   |   |   |   |   |   | To      Be Well |   |
|                                         |   |                   |    |   |                   |   |   |                   |   |   |   |   |   | Capitalized      Under |   |
|                                         |   |                   |    |   |                   |   |   | For      Capital       |   |   | Prompt      Corrective |   |
|                                         |   | Actual      Regulatory |    |   | Adequacy      Purposes |   |   | Action      Provisions |   |
|                                         |   | Capital                |    |   |                   |   |   | Capital                |   |   |   |   |   | Capital |   |   |   |   |
|                                         |   | Amount                 |    |   | Ratio                  |   |   | Amount                 |   |   | Ratio |   |   | Amount |   |   | Ratio |   |
| As      of December 31, 2007                 |   |                   |    |   |                   |   |   |                   |   |   |   |   |   |   |   |   |   |   |
| Total      capital to risk-weighted assets:  |   |                   |    |   |                   |   |   |                   |   |   |   |   |   |   |   |   |   |   |
| Bank                                         |   | $                      | 287,392 |   |                   |   | 11.93  | %                      |   | $ | 192,700 |   |   |   | 8.00 | % |   | $ | 240,900 |   |   |   | 10.00 | % |
| Consolidated                                 |   | $                      | 252,528 |   |                   |   | 10.36  | %                      |   | $ | 195,000 |   |   |   | 8.00 | % |   |   | N/A |   |   |   | N/A |   |
|                                         |   |                   |    |   |                   |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Tier      1 capital to risk-weighted assets: |   |                   |    |   |                   |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Bank                                         |   | $                      | 257,032 |   |                   |   | 10.67  | %                      |   | $ | 96,400 |   |   |   | 4.00 | % |   | $ | 144,500 |   |   |   | 6.00 | % |
| Consolidated                                 |   | $                      | 147,886 |   |                   |   | 6.07   | %                      |   | $ | 97,500 |   |   |   | 4.00 | % |   |   | N/A |   |   |   | N/A |   |
|                                         |   |                   |    |   |                   |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Tier      1 capital to average assets:       |   |                   |    |   |                   |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Bank                                         |   | $                      | 257,032 |   |                   |   | 10.30  | %                      |   | $ | 99,800 |   |   |   | 4.00 | % |   | $ | 124,800 |   |   |   | 5.00 | % |
| Consolidated                                 |   | $                      | 147,886 |   |                   |   | 5.89   | %                      |   | $ | 100,400 |   |   |   | 4.00 | % |   |   | N/A |   |   |   | N/A |   |
|                                         |   |                   |    |   |                   |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| As      of December 31, 2006                 |   |                   |    |   |                   |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total      capital to risk-weighted assets:  |   |                   |    |   |                   |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Bank                                         |   | $                      | 266,813 |   |                   |   | 12.17  | %                      |   | $ | 175,400 |   |   |   | 8.00 | % |   | $ | 219,200 |   |   |   | 10.00 | % |
| Consolidated                                 |   | $                      | 227,164 |   |                   |   | 10.34  | %                      |   | $ | 175,800 |   |   |   | 8.00 | % |   |   | N/A |   |   |   | N/A |   |
|                                         |   |                   |    |   |                   |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Tier      1 capital to risk-weighted assets: |   |                   |    |   |                   |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Bank                                         |   | $                      | 245,728 |   |                   |   | 11.20  | %                      |   | $ | 87,800 |   |   |   | 4.00 | % |   | $ | 131,600 |   |   |   | 6.00 | % |
| Consolidated                                 |   | $                      | 137,386 |   |                   |   | 6.25   | %                      |   | $ | 87,900 |   |   |   | 4.00 | % |   |   | N/A |   |   |   | N/A |   |
|                                         |   |                   |    |   |                   |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Tier      1 capital to average assets:       |   |                   |    |   |                   |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Bank                                         |   | $                      | 245,728 |   |                   |   | 11.41  | %                      |   | $ | 86,100 |   |   |   | 4.00 | % |   | $ | 107,700 |   |   |   | 5.00 | % |
| Consolidated                                 |   | $                      | 137,386 |   |                   |   | 6.36   | %                      |   | $ | 86,400 |   |   |   | 4.00 | % |   |   | N/A |   |   |   | N/A |   |

| (Dollars      in thousands)       |   | As      of December 31, |    |
|-----------------------------------|--------|-------------------------|---------|
|                              |   | 2007                    |    |   | 2006 |   |
| Commitments      to extend credit |   | $                       | 618,336 |   |   | $ | 684,794 |   |
| Commitments      to extend credit |   |                    |    |   |   |   |   |   |
| to      directors and officers    |   | $                       | 365     |   |   | $ | 1,411 |   |
| Standby      letters of credit    |   | $                       | 7,425   |   |   | $ | 10,547 |   |
| Commercial      letters of credit |   | $                       | -       |   |   | $ | - |   |

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ITEM 7A. 

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ITEM 8. Financial Statements and Supplementary Data

|                                                                                                   |   |
|--------------------------------------------------------------------------------------------------------|--------|
| Independent      Auditors’ Reports                                                               | 67     |
|                                                                                                   |   |
|                                                                                                   |   |
| Financial      Statements                                                                              |   |
|                                                                                                   |   |
| Consolidated Balance Sheets                                                                            |   |
| December      31, 2007 and 2006                                                                        | 69     |
|                                                                                                   |   |
| Consolidated Statements of Operations                                                                  |   |
| For      the Years Ended December 31, 2007, 2006 and 2005                                              | 70     |
|                                                                                                   |   |
| Consolidated Statement of Changes in Stockholders’ Equity      and Comprehensive Income / (Loss) |   |
| For      the Years Ended December 31, 2007, 2006 and 2005                                              | 71     |
|                                                                                                   |   |
| Consolidated Statements of Cash Flows                                                                  |   |
| For      the Years Ended December 31, 2007, 2006 and 2005                                              | 74     |
|                                                                                                   |   |
| Notes to Consolidated Financial    Statements                                                          | 76     |

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CONSOLIDATED BALANCE SHEETS

| (Dollars      in thousands)                                                                       |   | December      31, 2007 |      |   | December      31, 2006 |   |
|---------------------------------------------------------------------------------------------------|--------|------------------------|-----------|--------|------------------------|--------|
|                                                                                              |   |                   |      |   |                   |   |
| ASSETS                                                                                            |   |                   |      |   |                   |   |
| Cash      and cash equivalents                                                                    |   | $                      | 83,537    |   |                   | $      | 35,129 |   |
| Investment      securities                                                                        |   |                   | 177,321   |   |                   |   | 217,907 |   |
| Loans      held-for-sale                                                                          |   |                   | 119,427   |   |                   |   | - |   |
| Loans,      net of unearned income                                                                |   |                   | 2,008,071 |   |                   |   | 1,902,244 |   |
| Less:  Allowance      for loan losses                                                   |   |                   | (48,849   | )      |                   |   | (19,689 | ) |
| Net      Loans                                                                                    |   |                   | 1,959,222 |   |                   |   | 1,882,555 |   |
| Bank      premises and equipment, net                                                             |   |                   | 18,326    |   |                   |   | 20,402 |   |
| Accrued      interest                                                                             |   |                   | 11,834    |   |                   |   | 11,577 |   |
| Other      real estate owned                                                                      |   |                   | 17,375    |   |                   |   | - |   |
| Federal      Home Loan Bank ("FHLB") and other stock, at cost                                     |   |                   | 25,066    |   |                   |   | 15,693 |   |
| Deferred      income tax asset                                                                    |   |                   | 28,357    |   |                   |   | 15,475 |   |
| Goodwill      and other intangibles                                                               |   |                   | 4,637     |   |                   |   | 43,265 |   |
| Other      assets                                                                                 |   |                   | 38,177    |   |                   |   | 15,736 |   |
| TOTAL      ASSETS                                                                                 |   | $                      | 2,483,279 |   |                   | $      | 2,257,739 |   |
|                                                                                              |   |                   |      |   |                   |   |   |   |
| LIABILITIES      AND STOCKHOLDERS' EQUITY                                                         |   |                   |      |   |                   |   |   |   |
| Liabilities                                                                                       |   |                   |      |   |                   |   |   |   |
| Deposits                                                                                          |   |                   |      |   |                   |   |   |   |
| Non-interest      bearing                                                                         |   | $                      | 316,905   |   |                   | $      | 292,917 |   |
| Interest-bearing                                                                                  |   |                   | 1,618,747 |   |                   |   | 1,513,496 |   |
| Total      Deposits                                                                               |   |                   | 1,935,652 |   |                   |   | 1,806,413 |   |
|                                                                                              |   |                   |      |   |                   |   |   |   |
| Exchange      balances                                                                            |   |                   | 47,515    |   |                   |   | - |   |
| FHLB      advances                                                                                |   |                   | 175,000   |   |                   |   | 126,000 |   |
| Other      borrowings                                                                             |   |                   | 45,250    |   |                   |   | 40,000 |   |
| Subordinated      debentures                                                                      |   |                   | 5,000     |   |                   |   | 5,000 |   |
| Junior      subordinated debentures                                                               |   |                   | 115,470   |   |                   |   | 115,470 |   |
| Accrued      interest and other liabilities                                                       |   |                   | 46,367    |   |                   |   | 21,796 |   |
| TOTAL      LIABILITIES                                                                            |   |                   | 2,370,254 |   |                   |   | 2,114,679 |   |
|                                                                                              |   |                   |      |   |                   |   |   |   |
| COMMITMENTS      AND CONTINGENCIES                                                                |   |                   |      |   |                   |   |   |   |
|                                                                                              |   |                   |      |   |                   |   |   |   |
| Stockholders'      Equity                                                                         |   |                   |      |   |                   |   |   |   |
| Contributed      capital                                                                          |   |                   |      |   |                   |   |   |   |
| Perpetual      preferred stock - authorized 10,000,000 shares                                     |   |                   |      |   |                   |   |   |   |
| Series      C - no par value, issued and outstanding 10,000                                       |   |                   |      |   |                   |   |   |   |
| shares      in 2007 and 2006                                                                      |   |                   | 9,665     |   |                   |   | 9,665 |   |
| Series      D - no par value, issued and outstanding 2,300,000                                    |   |                   |      |   |                   |   |   |   |
| and      0 shares in 2007 and 2006, respectively                                                  |   |                   | 21,950    |   |                   |   | - |   |
| Common      stock - no par value, authorized 50,000,000 shares;                                   |   |                   |      |   |                   |   |   |   |
| issued      and outstanding 10,285,775 and 10,939,310 shares                                      |   |                   |      |   |                   |   |   |   |
| in      2007 and 2006, respectively                                                               |   |                   | 92,772    |   |                   |   | 88,819 |   |
| Additional      paid-in capital                                                                   |   |                   | 1,727     |   |                   |   | 2,149 |   |
| Retained      (deficit) / earnings                                                                |   |                   | (5,372    | )      |                   |   | 52,105 |   |
| Unallocated      Employee Stock Ownership Plan ("ESOP") shares                                    |   |                   | (5,168    | )      |                   |   | (5,765 | ) |
| Accumulated      other comprehensive loss, net of income taxes                                    |   |                   | (2,549    | )      |                   |   | (3,913 | ) |
| TOTAL      STOCKHOLDERS' EQUITY                                                                   |   |                   | 113,025   |   |                   |   | 143,060 |   |
| TOTAL      LIABILITIES AND STOCKHOLDERS' EQUITY                                                   |   | $                      | 2,483,279 |   |                   | $      | 2,257,739 |   |
|                                                                                              |   |                   |      |   |                   |   |   |   |
| The      accompanying notes are an integral part of these consolidated financial      statements. |   |                   |      |   |                   |

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CONSOLIDATED STATEMENTS OF OPERATIONS

| (Dollars      in thousands, except per share amounts)               |   |   |    |   |   |   |    |   |   |
|---------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|---------|--------|--------|
|                                                                |   | 2007   |    |   | 2006   |   |    | 2005   |   |
| Interest      Income                                                |   |   |    |   |   |   |    |   |   |
| Interest      and fees on loans                                     |   | $      | 177,852 |   |   | $      | 146,183 |   |   | $ | 98,303 |   |
| Interest      on investment securities                              |   |   | 11,295  |   |   |   | 11,751  |   |   |   | 12,552 |   |
| Interest      on federal funds sold                                 |   |   | 287     |   |   |   | 386     |   |   |   | 4 |   |
| TOTAL      INTEREST INCOME                                          |   |   | 189,434 |   |   |   | 158,320 |   |   |   | 110,859 |   |
|                                                                |   |   |    |   |   |   |    |   |   |   |   |   |
| Interest      Expense                                               |   |   |    |   |   |   |    |   |   |   |   |   |
| Interest      on savings deposits (1)                               |   |   | 27,087  |   |   |   | 20,053  |   |   |   | 12,289 |   |
| Interest      on time deposits in denominations of $100,000 or more |   |   | 27,212  |   |   |   | 21,330  |   |   |   | 6,766 |   |
| Interest      on other time deposits                                |   |   | 17,723  |   |   |   | 16,475  |   |   |   | 8,953 |   |
| Interest      on FHLB advances and other borrowings                 |   |   | 23,901  |   |   |   | 17,372  |   |   |   | 15,337 |   |
| TOTAL      INTEREST EXPENSE                                         |   |   | 95,923  |   |   |   | 75,230  |   |   |   | 43,345 |   |
| NET      INTEREST INCOME                                            |   |   | 93,511  |   |   |   | 83,090  |   |   |   | 67,514 |   |
|                                                                |   |   |    |   |   |   |    |   |   |   |   |   |
| Provision      for Loan Losses                                      |   |   | (38,400 | )      |   |   | (4,125  | )      |   |   | (1,886 | ) |
| NET      INTEREST INCOME AFTER                                      |   |   |    |   |   |   |    |   |   |   |   |   |
| PROVISION      FOR LOAN LOSSES                                      |   |   | 55,111  |   |   |   | 78,965  |   |   |   | 65,628 |   |
|                                                                |   |   |    |   |   |   |    |   |   |   |   |   |
| Other  Income                                             |   |   |    |   |   |   |    |   |   |   |   |   |
| Fees      and service charges                                       |   |   | 1,847   |   |   |   | 1,825   |   |   |   | 1,413 |   |
| Gain      on sale of SBA loans and SBA broker fee income            |   |   | 1,768   |   |   |   | 2,839   |   |   |   | 2,903 |   |
| Gain      on sale of securities and other loans                     |   |   | 486     |   |   |   | 456     |   |   |   | 660 |   |
| Other      income                                                   |   |   | 479     |   |   |   | 502     |   |   |   | 329 |   |
| TOTAL      OTHER INCOME                                             |   |   | 4,580   |   |   |   | 5,622   |   |   |   | 5,305 |   |
|                                                                |   |   |    |   |   |   |    |   |   |   |   |   |
| Other      Expenses                                                 |   |   |    |   |   |   |    |   |   |   |   |   |
| Salaries      and employee benefits                                 |   |   | 31,205  |   |   |   | 28,764  |   |   |   | 21,802 |   |
| Occupancy                                                           |   |   | 5,714   |   |   |   | 4,875   |   |   |   | 3,875 |   |
| Furniture      and equipment                                        |   |   | 4,286   |   |   |   | 4,372   |   |   |   | 3,391 |   |
| Professional      services                                          |   |   | 3,362   |   |   |   | 2,766   |   |   |   | 1,342 |   |
| Office      supplies, postage and telephone                         |   |   | 2,328   |   |   |   | 2,097   |   |   |   | 1,577 |   |
| Business      development                                           |   |   | 2,224   |   |   |   | 2,216   |   |   |   | 1,785 |   |
| Write-down      of assets                                           |   |   | 2,671   |   |   |   | -       |   |   |   | - |   |
| Write-down      of goodwill                                         |   |   | 40,771  |   |   |   | -       |   |   |   | - |   |
| Other                                                               |   |   | 7,205   |   |   |   | 5,927   |   |   |   | 4,974 |   |
| TOTAL      OTHER EXPENSES                                           |   |   | 99,766  |   |   |   | 51,017  |   |   |   | 38,746 |   |
| (LOSS)      / INCOME BEFORE INCOME  TAXES                 |   |   | (40,075 | )      |   |   | 33,570  |   |   |   | 32,187 |   |
| INCOME      TAX (BENEFIT) / PROVISION                               |   |   | (36     | )      |   |   | 13,825  |   |   |   | 13,276 |   |
| NET      (LOSS) / INCOME                                            |   | $      | (40,039 | )      |   | $      | 19,745  |   |   | $ | 18,911 |   |
|                                                                |   |   |    |   |   |   |    |   |   |   |   |   |
| (LOSS)      / EARNINGS PER SHARE (2)                                |   |   |    |   |   |   |    |   |   |   |   |   |
| BASIC                                                               |   | $      | (3.96   | )      |   | $      | 1.86    |   |   | $ | 1.88 |   |
| DILUTED                                                             |   | $      | (3.96   | )      |   | $      | 1.80    |   |   | $ | 1.80 |   |

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STOCKHOLDERS’ EQUITY AND COMPREHENSIVE INCOME(LOSS)

|                                          |   |      |   |   |              |   |       |       |   |   |    |   |   |          |   |   |     |   |   |        |   |   | Accumulated   |   |   |   |   |
|-----------------------------------------------|--------|-----------|--------|--------|-------------------|--------|------------|------------|--------|--------|---------|--------|--------|---------------|--------|--------|----------|--------|--------|-------------|--------|--------|---------------|--------|--------|--------|--------|
| (Dollars      in thousands)                   |   | Perpetual |   |   | Common      Stock |   |       | Additional |   |   |    |   |   |          |   |   |     |   |   | Other       |   |   |          |   |
|                                          |   | Preferred |   |   | Number      of    |   |       |       |   |   | Paid-in |   |   | Comprehensive |   |   | Retained |   |   | Unallocated |   |   | Comprehensive |   |   |   |   |
|                                          |   | Stock     |   |   | Shares            |   |       | Amount     |   |   | Capital |   |   | Income        |   |   | Earnings |   |   | ESOP        |   |   | Loss          |   |   | Total  |   |
| Balance      December 31, 2004                |   | $         | -      |   |              |   | 10,060,995 |       |   | $      | 70,536  |   |   | $             | 3,772  |   |     |   |   |        | $      | 20,513 |          |   | $      | (6,856 | )      |   | $ | (2,738 | ) |   | $ | 85,227 |   |
| Issuance      of preferred stock              |   |      | 9,665  |   |              |   |       |       |   |   |    |   |   |          |   |   |     |   |   |        |   |   |          |   |   |   |   |   |   |   |   |   |   | 9,665 |   |
| Exercise      of stock options                |   |      |   |   |              |   | 152,217    |       |   |   | 807     |   |   |          |   |   |     |   |   |        |   |   |          |   |   |   |   |   |   |   |   |   |   | 807 |   |
| Exercise      of warrants                     |   |      |   |   |              |   | 71,389     |       |   |   | 463     |   |   |          |   |   |     |   |   |        |   |   |          |   |   |   |   |   |   |   |   |   |   | 463 |   |
| Exercise      of additional investment rights |   |      |   |   |              |   | 126,813    |       |   |   | 3,530   |   |   |          |   |   |     |   |   |        |   |   |          |   |   |   |   |   |   |   |   |   |   | 3,530 |   |
| Purchase      of common stock                 |   |      |   |   |              |   | (512,384   | )          |   |   | (14,364 | )      |   |          |   |   |     |   |   |        |   |   |          |   |   |   |   |   |   |   |   |   |   | (14,364 | ) |
| Tax      benefit from exercise of             |   |      |   |   |              |   |       |       |   |   |    |   |   |          |   |   |     |   |   |        |   |   |          |   |   |   |   |   |   |   |   |   |   |   |   |
| non-qualified      stock options              |   |      |   |   |              |   |       |       |   |   |    |   |   |          | 499    |   |     |   |   |        |   |   |          |   |   |   |   |   |   |   |   |   |   | 499 |   |
| Release      of ESOP shares                   |   |      |   |   |              |   |       |       |   |   |    |   |   |          | 172    |   |     |   |   |        |   |   |          |   |   | 552    |   |   |   |   |   |   |   | 724 |   |
| Cash      dividends declared on preferred     |   |      |   |   |              |   |       |       |   |   |    |   |   |          |   |   |     |   |   |        |   |   |          |   |   |   |   |   |   |   |   |   |   |   |   |
| stock                                         |   |      |   |   |              |   |       |       |   |   |    |   |   |          |   |   |     |   |   |        |   | (540   | )             |   |   |   |   |   |   |   |   |   |   | (540 | ) |
| Cash      dividends declared on common        |   |      |   |   |              |   |       |       |   |   |    |   |   |          |   |   |     |   |   |        |   |   |          |   |   |   |   |   |   |   |   |   |   |   |   |
| stock                                         |   |      |   |   |              |   |       |       |   |   |    |   |   |          |   |   |     |   |   |        |   | (2,430 | )             |   |   |   |   |   |   |   |   |   |   | (2,430 | ) |
| Comprehensive      income                     |   |      |   |   |              |   |       |       |   |   |    |   |   |          |   |   |     |   |   |        |   |   |          |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      Income                               |   |      |   |   |              |   |       |       |   |   |    |   |   |          |   |   |     | $      | 18,911 |        |   |   | 18,911        |   |   |   |   |   |   |   |   |   |   |   | 18,911 |   |
| Unrealized      security holding              |   |      |   |   |              |   |       |       |   |   |    |   |   |          |   |   |     |   |   |        |   |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| losses      (net of $1,815                    |   |      |   |   |              |   |       |       |   |   |    |   |   |          |   |   |     |   |   |        |   |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| tax      benefit)                             |   |      |   |   |              |   |       |       |   |   |    |   |   |          |   |   |     |   | (2,507 | )           |   |   |          |   |   |   |   |   |   |   | (2,507 | ) |   |   | (2,507 | ) |
| Total      comprehensive income               |   |      |   |   |              |   |       |       |   |   |    |   |   |          |   |   |     | $      | 16,404 |        |   |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance,      December 31, 2005               |   | $         | 9,665  |   |              |   | 9,899,030  |       |   | $      | 60,972  |   |   | $             | 4,443  |   |     |   |   |        |   | $      | 36,454        |   |   | $      | (6,304 | ) |   | $ | (5,245 | ) |   | $ | 99,985 |   |
|                                          |   |      |   |   |              |   |       |       |   |   |    |   |   |          |   |   |     |   |   |        |   |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                          |   |      |   |   |              |   |       |       |   |   |    |   |   |          |   |   |     |   |   |        |   |   |          |   |   |   |   |   |   |   |   |   |   | (continued) |   |

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Table of Contents

|                                 |   |      |   |   |              |   |       |       |   |   |    |   |   |          |   |   |     |   |   |        |   |   | Accumulated   |   |   |   |   |
|-------------------------------------------|--------|-----------|--------|--------|-------------------|--------|------------|------------|--------|--------|---------|--------|--------|---------------|--------|--------|----------|--------|--------|-------------|--------|--------|---------------|--------|--------|--------|--------|
| (Dollars      in thousands)               |   | Perpetual |   |   | Common      Stock |   |       | Additional |   |   |    |   |   |          |   |   |     |   |   | Other       |   |   |          |   |
|                                      |   | Preferred |   |   | Number      of    |   |       |       |   |   | Paid-in |   |   | Comprehensive |   |   | Retained |   |   | Unallocated |   |   | Comprehensive |   |   |   |   |
|                                      |   | Stock     |   |   | Shares            |   |       | Amount     |   |   | Capital |   |   | Income        |   |   | Earnings |   |   | ESOP        |   |   | Loss          |   |   | Total  |   |
| Balance      December 31, 2005            |   | $         | 9,665  |   |              |   | 9,899,030  |       |   | $      | 60,972  |   |   | $             | 4,443  |   |     |   |   |        | $      | 36,454 |          |   | $      | (6,304 | )      |   | $ | (5,245 | ) |   | $ | 99,985 |   |
| Issuance      of common stock             |   |      |   |   |              |   | 1,260,000  |       |   |   | 30,287  |   |   |          |   |   |     |   |   |        |   |   |          |   |   |   |   |   |   |   |   |   |   | 30,287 |   |
| Exercise      of stock options            |   |      |   |   |              |   | 112,427    |       |   |   | 339     |   |   |          |   |   |     |   |   |        |   |   |          |   |   |   |   |   |   |   |   |   |   | 339 |   |
| Purchase      of common stock             |   |      |   |   |              |   | (107,802   | )          |   |   | (2,779  | )      |   |          |   |   |     |   |   |        |   |   |          |   |   |   |   |   |   |   |   |   |   | (2,779 | ) |
| Purchase      of restricted stock         |   |      |   |   |              |   | (47,512    | )          |   |   |    |   |   |          | (1,310 | )      |     |   |   |        |   |   |          |   |   |   |   |   |   |   |   |   |   | (1,310 | ) |
| Vesting      of restricted stock          |   |      |   |   |              |   | 51,072     |       |   |   |    |   |   |          |   |   |     |   |   |        |   |   |          |   |   |   |   |   |   |   |   |   |   | - |   |
| Reclassification      of restricted stock |   |      |   |   |              |   | (227,905   | )          |   |   |    |   |   |          | (3,134 | )      |     |   |   |        |   |   |          |   |   |   |   |   |   |   |   |   |   | (3,134 | ) |
| Amortization      of restricted stock     |   |      |   |   |              |   |       |       |   |   |    |   |   |          | 962    |   |     |   |   |        |   |   |          |   |   |   |   |   |   |   |   |   |   | 962 |   |
| Share-based      compensation expense     |   |      |   |   |              |   |       |       |   |   |    |   |   |          | 27     |   |     |   |   |        |   |   |          |   |   |   |   |   |   |   |   |   |   | 27 |   |
| Release      of ESOP shares               |   |      |   |   |              |   |       |       |   |   |    |   |   |          | 108    |   |     |   |   |        |   |   |          |   |   | 539    |   |   |   |   |   |   |   | 647 |   |
| Tax      benefit from exercise of         |   |      |   |   |              |   |       |       |   |   |    |   |   |          |   |   |     |   |   |        |   |   |          |   |   |   |   |   |   |   |   |   |   |   |   |
| non-qualified      stock options          |   |      |   |   |              |   |       |       |   |   |    |   |   |          | 1,053  |   |     |   |   |        |   |   |          |   |   |   |   |   |   |   |   |   |   | 1,053 |   |
| Cash      dividends declared on preferred |   |      |   |   |              |   |       |       |   |   |    |   |   |          |   |   |     |   |   |        |   |   |          |   |   |   |   |   |   |   |   |   |   |   |   |
| stock                                     |   |      |   |   |              |   |       |       |   |   |    |   |   |          |   |   |     |   |   |        |   | (900   | )             |   |   |   |   |   |   |   |   |   |   | (900 | ) |
| Cash      dividends declared on common    |   |      |   |   |              |   |       |       |   |   |    |   |   |          |   |   |     |   |   |        |   |   |          |   |   |   |   |   |   |   |   |   |   |   |   |
| stock                                     |   |      |   |   |              |   |       |       |   |   |    |   |   |          |   |   |     |   |   |        |   | (3,194 | )             |   |   |   |   |   |   |   |   |   |   | (3,194 | ) |
| Comprehensive      income                 |   |      |   |   |              |   |       |       |   |   |    |   |   |          |   |   |     |   |   |        |   |   |          |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      Income                           |   |      |   |   |              |   |       |       |   |   |    |   |   |          |   |   |     | $      | 19,745 |        |   |   | 19,745        |   |   |   |   |   |   |   |   |   |   |   | 19,745 |   |
| Unrealized      security holding          |   |      |   |   |              |   |       |       |   |   |    |   |   |          |   |   |     |   |   |        |   |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| gains      (net of $965                   |   |      |   |   |              |   |       |       |   |   |    |   |   |          |   |   |     |   |   |        |   |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| tax      provision)                       |   |      |   |   |              |   |       |       |   |   |    |   |   |          |   |   |     |   | 1,332  |        |   |   |          |   |   |   |   |   |   |   | 1,332 |   |   |   | 1,332 |   |
| Total      comprehensive income           |   |      |   |   |              |   |       |       |   |   |    |   |   |          |   |   |     | $      | 21,077 |        |   |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance,      December 31, 2006           |   | $         | 9,665  |   |              |   | 10,939,310 |       |   | $      | 88,819  |   |   | $             | 2,149  |   |     |   |   |        |   | $      | 52,105        |   |   | $      | (5,765 | ) |   | $ | (3,913 | ) |   | $ | 143,060 |   |
|                                      |   |      |   |   |              |   |       |       |   |   |    |   |   |          |   |   |     |   |   |        |   |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                      |   |      |   |   |              |   |       |       |   |   |    |   |   |          |   |   |     |   |   |        |   |   |          |   |   |   |   |   |   |   |   |   |   | (continued) |   |

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Table of Contents

| (Dollars      in thousands)                            |   |      |   |   |              |   |       |       |   |   |    |     |          |   |      |   |                                                                  |        |   |    | Accumulated   |   |   |   |   |
|--------------------------------------------------------|--------|-----------|--------|--------|-------------------|--------|------------|------------|--------|--------|---------|----------|---------------|--------|-----------|--------|-----------------------------------------------------------------------|-------------|--------|---------|---------------|--------|--------|--------|--------|
|                                                   |   | Perpetual |   |   | Common      Stock |   |       | Additional |   |   |    | Retained |          |   |      |   |                                                                  | Other       |   |    |          |   |
|                                                   |   | Preferred |   |   | Number      of    |   |       |       |   |   | Paid-in |     | Comprehensive |   | Earnings/ |   |                                                                  | Unallocated |   |    | Comprehensive |   |   |   |   |
|                                                   |   | Stock     |   |   | Shares            |   |       | Amount     |   |   | Capital |     | Income        |   | (Deficit) |   |                                                                  | ESOP        |   |    | Loss          |   |   | Total  |   |
| Balance      at December 31, 2006                      |   | $         | 9,665  |   |              |   | 10,939,310 |       |   | $      | 88,819  |     |          | $      | 2,149     |   |                                                                  |        | $      | 52,105  |          |   | $      | (5,765 | )      |   | $ | (3,913 | ) |   | $ | 143,060 |   |
|                                                   |   |      |   |   |              |   |       |       |   |   |    |     |          |   |      |   |                                                                  |        |   |    |          |   |   |   |   |   |   |   |   |   |   |   |   |
| Issuance      of 5% stock dividend                     |   |      |   |   |              |   |       |       |   |   | 12,309  |     |          |   |      |   |                                                                  |        |   | (12,309 | )             |   |   |   |   |   |   |   |   |   |   | - |   |
| Exercise      of stock options                         |   |      |   |   |              |   | 50,229     |       |   |   | 169     |     |          |   |      |   |                                                                  |        |   |    |          |   |   |   |   |   |   |   |   |   |   | 169 |   |
| Restricted      shares surrendered to      the Company |   |      |   | (7,942 | )                 |   |       | (150       | )      |   |    |     |          |   |      |   |                                                                  |        |   |    |          |   |   |   |   |   |   |   | (150 | ) |
| Transfer      of unissued common stock to              |   |      |   |   |              |   |       |       |   |   |    |     |          |   |      |   |                                                                  |        |   |    |          |   |   |   |   |   |   |   |   |   |   |   |   |
| restricted      stock                                  |   |      |   |   |              |   |       |       |   |   | 1,903   |     |          |   | (1,903    | )      |                                                                  |        |   |    |          |   |   |   |   |   |   |   |   |   |   | - |   |
| Purchase      of common stock                          |   |      |   |   |              |   | (693,000   | )          |   |   | (10,278 | )        |          |   |      |   |                                                                  |        |   |    |          |   |   |   |   |   |   |   |   |   |   | (10,278 | ) |
| Issuance      of preferred stock                       |   |      | 21,950 |   |              |   |       |       |   |   |    |     |          |   |      |   |                                                                  |        |   |    |          |   |   |   |   |   |   |   |   |   |   | 21,950 |   |
| Purchase      of restricted stock                      |   |      |   |   |              |   | (36,750    | )          |   |   |    |     |          |   | (858      | )      |                                                                  |        |   |    |          |   |   |   |   |   |   |   |   |   |   | (858 | ) |
| Vesting      of restricted stock                       |   |      |   |   |              |   | 33,928     |       |   |   |    |     |          |   |      |   |                                                                  |        |   |    |          |   |   |   |   |   |   |   |   |   |   | - |   |
| Amortization      of restricted stock                  |   |      |   |   |              |   |       |       |   |   |    |     |          |   | 1,379     |   |                                                                  |        |   |    |          |   |   |   |   |   |   |   |   |   |   | 1,379 |   |
| Share-based      compensation expense                  |   |      |   |   |              |   |       |       |   |   |    |     |          |   | 149       |   |                                                                  |        |   |    |          |   |   |   |   |   |   |   |   |   |   | 149 |   |
| Release      of ESOP shares                            |   |      |   |   |              |   |       |       |   |   |    |     |          |   | (33       | )      |                                                                  |        |   |    |          |   |   | 597    |   |   |   |   |   |   |   | 564 |   |
| Tax      benefit from exercise of non-qualified        |   |      |   |   |              |   |       |       |   |   |    |     |          |   |      |   |                                                                  |        |   |    |          |   |   |   |   |   |   |   |   |   |   |   |   |
|  stock      options and timing differences        |   |      |   |   |              |   |       |       |   |   |    |     |          |   | 833       |   |                                                                  |        |   |    |          |   |   |   |   |   |   |   |   |   |   | 833 |   |
| Disgorgement      of short swing profit                |   |      |   |   |              |   |       |       |   |   |    |     |          |   | 11        |   |                                                                  |        |   |    |          |   |   |   |   |   |   |   |   |   |   | 11 |   |
| Cash      paid for fractional shares in                |   |      |   |   |              |   |       |       |   |   |    |     |          |   |      |   |                                                                  |        |   |    |          |   |   |   |   |   |   |   |   |   |   |   |   |
| stock      dividend distribution                       |   |      |   |   |              |   |       |       |   |   |    |     |          |   |      |   |                                                                  |        |   | (18     | )             |   |   |   |   |   |   |   |   |   |   | (18 | ) |
| Cash      dividends declared on preferred              |   |      |   |   |              |   |       |       |   |   |    |     |          |   |      |   |                                                                  |        |   |    |          |   |   |   |   |   |   |   |   |   |   |   |   |
| stock                                                  |   |      |   |   |              |   |       |       |   |   |    |     |          |   |      |   |                                                                  |        |   | (1,735  | )             |   |   |   |   |   |   |   |   |   |   | (1,735 | ) |
| Cash      dividends declared on common                 |   |      |   |   |              |   |       |       |   |   |    |     |          |   |      |   |                                                                  |        |   |    |          |   |   |   |   |   |   |   |   |   |   |   |   |
| stock                                                  |   |      |   |   |              |   |       |       |   |   |    |     |          |   |      |   |                                                                  |        |   | (3,376  | )             |   |   |   |   |   |   |   |   |   |   | (3,376 | ) |
| Comprehensive      loss                                |   |      |   |   |              |   |       |       |   |   |    |     |          |   |      |   |                                                                  |        |   |    |          |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      Loss                                          |   |      |   |   |              |   |       |       |   |   |    |     |          |   |      |   | $          (40,039) |        |   | (40,039 | )             |   |   |   |   |   |   |   |   |   |   | (40,039 | ) |
| Unrealized      security holding                       |   |      |   |   |              |   |       |       |   |   |    |     |          |   |      |   |                                                                  |        |   |    |          |   |   |   |   |   |   |   |   |   |   |   |   |
| gains      (net of $988                                |   |      |   |   |              |   |       |       |   |   |    |     |          |   |      |   |                                                                  |        |   |    |          |   |   |   |   |   |   |   |   |   |   |   |   |
| tax      provision)                                    |   |      |   |   |              |   |       |       |   |   |    |     |          |   |      |   | 1,364                                                                 |        |   |    |          |   |   |   |   |   |   | 1,364 |   |   |   | 1,364 |   |
| Total      comprehensive loss                          |   |      |   |   |              |   |       |       |   |   |    |     |          |   |      |   | $          (38,675) |        |   |    |          |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance      at December 31, 2007                      |   | $         | 31,615 |   |              |   | 10,285,775 |       |   | $      | 92,772  |     |          | $      | 1,727     |   |                                                                  |        | $      | (5,372  | )             |   | $      | (5,168 | )      |   | $ | (2,549 | ) |   | $ | 113,025 |   |

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Table of Contents

CONSOLIDATED STATEMENTS OF CASH FLOWS

| (Dollars      in thousands)                                                             |   | 2007   |     |   | 2006   |   |     | 2005   |   |
|-----------------------------------------------------------------------------------------|--------|--------|----------|--------|--------|--------|----------|--------|--------|
|                                                                                    |   |   |     |   |   |   |     |   |   |
| Cash      Flows from Operating Activities                                               |   |   |     |   |   |   |     |   |   |
| Net      (Loss) / Income                                                                |   | $      | (40,039  | )      |   | $      | 19,745   |   |   | $ | 18,911 |   |
| Adjustments      to Reconcile Net (Loss) / Income to Net                                |   |   |     |   |   |   |     |   |   |   |   |   |
| Cash      Provided by Operating Activities                                              |   |   |     |   |   |   |     |   |   |   |   |   |
|                                                                                    |   |   |     |   |   |   |     |   |   |   |   |   |
| Depreciation      and amortization                                                      |   |   | 6,219    |   |   |   | 6,221    |   |   |   | 5,141 |   |
| Allocation      of ESOP shares                                                          |   |   | 564      |   |   |   | 647      |   |   |   | 724 |   |
| FHLB      stock dividends                                                               |   |   | (619     | )      |   |   | (731     | )      |   |   | (607 | ) |
| Share-based      compensation                                                           |   |   | 149      |   |   |   | 27       |   |   |   | - |   |
| Provision      for credit losses                                                        |   |   | 37,970   |   |   |   | 4,175    |   |   |   | 2,200 |   |
| Deferred      income taxes                                                              |   |   | (13,870  | )      |   |   | (3,815   | )      |   |   | (1,635 | ) |
| (Increase)      / decrease in net taxes                                                 |   |   | (625     | )      |   |   | (2,478   | )      |   |   | 1,356 |   |
| Changes      in assets and liabilities, net effects from                                |   |   |     |   |   |   |     |   |   |   |   |   |
|    mergers      and acquisitions                                         |   |   |     |   |   |   |     |   |   |   |   |   |
| Increase      in other assets                                                           |   |   | (3,893   | )      |   |   | (2,311   | )      |   |   | (6,952 | ) |
| (Increase)      / decrease in unearned loan fees                                        |   |   | (2,504   | )      |   |   | (1,956   | )      |   |   | 1,548 |   |
| Increase      in interest receivable                                                    |   |   | (257     | )      |   |   | (2,651   | )      |   |   | (2,853 | ) |
| Increase      in interest payable                                                       |   |   | 199      |   |   |   | 1,459    |   |   |   | 525 |   |
| Increase      in accrued expense and other liabilities                                  |   |   | 5,019    |   |   |   | 7,733    |   |   |   | 1,264 |   |
| Origination,      disbursement, and purchase of                                         |   |   |     |   |   |   |     |   |   |   |   |   |
| loans      held-for-sale, net of principal payments                                     |   |   | (13,637  | )      |   |   | -        |   |   |   | - |   |
| Gain      on sale of loans                                                              |   |   | (1,366   | )      |   |   | (1,722   | )      |   |   | (2,141 | ) |
| Proceeds      from sale of loans held-for-sale                                          |   |   | 14,290   |   |   |   | -        |   |   |   | - |   |
| Impairment      of assets                                                               |   |   | 43,442   |   |   |   | -        |   |   |   | - |   |
| Gain      on sale of assets                                                             |   |   | (3       | )      |   |   | (1       | )      |   |   | - |   |
| Total      Adjustments                                                                  |   |   | 71,078   |   |   |   | 4,597    |   |   |   | (1,430 | ) |
| Net      Cash Provided By Operating Activities                                          |   |   | 31,039   |   |   |   | 24,342   |   |   |   | 17,481 |   |
|                                                                                    |   |   |     |   |   |   |     |   |   |   |   |   |
| Cash      Flows From Investing Activities                                               |   |   |     |   |   |   |     |   |   |   |   |   |
| Proceeds      from sales of mortgage-backed                                             |   |   |     |   |   |   |     |   |   |   |   |   |
| securities      available-for-sale                                                      |   |   | 16,164   |   |   |   | -        |   |   |   | - |   |
| Purchase      of investment securities, net of effects from                             |   |   |     |   |   |   |     |   |   |   |   |   |
|    mergers      and acquisitions                                         |   |   | -        |   |   |   | 1,648    |   |   |   | (95,653 | ) |
| Proceeds      from principal reductions and maturities                                  |   |   |     |   |   |   |     |   |   |   |   |   |
| of      mortgage-backed securities available-for-sale                                   |   |   | 28,009   |   |   |   | 37,453   |   |   |   | 64,716 |   |
| Purchase      of FHLB and other stock                                                   |   |   | (14,453  | )      |   |   | (9,945   | )      |   |   | (8,755 | ) |
| Redemption      of FHLB stock                                                           |   |   | 5,699    |   |   |   | 14,138   |   |   |   | 2,442 |   |
| Net      cash acquired in mergers and acquisitions                                      |   |   | 23,173   |   |   |   | 34,165   |   |   |   | - |   |
| Origination,      disbursement, and purchase of loans, net      of  principal |   |   |     |   |   |   |     |   |   |   |   |   |
| payments      and net of effects from mergers and acquisitions                          |   |   | (353,254 | )      |   |   | (505,566 | )      |   |   | (514,490 | ) |
| Proceeds      from sale of loans                                                        |   |   | 101,931  |   |   |   | 98,597   |   |   |   | 168,928 |   |
| Capital      expenditures, net of effects from mergers                                  |   |   |     |   |   |   |     |   |   |   |   |   |
| and      acquisitions                                                                   |   |   | (1,682   | )      |   |   | (3,392   | )      |   |   | (9,773 | ) |
| Proceeds      from sale of property, plant, and equipment                               |   |   | -        |   |   |   | 4        |   |   |   | - |   |
| Net      Cash Used in Investing Activities                                              |   | $      | (194,413 | )      |   | $      | (332,898 | )      |   | $ | (392,585 | ) |

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| (Dollars in thousands)                                              |   | 2007   |    |   | 2006   |   |    | 2005   |   |
|---------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|---------|--------|--------|
|                                                                |   |   |    |   |   |   |    |   |   |
| Cash      Flows From Financing Activities                           |   |   |    |   |   |   |    |   |   |
| Net      increase in non-interest bearing deposits, net             |   |   |    |   |   |   |    |   |   |
| of      effects from mergers and acquisitions                       |   | $      | 23,988  |   |   | $      | 52,821  |   |   | $ | 27,085 |   |
| Net      increase in interest-bearing deposits, net of effects from |   |   |    |   |   |   |    |   |   |   |   |   |
| mergers      and acquisitions                                       |   |   | 105,251 |   |   |   | 278,705 |   |   |   | 284,268 |   |
| Increase      in exchange balances, net of effects from             |   |   |    |   |   |   |    |   |   |   |   |   |
| mergers      and acquisitions                                       |   |   | 22,414  |   |   |   | -       |   |   |   | - |   |
| Proceeds      from issuance of preferred stock, net                 |   |   | 21,950  |   |   |   | -       |   |   |   | 9,665 |   |
| Proceeds      from issuance of common stock                         |   |   | -       |   |   |   | 30,287  |   |   |   | - |   |
| Proceeds      from issuance of junior subordinated debentures       |   |   | -       |   |   |   | 18,000  |   |   |   | 25,000 |   |
| Increase      in other borrowings, net of effects from              |   |   |    |   |   |   |    |   |   |   |   |   |
| mergers      and acquisitions                                       |   |   | 4,582   |   |   |   | 30,000  |   |   |   | 10,000 |   |
| Purchase      of common stock                                       |   |   | (10,428 | )      |   |   | (2,779  | )      |   |   | (14,364 | ) |
| Purchase      of restricted stock                                   |   |   | (858    | )      |   |   | (1,310  | )      |   |   | - |   |
| Increase      / (decrease) in FHLB advances                         |   |   | 49,000  |   |   |   | (88,000 | )      |   |   | 37,000 |   |
| Proceeds      from exercise of Series A warrants                    |   |   | -       |   |   |   | -       |   |   |   | 463 |   |
| Dividends      paid on preferred stock                              |   |   | (1,735  | )      |   |   | (867    | )      |   |   | (340 | ) |
| Dividends      paid on common stock                                 |   |   | (3,377  | )      |   |   | (3,194  | )      |   |   | (2,430 | ) |
| Cash      paid in lieu of fractional shares of stock dividend       |   |   | (18     | )      |   |   | -       |   |   |   | - |   |
| Cash      received for disgorgement of short swing profit           |   |   | 11      |   |   |   | -       |   |   |   | - |   |
| Proceeds      from exercise of additional investment rights         |   |   | -       |   |   |   | -       |   |   |   | 3,530 |   |
| Tax      benefit for exercise of non-qualified stock options        |   |   |    |   |   |   |    |   |   |   |   |   |
| and      timing differences                                         |   |   | 833     |   |   |   | 1,053   |   |   |   | 499 |   |
| Proceeds      from exercise of stock options                        |   |   | 169     |   |   |   | 339     |   |   |   | 807 |   |
| Net      Cash Provided by Financing Activities                      |   |   | 211,782 |   |   |   | 315,055 |   |   |   | 381,183 |   |
|                                                                |   |   |    |   |   |   |    |   |   |   |   |   |
| Net      Increase in Cash and Cash Equivalents                      |   |   | 48,408  |   |   |   | 6,499   |   |   |   | 6,079 |   |
|                                                                |   |   |    |   |   |   |    |   |   |   |   |   |
| Cash and Cash      Equivalents, Beginning of Year                   |   |   | 35,129  |   |   |   | 28,630  |   |   |   | 22,551 |   |
|                                                                |   |   |    |   |   |   |    |   |   |   |   |   |
| Cash and Cash      Equivalents, End of Year                         |   | $      | 83,537  |   |   | $      | 35,129  |   |   | $ | 28,630 |   |
|                                                                |   |   |    |   |   |   |    |   |   |   |   |   |
|                                                                |   |   |    |   |   |   |    |   |   |   |   |   |
| Supplementary      Information                                      |   |   |    |   |   |   |    |   |   |   |   |   |
| Non-cash      Items                                                 |   |   |    |   |   |   |    |   |   |   |   |   |
| Transfer      of loans to other real estate owned                   |   | $      | 19,649  |   |   | $      | -       |   |   | $ | - |   |
| Transfer      of loans held-for-investment to loans held-for-sale   |   | $      | 141,078 |   |   | $      | -       |   |   | $ | - |   |
| Issuance      of 5% stock dividend                                  |   | $      | 12,309  |   |   | $      | -       |   |   | $ | - |   |
| Other      Required Disclosures                                     |   |   |    |   |   |   |    |   |   |   |   |   |
| Net      change in unrealized loss on investment securities         |   | $      | 1,364   |   |   | $      | 1,332   |   |   | $ | (2,507 | ) |
| Income      taxes paid                                              |   | $      | 15,125  |   |   | $      | 17,460  |   |   | $ | 13,075 |   |
| Interest      paid                                                  |   | $      | 95,724  |   |   | $      | 73,771  |   |   | $ | 42,620 |   |

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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| (Dollars      in thousands)                                 |   | Year      Ended December 31, |       |
|-------------------------------------------------------------|--------|------------------------------|------------|
|                                                        |   | 2005                         |       |
| Net      income:                                            |   |                         |       |
| As      reported                                            |   | $                            | 18,911     |   |
| Stock-based      compensation that would have been reported |   |                         | (110       | ) |
| using      the fair value method of SFAS No. 123            |   | $                            | 18,801     |   |
| Pro      forma net income                                   |   |                         |       |   |
|                                                        |   |                         |       |   |
| Basic      Shares                                           |   |                         | 9,776,770  |   |
| Diluted      Shares                                         |   |                         | 10,231,286 |   |
|                                                        |   |                         |       |   |
| Basic      earnings per share:                              |   |                         |       |   |
| As      reported                                            |   | $                            | 1.88       |   |
| Pro      forma                                              |   | $                            | 1.87       |   |
|                                                        |   |                         |       |   |
| Diluted      earnings per share:                            |   |                         |       |   |
| As      reported                                            |   | $                            | 1.80       |   |
| Pro      forma                                              |   | $                            | 1.78       |   |

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| (Dollars      in thousands)            |   | As      of December 31, |    |
|----------------------------------------|--------|-------------------------|---------|
|                                   |   | 2007                    |    |   | 2006 |   |
| Balance,      beginning of year        |   | $                       | 40,771  |   |   | $ | 238 |   |
| Goodwill      acquired during the year |   |                    | 2,813   |   |   |   | 40,533 |   |
| Write-down      of goodwill            |   |                    | (40,771 | ) |   |   | - |   |
| Balance,      end of year              |   | $                       | 2,813   |   |   | $ | 40,771 |   |

| (Dollars      in thousands)         |   | For      the years ended December 31, |   |
|-------------------------------------|--------|---------------------------------------|--------|
|                                |   | 2007                                  |   |   | 2006 |   |
| Amortizable      intangible assets: |   | Net      Carrying Amount              |   |   | Accumulated      Amortization |   |   | Net      Carrying Amount |   |   | Accumulated      Amortization |   |
| Core      deposit intangibles       |   | $                                     | 1,824  |   |   | $ | 670 |   |   | $ | 2,494 |   |   | $ | 324 |   |

| (Dollars      in thousands)             |   |              |   |
|-----------------------------------------|--------|-------------------|--------|
|                                    |   |              |   |
| Estimated      amortization expense for |   | Core      deposit |   |
| the      year ending December 31:       |   | intangibles       |   |
| 2008                                    |   | $                 | 498    |   |
| 2009                                    |   | $                 | 416    |   |
| 2010                                    |   | $                 | 334    |   |
| 2011                                    |   | $                 | 252    |   |
| 2012                                    |   | $                 | 170    |   |

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| (Dollars      in thousands)              |   |      |    |   | Gross      |   |   | Gross      |   |   |            |   |
|------------------------------------------|--------|-----------|---------|--------|------------|--------|--------|------------|--------|--------|-----------------|--------|
|                                     |   | Amortized |    |   | Unrealized |   |   | Unrealized |   |   |            |   |
|                                     |   | Cost      |    |   | Gains      |   |   | Losses     |   |   | Fair      Value |   |
| Trading      securities:                 |   | $         | 5,516   |   |       | $      | 268    |       |   | $      | -               |   |   | $ | 5,784 |   |
|                                     |   |      |    |   |       |   |   |       |   |   |            |   |   |   |   |   |
| Available-for-sale      securities:      |   |      |    |   |       |   |   |       |   |   |            |   |   |   |   |   |
| U.S.      agency securities              |   |      | 13,328  |   |       |   | -      |       |   |   | (193            | )      |   |   | 13,135 |   |
| Mortgage-backed      securities          |   |      | 160,214 |   |       |   | 9      |       |   |   | (4,111          | )      |   |   | 156,112 |   |
| Mutual      funds                        |   |      | 2,310   |   |       |   | -      |       |   |   | (20             | )      |   |   | 2,290 |   |
| Total      available-for-sale securities |   |      | 175,852 |   |       |   | 9      |       |   |   | (4,324          | )      |   |   | 171,537 |   |
| Total      Investment Securities         |   | $         | 181,368 |   |       | $      | 277    |       |   | $      | (4,324          | )      |   | $ | 177,321 |   |

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| (Dollars      in thousands)              |   |      |    |   | Gross      |   |   | Gross      |   |   |            |   |
|------------------------------------------|--------|-----------|---------|--------|------------|--------|--------|------------|--------|--------|-----------------|--------|
|                                     |   | Amortized |    |   | Unrealized |   |   | Unrealized |   |   |            |   |
|                                     |   | Cost      |    |   | Gains      |   |   | Losses     |   |   | Fair      Value |   |
| Trading      securities:                 |   | $         | 4,707   |   |       | $      | -      |       |   | $      | -               |   |   | $ | 4,707 |   |
|                                     |   |      |    |   |       |   |   |       |   |   |            |   |   |   |   |   |
| Available-for-sale      securities:      |   |      |    |   |       |   |   |       |   |   |            |   |   |   |   |   |
| U.S.      agency securities              |   |      | 12,515  |   |       |   | -      |       |   |   | (181            | )      |   |   | 12,334 |   |
| Mortgage-backed      securities          |   |      | 205,139 |   |       |   | -      |       |   |   | (6,437          | )      |   |   | 198,702 |   |
| Mutual      funds                        |   |      | 2,213   |   |       |   | -      |       |   |   | (49             | )      |   |   | 2,164 |   |
| Total      available-for-sale securities |   |      | 219,867 |   |       |   | -      |       |   |   | (6,667          | )      |   |   | 213,200 |   |
| Total      Investment Securities         |   | $         | 224,574 |   |       | $      | -      |       |   | $      | (6,667          | )      |   | $ | 217,907 |   |

| (Dollars      in thousands)     |   | Securities      Available-for-Sale |    |
|---------------------------------|--------|------------------------------------|---------|
|                            |   | Maturing      after 10 years       |    |
|                            |   | Amortized                          |    |   |   |   |
|                            |   | Cost                               |    |   | Fair      Value |   |
| U.S.      agency securities     |   | $                                  | 13,328  |   |   | $ | 13,135 |   |
| Mortgage-backed      securities |   |                               | 160,214 |   |   |   | 156,112 |   |
| Total                           |   | $                                  | 173,542 |   |   | $ | 169,247 |   |

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| (Dollars      in thousands)     |   | Less      than 12 months |   |   | 12      months or Longer |   |   | Total           |   |
|---------------------------------|--------|--------------------------|--------|--------|--------------------------|--------|--------|-----------------|--------|
|                            |   |                     |   |   | Gross                    |   |   |            |   |   | Gross |   |   |   |   |   | Gross |   |
|                            |   |                     |   |   | Unrealized               |   |   |            |   |   | Unrealized |   |   |   |   |   | Unrealized |   |
|                            |   |                     |   |   | Holding                  |   |   |            |   |   | Holding |   |   |   |   |   | Holding |   |
|                            |   | Fair      Value          |   |   | Losses                   |   |   | Fair      Value |   |   | Losses |   |   | Fair      Value |   |   | Losses |   |
|                            |   |                     |   |   |                     |   |   |            |   |   |   |   |   |   |   |   |   |   |
| U.S.      agency securities     |   | $                        | 13,135 |   |                     | $      | (193   | )               |   | $ | - |   |   | $ | - |   |   | $ | 13,135 |   |   | $ | (193 | ) |
| Mortgage-backed      securities |   |                     | 21,308 |   |                     |   | (241   | )               |   |   | 129,955 |   |   |   | (3,870 | ) |   |   | 151,263 |   |   |   | (4,111 | ) |
| Mutual      funds               |   |                     | 2,290  |   |                     |   | (20    | )               |   |   | - |   |   |   | - |   |   |   | 2,290 |   |   |   | (20 | ) |
| Total                           |   | $                        | 36,733 |   |                     | $      | (454   | )               |   | $ | 129,955 |   |   | $ | (3,870 | ) |   | $ | 166,688 |   |   | $ | (4,324 | ) |

| (Dollars      in thousands)     |   | Less      than 12 months |   |   | 12      months or Longer |   |   | Total           |   |
|---------------------------------|--------|--------------------------|--------|--------|--------------------------|--------|--------|-----------------|--------|
|                            |   |                     |   |   | Gross                    |   |   |            |   |   | Gross |   |   |   |   |   | Gross |   |
|                            |   |                     |   |   | Unrealized               |   |   |            |   |   | Unrealized |   |   |   |   |   | Unrealized |   |
|                            |   |                     |   |   | Holding                  |   |   |            |   |   | Holding |   |   |   |   |   | Holding |   |
|                            |   | Fair      Value          |   |   | Losses                   |   |   | Fair      Value |   |   | Losses |   |   | Fair      Value |   |   | Losses |   |
|                            |   |                     |   |   |                     |   |   |            |   |   |   |   |   |   |   |   |   |   |
| U.S.      agency securities     |   | $                        | -      |   |                     | $      | -      |            |   | $ | 12,334 |   |   | $ | (181 | ) |   | $ | 12,334 |   |   | $ | (181 | ) |
| Mortgage-backed      securities |   |                     | -      |   |                     |   | -      |            |   |   | 198,702 |   |   |   | (6,437 | ) |   |   | 198,702 |   |   |   | (6,437 | ) |
| Mutual      funds               |   |                     | 2,164  |   |                     |   | (49    | )               |   |   | - |   |   |   | - |   |   |   | 2,164 |   |   |   | (49 | ) |
| Total                           |   | $                        | 2,164  |   |                     | $      | (49    | )               |   | $ | 211,036 |   |   | $ | (6,618 | ) |   | $ | 213,200 |   |   | $ | (6,667 | ) |

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| (Dollars      in thousands)                 |   | As      of             |      |
|---------------------------------------------|--------|------------------------|-----------|
|                                        |   | December      31, 2007 |      |   | December      31, 2006 |   |
|                                        |   |                   |      |   |   |   |
| Commercial      and industrial              |   | $                      | 156,966   |   |   | $ | 122,257 |   |
| Real      estate construction and land:     |   |                   |      |   |   |   |   |   |
| Single-family      luxury                   |   |                   | 582,962   |   |   |   | 514,385 |   |
| Single-family      tract                    |   |                   | 146,627   |   |   |   | 152,060 |   |
| Commercial                                  |   |                   | 198,186   |   |   |   | 134,404 |   |
| Land:                                       |   |                   |      |   |   |   |   |   |
| Single-family      luxury                   |   |                   | 22,931    |   |   |   | 20,982 |   |
| Single-family      tract                    |   |                   | 64,405    |   |   |   | 67,647 |   |
| Commercial                                  |   |                   | 15,439    |   |   |   | 22,550 |   |
| Other                                       |   |                   | 909       |   |   |   | 1,239 |   |
| Real      estate mortgage:                  |   |                   |      |   |   |   |   |   |
| Commercial                                  |   |                   | 553,531   |   |   |   | 531,159 |   |
| Multi-family      residential               |   |                   | 93,662    |   |   |   | 222,470 |   |
| All      other residential                  |   |                   | 56,257    |   |   |   | 49,353 |   |
| Consumer      loans                         |   |                   | 115,702   |   |   |   | 65,914 |   |
| All      other loans (including overdrafts) |   |                   | 264       |   |   |   | 98 |   |
|                                        |   |                   | 2,007,841 |   |   |   | 1,904,518 |   |
| Less:                                       |   |                   |      |   |   |   |   |   |
| Unearned      premium (discount) on loans   |   |                   | 3,272     |   |   |   | 1,696 |   |
| Deferred      loan fees                     |   |                   | (3,042    | ) |   |   | (3,970 | ) |
| Loans,      net of unearned income          |   | $                      | 2,008,071 |   |   | $ | 1,902,244 |   |
| Loans      held-for-sale                    |   | $                      | 119,427   |   |   | $ | - |   |

| (Dollars      in thousands)                                 |   | At      December 31, |    |
|-------------------------------------------------------------|--------|----------------------|---------|
|                                                        |   | 2007                 |    |   | 2006 |   |   | 2005 |   |
| Impaired      loans with a valuation allowance              |   | $                    | 103,732 |   |   | $ | - |   |   | $ | - |   |
| Impaired      loans without a valuation allowance           |   |                 | 36,156  |   |   |   | 16,715 |   |   |   | 964 |   |
| Total      impaired loans                                   |   | $                    | 139,888 |   |   | $ | 16,715 |   |   | $ | 964 |   |
|                                                        |   |                 |    |   |   |   |   |   |   |   |   |   |
| Specific      valuation allowance related to impaired loans |   | $                    | 20,848  |   |   | $ | - |   |   | $ | - |   |

| (Dollars      in thousands)                            |   | Years      Ended December 31, |   |
|--------------------------------------------------------|--------|-------------------------------|--------|
|                                                   |   | 2007                          |   |   | 2006 |   |   | 2005 |   |
| Average      recorded investment in impaired loans     |   | $                             | 13,923 |   |   | $ | 9,285 |   |   | $ | 3,472 |   |
| Cash      receipts applied to reduce principal balance |   | $                             | 9,787  |   |   | $ | 1,093 |   |   | $ | 4,705 |   |
| Interest      income recognized for cash payments      |   | $                             | 107    |   |   | $ | 185 |   |   | $ | 338 |   |

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| (Dollars      in thousands)              |   | Years      Ended December 31, |   |
|------------------------------------------|--------|-------------------------------|--------|
|                                     |   | 2007                          |   |   | 2006 |   |   | 2005 |   |
| Servicing      rights, beginning of year |   | $                             | 933    |   |   | $ | 1,358 |   |   | $ | 1,705 |   |
| Servicing      rights added in year, net |   |                          | 261    |   |   |   | 318 |   |   |   | 324 |   |
| Servicing      rights amortized          |   |                          | (445   | ) |   |   | (743 | ) |   |   | (671 | ) |
| Servicing      rights, end of year       |   | $                             | 749    |   |   | $ | 933 |   |   | $ | 1,358 |   |

| Assumption                  | Range                |
|-----------------------------|----------------------|
| Discount      Rate          | 9.25%      to 11.00% |
| Prepayment      Speed (CPR) | 10.36      to 37.29  |

| (Dollars      in thousands)                |   | Years      Ended December 31, |   |
|--------------------------------------------|--------|-------------------------------|--------|
|                                       |   | 2007                          |   |   | 2006 |   |   | 2005 |   |
| Mortgage      servicing rights capitalized |   | $                             | 261    |   |   | $ | 318 |   |   | $ | 324 |   |
| Mortgage      servicing rights amortized   |   | $                             | 445    |   |   | $ | 743 |   |   | $ | 671 |   |
| Valuation      allowances                  |   | $                             | -      |   |   | $ | - |   |   | $ | - |   |

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| (Dollars      in thousands)                     |   | Years      ended December 31, |   |
|-------------------------------------------------|--------|-------------------------------|--------|
|                                            |   | 2007                          |   |   | 2006 |   |   | 2005 |   |
| Allowance      for Loan Losses                  |   |                          |   |   |   |   |   |   |   |
| Balance,      beginning of period               |   | $                             | 19,689 |   |   | $ | 13,762 |   |   | $ | 11,969 |   |
| Additions      due to acquisitions              |   |                          | -      |   |   |   | 2,097 |   |   |   | - |   |
| Recoveries      on loans previously charged off |   |                          | 85     |   |   |   | 71 |   |   |   | 67 |   |
| Loans      charged off                          |   |                          | (9,325 | ) |   |   | (366 | ) |   |   | (160 | ) |
| Provision      charged to operating expense     |   |                          | 38,400 |   |   |   | 4,125 |   |   |   | 1,886 |   |
| Balance,      end of period                     |   | $                             | 48,849 |   |   | $ | 19,689 |   |   | $ | 13,762 |   |
|                                            |   |                          |   |   |   |   |   |   |   |   |   |   |
| Reserve      for Unfunded Commitments           |   |                          |   |   |   |   |   |   |   |   |   |   |
| Balance,      beginning of period               |   | $                             | 1,396  |   |   | $ | 1,346 |   |   | $ | 1,032 |   |
| Net      increase charged to other expenses     |   |                          | (430   | ) |   |   | 50 |   |   |   | 314 |   |
| Balance,      end of period                     |   | $                             | 966    |   |   | $ | 1,396 |   |   | $ | 1,346 |   |
|                                            |   |                          |   |   |   |   |   |   |   |   |   |   |
| Allowance      for Credit Losses                |   |                          |   |   |   |   |   |   |   |   |   |   |
| Allowance      for loan losses                  |   | $                             | 48,849 |   |   | $ | 19,689 |   |   | $ | 13,762 |   |
| Reserve      for unfunded commitments           |   |                          | 966    |   |   |   | 1,396 |   |   |   | 1,346 |   |
| Allowance      for credit losses                |   | $                             | 49,815 |   |   | $ | 21,085 |   |   | $ | 15,108 |   |

| (Dollars      in thousands)             |   | As      of December 31, |   |
|-----------------------------------------|--------|-------------------------|--------|
|                                    |   | 2007                    |   |   | 2006 |   |
| Balance,      Beginning of year         |   | $                       | 490    |   |   | $ | 458 |   |
| Credit      granted, including renewals |   |                    | 1,239  |   |   |   | 684 |   |
| Repayments                              |   |                    | (569   | ) |   |   | (652 | ) |
| Balance,      End of year               |   | $                       | 1,160  |   |   | $ | 490 |   |

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| (Dollars      in thousands)                          |   | December      31, |    |
|------------------------------------------------------|--------|-------------------|---------|
|                                                 |   | 2007              |    |   | 2006 |   |
| Buildings                                            |   | $                 | 5,605   |   |   | $ | 5,349 |   |
| Furniture      and equipment                         |   |              | 18,337  |   |   |   | 16,770 |   |
| Leasehold      improvements                          |   |              | 9,526   |   |   |   | 9,359 |   |
| Bank      owned autos                                |   |              | 791     |   |   |   | 797 |   |
|                                                 |   |              | 34,259  |   |   |   | 32,275 |   |
| Less:      Accumulated depreciation and amortization |   |              | (18,388 | ) |   |   | (14,628 | ) |
| Projects      in progress                            |   |              | 560     |   |   |   | 860 |   |
| Land                                                 |   |              | 1,895   |   |   |   | 1,895 |   |
| Total                                                |   | $                 | 18,326  |   |   | $ | 20,402 |   |

| (Dollars      in thousands)   |   |   |   |
|-------------------------------|--------|--------|--------|
|                          |   |   |   |
| Year      Ending December 31, |   |   |   |
| 2008                          |   | $      | 4,002  |   |
| 2009                          |   |   | 4,082  |   |
| 2010                          |   |   | 3,459  |   |
| 2011                          |   |   | 3,288  |   |
| 2012                          |   |   | 3,337  |   |
| Thereafter                    |   |   | 13,771 |   |
| Total                         |   | $      | 31,939 |   |

| (Dollars      in thousands)            |   | As      of December 31, |      |
|----------------------------------------|--------|-------------------------|-----------|
|                                   |   | 2007                    |      |   | 2006 |   |
|                                   |   |                    |      |   |   |   |
| Money      market deposits             |   | $                       | 568,713   |   |   | $ | 562,622 |   |
| Savings      and NOW deposits          |   |                    | 136,982   |   |   |   | 70,741 |   |
| Time      deposits under $100,000      |   |                    | 360,249   |   |   |   | 362,365 |   |
| Time      deposits of $100,000 or more |   |                    | 552,803   |   |   |   | 517,768 |   |
| Total                                  |   | $                       | 1,618,747 |   |   | $ | 1,513,496 |   |

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| (Dollars      in thousands) |   |   |    |
|-----------------------------|--------|--------|---------|
|                        |   |   |    |
| Maturity                    |   |   |    |
| 2008                        |   | $      | 824,179 |   |
| 2009                        |   |   | 88,836  |   |
| 2010                        |   |   | 37      |   |
| 2011                        |   |   | -       |   |
|                        |   | $      | 913,052 |   |

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| (Dollars      in thousands) |   | Weighted |   |   |     |   |    |    |   |
|-----------------------------|--------|----------|--------|--------|----------|--------|---------|---------|--------|
|                        |   | Average  |   |   | Maturity |   |    | Putable |   |
| Maturity                    |   | Rate     |   |   | Amount   |   |    | Amount  |   |
| 2008                        |   |     | 5.08   | %      |     | $      | 40,000  |    |   | $ | 20,000 |   |
| 2009                        |   |     | 4.87   | %      |     |   | 90,000  |    |   |   | 90,000 |   |
| 2010                        |   |     | 4.64   | %      |     |   | 45,000  |    |   |   | 45,000 |   |
|                        |   |     | 4.86   | %      |     | $      | 175,000 |    |   | $ | 155,000 |   |

| (Dollars      in thousands)        |                       |                   |   |   |   |   | As      of December 31, 2007 |   |
|------------------------------------|----------------------------|------------------------|--------|--------|--------|--------|------------------------------|--------|
|                               |                       |                   |   | Common |   |   | Effective                    |   |   |   |   |
|                               | Interest      Rate         | Due      Date          |   | Stock  |   |   | Interest      Rate           |   |   | Balance |   |
| Vineyard      Statutory Trust I    | 3-month      LIBOR + 3.60% | December      18, 2031 |   | $      | 372    |   |                         |   | 8.57 | % |   | $ | 12,372 |   |
| Vineyard      Statutory Trust II   | 3-month      LIBOR + 3.35% | December      26, 2032 |   |   | 155    |   |                         |   | 8.59 | % |   |   | 5,155 |   |
| Vineyard      Statutory Trust III  | 3-month      LIBOR + 3.05% | October      8, 2033   |   |   | 310    |   |                         |   | 8.29 | % |   |   | 10,310 |   |
| Vineyard      Statutory Trust IV   | 3-month      LIBOR + 2.85% | January      23, 2034  |   |   | 310    |   |                         |   | 7.83 | % |   |   | 10,310 |   |
| Vineyard      Statutory Trust V    | 3-month      LIBOR + 2.85% | April      23, 2034    |   |   | 310    |   |                         |   | 8.09 | % |   |   | 10,310 |   |
| Vineyard      Statutory Trust VI   | 3-month      LIBOR + 2.85% | July      23, 2034     |   |   | 372    |   |                         |   | 8.00 | % |   |   | 12,372 |   |
| Vineyard      Statutory Trust VII  | 3-month      LIBOR + 2.00% | December      16, 2034 |   |   | 310    |   |                         |   | 7.12 | % |   |   | 10,310 |   |
| Vineyard      Statutory Trust VIII | 3-month      LIBOR + 2.25% | May      23, 2035      |   |   | 310    |   |                         |   | 7.27 | % |   |   | 10,310 |   |
| Vineyard      Statutory Trust IX   | 3-month      LIBOR + 1.70% | November      23, 2035 |   |   | 464    |   |                         |   | 6.72 | % |   |   | 15,464 |   |
| Vineyard      Statutory Trust XI   | 3-month      LIBOR + 1.60% | June      23, 2036     |   |   | 557    |   |                         |   | 6.48 | % |   |   | 18,557 |   |
|                               |                       |                   |   | $      | 3,470  |   |                         |   | 7.55 | % |   | $ | 115,470 |   |

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| (Dollars      in thousands)        |   | Years      Ended December 31, |    |
|------------------------------------|--------|-------------------------------|---------|
|                               |   | 2007                          |    |   | 2006 |   |   | 2005 |   |
| Federal      Income Tax            |   |                          |    |   |   |   |   |   |   |
| Current                            |   | $                             | 10,216  |   |   | $ | 13,831 |   |   | $ | 11,255 |   |
| Deferred      / (credit)           |   |                          | (10,377 | ) |   |   | (3,359 | ) |   |   | (1,353 | ) |
| Total      Federal Income Tax      |   |                          | (161    | ) |   |   | 10,472 |   |   |   | 9,902 |   |
|                               |   |                          |    |   |   |   |   |   |   |   |   |   |
| State      Franchise Tax           |   |                          |    |   |   |   |   |   |   |   |   |   |
| Current                            |   |                          | 3,550   |   |   |   | 4,787 |   |   |   | 3,656 |   |
| Deferred      / (credit)           |   |                          | (3,425  | ) |   |   | (1,434 | ) |   |   | (282 | ) |
| Total      State Franchise Tax     |   |                          | 125     |   |   |   | 3,353 |   |   |   | 3,374 |   |
|                               |   |                          |    |   |   |   |   |   |   |   |   |   |
| Change      in valuation allowance |   |                          | -       |   |   |   | - |   |   |   | - |   |
| Total      Income Taxes            |   | $                             | (36     | ) |   | $ | 13,825 |   |   | $ | 13,276 |   |

| (Dollars      in thousands)          |   | 2007   |    |   | 2006           |   |   | 2005   |   |
|--------------------------------------|--------|--------|---------|--------|----------------|--------|--------|--------|--------|
|                                 |   |   |    |   | Percent        |   |   |   |   |   | Percent |   |   |   |   |   | Percent |   |
|                                 |   |   |    |   | of      Pretax |   |   |   |   |   | of      Pretax |   |   |   |   |   | of      Pretax |   |
|                                 |   | Amount |    |   | Loss           |   |   | Amount |   |   | Income |   |   | Amount |   |   | Income |   |
| Federal      rate                    |   | $      | (14,027 | )      |           |   | -35.0  | %      |   | $ | 11,749 |   |   |   | 35.0 | % |   | $ | 11,265 |   |   |   | 35.0 | % |
| Changes      due to state income     |   |   |    |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| tax,      net of federal tax benefit |   |   | (65     | )      |           |   | -0.2   | %      |   |   | 2,365 |   |   |   | 7.0 | % |   |   | 2,268 |   |   |   | 7.0 | % |
| Change      in valuation allowance   |   |   | -       |   |           |   | 0.0    | %      |   |   | - |   |   |   | 0.0 | % |   |   | - |   |   |   | 0.0 | % |
| Goodwill      impairment             |   |   | 14,270  |   |           |   | 35.6   | %      |   |   | - |   |   |   | 0.0 | % |   |   | - |   |   |   | 0.0 | % |
| Other                                |   |   | (214    | )      |           |   | -0.5   | %      |   |   | (289 | ) |   |   | -0.8 | % |   |   | (257 | ) |   |   | -0.8 | % |
| Total                                |   | $      | (36     | )      |           |   | -0.1   | %      |   | $ | 13,825 |   |   |   | 41.2 | % |   | $ | 13,276 |   |   |   | 41.2 | % |

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| (Dollars      in thousands)              |   | December      31, |   |
|------------------------------------------|--------|-------------------|--------|
|                                     |   | 2007              |   |   | 2006 |   |
| Deferred      Tax Assets                 |   |              |   |   |   |   |
| Reserve      for loan losses             |   | $                 | 20,610 |   |   | $ | 7,382 |   |
| Reserve      for other real estate owned |   |              | 956    |   |   |   | - |   |
| Deferred      compensation               |   |              | 2,432  |   |   |   | 1,979 |   |
| Non-deductible      reserves             |   |              | 1,856  |   |   |   | 1,767 |   |
| Net      operating loss                  |   |              | 725    |   |   |   | 1,030 |   |
| Deferred      income                     |   |              | 1,797  |   |   |   | 1,946 |   |
| Fixed      assets                        |   |              | 369    |   |   |   | 36 |   |
| Stock      compensation                  |   |              | 720    |   |   |   | 121 |   |
| Other      assets and liabilities        |   |              | 1,281  |   |   |   | 2,189 |   |
| Other      unrealized loss on securities |   |              | 1,766  |   |   |   | 2,753 |   |
|                                     |   |              | 32,512 |   |   |   | 19,203 |   |
| Deferred      Tax Liabilities            |   |              |   |   |   |   |   |   |
| Other      assets and liabilities        |   |              | (1,800 | ) |   |   | (1,393 | ) |
| Deferred      costs                      |   |              | (2,355 | ) |   |   | (2,335 | ) |
|                                     |   |              | (4,155 | ) |   |   | (3,728 | ) |
| Net      Deferred Tax Assets             |   | $                 | 28,357 |   |   | $ | 15,475 |   |

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|                                                           |   | Years      Ended December |   |
|----------------------------------------------------------------|--------|---------------------------|--------|
|                                                           |   | 2007                      |   |   | 2006 |   |
| Dividend      yield                                            |   |                      | 1.42   | % |   |   | 1.45 | % |
| Expected      life (in years)                                  |   |                      | 3.25   |   |   |   | 3.25 |   |
| Expected      volatility                                       |   |                      | 27.14  | % |   |   | 27.24 | % |
| Risk-free      rate                                            |   |                      | 4.48   | % |   |   | 4.69 | % |
| Weighted      average grant date fair value of options granted |   | $                         | 4.79   |   |   | $ | 4.76 |   |

| (Dollars      in thousands, except per share amounts) |   |   |     |   |      |   |   | Weighted-   |   |            |      |   |
|-------------------------------------------------------|--------|--------|----------|--------|-----------|--------|--------|-------------|--------|-----------------|-----------|--------|
|                                                  |   |   |     |   | Weighted- |   |   | Average     |   |            |      |   |
|                                                  |   |   |     |   | Average   |   |   | Remaining   |   |            | Aggregate |   |
|                                                  |   |   |     |   | Exercise  |   |   | Contractual |   |            | Intrinsic |   |
|                                                  |   | Shares |     |   | Price     |   |   | Term        |   |            | Value     |   |
| Outstanding      at December 31, 2004                 |   |   | 600,723  |   |      | $      | 4.05   |        |   | 7.22      years |      |   | $ | - |   |
| Granted                                               |   |   | -        |   |      |   | -      |        |   |            | -         |   |   |   | - |   |
| Exercised                                             |   |   | (152,217 | )      |      |   | 5.31   |        |   |            | -         |   |   |   | - |   |
| Forfeited      or expired                             |   |   | -        |   |      |   | -      |        |   |            | -         |   |   |   | - |   |
| Outstanding      at December 31, 2005                 |   |   | 448,506  |   |      | $      | 3.65   |        |   | 6.15      years |      |   | $ | 11,371 |   |
| Exercisable      at December 31, 2005                 |   |   | 440,109  |   |      | $      | 3.66   |        |   | 6.17      years |      |   | $ | 11,158 |   |

| (Dollars      in thousands, except per share amounts) |   |   |     |   |      |   |   | Weighted-   |   |            |      |   |
|-------------------------------------------------------|--------|--------|----------|--------|-----------|--------|--------|-------------|--------|-----------------|-----------|--------|
|                                                  |   |   |     |   | Weighted- |   |   | Average     |   |            |      |   |
|                                                  |   |   |     |   | Average   |   |   | Remaining   |   |            | Aggregate |   |
|                                                  |   |   |     |   | Exercise  |   |   | Contractual |   |            | Intrinsic |   |
|                                                  |   | Shares |     |   | Price     |   |   | Term        |   |            | Value     |   |
| Outstanding      at December 31, 2005                 |   |   | 448,506  |   |      | $      | 3.65   |        |   | 6.15      years |      |   | $ | - |   |
| Granted                                               |   |   | 52,500   |   |      |   | 21.06  |        |   |            | -         |   |   |   | - |   |
| Exercised                                             |   |   | (112,427 | )      |      |   | 3.01   |        |   |            | -         |   |   |   | - |   |
| Forfeited      or expired                             |   |   | -        |   |      |   | -      |        |   |            | -         |   |   |   | - |   |
| Outstanding      at December 31, 2006                 |   |   | 388,579  |   |      | $      | 6.19   |        |   | 5.03      years |      |   | $ | 6,114 |   |
| Exercisable      at December 31, 2006                 |   |   | 336,079  |   |      | $      | 3.87   |        |   | 5.21      years |      |   | $ | 6,069 |   |

| (Dollars      in thousands, except per share amounts) |   |   |    |   |      |   |   | Weighted-   |   |            |      |   |
|-------------------------------------------------------|--------|--------|---------|--------|-----------|--------|--------|-------------|--------|-----------------|-----------|--------|
|                                                  |   |   |    |   | Weighted- |   |   | Average     |   |            |      |   |
|                                                  |   |   |    |   | Average   |   |   | Remaining   |   |            | Aggregate |   |
|                                                  |   |   |    |   | Exercise  |   |   | Contractual |   |            | Intrinsic |   |
|                                                  |   | Shares |    |   | Price     |   |   | Term        |   |            | Value     |   |
| Outstanding      at December 31, 2006                 |   |   | 388,579 |   |      | $      | 6.19   |        |   | 5.03      years |      |   | $ | - |   |
| Granted                                               |   |   | 52,500  |   |      |   | 21.44  |        |   |            | -         |   |   |   | - |   |
| Exercised                                             |   |   | (50,229 | )      |      |   | 3.37   |        |   |            | -         |   |   |   | - |   |
| Forfeited      or expired                             |   |   | -       |   |      |   | -      |        |   |            | -         |   |   |   | - |   |
| Outstanding      at December 31, 2007                 |   |   | 390,850 |   |      | $      | 8.60   |        |   | 3.89      years |      |   | $ | 586 |   |
| Exercisable      at December 31, 2007                 |   |   | 285,850 |   |      | $      | 3.96   |        |   | 4.20      years |      |   | $ | 1,755 |   |

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|                                |   |       |    |   | Weighted-       |   |
|-------------------------------------|--------|------------|---------|--------|-----------------|--------|
|                                |   |       |    |   | Average         |   |
|                                |   | Non-vested |    |   | Grant-Date      |   |
|                                |   | Shares     |    |   | Fair      Value |   |
| Nonvested      at December 31, 2004 |   |       | 98,434  |   |            | $      | 2.05 |   |
| Granted                             |   |       | -       |   |            |   | - |   |
| Vested                              |   |       | (90,037 | )      |            |   | 2.10 |   |
| Forfeited      or expired           |   |       | -       |   |            |   | - |   |
| Nonvested      at December 31, 2005 |   |       | 8,397   |   |            | $      | 1.54 |   |
| Granted                             |   |       | 52,500  |   |            |   | 4.76 |   |
| Vested                              |   |       | (8,397  | )      |            |   | 1.54 |   |
| Forfeited      or expired           |   |       | -       |   |            |   | - |   |
| Nonvested      at December 31, 2006 |   |       | 52,500  |   |            | $      | 4.76 |   |
| Granted                             |   |       | 52,500  |   |            |   | 4.79 |   |
| Vested                              |   |       | -       |   |            |   | - |   |
| Forfeited      or expired           |   |       | -       |   |            |   | - |   |
| Nonvested      at December 31, 2007 |   |       | 105,000 |   |            | $      | 4.78 |   |

| Options      Outstanding |                |   | Options      Exercisable |   |
|--------------------------|---------------------|--------|--------------------------|--------|
|                     |                |   |                     |   | Weighted- |   | Weighted- |   |   |   |   |   | Weighted- |   |
|                     |                |   |                     |   | Average |   | Average |   |   |   |   |   | Average |   |
| Exercise                 |                |   | Number                   |   | Remaining |   | Exercise |   |   | Number |   |   | Exercise |   |
| Price                    |                |   | Outstanding              |   | Contractual      Life |   | Price |   |   | Exercisable |   |   | Price |   |
|                     |                |   |                     |   |   |   |   |   |   |   |   |   |   |   |
|                     | $1.30      - $2.16  |   |                     |   | 69,457 |   | 3.13      Years |   | $ | 1.66 |   |   |   | 69,457 |   |   | $ | 1.66 |   |
|                     | $2.81      - $3.89  |   |                     |   | 188,830 |   | 4.40      Years |   | $ | 3.69 |   |   |   | 188,830 |   |   | $ | 3.69 |   |
|                     | $7.26      - $12.70 |   |                     |   | 27,563 |   | 5.56      Years |   | $ | 11.61 |   |   |   | 27,563 |   |   | $ | 11.61 |   |
|                     | $21.06      - 21.44 |   |                     |   | 105,000 |   | 3.02      Years |   | $ | 21.25 |   |   |   | - |   |   |   |   |   |
|                     |                |   |                     |   | 390,850 |   | 3.89      Years |   | $ | 8.60 |   |   |   | 285,850 |   |   | $ | 3.96 |   |

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|                                  |   |                   |    |   | Weighted-Average |   |
|---------------------------------------|--------|------------------------|---------|--------|------------------|--------|
|                                  |   | Restricted      Shares |    |   | Fair      Value  |   |
| Outstanding      at December 31, 2006 |   |                   | 224,344 |   |             | $      | 23.82 |   |
| Granted                               |   |                   | 148,973 |   |             |   | 21.64 |   |
| Forfeited                             |   |                   | (40,923 | )      |             |   | 21.55 |   |
| Vested                                |   |                   | (33,928 | )      |             |   | 17.85 |   |
| Outstanding      at December 31, 2007 |   |                   | 298,466 |   |             | $      | 23.72 |   |

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| (Dollars      in thousands)                  |   |                   |    |   |                   |   |   | Capital      Needed    |   |
|----------------------------------------------|--------|------------------------|---------|--------|------------------------|--------|--------|------------------------|--------|
|                                         |   |                   |    |   |                   |   |   |                   |   |   |   |   |   | To      Be Well |   |
|                                         |   |                   |    |   |                   |   |   |                   |   |   |   |   |   | Capitalized      Under |   |
|                                         |   |                   |    |   |                   |   |   | For      Capital       |   |   | Prompt      Corrective |   |
|                                         |   | Actual      Regulatory |    |   | Adequacy      Purposes |   |   | Action      Provisions |   |
|                                         |   | Capital                |    |   |                   |   |   | Capital                |   |   |   |   |   | Capital |   |   |   |   |
|                                         |   | Amount                 |    |   | Ratio                  |   |   | Amount                 |   |   | Ratio |   |   | Amount |   |   | Ratio |   |
| As      of December 31, 2007                 |   |                   |    |   |                   |   |   |                   |   |   |   |   |   |   |   |   |   |   |
| Total      capital to risk-weighted assets:  |   |                   |    |   |                   |   |   |                   |   |   |   |   |   |   |   |   |   |   |
| Bank                                         |   | $                      | 287,392 |   |                   |   | 11.93  | %                      |   | $ | 192,700 |   |   |   | 8.00 | % |   | $ | 240,900 |   |   |   | 10.00 | % |
| Consolidated                                 |   | $                      | 252,528 |   |                   |   | 10.36  | %                      |   | $ | 195,000 |   |   |   | 8.00 | % |   |   | N/A |   |   |   | N/A |   |
|                                         |   |                   |    |   |                   |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Tier      1 capital to risk-weighted assets: |   |                   |    |   |                   |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Bank                                         |   | $                      | 257,032 |   |                   |   | 10.67  | %                      |   | $ | 96,400 |   |   |   | 4.00 | % |   | $ | 144,500 |   |   |   | 6.00 | % |
| Consolidated                                 |   | $                      | 147,886 |   |                   |   | 6.07   | %                      |   | $ | 97,500 |   |   |   | 4.00 | % |   |   | N/A |   |   |   | N/A |   |
|                                         |   |                   |    |   |                   |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Tier      1 capital to average assets:       |   |                   |    |   |                   |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Bank                                         |   | $                      | 257,032 |   |                   |   | 10.30  | %                      |   | $ | 99,800 |   |   |   | 4.00 | % |   | $ | 124,800 |   |   |   | 5.00 | % |
| Consolidated                                 |   | $                      | 147,886 |   |                   |   | 5.89   | %                      |   | $ | 100,400 |   |   |   | 4.00 | % |   |   | N/A |   |   |   | N/A |   |
|                                         |   |                   |    |   |                   |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| As      of December 31, 2006                 |   |                   |    |   |                   |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total      capital to risk-weighted assets:  |   |                   |    |   |                   |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Bank                                         |   | $                      | 266,813 |   |                   |   | 12.17  | %                      |   | $ | 175,400 |   |   |   | 8.00 | % |   | $ | 219,200 |   |   |   | 10.00 | % |
| Consolidated                                 |   | $                      | 227,164 |   |                   |   | 10.34  | %                      |   | $ | 175,800 |   |   |   | 8.00 | % |   |   | N/A |   |   |   | N/A |   |
|                                         |   |                   |    |   |                   |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Tier      1 capital to risk-weighted assets: |   |                   |    |   |                   |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Bank                                         |   | $                      | 245,728 |   |                   |   | 11.20  | %                      |   | $ | 87,800 |   |   |   | 4.00 | % |   | $ | 131,600 |   |   |   | 6.00 | % |
| Consolidated                                 |   | $                      | 137,386 |   |                   |   | 6.25   | %                      |   | $ | 87,900 |   |   |   | 4.00 | % |   |   | N/A |   |   |   | N/A |   |
|                                         |   |                   |    |   |                   |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Tier      1 capital to average assets:       |   |                   |    |   |                   |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Bank                                         |   | $                      | 245,728 |   |                   |   | 11.41  | %                      |   | $ | 86,100 |   |   |   | 4.00 | % |   | $ | 107,700 |   |   |   | 5.00 | % |
| Consolidated                                 |   | $                      | 137,386 |   |                   |   | 6.36   | %                      |   | $ | 86,400 |   |   |   | 4.00 | % |   |   | N/A |   |   |   | N/A |   |

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| (Dollars      in thousands)           |   | 2007   |   |   | 2006   |   |   | 2005   |   |
|---------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Other      non-interest expense:      |   |   |   |   |   |   |   |   |   |
| Data      processing                  |   | $      | 1,503  |   |   | $      | 1,064  |   |   | $ | 819 |   |
| Marketing                             |   |   | 928    |   |   |   | 1,253  |   |   |   | 1,103 |   |
| Insurance      and assessments        |   |   | 1,627  |   |   |   | 905    |   |   |   | 793 |   |
| Administrative                        |   |   | 772    |   |   |   | 602    |   |   |   | 535 |   |
| Loan      related                     |   |   | 1,282  |   |   |   | 883    |   |   |   | 835 |   |
| Other                                 |   |   | 1,093  |   |   |   | 1,220  |   |   |   | 889 |   |
| Total      other non-interest expense |   | $      | 7,205  |   |   | $      | 5,927  |   |   | $ | 4,974 |   |

| (Dollars      in thousands)                   |   | 2007   |    |   | 2006   |   |       | 2005   |   |
|-----------------------------------------------|--------|--------|---------|--------|--------|--------|------------|--------|--------|
|                                          |   | Income |    |   | Shares |   |       | Income |   |   | Shares |   |   | Income |   |   | Shares |   |
| Net      (loss)/income, as reported           |   | $      | (40,039 | )      |   |   |       |   | $      | 19,745 |   |   |   |   |   | $ | 18,911 |   |   |   |   |
| Less:      Preferred stock dividends declared |   |   | (1,735  | )      |   |   |       |   |   | (900 | ) |   |   |   |   |   | (540 | ) |   |   |   |
| Shares      outstanding at year-end           |   |   |    |   |   |   | 10,285,775 |   |   |   |   |   |   |   | 10,939,310 |   |   |   |   |   |   |   | 9,899,030 |   |
| Unreleased      and unallocated ESOP shares   |   |   |    |   |   |   | (231,781   | )      |   |   |   |   |   |   | (257,828 | ) |   |   |   |   |   |   | (281,913 | ) |
| Impact      of weighting shares               |   |   |    |   |   |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| issued      during the year                   |   |   |    |   |   |   | 486,934    |   |   |   |   |   |   |   | (527,563 | ) |   |   |   |   |   |   | 159,653 |   |
| Used      in basic EPS                        |   |   | (41,774 | )      |   |   | 10,540,928 |   |   |   | 18,845 |   |   |   | 10,153,919 |   |   |   | 18,371 |   |   |   | 9,776,770 |   |
| Dilutive      effect of outstanding           |   |   |    |   |   |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| stock      options and warrants               |   |   |    |   |   |   | -          |   |   |   |   |   |   |   | 340,049 |   |   |   |   |   |   |   | 454,516 |   |
| Used      in diluted EPS      (1)             |   | $      | (41,774 | )      |   |   | 10,540,928 |   |   | $ | 18,845 |   |   |   | 10,493,968 |   |   | $ | 18,371 |   |   |   | 10,231,286 |   |

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| (Dollars      in thousands)           |   | December      31, 2007 |      |   | December      31, 2006 |   |
|---------------------------------------|--------|------------------------|-----------|--------|------------------------|--------|
|                                  |   | Carrying               |      |   |                   |   |   | Carrying |   |   |   |   |
|                                  |   | Amount                 |      |   | Fair      Value        |   |   | Amount |   |   | Fair      Value |   |
| Assets                                |   |                   |      |   |                   |   |   |   |   |   |   |   |
| Cash      and cash equivalents        |   | $                      | 83,537    |   |                   | $      | 83,537 |   |   | $ | 35,129 |   |   | $ | 35,129 |   |
| Investment      securities            |   |                   | 177,321   |   |                   |   | 177,321 |   |   |   | 217,907 |   |   |   | 217,907 |   |
| FHLB      and other stock             |   |                   | 25,066    |   |                   |   | 25,084 |   |   |   | 15,693 |   |   |   | 15,693 |   |
| Loans,      net of unearned income    |   |                   | 2,127,498 |   |                   |   | 2,107,892 |   |   |   | 1,902,244 |   |   |   | 1,896,692 |   |
| Accrued      interest receivable      |   |                   | 11,834    |   |                   |   | 11,834 |   |   |   | 11,577 |   |   |   | 11,577 |   |
|                                  |   |                   |      |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities                           |   |                   |      |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Non-interest      bearing deposits    |   | $                      | 316,905   |   |                   | $      | 316,905 |   |   | $ | 292,917 |   |   | $ | 292,917 |   |
| Interest      bearing deposits        |   |                   | 1,618,747 |   |                   |   | 1,620,140 |   |   |   | 1,513,496 |   |   |   | 1,512,818 |   |
| Exchange      balances                |   |                   | 47,515    |   |                   |   | 47,515 |   |   |   | - |   |   |   | - |   |
| FHLB      advances                    |   |                   | 175,000   |   |                   |   | 177,729 |   |   |   | 126,000 |   |   |   | 125,827 |   |
| Other      borrowings                 |   |                   | 45,250    |   |                   |   | 45,257 |   |   |   | 40,000 |   |   |   | 40,008 |   |
| Subordinated      debentures          |   |                   | 5,000     |   |                   |   | 5,002 |   |   |   | 5,000 |   |   |   | 5,000 |   |
| Junior      subordinated debentures   |   |                   | 115,470   |   |                   |   | 113,820 |   |   |   | 115,470 |   |   |   | 116,968 |   |
| Accrued      interest payable         |   |                   | 4,320     |   |                   |   | 4,320 |   |   |   | 4,121 |   |   |   | 4,121 |   |
|                                  |   |                   |      |   |                   |   |   |   |   |   |   |   |   |   |   |   |
|                                  |   | Notional               |      |   | Cost      to Cede      |   |   | Notional |   |   | Cost      to Cede |   |
|                                  |   | Amount                 |      |   | or      Assume         |   |   | Amount |   |   | or      Assume |   |
| Off-Balance      Sheet Instruments    |   |                   |      |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Commitments      to extend credit and |   |                   |      |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| standby      letters of credit        |   | $                      | 625,761   |   |                   | $      | 6,258 |   |   | $ | 695,341 |   |   | $ | 6,953 |   |

| ·   | Cash      and Cash Equivalents |
|--------------------|--------------------------------|

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| ·   | Investment      Securities |
|--------------------|----------------------------|

| ·   | Loans |
|--------------------|-------|

| ·   | Deposits |
|--------------------|----------|

| ·   | FHLB      Advances |
|--------------------|--------------------|

| ·   | Junior      Subordinated Debentures and SubordinatedDebt |
|--------------------|----------------------------------------------------------|

| ·   | Off-Balance      Sheet Instruments |
|--------------------|------------------------------------|

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| Condensed      Balance Sheets                   |   |
|-------------------------------------------------|--------|
|                                            |   |   |   |   |   |   |   |   |   |
| (Dollars      in thousands)                     |   | December      31, |   |
|                                            |   | 2007 |   |   | 2006 |   |   | 2005 |   |
| Assets                                          |   |   |   |   |   |   |   |   |   |
| Cash      and cash equivalents                  |   | $ | 16,281 |   |   | $ | 12,822 |   |   | $ | 12,716 |   |
| Investment      in consolidated subsidiaries    |   |   | 256,359 |   |   |   | 285,748 |   |   |   | 191,961 |   |
| Prepaid      expenses                           |   |   | 2,103 |   |   |   | 2,236 |   |   |   | 2,360 |   |
| Goodwill                                        |   |   | 2,813 |   |   |   | - |   |   |   | - |   |
| Other      assets                               |   |   | 5,671 |   |   |   | 5,637 |   |   |   | 7,526 |   |
| Total      Assets                               |   | $ | 283,227 |   |   | $ | 306,443 |   |   | $ | 214,563 |   |
|                                            |   |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities                                     |   |   |   |   |   |   |   |   |   |   |   |   |
| Accrued      interest and other liabilities     |   | $ | 4,482 |   |   | $ | 2,913 |   |   | $ | 2,665 |   |
| Debt      payable                               |   |   | 45,250 |   |   |   | 40,000 |   |   |   | 10,000 |   |
| Subordinated      debentures                    |   |   | 5,000 |   |   |   | 5,000 |   |   |   | 5,000 |   |
| Junior      subordinated debentures             |   |   | 115,470 |   |   |   | 115,470 |   |   |   | 96,913 |   |
| Total      Liabilities                          |   |   | 170,202 |   |   |   | 163,383 |   |   |   | 114,578 |   |
|                                            |   |   |   |   |   |   |   |   |   |   |   |   |
| Stockholders'      Equity                       |   |   |   |   |   |   |   |   |   |   |   |   |
| Preferred      stock                            |   |   | 31,615 |   |   |   | 9,665 |   |   |   | 9,665 |   |
| Common      stock                               |   |   | 92,772 |   |   |   | 88,819 |   |   |   | 60,972 |   |
| Additional      paid-in capital                 |   |   | 1,727 |   |   |   | 2,149 |   |   |   | 4,443 |   |
| Retained      (deficit)/earnings                |   |   | (5,372 | ) |   |   | 52,105 |   |   |   | 36,454 |   |
| Unallocated      ESOP shares                    |   |   | (5,168 | ) |   |   | (5,765 | ) |   |   | (6,304 | ) |
| Accumulated      other comprehensive loss       |   |   | (2,549 | ) |   |   | (3,913 | ) |   |   | (5,245 | ) |
| Total      Stockholders' Equity                 |   |   | 113,025 |   |   |   | 143,060 |   |   |   | 99,985 |   |
| Total      Liabilities and Stockholders' Equity |   | $ | 283,227 |   |   | $ | 306,443 |   |   | $ | 214,563 |   |

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| Condensed      Statements of Income                        |   |
|------------------------------------------------------------|--------|
|                                                       |   |   |   |   |   |   |   |   |   |
| (Dollars      in thousands)                                |   | For      the years ended December 31, |   |
|                                                       |   | 2007 |   |   | 2006 |   |   | 2005 |   |
| Income                                                     |   |   |   |   |   |   |   |   |   |
| Other      income                                          |   | $ | 275 |   |   | $ | 253 |   |   | $ | 159 |   |
| Total      Income                                          |   |   | 275 |   |   |   | 253 |   |   |   | 159 |   |
|                                                       |   |   |   |   |   |   |   |   |   |   |   |   |
| Expenses                                                   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest      expense                                      |   |   | 11,657 |   |   |   | 10,013 |   |   |   | 5,709 |   |
| Salaries      and benefits                                 |   |   | 2,735 |   |   |   | 2,441 |   |   |   | 2,111 |   |
| Other                                                      |   |   | 1,616 |   |   |   | 1,242 |   |   |   | 1,132 |   |
| Allocated      income tax benefit                          |   |   | (6,482 | ) |   |   | (5,733 | ) |   |   | (3,760 | ) |
| Total      Expenses                                        |   |   | 9,526 |   |   |   | 7,963 |   |   |   | 5,192 |   |
|                                                       |   |   |   |   |   |   |   |   |   |   |   |   |
| Loss      Before Equity in Undistributed                   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income/(Loss)      of Subsidiaries                         |   |   | (9,251 | ) |   |   | (7,710 | ) |   |   | (5,033 | ) |
|                                                       |   |   |   |   |   |   |   |   |   |   |   |   |
| Equity      in Undistributed (Loss)/Income of Subsidiaries |   |   | (30,788 | ) |   |   | 27,455 |   |   |   | 23,944 |   |
|                                                       |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      (Loss)/Income                                     |   | $ | (40,039 | ) |   | $ | 19,745 |   |   | $ | 18,911 |   |

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| Condensed      Statements of Cash Flows                       |   |
|---------------------------------------------------------------|--------|
|                                                          |   |   |   |   |   |   |   |   |   |
| (Dollars      in thousands)                                   |   | For      the years ended December 31, |   |
|                                                          |   | 2007 |   |   | 2006 |   |   | 2005 |   |
|                                                          |   |   |   |   |   |   |   |   |   |
| Cash      Flows From Operating Activities                     |   |   |   |   |   |   |   |   |   |
| Net      (Loss) / Income                                      |   | $ | (40,039 | ) |   | $ | 19,745 |   |   | $ | 18,911 |   |
| Adjustments      to Reconcile Net (Loss) / Income             |   |   |   |   |   |   |   |   |   |   |   |   |
| to      Net Cash Used In Operating Activities                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Restricted      stock amortization                            |   |   | 1,379 |   |   |   | 962 |   |   |   | 814 |   |
| Share      based compensation expense                         |   |   | 149 |   |   |   | 27 |   |   |   | - |   |
| Increase      in other assets                                 |   |   | (1,965 | ) |   |   | (564 | ) |   |   | (3,642 | ) |
| Allocation      of ESOP shares                                |   |   | 564 |   |   |   | 647 |   |   |   | 724 |   |
| Undistributed      loss / (earnings) of subsidiaries          |   |   | 30,788 |   |   |   | (27,455 | ) |   |   | (23,944 | ) |
| Increase      in other liabilities                            |   |   | 1,570 |   |   |   | 215 |   |   |   | 951 |   |
| Net      Cash Used In Operating Activities                    |   |   | (7,554 | ) |   |   | (6,423 | ) |   |   | (6,186 | ) |
|                                                          |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                          |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash      Flows From Investing Activities                     |   |   |   |   |   |   |   |   |   |   |   |   |
| Investment      in Bank subsidiary                            |   |   | (18,000 | ) |   |   | (80,000 | ) |   |   | (36,000 | ) |
| Cash      paid for acquisition of Exchange Companies          |   |   | (784 | ) |   |   | - |   |   |   | - |   |
| Dividends      received from Bank subsidiary                  |   |   | 18,000 |   |   |   | 15,000 |   |   |   | 11,000 |   |
| Net      Cash Used In Investing Activities                    |   |   | (784 | ) |   |   | (65,000 | ) |   |   | (25,000 | ) |
|                                                          |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                          |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash      Flows From Financing Activities                     |   |   |   |   |   |   |   |   |   |   |   |   |
| Proceeds      from issuance of junior subordinated debentures |   |   | - |   |   |   | 18,000 |   |   |   | 25,000 |   |
| Proceeds      from issuance of common stock                   |   |   | - |   |   |   | 30,287 |   |   |   | - |   |
| Proceeds      from issuance of preferred stock, net           |   |   | 21,950 |   |   |   | - |   |   |   | 9,665 |   |
| Increase      in other borrowings                             |   |   | 5,250 |   |   |   | 30,000 |   |   |   | 10,000 |   |
| Purchase      of common stock                                 |   |   | (10,428 | ) |   |   | (2,779 | ) |   |   | (14,364 | ) |
| Tax      benefit from exercise of non-qualified               |   |   |   |   |   |   |   |   |   |   |   |   |
| stock      options and timing differences                     |   |   | 833 |   |   |   | 1,053 |   |   |   | 499 |   |
| Purchase      of restricted stock                             |   |   | (858 | ) |   |   | (1,310 | ) |   |   | - |   |
| Cash      dividends paid                                      |   |   | (5,112 | ) |   |   | (4,061 | ) |   |   | (2,770 | ) |
| Cash      paid in lieu of fractional shares                   |   |   | (18 | ) |   |   | - |   |   |   | - |   |
| Cash      received for disgorgement of short swing profit     |   |   | 11 |   |   |   | - |   |   |   | - |   |
| Proceeds      from exercise of additional investment rights   |   |   | - |   |   |   | - |   |   |   | 3,530 |   |
| Proceeds      from exercise of warrants                       |   |   | - |   |   |   | - |   |   |   | 463 |   |
| Proceeds      from exercise of stock options                  |   |   | 169 |   |   |   | 339 |   |   |   | 807 |   |
| Net      Cash Provided By Financing Activities                |   |   | 11,797 |   |   |   | 71,529 |   |   |   | 32,830 |   |
|                                                          |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      Increase in Cash and Cash Equivalents                |   |   | 3,459 |   |   |   | 106 |   |   |   | 1,644 |   |
|                                                          |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash and Cash      Equivalents, Beginning of Year             |   |   | 12,822 |   |   |   | 12,716 |   |   |   | 11,072 |   |
|                                                          |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash and Cash      Equivalents, End of Year                   |   | $ | 16,281 |   |   | $ | 12,822 |   |   | $ | 12,716 |   |

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|                                            |   | For      the Year Ended December 31, 2007 |   |
|-------------------------------------------------|--------|-------------------------------------------|--------|
| (Dollars      in thousands, except per share    |   | First                                     |   |   | Second |   |   | Third |   |   | Fourth |   |   |   |   |
|  amounts)                                  |   | Quarter                                   |   |   | Quarter |   |   | Quarter |   |   | Quarter |   |   | Annual |   |
|                                            |   |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest      income                            |   | $                                         | 45,149 |   |   | $ | 47,485 |   |   | $ | 48,685 |   |   | $ | 48,115 |   |   | $ | 189,434 |   |
| Interest      expense                           |   |                                      | 22,656 |   |   |   | 24,115 |   |   |   | 24,368 |   |   |   | 24,784 |   |   |   | 95,923 |   |
| Net      interest income                        |   |                                      | 22,493 |   |   |   | 23,370 |   |   |   | 24,317 |   |   |   | 23,331 |   |   |   | 93,511 |   |
| Provision      for loan losses                  |   |                                      | (1,200 | ) |   |   | (500 | ) |   |   | (1,000 | ) |   |   | (35,700 | ) |   |   | (38,400 | ) |
| Net      interest income/(loss) after provision |   |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| for      loan losses                            |   |                                      | 21,293 |   |   |   | 22,870 |   |   |   | 23,317 |   |   |   | (12,369 | ) |   |   | 55,111 |   |
| Non-interest      income                        |   |                                      | 1,202  |   |   |   | 1,462 |   |   |   | 691 |   |   |   | 1,225 |   |   |   | 4,580 |   |
| Non-interest      expense                       |   |                                      | 13,127 |   |   |   | 14,174 |   |   |   | 14,715 |   |   |   | 57,750 |   |   |   | 99,766 |   |
| Income/(loss)      before income taxes          |   |                                      | 9,368  |   |   |   | 10,158 |   |   |   | 9,293 |   |   |   | (68,894 | ) |   |   | (40,075 | ) |
| Income      tax provision /(benefit)            |   |                                      | 3,859  |   |   |   | 4,156 |   |   |   | 3,822 |   |   |   | (11,873 | ) |   |   | (36 | ) |
| Net      income/(loss)                          |   | $                                         | 5,509  |   |   | $ | 6,002 |   |   | $ | 5,471 |   |   | $ | (57,021 | ) |   | $ | (40,039 | ) |
| Net      income/(loss) per common share:        |   |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                           |   | $                                         | 0.49   |   |   | $ | 0.54 |   |   | $ | 0.46 |   |   | $ | (5.64 | ) |   | $ | (3.96 | ) |
| Fully      diluted                              |   | $                                         | 0.48   |   |   | $ | 0.53 |   |   | $ | 0.45 |   |   | $ | (5.64 | ) |   | $ | (3.96 | ) |

| ·   | In      accordance with SFAS No. 128, due to the net loss, the impact of      securities convertible to common stock is not included as its effect would      be anti-dilutive. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                         |   | For      the Year Ended December 31, 2006 |   |
|----------------------------------------------|--------|-------------------------------------------|--------|
| (Dollars      in thousands, except per share |   | First                                     |   |   | Second |   |   | Third |   |   | Fourth |   |   |   |   |
|  amounts)                               |   | Quarter                                   |   |   | Quarter |   |   | Quarter |   |   | Quarter |   |   | Annual |   |
|                                         |   |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest      income                         |   | $                                         | 34,247 |   |   | $ | 38,294 |   |   | $ | 40,926 |   |   | $ | 44,853 |   |   | $ | 158,320 |   |
| Interest      expense                        |   |                                      | 15,496 |   |   |   | 17,948 |   |   |   | 19,733 |   |   |   | 22,053 |   |   |   | 75,230 |   |
| Net      interest income                     |   |                                      | 18,751 |   |   |   | 20,346 |   |   |   | 21,193 |   |   |   | 22,800 |   |   |   | 83,090 |   |
| Provision      for loan losses               |   |                                      | (1,200 | ) |   |   | (700 | ) |   |   | (1,175 | ) |   |   | (1,050 | ) |   |   | (4,125 | ) |
| Net      interest income after provision for |   |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| loan      losses                             |   |                                      | 17,551 |   |   |   | 19,646 |   |   |   | 20,018 |   |   |   | 21,750 |   |   |   | 78,965 |   |
| Non-interest      income                     |   |                                      | 931    |   |   |   | 1,797 |   |   |   | 1,360 |   |   |   | 1,534 |   |   |   | 5,622 |   |
| Non-interest      expense                    |   |                                      | 11,349 |   |   |   | 12,146 |   |   |   | 13,510 |   |   |   | 14,012 |   |   |   | 51,017 |   |
| Income      before income taxes              |   |                                      | 7,133  |   |   |   | 9,297 |   |   |   | 7,868 |   |   |   | 9,272 |   |   |   | 33,570 |   |
| Income      tax provision                    |   |                                      | 2,972  |   |   |   | 3,857 |   |   |   | 3,214 |   |   |   | 3,782 |   |   |   | 13,825 |   |
| Net      income                              |   | $                                         | 4,161  |   |   | $ | 5,440 |   |   | $ | 4,654 |   |   | $ | 5,490 |   |   | $ | 19,745 |   |
| Net      income per common share:            |   |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                        |   | $                                         | 0.43   |   |   | $ | 0.52 |   |   | $ | 0.42 |   |   | $ | 0.49 |   |   | $ | 1.86 |   |
| Fully      diluted                           |   | $                                         | 0.41   |   |   | $ | 0.50 |   |   | $ | 0.40 |   |   | $ | 0.48 |   |   | $ | 1.80 |   |

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ITEM 9

b) Management’s Annual Report onInternal Control Over Financial Reporting

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| 1.   | The      Company did not maintain an effective control environment. Specifically,      the control environment in several areas was not effective at ensuring      that management’s philosophy and operating style promoted commitment and      compliance with policies and procedures and the prevention or detection of      the override of such policies and procedures.  This weakness      resulted in non-compliance with or misinterpretation of policies that      rendered or could have rendered adequately designed controls ineffective      and contributed to the additional material weaknesses noted      below.  Additionally, because the control environment influences      the control consciousness of the Company’s people, and is the foundation      of all other components of internal control over financial reporting, if      uncorrected this material weakness may increase the risk of breakdowns in      other internal control components in thefuture. |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 2.   | The      Company’s procedures for assessing financial reporting risks related to      the loan portfolio did not effectively identify and assess whether changes      in risks, such as those arising from the economic environment, impacted      the effectiveness of or required changes in the Company’s existing      policies and procedures. As a result, our policies and procedures related      to the determination of the allowance for loan losses, including, policies      and procedures related to collateral valuation and loss allocation, were      not modified in response to the rapid decline in the Company’s lending      markets and were therefore ineffective as of December 31,      2007.  These material weaknesses led to material errors in the      Company’s preliminary 2007 financialstatements. |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 3.   | The      Company did not maintain sufficient levels of appropriately qualified and      trained accounting personnel to have effective procedures for the      selection and application of appropriate accounting and disclosure      policies. This material weakness led to inappropriate accounting treatment      for non-routine or complex transactions which resulted in errors,      including errors related to accounting for goodwill impairment in the      preparation of the Company’s preliminary 2007 financial      results. |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 4.   | Management      oversight and information security policies and procedures in place were      inadequate to prevent a breach of information technology security policies      by employees.  This gives rise to a material weakness in the      ability to prevent potential security breaches by employees which could      result in security lapses, inappropriate or unauthorized use, or illegal      activities, or negative impacts to the accuracy and completeness of the      Company’s financial reporting. |
|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 5.   | Our      policies, procedures and controls related to expense reimbursement were      not effective to ensure consistent application of established policies or      to detect or prevent unauthorized or potentially fraudulent transactions.      This material weakness resulted in certain expenses being submitted      through the accounts payable process that were not independently reviewed      and approved in accordance with the Company’s  policies. |
|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| ·   | Addressing      issues arising from management philosophy and operating style which led to      the identified weaknesses and reestablishing, through internal      communication, training (including training regarding the identification      and elevation of control environment issues for corrective action) and      monitoring, the appropriate level of control consciousness within the      organization. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Enhancing      audit procedures to aid in the early detection and remediation of      potential future breakdowns in other control components which may arise as      a result of management action. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Enhancing      communication among internal audit, the Audit Committee of the Board of      Directors and other areas of the Company to ensure that effective, timely      and sufficient communication and enhanced oversight is provided on matters      which impact the Company’s control environment and that control      deficiencies are remediated in a timely manner to protect, preserve and      promote a strong controlenvironment. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Using      external advisors to assist with monitoring and testing of the      effectiveness of the Company’s risk mitigation efforts, including its      procedures, controls and execution; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Hiring      additional accounting personnel and/or engaging the services of qualified      advisors with the requisite experience, skills and knowledge dictated by      the level of transaction complexity and establishing a set of protocols      and procedures for the involvement of such parties in the respective      transactions; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Ensuring      that senior accounting personnel, together with the Audit Committee of the      Board of Directors and the Company’s accounting or tax advisors (as      applicable), evaluate the selection and application of the proposed      accounting treatment for non-routine or complex transactions prior to      execution; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Enhancing      the documentation of the processes and procedures employed, and providing      appropriate employee training, to ensure that any accounting policies have      been established or corrected to conform with U.S. GAAP, are consistently      applied in the future; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Enhancing      the Information Security Monitoring procedures and documentation by      expanding the current reporting requirements related to various      information technology systems; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Documenting      the alert and report settings for the information technology systems to      establish a baseline of security monitoring for periodic audit      assessment; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Adapting      policies, procedures, methodologies and software (as applicable) used in      connection with the Information Security function to address identified      and anticipated threats, changing business requirements, and other matters      dictated by the Company’s operatingenvironment; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Ensuring      that our policies, procedures and controls related to expense      reimbursement are consistently applied, that any ambiguities or gaps in      the policies, procedures and controls are adequately addressed, and that      the payment of such expenses are independently reviewed and approved by      the parties holding properauthority; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Establishing      an independent review process, with the oversight of the Audit Committee      or its designee, to provide accounting personnel and other employees with      a venue to address unauthorized or potentially fraudulent transactions;      and |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| ·   | With      the oversight of the Audit Committee, enhancing our process for the formal      review of internal controls over financial reporting to ensure best      practices are employed to comply with the SEC’s interpretive guidance and      the criteria established in COSO for the five internal control elements      (i.e. Control Environment, Risk Assessment, Control Activities,      Information and Communication andMonitoring). |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| ·   | The      Company’s control environment. |
|--------------------|-----------------------------------------------|

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| ·   | The      Company’s risk assessment process and its policies and procedures to      determine the valuation of the loan portfolio were not      effective. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Ineffective      process for the selection and application of accounting and disclosure      policies. |
|--------------------|--------------------------------------------------------------------------------------------------------|

| ·   | Inadequate      policies and procedures to prevent a breach of information technology      security policies by employees. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------|

| ·   | Ineffective      policies, procedures and controls for the detection or prevention of      unauthorized or potentially fraudulent transactions related to expense      reimbursement. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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ITEM 9B. Other Information

ITEM 10. 

|  Name               |   | Age    |   |  Position | Director      Since                                            |
|--------------------------|--------|--------|--------|----------------|----------------------------------------------------------------|
| James      G. LeSieur    |   |   | 66     |           | Chairman      of the Board and Interim Chief Executive Officer | 2004 |
| Frank      S. Alvarez    |   |   | 73     |           | Director                                                       | 1988 |
| David      A. Buxbaum    |   |   | 63     |           | Director                                                       | 2004 |
| Charles      L. Keagle   |   |   | 68     |           | Director                                                       | 1998 |
| Dr.      Robb D. Quincey |   |   | 47     |           | Lead      Director                                             | 2006 |
| Joel      H. Ravitz      |   |   | 62     |           | Director                                                       | 1988 |

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|  Name            |   |  Age |   |  Position                                                             |
|-----------------------|--------|-----------|--------|----------------------------------------------------------------------------|
| James      G. LeSieur |   | 66        |   | Chairman      of the Board and Interim Chief Executive Officer             |
| Maureen      Clark    |   | 48        |   | Senior      Vice President and Chief Information Officer                   |
| Lucilio      Couto    |   | 38        |   | Senior      Vice President and Chief Risk Officer                          |
| Karyn      Elkington  |   | 54        |   | Senior      Vice President and Chief Culture Officer                       |
| Gordon      Fong      |   | 41        |   | Executive      Vice President and Chief Financial Officer                  |
| Richard      Hagan    |   | 55        |   | Executive      Vice President and Chief Credit Officer                     |
| Donald      Pelgrim   |   | 46        |   | Executive      Vice President, Chief Administrative Officer and  Secretary |
| J.      Chris Walsh   |   | 49        |   | Executive      Vice President and Chief BankingOfficer                     |

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ITEM 11.  Executive Compensation

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| §   | establish      the base salary, incentive compensation and any other compensation for the      Company’s CEO; |
|--------------------|---------------------------------------------------------------------------------------------------------------------|

| §   | review      and approve the base salary, incentive compensation and other compensation      for the other executive officers in consultation with the Company’s      CEO; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | perform      other functions or duties deemed appropriate by the Board;    and |
|--------------------|--------------------------------------------------------------------------------|

| §   | monitor      the Company’s management incentive and equity-based compensation plans,      retirement and benefit plans and discharge the duties imposed on the      Committee by the terms of thoseplans. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | base      salary; |
|--------------------|-------------------|

| §   | performance-based      incentive compensation including cash (short term) and equity (long      term); |
|--------------------|--------------------------------------------------------------------------------------------------------|

| §   | other      equity (non-incentive related) compensation; retirement and other      benefits; and |
|--------------------|-------------------------------------------------------------------------------------------------|

| §   | perquisites      and other personal benefits. |
|--------------------|-----------------------------------------------|

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| §   | market      data provided by public proxy information which may be confirmed or      reviewed by independent sources; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------|

| §   | internal      review of the executive’s compensation, both individually and relative to      other officers; |
|--------------------|--------------------------------------------------------------------------------------------------------------------|

| §   | scope      of the roles, duties and responsibilities of the executive and the impact      these duties have on the Company;and |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------|

| §   | individual      performance of the executive. |
|--------------------|-----------------------------------------------|

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| §   | enhance      the link between the creation of shareholder value and long-term executive      compensation; |
|--------------------|------------------------------------------------------------------------------------------------------------|

| §   | provide      an opportunity for increased equity ownership by    executives; |
|--------------------|------------------------------------------------------------------------------|

| §   | maintain      competitive levels of total compensation (relating to base compensation as      well as incentive compensation);and |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------|

| §   | retain      employees. |
|--------------------|------------------------|

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|                                  |   |                     |   |            |    |   |   |   |   |            |   |   |            |   |   | Non-Equity            |    |   |           |   |    |   |   |   |    |      |
|---------------------------------------|--------|--------------------------|--------|-----------------|---------|--------|--------|--------|--------|-----------------|--------|--------|-----------------|--------|--------|-----------------------|---------|--------|----------------|--------|---------|--------|--------|--------|---------|-----------|
|                                  |   |                     |   |            |    |   |   |   |   | Stock           |   |   | Option          |   |   | Incentive      Plan   |    |   | All      Other |   |    |   |   |   |    |      |
| Name      and Principal Position      | Year   |      |   | Salary      (1) |    |   | Bonus  |   |   | Awards      (2) |   |   | Awards      (3) |   |   | Compensation      (4) |    |   | Compensation   |   |    |   |   |   | Total   |      |
|                                  |   |                     |   |            |    |   |   |   |   |            |   |   |            |   |   |                  |    |   |           |   |    |   |   |   |    |      |
| Norman      A. Morales                | 2007   |                     |   | $               | 475,000 |   |   |   | -      |            |   |   | -               |   |   | $                     | 149,196 |   |           |   | -       |   |   | $      | 191,727 |  (5) |   |   |   |   |   | $ | 815,923 |   |
| Former      President                 | 2006   |                     |   | $               | 468,269 |   |   |   | -      |            |   |   | -               |   |   | $                     | 13,898  |   |           | $      | 285,000 |   |   | $      | 148,760 |  (5) |   |   |   |   |   | $ | 915,927 |   |
| and      Chief Executive Officer      |   |                     |   |            |    |   |   |   |   |            |   |   |            |   |   |                  |    |   |           |   |    |   |   |   |    |      |   |   |   |   |   |   |   |   |
| Gordon      Fong                      | 2007   |                     |   | $               | 235,000 |   |   |   | -      |            |   | $      | 138,318         |   |   |                  | -       |   |           |   | -       |   |   | $      | 62,134  |  (6) |   |   |   |   |   | $ | 435,452 |   |
| Executive      Vice President         | 2006   |                     |   | $               | 210,000 |   |   |   | -      |            |   | $      | 165,243         |   |   |                  | -       |   |           | $      | 20,000  |   |   | $      | 51,593  |  (6) |   |   |   |   |   | $ | 446,836 |   |
| and      Chief Financial Officer      |   |                     |   |            |    |   |   |   |   |            |   |   |            |   |   |                  | -       |   |           |   |    |   |   |   |    |      |   |   |   |   |   |   |   |   |
| Richard      Hagan                    | 2007   |                     |   | $               | 237,500 |   |   |   | -      |            |   | $      | 88,907          |   |   |                  | -       |   |           |   | -       |   |   | $      | 58,243  |  (7) |   |   |   |   |   | $ | 384,650 |   |
| Executive      Vice President         | 2006   |                     |   | $               | 220,000 |   |   |   | -      |            |   | $      | 117,886         |   |   |                  | -       |   |           | $      | 20,000  |   |   | $      | 65,122  |  (7) |   |   |   |   |   | $ | 423,008 |   |
| and      Chief Credit Officer         |   |                     |   |            |    |   |   |   |   |            |   |   |            |   |   |                  | -       |   |           |   |    |   |   |   |    |      |   |   |   |   |   |   |   |   |
| Donald      Pelgrim                   | 2007   |                     |   | $               | 237,500 |   |   |   | -      |            |   | $      | 141,115         |   |   |                  | -       |   |           |   | -       |   |   | $      | 58,852  |  (8) |   |   |   |   |   | $ | 437,467 |   |
| Executive      Vice President         | 2006   |                     |   | $               | 167,500 |   |   |   | -      |            |   | $      | 50,596          |   |   |                  | -       |   |           | $      | 20,000  |   |   | $      | 33,826  |  (8) |   |   |   |   |   | $ | 271,922 |   |
| and      Chief Administrative Officer |   |                     |   |            |    |   |   |   |   |            |   |   |            |   |   |                  | -       |   |           |   |    |   |   |   |    |      |   |   |   |   |   |   |   |   |
| Michael      Cain                     | 2007   |                     |   | $               | 234,231 |   |   |   | -      |            |   | $      | 66,101          |   |   |                  | -       |   |           | $      | 300,000 |   |   | $      | 58,114  |  (9) |   |   |   |   |   | $ | 658,446 |   |
| Former      Executive Vice President  | 2006   | (10)                     |   |            | -       |   |   |   | -      |            |   |   | -               |   |   |                  | -       |   |           |   | -       |   |   |   | -       |      |   |   |   |   |   | $ | - |   |
| and      Chief Lending Officer        |   |                     |   |            |    |   |   |   |   |            |   |   |            |   |   |                  |    |   |           |   |    |   |   |   |    |      |   |   |   |   |   |   |   |   |

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| (1) | Reflects      the amounts actually earned by the NEOs during the fiscal year, which may      not necessarily reflect the annual base salary for such NEO for the fiscal      year due to increases to base pay during the year.  In      connection with Mr. Pelgrim’s promotion to Executive Vice President in      November 2006, his annual base salary was increased to      $225,000.  In July 2007 each of Mssrs. Fong, Hagan and Pelgrim      received a salary increase bringing each of their respective base salaries      to $250,000.  Mr. Cain’s employment commenced in March 2007,      with a base salary of $300,000. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Amounts      represent 2007 and 2006 expense recognized for all equity awards as      calculated in accordance with SFAS No. 123R. See Note 16 of the      consolidated financial statements included herein regarding assumptions      underlying valuation of equityawards. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | This      amount reflects stock option expense relating to awards granted on October      30, 2006 and March 19, 2007 pursuant to Mr. Morales’ Employment      Agreement.  The stock options had an exercise price of $21.06      and $21.44, respectively (which is equal to the closing price of the      Company’s Common Stock on the date of grant). They would have vested three      years from the date of grant and expired four years from the date of      grant. The dollar amounts expensed for these awards were calculated in      accordance with SFAS No. 123R. See Note 16 of the consolidated financial      statements included herein regarding assumptions underlying valuation of      equity awards. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4) | These      amounts represent non-equity cash incentive awards earned in 2006 and 2007      though paid in 2007 and 2008 in accordance with the Company’s      performance-based incentive compensation  program. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (5) | Includes      for 2006: (i) automobile and gasoline allowance in the amount of $28,877;      (ii) health benefits paid by the Company in the amount of $15,903; and      (iii) perquisites consisting of Company paid disability insurance premium      of $4,792, transportation and travel expense (including spouse travel) of      $30,058, personal entertainment expense of $6,065, director annual      commitment for membership on business council of $22,917, and three club      membership dues totaling $40,148.  For 2007: (i) automobile and      gasoline allowance in the amount of $98,959; (ii) health benefits paid by      the Company in the amount of $18,440; and (iii) perquisites consisting of      Company paid disability insurance premium of $4,792, transportation and      travel expense (including spouse travel) of $10,671, personal      entertainment expense of $10,278, and three club membership dues totaling      $48,587. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (6) | Includes      for 2006: (i) automobile and gasoline allowance in the amount of $11,759;      (ii) $7,724 in cash dividends paid on restricted stock grants at $0.08 per      share, paid in March, June, September and December 2006; (iii) health      benefits paid by the Company in the amount of $4,610; (iv) $7,500      allocated to Mr. Fong pursuant to the Company’s 401(k) Plan; and (v)      $20,000 allocated to Mr. Fong pursuant to the Company’s Non-Qualified      Deferred Compensation Plan. For 2007:(i) automobile and gasoline allowance      in the amount of $21,427; (ii) $8,388 in cash dividends paid on restricted      stock grants at $0.08 per share, paid in March, June, September and      December 2007; (iii) health benefits paid by the Company in the amount of      $5,315; (iv) $7,294 allocated to Mr. Fong pursuant to the Company’s 401(k)      Plan; and (v) $19,710 allocated to Mr. Fong pursuant to the Company’s      Non-Qualified Deferred CompensationPlan |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (7) | Includes      for 2006: (i) automobile and gasoline allowance in the amount of $18,567;      (ii) $5,234 in cash dividends paid on restricted stock grants at $0.08 per      share, paid in March, June, September and December 2006; (iii) health      benefits paid by the Company in the amount of $11,789; (iv) $7,532      allocated to Mr. Hagan pursuant to the Company’s 401(k) Plan; and (v)      $22,000 allocated to Mr. Hagan pursuant to the Company’s Non-Qualified      Deferred Compensation Plan.  For 2007: (i) automobile and      gasoline allowance in the amount of $20,092; (ii) $3,962 in cash dividends      paid on restricted stock grants at $0.08 per share, paid in March, June,      September and December 2007; (iii) health benefits paid by the Company in      the amount of $11,860; (iv) $8,329 allocated to Mr. Hagan pursuant to the      Company’s 401(k) Plan; and (v) $14,000 allocated to Mr. Hagan pursuant to      the Company’s Non-Qualified Deferred Compensation  Plan. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| (8) | Includes      for 2006: (i) automobile allowance in the amount of $8,050; (ii) $2,400 in      cash dividends paid on restricted stock grants at $0.08 per share, paid in      March, June, September and December 2006; (iii) health benefits paid by      the Company in the amount of $7,443; (iv) $5,166 allocated to Mr. Pelgrim      pursuant to the Company’s 401(k) Plan, and (v) $10,767 allocated to Mr.      Pelgrim pursuant to the Company’s Non-Qualified Deferred Compensation      Plan.  For 2007: (i) automobile allowance in the amount of      $10,675; (ii) $6,001 in cash dividends paid on restricted stock grants at      $0.08 per share, paid in March, June, September and December 2007; (iii)      health benefits paid by the Company in the amount of $11,860; (iv) $5,316      allocated to Mr. Pelgrim pursuant to the Company’s 401(k) Plan, and (v)      $25,000 allocated to Mr. Pelgrim pursuant to the Company’s Non-Qualified      Deferred Compensation Plan. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (9) | Includes:      (i) automobile allowance in the amount of $12,391; (ii) $3,603 in cash      dividends paid on restricted stock grants at $0.08 per share, paid in      March, June, September and December 2007; (ii) health benefits paid by the      Company in the amount of $11,820; (iii) $6,300 allocated to Mr. Cain      pursuant to the Company’s 401(k) Plan, and (iv) $24,000 allocated to Mr.      Cain pursuant to the Company’s Non-Qualified Deferred Compensation      Plan. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (10) | Mr.      Cain’s employment commenced in March 2007. Subsequently, Mr. Cain’s      employment has been terminated as of May 12,  2008. |
|------|---------------------------------------------------------------------------------------------------------------------------------------------------|

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Table of Contents

|                        |   | Grant     |   |   | Estimated FuturePayouts Under Non-Equity      Incentive Plan Awards |   |   | Estimated Future Payouts Under      Equity Incentive Plan Awards (3) |   |   | All Other Stock Awards: Number      of Shares of Stock or |   |   | All Other Option Awards: Number      of Securities Underlying |    |   | Exercise or Base Price of      Option |   |   | Grant Date Fair Value of Stock      and Option |   |
|-----------------------------|--------|-----------|--------|--------|---------------------------------------------------------------------|--------|--------|---------------------------------------------------------------------------|--------|--------|-----------------------------------------------------------|--------|--------|---------------------------------------------------------------|---------|--------|---------------------------------------|--------|--------|------------------------------------------------|--------|
| Name                        |   | Date      |   |   | Threshold                                                           |   |   | Target                                                                    |   |   | Max                                                       |   |   | Threshold                                                     |    |   | Target                                |   |   | Max                                            |   |   | Units (3) |   |   | Options |   |   | Awards |   |   | Awards(4) |   |
| Norman      A. Morales(1)   |   |      | -      |   |                                                                | $      | -      |                                                                      |   | $      | 570,000                                                   |   |   | $                                                             | 570,000 |   |                                  |   | -      |                                           |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
|                        |   | 3/19/2007 |   |   |                                                                | -      |   |                                                                      |   | -      |                                                      |   |   | -                                                             |    |   |                                  | -      |   |                                           |   | - |   |   |   | - |   |   |   | - |   |   |   | 52,500 |   |   | $ | 21.44 |   |   |   | - |   |
|                        |   |      |   |   |                                                                |   |   |                                                                      |   |   |                                                      |   |   |                                                          |    |   |                                  |   |   |                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Gordon      Fong(2)         |   | 3/7/2007  |   |   |                                                                | -      |   |                                                                      |   | -      |                                                      |   |   | -                                                             |    |   |                                  | -      |   |                                           |   | 3,151 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   | $ | 73,539 |   |
|                        |   |      | -      |   |                                                                | $      | 11,000 |                                                                      |   | $      | 88,000                                                    |   |   | $                                                             | 88,000  |   |                                  |   | -      |                                           |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
|                        |   |      |   |   |                                                                |   |   |                                                                      |   |   |                                                      |   |   |                                                          |    |   |                                  |   |   |                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Richard      Hagan (2) |   | 3/7/2007  |   |   |                                                                | -      |   |                                                                      |   | -      |                                                      |   |   | -                                                             |    |   |                                  | -      |   |                                           |   | 2,940 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   | $ | 68,636 |   |
|                        |   |      | -      |   |                                                                | $      | 11,250 |                                                                      |   | $      | 90,000                                                    |   |   | $                                                             | 90,000  |   |                                  |   | -      |                                           |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
|                        |   |      |   |   |                                                                |   |   |                                                                      |   |   |                                                      |   |   |                                                          |    |   |                                  |   |   |                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Donald      Pelgrim(2)      |   | 3/7/2007  |   |   |                                                                | -      |   |                                                                      |   | -      |                                                      |   |   | -                                                             |    |   |                                  | -      |   |                                           |   | 4,200 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   | $ | 98,052 |   |
|                        |   |      | -      |   |                                                                | $      | 11,250 |                                                                      |   | $      | 90,000                                                    |   |   | $                                                             | 90,000  |   |                                  |   | -      |                                           |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
|                        |   |      |   |   |                                                                |   |   |                                                                      |   |   |                                                      |   |   |                                                          |    |   |                                  |   |   |                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Michael      Cain(2)        |   | 3/7/2007  |   |   |                                                                | -      |   |                                                                      |   | -      |                                                      |   |   | -                                                             |    |   |                                  | -      |   |                                           |   | - |   |   |   | - |   |   |   | 13,933 |   |   |   | - |   |   |   | - |   |   | $ | 317,286 |   |
|                        |   |      | -      |   |                                                                |   | -      |                                                                      |   | $      | 300,000                                                   |   |   |                                                          | -       |   |                                  |   | -      |                                           |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |

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Table of Contents

| (1) | Pursuant      to Mr. Morales' Employment Agreement, Mr. Morales was entitled to receive      an incentive bonus based on the Company's financial      performance.  The amounts payable under the incentive      compensation plan for calendar year 2006 were determined by a formula      based on the Company's ROACE.  For calendar years 2007, 2008 and      2009, the amounts payable under the incentive compensation plan would have      been determined by a formula based on both the Company’s ROACE and the      Company’s EPS growth. This incentive payout could have ranged between zero      and 120% of Mr. Morales' base salary, with a maximum payout of      $570,000.  As disclosed in the “Summary Compensation Table”, Mr.      Morales received a non-equity incentive award of $285,000 based on the      Company's ROACE of approximately 16.8% for fiscal year 2006. Mr. Morales      did not receive a non-equity incentive award for fiscal year      2007.  In addition, under the terms of the previous Employment      Agreement Mr. Morales was entitled to receive stock option      awards.  Stock option awards to acquire 52,500 shares of Common      Stock were granted on October 30, 2006 and March 19, 2007,      respectively.  The stock options had an exercise price of $21.06      and $21.44, respectively (which is equal to the closing price of the      Company’s Common Stock on the date of grant). The stock options would have      vested three years from the date of grant and would have expired four      years from the date of grant. The dollar amount recognized for this award      was calculated in accordance with SFAS No. 123R. See Note 16 of the      consolidated financial statements included herein regarding assumptions      underlying valuation of equityawards. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | For      fiscal year ended December 31, 2007, as disclosed in the Summary      Compensation Table, Mr. Cain received a non-equity cash incentive award of      $300,000 for fiscal 2007, based on the terms of his offer of      employment.  No other NEOs received non-equity cash incentive      awards as a portion of the Company’s performance-based incentive      compensation. The cash portion of the Company’s performance-based      incentive compensation was based upon a percentage of the Company’s      ROACE.  If the Company would have met its operating objectives,      each participant in the performance-based incentive compensation plan      would have been eligible to receive a non-equity cash incentive award      based on a range of 0.25 to 2.0 times the ROACE, multiplied by his or her      base salary. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | These      stock awards were granted in 2007 for fiscal year 2006 pursuant to the      Company’s equity based programs as follows:  (i) Mr. Fong was      granted 3,151 shares of restricted Common Stock as an equity incentive      award; (ii) Mr. Hagan was granted 2,940 shares of restricted Common Stock      as an equity incentive award; (iii) Mr. Pelgrim was granted 4,200 shares      of restricted Common Stock as an equity incentive award; and (iv) Mr. Cain      was granted 13,933 shares of restricted Common Stock related to the      commencement of his employment as an executive officer, as an equity stock      award.  The granting of restricted shares gives the recipient      the right to receive any cash or stock dividends paid in respect to      unvested restricted shares and the right to vote such    shares. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4) | The      grant date dollar value recognized for these awards was calculated in      accordance with SFAS No. 123R. |
|-----|--------------------------------------------------------------------------------------------------------------------|

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Table of Contents

|                   |   | Option      Awards |   |   | Stock      Awards |   |
|------------------------|--------|--------------------|--------|--------|-------------------|--------|
|                   |   |               |   |   |              |   |   | Equity      Incentive |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | Equity      Incentive |   |
|                   |   |               |   |   |              |   |   | Plan      Awards: |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | Plan      Awards: |   |
|                   |   | Number      of     |   |   | Number      of    |   |   | Number      of |   |   |   |   |   |   |   |   | Number |   |   | Market      Value |   |   | Number      of |   |   | Market      or |   |
|                   |   | Securities         |   |   | Securities        |   |   | Securities |   |   |   |   |   |   |   |   | of      Shares |   |   | of      Shares |   |   | Unearned      Shares, |   |   | Payout      Value of |   |
|                   |   | Underlying         |   |   | Underlying        |   |   | Underlying |   |   |   |   |   |   |   |   | or      Units of |   |   | or      Units of |   |   | Units      or |   |   | Unearned      Shares, |   |
|                   |   | Unexercised        |   |   | Unexercised       |   |   | Unexercised |   |   | Option |   |   | Option |   |   | of      Stock |   |   | of      Stock |   |   | Other      Rights |   |   | Units      or Other |   |
|                   |   | Options            |   |   | Options           |   |   | Unearned |   |   | Exercise |   |   | Expiration |   |   | That      Have |   |   | That      Have |   |   | That      Have |   |   | Rights      That Have |   |
| Name                   |   | Exercisable(1)     |   |   | Unexercisable (2) |   |   | Options |   |   | Price |   |   | Date |   |   | Not      Vested |   |   | Not Vested (3) |   |   | Not      Vested |   |   | Not Vested (3) |   |
| Norman      A. Morales |   |               | -      |   |              |   | 52,500 |   |   |   | - |   |   | $ | 21.06 |   |   | 10/30/2010 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
|                   |   |               | -      |   |              |   | 52,500 |   |   |   | - |   |   | $ | 21.44 |   |   | 3/19/2011 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
|                   |   |               |   |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Gordon Fong      (4)   |   |               | -      |   |              |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 5,250 |   |   | $ | 53,025 |   |   |   | 12,889 |   |   | $ | 130,179 |   |
|                   |   |               |   |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Richard Hagan(5)       |   |               | 23,152 |   |              |   | - |   |   |   | - |   |   | $ | 1.73 |   |   | 12/23/2010 |   |   |   | - |   |   |   | - |   |   |   | 12,652 |   |   | $ | 127,785 |   |
|                   |   |               | 11,576 |   |              |   | - |   |   |   | - |   |   | $ | 3.89 |   |   | 6/26/2012 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
|                   |   |               | 5,513  |   |              |   | - |   |   |   | - |   |   | $ | 7.26 |   |   | 2/26/2013 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
|                   |   |               | 22,050 |   |              |   | - |   |   |   | - |   |   | $ | 12.70 |   |   | 8/27/2013 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
|                   |   |               |   |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Donald Pelgrim(6)      |   |               | -      |   |              |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 15,750 |   |   | $ | 159,075 |   |   |   | 4,200 |   |   | $ | 42,420 |   |
|                   |   |               |   |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Michael Cain (7)       |   |               | -      |   |              |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 13,933 |   |   | $ | 140,723 |   |   |   | - |   |   |   | - |   |

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| (1) | All      options are exercisable as of December 31,2007. |
|-----|----------------------------------------------------------|

| (2) | 52,500      options were to vest on the third anniversary from date of grant, October      30, 2006; and 52,500 options were to vest on the third anniversary from      date of grant, March 19, 2007. Upon the resignation of Mr. Morales on      January 23, 2008 these options werecancelled. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | Market      value based on closing price of the Company’s Common Stock at December 31,      2007, multiplied by the number of shares  granted. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4) | Shares      of restricted stock vest as follows: 5,250 shares vest on July 1, 2009;      Shares of equity incentive stock vest as follows: 2,625 shares vested on      January 20, 2008; 2,362 shares vested on February 13, 2008; 3,176 shares      vest on February 7, 2009; 1,575 shares vest on February 13, 2010 and 3,151      shares vest on March 7, 2011. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (5) | Shares      of equity incentive restricted stock vest as follows: 2,100 shares vested      on January 20, 2008; 2,362 shares vested on February 13, 2008; 3,675      shares vest on February 7, 2009; 1,575 shares vest on February 13, 2010;      and 2,940 shares vest on March 7,2011. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (6) | Shares      of restricted stock vest as follows: 5,250 shares vest on October 18, 2008      and 10,500 shares vest on November 1, 2010; Shares of equity incentive      stock vest as follows: 4,200 shares vest on March 7,  2010. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (7) | Shares      of restricted stock vest as follows:  13,933 shares vest on      March 12, 2011. Upon the termination of Mr. Cain’s employment on May 12,      2008, this restricted stock grant wasrevoked. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                             |   | Option      Awards |   |   | Stock      Awards   |   |
|----------------------------------|--------|--------------------|--------|--------|---------------------|--------|
|                             |   | Number      of     |   |   |                |   |   | Number      of |   |   |   |   |
|                             |   | Shares             |   |   |                |   |   | Shares |   |   |   |   |
|                             |   | Acquired           |   |   | Value      Realized |   |   | Acquired |   |   | Value      Realized |   |
| Name      and Principal Position |   | on      Exercise   |   |   | on      Exercise    |   |   | on      Vesting * |   |   | on      Vesting |   |
| Gordon      Fong (1)             |   |               | -      |   |                |   | - |   |   |   | 4,568 |   |   | $ | 94,252 |   |
|                             |   |               |   |   |                |   |   |   |   |   |   |   |   |   |   |   |
| Richard      Hagan (2)           |   |               | -      |   |                |   | - |   |   |   | 4,568 |   |   | $ | 108,960 |   |

| (1) | Value      realized based on closing price of $24.07 on February 13, 2007, the day of      vesting, multiplied by 2,363 shares plus closing price of $16.95 on      September 11, 2007, the day of vesting for 2,205  shares. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Value      realized based on closing price of $24.07 on February 13, 2007, the day of      vesting, multiplied by 2,363 shares plus closing price of $23.62 on      February 26, 2007, the day of vesting for 2,205  shares. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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Upon a distributable event (termination of employment, participantsattainment of normal retirement age, death, plan termination) each NEO listedbelow is entitled to receive as a lump sum or installment payment(s) theaggregate balance in their deferred compensation accounts. If a termination ofemployment had occurred as of December 31, 2007, in addition to other benefitsdiscussed herein, each NEO would be entitled to receive the amount specified inthe Aggregate Balance at Last Fiscal Year End Column of thisTable.

|                   |   |                     |   |   | Registrant          |   |   | Aggregate        |   |   | Aggregate            |   |
|------------------------|--------|--------------------------|--------|--------|---------------------|--------|--------|------------------|--------|--------|----------------------|--------|
|                   |   | Executive                |   |   | Contributions       |   |   | Earnings in |   |   | Balance      at Last |   |
|                   |   | Contributions            |   |   | in      Last Fiscal |   |   | Last      Fiscal |   |   | Fiscal      Year     |   |
| Name                   |   | in      Last Fiscal Year |   |   | Year(1)             |   |   | Year(2)          |   |   | End(3)               |   |
| Norman      A. Morales |   | $                        | -      |   |                | $      | -      |             |   | $      | 4,345                |   |   | $ | 237,789 |   |
|                   |   |                     |   |   |                |   |   |             |   |   |                 |   |   |   |   |   |
| Gordon      Fong       |   | $                        | 19,710 |   |                | $      | 19,710 |             |   | $      | 7,338                |   |   | $ | 118,768 |   |
|                   |   |                     |   |   |                |   |   |             |   |   |                 |   |   |   |   |   |
| Richard      Hagan     |   | $                        | 14,000 |   |                | $      | 14,000 |             |   | $      | 15,505               |   |   | $ | 391,315 |   |
|                   |   |                     |   |   |                |   |   |             |   |   |                 |   |   |   |   |   |
| Donald      Pelgrim    |   | $                        | 25,200 |   |                | $      | 25,000 |             |   | $      | 5,525                |   |   | $ | 122,562 |   |
|                   |   |                     |   |   |                |   |   |             |   |   |                 |   |   |   |   |   |
| Michael      Cain      |   | $                        | 24,000 |   |                | $      | 24,000 |             |   | $      | 1,505                |   |   | $ | 49,490 |   |

| (1) | These      amounts represent the Company’s contributions for each NEO during fiscal      year ended December 31, 2007.  The amount set forth in the      Registrant Contributions column has been reported in the “Summary      Compensation Table.” |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | These      amounts represent earnings based on each NEOs investment      selection.  There are no above-market or preferential earnings      under the Company’s non-qualified deferred compensation    plan. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | These      amounts represent the total plan balance for each NEO as of December 31,      2007. |
|-----|------------------------------------------------------------------------------------------------|

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|  Norman A. Morales      (1)             |   | Termination      Without Cause Not Following a Change of Control |    |   | Termination      With or Without Cause Following a Change of Control |   |
|----------------------------------------------|--------|------------------------------------------------------------------|---------|--------|----------------------------------------------------------------------|--------|
| Lump      Sum Severance Payment      (2)     |   | $                                                                | 950,000 |   |                                                                 | $      | 950,000 |   |
| Lump      Sum Incentive Bonus Payment (3)    |   | $                                                                | 570,000 |   |                                                                 | $      | 570,000 |   |
| Accelerated      Vesting of Stock Awards (4) |   | $                                                                | -       |   |                                                                 | $      | - |   |
| Continuation      of Insurance Benefits (5)  |   | $                                                                | 43,933  |   |                                                                 | $      | 43,933 |   |

| (1)   | Descriptions      of the Termination of Employment and Change of Control provisions      applicable to Mr. Morales are set forth under the heading “Employment      Agreement” in the Compensation Discussion and Analysis set forth      above. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2)   | Payment      based on base salary at fiscal year-end2007. |
|-----------------|-----------------------------------------------------------|

| (3)   | Severance      incentive payments for Mr. Morales were based on the language in his      Employment Agreement related to twice the amount of the most recent      incentive received. |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4)   | The      exercise price was more than the closing price of the Company’s Common      Stock on December 31, 2007 therefore no accelerated value is      listed. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (5)   | Continuation      of insurance benefits for Mr. Morales was based on twenty-four      months. |
|-----------------|-----------------------------------------------------------------------------------------------|

|                |   |                       |    |   |                       |   |   | Lump      Sum    |   |   | Accelerated           |   |
|---------------------|--------|----------------------------|---------|--------|----------------------------|--------|--------|------------------|--------|--------|-----------------------|--------|
|                |   | Lump      Sum              |    |   | Continuation      of       |   |   | Incentive        |   |   | Vesting      of       |   |
| Name                |   | Severance      Payment (1) |    |   | Insurance      Benefit (2) |   |   | Payment      (3) |   |   | Stock      Awards (4) |   |
| Gordon      Fong    |   | $                          | 500,000 |   |                       | $      | 6,155  |             |   | $      | 301,800               |   |   | $ | 183,204 |   |
| Richard      Hagan  |   | $                          | 500,000 |   |                       | $      | 13,952 |             |   | $      | 297,760               |   |   | $ | 351,928 |   |
| Donald      Pelgrim |   | $                          | 500,000 |   |                       | $      | 13,952 |             |   | $      | 176,570               |   |   | $ | 201,495 |   |
| Michael      Cain   |   | $                          | 600,000 |   |                       | $      | 13,927 |             |   | $      | 600,000               |   |   | $ | 140,723 |   |

| (1) | Payment      based on base salary at fiscal year-end2007. |
|-----|-----------------------------------------------------------|

| (2) | Continuation      of insurance benefits based on twelvemonths. |
|-----|----------------------------------------------------------------|

| (3) | Severance      incentive payments based on language in the Change of Control agreements      based on two times the average of the two most recent annual equity and      non-equity incentive payments. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4) | Accelerated      vesting of restricted stock awards was determined by calculating the      closing price of the Company’s Common Stock on December 31, 2007, and      multiplying that by the number of shares for each award, held by each NEO,      at the end of year 2007.  Accelerated vesting of stock options      was determined by calculating the closing price of the Company’s Common      Stock on December 31, 2007 less the option exercise price, and multiplying      that by the number of shares for each award, held by each NEO, at the end      of year 2007. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| Name                     |   | Fees      Earned or Paid in Cash (1) |   |   | Stock      Awards (2) |   |   | Option      Awards (3) |   |   | Change      in Pension Value and Nonqualified Deferred Compensation Earnings      (4) |   |   | All      Other Compensation (5) |   |   | Total  |   |
|--------------------------|--------|--------------------------------------|--------|--------|-----------------------|--------|--------|------------------------|--------|--------|---------------------------------------------------------------------------------------|--------|--------|---------------------------------|--------|--------|--------|--------|
| Frank      S. Alvarez    |   | $                                    | 48,000 |   |                  | $      | 22,106 |                   |   |   | -                                                                                     |   |   | $                               | 17,243 |   |   | $      | 19,003 |   |   | $ | 106,352 |   |
| David      A. Buxbaum    |   | $                                    | 48,000 |   |                  | $      | 22,106 |                   |   |   | -                                                                                     |   |   | $                               | 1,055  |   |   | $      | 19,003 |   |   | $ | 90,164 |   |
| Charles      L. Keagle   |   | $                                    | 48,000 |   |                  | $      | 22,106 |                   |   |   | -                                                                                     |   |   | $                               | 12,709 |   |   | $      | 19,167 |   |   | $ | 101,982 |   |
| James      G. LeSieur    |   | $                                    | 75,000 |   |                  | $      | 22,106 |                   |   |   | -                                                                                     |   |   | $                               | 618    |   |   | $      | 19,003 |   |   | $ | 116,727 |   |
| Dr.      Robb D. Quincey |   | $                                    | 48,000 |   |                  | $      | 12,882 |                   |   |   | -                                                                                     |   |   | $                               | 2,565  |   |   | $      | 18,675 |   |   | $ | 82,122 |   |
| Joel      H. Ravitz      |   | $                                    | 48,000 |   |                  | $      | 22,106 |                   |   |   | -                                                                                     |   |   | $                               | 22,083 |   |   | $      | 19,003 |   |   | $ | 111,192 |   |

| (1) | For      2007, each of the non-employee Directors received $3,000 monthly for their      services as Company Directors and $1,000 monthly for their services as      Bank Directors.  The chairman received an additional $1,500      monthly for the first three months of 2007 which was increased to an      additional $2,500 monthly for April through December 2007. Of the amounts      earned or paid in cash, the following amounts were deferred by each      director pursuant to the Company’s Non-Qualified Directors Deferred      Compensation Plan, including $1,500 per month the directors receive for      health insurance related expenses (which can also be deferred pursuant to      the Company’s Non-Qualified Directors Deferred Compensation Plan): Mr.      Ravitz deferred $66,000, and Dr. Quincey deferred  $66,000. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Amounts      calculated in accordance with SFAS No. 123R. See Note 16 of the      consolidated financial statements included herein. The full grant date      fair value of the awards issued to each director in the fiscal year 2007,      computed in accordance with SFAS No. 123R, is  $42,160. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | No      option awards were granted to non-employee Directors in the fiscal year      2007.  At fiscal year-end, the aggregate number of option awards      outstanding for each non-employee Director was as follows: Mr. Alvarez      26,763; Mr. Keagle 57,881; and Mr. Ravitz  138,915. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4) | Represents      the above market earnings in the fiscal year 2007. Above market earnings      represent earnings greater than 120% of the applicable federal long-term      rate of 5.54%. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (5) | Includes      $1,500 per month for health insurance related expenses (which can also be      deferred pursuant to the Company’s Non-Qualified Directors Deferred      Compensation Plan), and cash dividends on restricted stock grants at $0.08      per share, paid in March, June, September and December    2007. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

ITEM 12

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Table of Contents

| Plan      Category                        |   | Number      of securities to be issued upon exercise of outstanding options      (1) |    |      |   |   |   | Weighted      Average Exercise Price |   |   | Number      of securities available for future issuance under equity compensation      plans (excluding those reflected in column (a))(1) |   |   |   |             |
|------------------------------------------------|--------|------------------------------------------------------------------------------------------------|---------|-----------|--------|--------|--------|--------------------------------------|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|------------------|
|                                           |   | (a)                                                                                            |    |      |   |   |   | (b)                                  |   |   | (c)                                                                                                                                       |   |   |   |             |
| Approved      by security holders         |   |                                                                                           | 643,566 |  (2) |   |   |   |                                 |   | $      | 14.81                                                                                                                                     |   |   |   | 1,159,177        |  (3) |   |   |   |   |
| Not      approved by security holders (4) |   |                                                                                           | 39,090  |      |   |   |   |                                 |   |   | 19.48                                                                                                                                     |   |   |   | 5,021 5,021 |   |   |   |   |   |
| Total                                     |   |                                                                                           | 682,656 |      |   |   |   |                                 |   | $      | 15.08                                                                                                                                     |   |   |   | 1,164,198        |   |   |   |   |   |

| (1) | Number      of shares have been adjusted to reflect the 5% stock dividends paid in      January 2003, January 2004 and June 2007 and the two-for-one stock split      in August 2004. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Represents      285,850 exercisable shares granted pursuant to the Company’s 1997 Option      Plan; approximately 153,801 shares granted under the Company’s 2004 Plan;      approximately 98,915 shares issued under the Company’s 2005 Plan; and      105,000 shares issued under the Company’s 2006 Plan which have not vested      as of December 31, 2007. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | Includes      approximately 53,217 shares remaining under the 2004 Plan, approximately      160,960 shares remaining under the 2005 Plan and 945,000 shares remaining      under the 2006 Plan. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4) | Relates      to the Company’s 2002 and 2003 Plans.  Approximately 107,985      shares of Common Stock have been granted under the 2002 and 2003 Plans of      which approximately 68,895 shares havevested. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                               |   | Common      Stock Beneficially Owned (1) |    |
|----------------------------------------------------|--------|------------------------------------------|---------|
|                                               |   | Number      of                           |    |   |   |   |
|                                               |   | Shares                                   |    |   | Percent      of |   |
|                                               |   | Beneficially                             |    |   | Outstanding |   |
| Name      and Address of Beneficial Owner          |   | Owned                                    |    |   | Shares      (2) |   |
| One      Investments, LLC                          |   |                                     | 530,000 |   |   |   | 5.19 | % |
|    c/o      Douglas M. Kratz        |   |                                     |    |   |   |   |   |   |
|    852      Middle Road, Space #205 |   |                                     |    |   |   |   |   |   |
|    Bettendorf,      Iowa 52722      |   |                                     |    |   |   |   |   |   |

| (1) | “Beneficial      ownership” is a technical term broadly defined by the SEC to mean more      than ownership in the usual sense.  For example, a person has      beneficial ownership of a share not only if he or she owns it, but also if      he or she has the power to vote, sell or otherwise dispose of the      share.  Beneficial ownership also includes that number of shares      which a person has the right to acquire within 60 days of April 21,      2008. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Based      on 10,220,465 shares outstanding as of April 21,      2008. |
|-----|-----------------------------------------------------------------------------|

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Table of Contents

| (3) | Based      on information provided in the Schedule 13D filed with the SEC on April 2,      2008. |
|-----|--------------------------------------------------------------------------------------------------|

|                                                                           |   | Common      Stock Beneficially Owned(1) |      |
|--------------------------------------------------------------------------------|--------|-----------------------------------------|-----------|
|                                                                           |   | Number      of Shares                   |      |   |   |   |   | Percent |   |
|                                                                           |   | Beneficially                            |      |   |   |   |   | of      outstanding |   |
| Name                                                                      |   | Owned(2)                                |      |   |   |   |   | Shares(3)(4) |   |
| Frank      S. Alvarez                                                     |   |                                    | 167,022   |   |   |   |   | (5)      (6) |   |   | 1.63 | % |
| David      A. Buxbaum                                                          |   |                                    | 125,575   |   |   |   |   | (7) |   |   | 1.23 | % |
| Charles      L. Keagle                                                    |   |                                    | 316,662   |   |   |   |   | (9) |   |   | 3.08 | % |
| James      G. LeSieur                                                     |   |                                    | 9,399     |   |   |   |   | (10) |   |   | * |   |
| Robb      D. Quincey                                                      |   |                                    | 17,805    |   |   |   |   | (11) |   |   | * |   |
| Joel      H. Ravitz                                                       |   |                                    | 282,707   |   |   |   |   | (12) |   |   | 2.73 | % |
| Gordon      Fong                                                          |   |                                    | 26,547    |   |   |   |   | (6)      (12) |   |   | * |   |
| Richard      Hagan                                                        |   |                                    | 71,427    |   |   |   |   | (6)      (13) |   |   | * |   |
| Donald      Pelgrim                                                            |   |                                    | 23,315    |   |   |   |   | (14) |   |   | * |   |
| Michael      Cain                                                              |   |                                    | 16,219    |   |   |   |   | (15) |   |   | * |   |
| Norman      Morales                                                            |   |                                    | 320,451   |   |   |   |   | (16) |   |   | 3.14 | % |
| All      current directors and executive officers as a group (14      persons) |   |                                    | 1,105,340 |   |   |   |   | (17) |   |   | 10.55 | % |

| * | Indicates      ownership of less than 1% of the outstanding shares of the Company’s      Common Stock. |
|---|--------------------------------------------------------------------------------------------------------------|

| (1) | “Beneficial      ownership” is a technical term broadly defined by the SEC to mean more      than ownership in the usual sense.  For example, a person has      beneficial ownership of a share not only if he or she owns it, but also if      he or she has the power to vote, sell or otherwise dispose of the      share.  Beneficial ownership also includes that number of shares      which a person has the right to acquire within 60 days of April 21,      2008. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Except      pursuant to applicable community property laws and except as otherwise      indicated, each shareholder possesses sole voting and investment power      with respect to its, his or hershares. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | Shares      of Common Stock issuable upon exercise of stock options exercisable within      60 days of April 21, 2008 are deemed outstanding for computing the      percentage of the person holding such securities but are not deemed      outstanding for computing the percentage of any other    person. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4) | Based      on 10,220,465 shares outstanding as of April 21,  2008. |
|-----|--------------------------------------------------------------------|

| (5) | Includes      82,476 shares held by Louis M. Alvarez and Frank S. Alvarez as co-trustees      of the Manual Alvarez and Lorenza E. Alvarez Trust, 81,892 shares held      jointly with Mr. Alvarez’s spouse, 525 shares of restricted Common Stock      which vest on February 6, 2009, and 2,129 shares of restricted Common      Stock which cliff vest in three years from January 30, 2007 pursuant to      the 2005 Plan. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (6) | Does      not include 217,930 unallocated shares of Common Stock held by the ESOP      Trust, which was established pursuant to the ESOP.  First      Bankers Trust Company is the trustee (“Trustee”) of the      Trust.  Under the terms of the ESOP, the Trustee will generally      vote the allocated shares held in the ESOP in accordance with the      instructions of the participating employees.  Unallocated shares      held in the ESOP and allocated shares for which timely voting instructions      are not received by the Trustee will be voted by the Trustee as directed      by a committee appointed by the Board of Directors (“ESOP      Committee”).  The ESOP Committee is comprised of Messrs.      Alvarez, Fong and Hagan.  The ESOP Committee may only act by      majority vote and no ESOP Committee member may act individually to vote or      sell unallocated shares of Common Stock held by the ESOP.  Each      ESOP Committee member disclaims beneficial ownership with respect to the      unallocated shares held by theTrust. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

Table of Contents

| (7) | Includes      525 shares of restricted Common Stock which vest on February 6, 2009,      2,129 shares of restricted Common Stock which cliff vest in three years      from January 30, 2007 pursuant to the 2005 Plan, 35,357 shares held by Mr.      Buxbaum in two trusts, 939 shares held by Mr. Buxbaum in his IRA and      86,625 shares indirectly owned by Mr. Buxbaum in the Buxbaum & Chakmak      partnership for which Mr. Buxbaum disclaims beneficial ownership of the      securities held by the partnership to the extent of his pecuniary interest      therein. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (8) | Includes      227,109 shares held jointly with Mr. Keagle’s spouse, 23,153 shares held      in a trust under Mr. Keagle’s spouse’s name, 2,545 shares held by Mr.      Keagle’s spouse in her IRA, 3,320 shares held by Mr. Keagle in his IRA,      57,881 shares of Common Stock issuable upon exercise of outstanding stock      options, 525 shares of restricted Common Stock which vest on February 6,      2009, and 2,129 shares of restricted Common Stock which cliff vest in      three years from January 30, 2007 pursuant to the 2005      Plan.  Mr. Keagle has 225,532 shares pledged as security for a      loan. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (9) | Includes      5,682 shares held by Mr. LeSieur in IRA, 1,063 shares held by Mr. LeSieur      in the LeSieur family trust, 525 shares of restricted Common Stock which      vest on February 6, 2009, and 2,129 shares of restricted Common Stock      which cliff vest in three years from January 30, 2007 pursuant to the 2005      Plan. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (10) | Includes      15,676 shares held in Dr. Quincey's trust and 2,129 shares of restricted      Common Stock which cliff vest in three years from January 30, 2007      pursuant to the 2005 Plan. |
|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (11) | Includes      11,575 shares held by Mr. Ravitz in his IRA, 138,915 shares of Common      Stock issuable upon exercise of outstanding stock options, 525 shares of      restricted Common Stock which vest on February 6, 2009, 2,129 shares of      restricted Common Stock which cliff vest in three years from January 30,      2007 pursuant to the 2005 Plan, and 15,544 shares of Common Stock and      4,600 shares of Series D Preferred Stock held in the Janice Winterswyk      Gearhart Trust dated 8/1/07 which Mr. Ravitz is trustee of    . |
|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (12) | Includes      13,152 shares of restricted Common Stock granted pursuant to the Company’s      restricted share plans which vest as follows:  3,176 shares vest      on February 7, 2009; 5,250 shares vest on July 1, 2009; 1,575 shares vest      on February 13, 2010 and 3,151 shares vest on March 7, 2011; and 946      shares allocated pursuant to theESOP. |
|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (13) | Includes      62,291 shares of Common Stock issuable upon exercise of outstanding stock      options; 8,190 shares of restricted Common Stock granted pursuant to the      Company’s restricted share plans which vest as follows: 3,675 shares vest      on February 7, 2009; 1,575 shares vest on February 13, 2010; and 2,940      shares vest on March 7, 2011; and 946 shares allocated pursuant to the      ESOP. |
|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (14) | Includes      19,950 shares of restricted Common Stock granted pursuant to the Company’s      restricted share plans which vest as follows: 5,250 shares vest on October      18, 2008; 4,200 shares vest on March 7, 2010; 10,500 shares vest on      November 1, 2010; and 865 shares allocated pursuant to the      ESOP. |
|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (15) | Includes      13,933 shares of restricted Common Stock granted pursuant to the Company’s      restricted share plans which vest on March 12, 2011; and 286 shares      allocated pursuant to the ESOP.  Mr. Cain has 1,000 shares      pledged as security in a marginaccount. |
|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (16) | Based      on Consent Solicitation Statement filed with the SEC on March 10, 2008,      Mr. Morales’ ownership includes:  239,597 shares owned directly      by Mr. Morales, 13,637 shares beneficially owned by Mr. Morales’ sister      and brother-in-law, as to which Mr. Morales has voting authority pursuant      to a power of attorney, 56,555 shares beneficially owned by Mr. Morales’      sister, as to which Mr. Morales has voting authority pursuant to a power      of attorney, and 8,662 shares beneficially owned by a foundation, as to      which Mr. Morales is a trustee and as to which Mr. Morales has voting      authority pursuant to a power ofattorney. |
|------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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Table of Contents

| (17)   | Includes      101,867 shares granted pursuant to the Company’s restricted share plans,      which may be voted by directors and executive officers, 3,922 shares      allocated to executive officers pursuant to the ESOP and 259,087 shares      which may be acquired by directors and executive officers upon the      exercise of stock options exercisable within 60 days of the Record      Date.  This total does not include any shares held by Mr.      Morales. |
|------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

ITEM 13.

ITEM 14. 

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Table of Contents

|                          |   | 2007      (1) |      |   | 2006 (2) |   |
|-------------------------------|--------|---------------|-----------|--------|---------------|--------|
| Audit      fees          |   | $             | 1,668,722 |   |          | $      | 587,775 |   |
| Audit-related      fees  |   |          | 67,211    |   |          |   | 36,800 |   |
| Tax      fees            |   |          | 73,300    |   |          |   | 53,700 |   |
| All      other fees      |   |          | -         |   |          |   | 42,830 |   |
| Total                    |   | $             | 1,809,233 |   |          | $      | 721,105 |   |

| (1) | In      2007, Audit fees were paid to KPMG and Haskell & White; Audit-related      fees were paid to KPMG and VTD; Tax fees were paid to KPMG and      VTD. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | In      2006, Audit fees were paid to KPMG, VTD and Haskell & White;      Audit-related fees were paid to KPMG; Tax fees were paid to VTD and      Deloitte; and all other fees were paid toVTD. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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Table of Contents

ITEM 15.

|   | Consolidated      Statements of Changes in Stockholders’ Equity and Other Comprehensive      Income for the Years Ended December 31, 2007, 2006 and    2005. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Consolidated      Statements of Cash Flows for the Years Ended December 31, 2007, 2006 and      2005. |
|--------|-------------------------------------------------------------------------------------------------------|

| EXHIBIT NO. | DESCRIPTION |
|-------------|-------------|
| 2.1         |        | Agreement      and Plan of Reorganization among Vineyard National Bancorp, Vineyard Bank,      and Rancho Bank (12) |
| 3.1         |        | Restated      Articles of Incorporation of Vineyard National Bancorp (16) |
| 3.2         |        | Amended      and Restated Bylaws of Vineyard National Bancorp, as    amended |
| 3.3         |        | Certificate      of Determination of Floating Rate Series C Noncumulative Preferred      Stock      (17) |
| 3.4         |        | Certificate      of Determination of 7.50% Series D Noncumulative Preferred Stock (18) |
| 4.1         |        | Specimen      Common Stock Certificate of Vineyard National Bancorp (1) |
| 4.2         |        | Form      of Warrant to Purchase Shares of Common Stock      (2) |
| 4.3         |        | Debenture      Subscription Agreement, dated as of December 19, 2002, between Vineyard      National Bancorp and Vineyard Statutory Trust II (4) |
| 4.4         |        | Indenture,      dated as of December 19, 2002, between Vineyard National Bancorp, as      Issuer, and Wilmington Trust Company, as Trustee, relating to the floating      rate junior subordinated debt securities due 2033 (4) |
| 4.5         |        | Amended      and Restated Declaration of Trust by and among State Street Bank and Trust      Company of Connecticut, National Association, as Institutional Trustee and      Vineyard National Bancorp, as Sponsor, dated as of December 18, 2001      (4) |
| 4.6         |        | Guarantee      Agreement by and between Vineyard National Bancorp and State Street Bank      and Trust Company of Connecticut and National Association, dated as of      December 18, 2001      (4) |
| 4.7         |        | Amended      and Restated Declaration of Trust, dated as of December 19, 2002, of      Vineyard Statutory Trust II (4) |
| 4.8         |        | Guarantee      Agreement, dated as of December 19, 2002 (4) |

----

Table of Contents

| 4.9  |   | Indenture      dated as of December 19, 2002, between Vineyard National Bancorp, as      Issuer, and State Street Bank and Trust Company of Connecticut, National      Association, as Trustee, relating to the floating rate junior subordinated      debentures due 2017      (4) |
|------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 4.10 |   | Indenture      dated as of September 25, 2003, between Vineyard National Bancorp, as      Issuer, and Wilmington Trust Company, as Trustee, relating to the floating      rate junior subordinated debentures due 2033 (3)                                                          |
| 4.11 |   | Amended      and Restated Declaration of Trust, dated as of September 25, 2003, of      Vineyard Statutory Trust III (3)                                                                                                                                                            |
| 4.12 |   | Guarantee      Agreement, dated as of September 25, 2003 (3)                                                                                                                                                                                                                        |
| 4.13 |   | Indenture      dated as of December 19, 2003, between Vineyard National Bancorp, as      Issuer, and Wilmington Trust Company, as Trustee, relating to the floating      rate junior subordinated debentures due 2034 (7)                                                           |
| 4.14 |   | Amended      and Restated Declaration of Trust, dated as of December 19, 2003, of      Vineyard Statutory Trust IV      (7)                                                                                                                                                         |
| 4.15 |   | Guarantee      Agreement, dated as of December 19, 2003 (7)                                                                                                                                                                                                                         |
| 4.16 |   | Indenture      dated as of March 25, 2004, between Vineyard National Bancorp, as Issuer,      and Wilmington Trust Company, as Trustee, relating to the floating rate      junior subordinated debentures due 2034 (9)                                                              |
| 4.17 |   | Amended      and Restated Declaration of Trust, dated as of March 25, 2004, of Vineyard      Statutory Trust V (9)                                                                                                                                                                  |
| 4.18 |   | Guarantee      Agreement, dated as of March 25, 2004 (9)                                                                                                                                                                                                                            |
| 4.19 |   | Indenture      dated as of May 18, 2004, between Vineyard National Bancorp, as Issuer,      and Wilmington Trust Company, as Trustee, relating to the floating rate      junior subordinated debentures due 2034 (9)                                                                |
| 4.20 |   | Amended      and Restated Declaration of Trust, dated as of May 18, 2004, of Vineyard      Statutory Trust VI (9)                                                                                                                                                                   |
| 4.21 |   | Guarantee      Agreement, dated as of May 18, 2004 (9)                                                                                                                                                                                                                              |
| 4.22 |   | Indenture      dated as of December 22, 2004, between Vineyard National Bancorp, as      Issuer, and Wilmington Trust Company, as Trustee, relating to the floating      rate junior subordinated debentures due 2034 (9)                                                           |
| 4.23 |   | Amended      and Restated Declaration of Trust, dated as of December 22, 2004, of      Vineyard Statutory Trust VII      (9)                                                                                                                                                        |
| 4.24 |   | Guarantee      Agreement, dated as of December 22, 2004 (9)                                                                                                                                                                                                                         |
| 4.25 |   | Indenture      dated as of April 15, 2005, between Vineyard National Bancorp, as Issuer,      and Wilmington Trust Company, as Trustee, relating to the floating rate      junior subordinated debentures due 2035      (15)                                                        |
| 4.26 |   | Amended      and Restated Declaration of Trust, dated as of April 15, 2005, of Vineyard      Statutory Trust VIII (15)                                                                                                                                                              |
| 4.27 |   | Guarantee      Agreement, dated as of April 15, 2005 (15)                                                                                                                                                                                                                           |
| 4.28 |   | Indenture      dated as of August 19, 2005, between Vineyard National Bancorp, as Issuer,      and Wilmington Trust Company, as Trustee, relating to the floating rate      junior subordinated debentures due 2035      (15)                                                       |
| 4.29 |   | Amended      and Restated Declaration of Trust, dated as of August 19, 2005, of      Vineyard Statutory Trust IX (15)                                                                                                                                                               |
| 4.30 |   | Guarantee      Agreement, dated as of August 19, 2005 (15)                                                                                                                                                                                                                          |
| 4.31 |   | Indenture      dated as of May 16, 2006, between Vineyard National Bancorp, as Issuer,      and Wilmington Trust Company, as Trustee, relating to the floating rate      junior subordinated debentures due 2036 (22)*                                                              |
| 4.32 |   | Amended      and Restated Declaration of Trust, dated as of May 16, 2006, of Vineyard      Statutory Trust IX  (22)*                                                                                                                                                      |
| 4.33 |   | Guarantee      Agreement, dated as of May 16, 2006 (22)*                                                                                                                                                                                                                            |
| 10.1 |   | Vineyard      National Bancorp Nonqualified Deferred Compensation Plan (4)*                                                                                                                                                                                                         |
| 10.2 |   | Vineyard      National Bancorp Directors’ Deferred Compensation Plan      (4)*                                                                                                                                                                                                |
| 10.3 |   | Amended      and Restated Vineyard National Bancorp 1997 Incentive Stock Option      Plan      (4)*                                                                                                                                                                                 |
| 10.4 |   | Form      of Amended and Restated Vineyard National Bancorp 1997 Incentive Stock      Option Plan Notice of Stock Option Grant (9)*                                                                                                                                                 |
| 10.5 |   | Vineyard      National Bancorp 2006 Incentive Stock Plan (13)*                                                                                                                                                                                                                      |
| 10.6 |   | Form      of 2006 Incentive Stock Plan Award Agreement (19)*                                                                                                                                                                                                                        |

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Table of Contents

| 10.7  |   | Vineyard      National Bancorp 2002 Restricted Share Plan      (4)*                                                                                      |
|-------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.8  |   | Form      of 2002 Restricted Share Award Agreement (9)*                                                                                                  |
| 10.9  |   | Vineyard      National Bancorp 2003 Restricted Share Plan (8)*                                                                                           |
| 10.10 |   | Form      of 2003 Restricted Share Award Agreement (9)*                                                                                                  |
| 10.11 |   | Vineyard      National Bancorp 2004 Restricted Share Plan (6)*                                                                                           |
| 10.12 |   | Form      of 2004 Restricted Share Award Agreement (9)*                                                                                                  |
| 10.13 |   | Vineyard      National Bancorp 2005 Restricted Share Plan (10)*                                                                                          |
| 10.14 |   | Form      of 2005 Restricted Share Award Agreement (11)*                                                                                                 |
| 10.15 |   | Amended      and Restated Employment Agreement between Vineyard National Bancorp,      Vineyard Bank, National Association, and Norman A. Morales(5)*    |
| 10.16 |   | Agreement      and Release dated January 23, 2008 among Vineyard National Bancorp,      Vineyard Bank, National Association, and Norman A. Morales (20)* |
| 10.17 |   | Revised      Form of Change of Control Agreement (21)*                                                                                                   |
| 10.18 |   | Loan      Agreement between Vineyard National Bancorp and First Tennessee Bank,      National Association (14)*                                          |
| 10.19 |   | Third      Modification Agreement and Covenant Waiver between Vineyard National      Bancorp and First Tennessee Bank, National Association              |
| 21    |   | Subsidiaries      of the Registrant (See “Business” in Item 1 hereof for the required      information)                                      |
| 23.1  |   | Consent      of KPMG LLP                                                                                                                                 |
| 23.2  |   | Consent      of Vavrinek, Trine, Day and Company LLP                                                                                                     |
| 31.1  |   | Certification      of Interim Chief Executive Officer under Section 302 of the Sarbanes-Oxley      Act of 2002                                           |
| 31.2  |   | Certification      of Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of      2002                                                   |
| 32    |   | Certification      of Interim Chief Executive Officer and Chief Financial Officer pursuant to      Section 906 of the Sarbanes-Oxley Act of2002          |

| (1)   | Incorporated      by reference from our Annual Report on Form 10-K for the year ended      December 31, 1988. |
|-----------------|---------------------------------------------------------------------------------------------------------------|

| (2)   | Incorporated      by reference from our Form 8-K filed with the SEC on June 21,      2004. |
|-----------------|--------------------------------------------------------------------------------------------|

| (3)   | Incorporated      by reference from our Quarterly Report on Form 10-Q for the quarter ended      September 30, 2003 which we filed with the SEC on November 7,      2003. |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4)   | Incorporated      by reference from our Annual Report on Form 10-K for the year ended      December 31, 2002 which we filed with the SEC on March 28,      2003. |
|-----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (5)   | Incorporated      by reference from our Form 8-K filed with the SEC on April 11,      2007. |
|-----------------|---------------------------------------------------------------------------------------------|

| (6)   | Incorporated      by reference from our Proxy Statement for an annual meeting held on May      22, 2003 filed with the SEC on April 14,2003. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------|

| (7)   | Incorporated      by reference from our Annual Report on Form 10-K for the year ended      December 31, 2003 which we filed with the SEC on March 22,      2004. |
|-----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (8)   | Incorporated      by reference from our Quarterly Report on Form 10-Q for the quarter ended      September 30, 2004 which we filed with the SEC on November 10,      2004. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (9)   | Incorporated      by reference from our Annual Report on Form 10-K for the year ended      December 31, 2004 which we filed with the SEC on March 10,      2005. |
|-----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (10)   | Incorporated      by reference from our Proxy Statement for an annual meeting held on May      25, 2005 which we filed with the SEC on April 18,  2005. |
|------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------|

| (11)   | Incorporated      by reference from our Quarterly Report on Form 10-Q for the quarter ended      June 30, 2005 which we filed with the SEC on August 1,    2005. |
|------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| (12)   | Incorporated      by reference from our Form 8-K filed with the SEC on April 20,      2006. |
|------------------|---------------------------------------------------------------------------------------------|

| (13)   | Incorporated      by reference from our Proxy Statement for an annual meeting held on May      24, 2006 filed with the SEC on April 17,2006. |
|------------------|----------------------------------------------------------------------------------------------------------------------------------------------|

| (14)   | Incorporated      by reference from our Quarterly Report on Form 10-Q for the quarter ended      March 31, 2006 which we filed with the SEC on May 10,  2006 |
|------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (15)   | Incorporated      by reference from our Annual Report on Form 10-K for the year ended      December 31, 2005 which we filed with the SEC on March 14,      2006. |
|------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (16)   | Incorporated      by reference from our Form 8-K filed with the SEC on August 8,      2007. |
|------------------|---------------------------------------------------------------------------------------------|

| (17)   | Incorporated      by reference from our Form 8-K filed with the SEC on April 19,      2005. |
|------------------|---------------------------------------------------------------------------------------------|

| (18)   | Incorporated      by reference from our Form 8-K filed with the SEC on June 26,      2007. |
|------------------|--------------------------------------------------------------------------------------------|

| (19)   | Incorporated      by reference from our Quarterly Report on Form 10-Q for the quarter ended      September 30, 2006 which we filed with the SEC on November 9,      2006 |
|------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (20)   | Incorporated      by reference from our Form 8-K filed with the SEC on January 24,      2008. |
|------------------|-----------------------------------------------------------------------------------------------|

| (21)   | Incorporated      by reference from our Form 8-K filed with the SEC on October 4,      2007. |
|------------------|----------------------------------------------------------------------------------------------|

| (22)   | Incorporated      by reference from our Annual Report on Form 10-K for the year ended      December 31, 2006, as amended on June 12,2007. |
|------------------|-------------------------------------------------------------------------------------------------------------------------------------------|

| * | Management      contract or compensatory plan orarrangement. |
|---|--------------------------------------------------------------|

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|   | VINEYARD      NATIONAL BANCORP |
|--------|--------------------------------|
|   |                           |
|   | By:                            | /s/ James G. LeSieur |
|   |                           | James      G. LeSieur |
|   |                           | Interim      Chief Executive Officer |
|   |                           |
|   |                           |
|   | By:                            | /s/ Gordon Fong |
|   |                           | Gordon      Fong |
|   |                           | Executive      Vice President and Chief Financial Officer |
|   |                           |   |

| NAME                   |   | TITLE                                                                                                                         | DATE                                |
|------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------|-------------------------------------|
|                   |   |                                                                                                                          |                                |
| /s/ James G. LeSieur   |   | Interim      Chief Executive Officer and                                                                                      |  May      19, 2008             |
| James      G. LeSieur  |   | Chairman      of the Board (Principal Executive Officer)                                                                      |
|                   |   |                                                                                                                          |                                |
|                   |   |                                                                                                                          |                                |
| /s/ Charles L. Keagle  |   |                                                                                                                          |  May      19, 2008             |
| Charles      L. Keagle |   | Director                                                                                                                      |
|                   |   |                                                                                                                          |                                |
|                   |   |                                                                                                                          |                                |
| /s/ Frank S. Alvarez   |   |                                                                                                                          |                                |
| Frank      S. Alvarez  |   | Director                                                                                                                      | May      19, 2008                   |
|                   |   |                                                                                                                          |                                |
|                   |   |                                                                                                                          |                                |
| /s/ Joel H. Ravitz     |   |                                                                                                                          |
| Joel      H. Ravitz    |   | Director                                                                                                                      | May      19, 2008                   |
|                   |   |                                                                                                                          |                                |
|                   |   |                                                                                                                          |                                |
| /s/Robb D. Quincey     |   |                                                                                                                          |                                |
| Robb      D. Quincey   |   | Director                                                                                                                      | May      19,      2008              |
|                   |   |                                                                                                                          |    May      19, 2008 |
|                   |   |                                                                                                                          |
| /s/ David A. Buxbaum   |   |                                                                                                                          |
| David      A. Buxbaum  |   | Director                                                                                                                      |
|                   |   |                                                                                                                          |                                |
|                   |   |                                                                                                                          |
| /s/ Gordon Fong        |   |                                                                                                                          |
| Gordon      Fong       |   | Executive      Vice President and Chief Financial Officer (Principal Financial Officer      and Principal Accounting Officer) | May      19,      2008              |

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