UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                    FORM 10-K


 (Mark One)

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
    ACT OF 1934


                 For the fiscal year ended December 31, 2005 or


[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
    EXCHANGE ACT OF 1934


       For the transition period from________________to ________________


                                    000-50914
                            ________________________
                            (Commission File Number)


                             BRIDGE CAPITAL HOLDINGS
             ______________________________________________________
             (Exact name of registrant as specified in its charter)


          CALIFORNIA                                   80-0123855
_______________________________          _______________________________________
(State or other jurisdiction of          (I.R.S. Employer Identification Number)
 incorporation or organization)


                    55 ALMADEN BOULEVARD, SAN JOSE, CA 95113
          ____________________________________________________________
          (Address of principal executive offices, including zip code)


Registrant's telephone number, including area code:  (408) 423-8500


Securities registered pursuant to Section 12 (b) of the Act:

                                            Name of each exchange
              Title of each class            on which registered
              ___________________           _____________________

                     None                           None


Securities registered pursuant to Section 12 (g) of the Act:

                               Title of each class
                           __________________________
                           Common Stock, no par value


         Indicate  by check  mark if the  registrant  is a  well-known  seasoned
issuer, as defined in Rule 405 of the Securities Act. Yes [ ] No [X]

         Indicate  by  check  mark if the  registrant  is not  required  to file
reports pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [X]

         Bridge Capital  Holdings (1) has filed all reports required to be filed
by  section  13 or 15(d)  of the  Securities  Exchange  Act of 1934  during  the
preceding 12 months and (2) has been subject to such filing requirements for the
past 90 days.

         Yes [X]   No [ ]

         Indicate by checkmark if disclosure of  delinquent  filers  pursuant to
Item 405 of Regulation S-K is not contained  herein,  and will not be contained,
to the best of  registrant's  knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part  III of this  Form  10-K or any
amendment to this Form 10-K. [X]

         Indicate by check mark whether the  registrant  is a large  accelerated
filer,  an accelerated  filer,  or a  non-accelerated  filer.  See definition of
"accelerated  filer and large  accelerated  filer" in Rule 12b-2 of the Exchange
Act.  (Check  one):  Large   accelerated   filer  [  ]  Accelerated   filer  [X]
Non-accelerated filer [ ]

         Indicate by check mark whether the  registrant  is a shell  company (as
defined in Rule 12b-2 of the Act). Yes [ ] No [X]

         The aggregate  market value of the voting stock held by  non-affiliates
of Bridge Capital Holdings was $88,002,658 as of June 30, 2005.

         As of January 27, 2006,  Bridge Capital Holdings had 6,227,596,  shares
of common stock outstanding.

         Documents incorporated by reference:  The Company's Proxy Statement for
its 2006 Annual Meeting of Shareholders  is incorporated  herein by reference in
Part III, Items 10 through 14.


                                       1


<PAGE>


Forward-looking Statements

IN ADDITION TO THE HISTORICAL  INFORMATION,  THIS ANNUAL REPORT CONTAINS CERTAIN
FORWARD-LOOKING  INFORMATION WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES
ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934,
AS  AMENDED,  AND  WHICH  ARE  SUBJECT  TO THE "SAFE  HARBOR"  CREATED  BY THOSE
SECTIONS.  THE READER OF THIS  ANNUAL  REPORT  SHOULD  UNDERSTAND  THAT ALL SUCH
FORWARD-LOOKING  STATEMENTS ARE SUBJECT TO VARIOUS  UNCERTAINTIES AND RISKS THAT
COULD AFFECT THEIR OUTCOME. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY
FROM  THOSE  SUGGESTED  BY  SUCH  FORWARD-LOOKING  STATEMENTS.  SUCH  RISKS  AND
UNCERTAINTIES  INCLUDE,  AMONG OTHERS,  (1) COMPETITIVE  PRESSURE IN THE BANKING
INDUSTRY INCREASES  SIGNIFICANTLY;  (2) CHANGES IN THE INTEREST RATE ENVIRONMENT
REDUCES  MARGINS;  (3)  GENERAL  ECONOMIC   CONDITIONS,   EITHER  NATIONALLY  OR
REGIONALLY, ARE LESS FAVORABLE THAN EXPECTED,  RESULTING IN, AMONG OTHER THINGS,
A DETERIORATION  IN CREDIT QUALITY;  (4) CHANGES IN THE REGULATORY  ENVIRONMENT;
(5) CHANGES IN BUSINESS  CONDITIONS  AND  INFLATION;  (6) COSTS AND  EXPENSES OF
COMPLYING WITH THE INTERNAL CONTROL PROVISIONS OF THE SARBANES-OXLEY ACT AND OUR
DEGREE OF SUCCESS IN ACHIEVING  COMPLIANCE;  (7) CHANGES IN SECURITIES  MARKETS,
(8) FUTURE CREDIT LOSS EXPERIENCE;  (9) CIVIL  DISTURBANCES OR TERRORIST THREATS
OR ACTS, OR APPREHENSION  ABOUT POSSIBLE FUTURE OCCURANCES OF ACTS OF THIS TYPE;
AND (10) THE  INVOLVEMENT  OF THE  UNITED  STATES  IN WAR OR OTHER  HOSTILITIES.
THEREFORE,  THE INFORMATION IN THIS ANNUAL REPORT SHOULD BE CAREFULLY CONSIDERED
WHEN EVALUATING THE BUSINESS PROSPECTS OF THE COMPANY.

FORWARD-LOOKING  STATEMENTS ARE GENERALLY  IDENTIFIABLE BY THE USE OF TERMS SUCH
AS "BELIEVE", "EXPECT", "INTEND", "ANTICIPATE", "ESTIMATE", "PROJECT", "ASSUME,"
"PLAN," "PREDICT," "FORECAST," "IN MANAGEMENT'S OPINION," "MANAGEMENT CONSIDERS"
OR SIMILAR  EXPRESSIONS.  WHEREVER SUCH PHRASES ARE USED, SUCH STATEMENTS ARE AS
OF AND BASED UPON THE KNOWLEDGE OF MANAGEMENT,  AT THE TIME MADE AND ARE SUBJECT
TO CHANGE BY THE PASSAGE OF TIME AND/OR SUBSEQUENT  EVENTS, AND ACCORDINGLY SUCH
STATEMENTS  ARE  SUBJECT TO THE SAME RISKS AND  UNCERTAINTIES  NOTED  ABOVE WITH
RESPECT TO FORWARD-LOOKING STATEMENTS.

ALL OF THE  COMPANY'S  OPERATIONS  AND  MOST OF ITS  CUSTOMERS  ARE  LOCATED  IN
CALIFORNIA.  OTHER EVENTS, INCLUDING THOSE OF SEPTEMBER 11, 2001, HAVE INCREASED
THE  UNCERTAINTY  RELATED TO THE NATIONAL AND  CALIFORNIA  ECONOMIC  OUTLOOK AND
COULD HAVE AN EFFECT ON THE FUTURE  OPERATIONS OF THE COMPANY OR ITS  CUSTOMERS,
INCLUDING BORROWERS.  THE COMPANY DOES NOT UNDERTAKE, AND SPECIFICALLY DISCLAIMS
ANY OBLIGATION, TO UPDATE ANY FORWARD-LOOKING  STATEMENTS TO REFLECT OCCURRENCES
OR UNANTICIPATED EVENTS OR CIRCUMSTANCES AFTER THE DATE OF SUCH STATEMENTS.


                                        2


<PAGE>


                                     PART 1


ITEM 1.  BUSINESS


General

         On July 26, 2000 an  Application to Obtain a National  Banking  Charter
and Federal  Deposit  Insurance was filed with the  Comptroller  of the Currency
(the  "Comptroller")  and with the Federal Deposit  Insurance  Corporation  (the
"FDIC").  The Comptroller  approved the Application on November 17, 2000 and the
FDIC approved the Bank's  Application for Federal  Deposit  Insurance for Bridge
Bank,  National  Association.  On  December  6,  2000,  the Bank's  Articles  of
Association and Organizers'  Certificate were adopted by the Bank's  organizers,
which established the Bank's corporate  existence.  There are no predecessors to
the Bank.

         The Bank  commenced  operations  on May 14,  2001.  The Bank engages in
general commercial banking business,  and accepts checking and savings deposits,
makes  commercial,  real estate,  auto and other installment and term loans, and
provides other customary banking services. The Bank attracts the majority of its
loan and deposit  business  from the  residents  and  numerous  small and middle
market  businesses  and  professional  firms located in Santa Clara County.  Its
headquarters  office is located at 55 Almaden  Boulevard,  San Jose,  California
95113.

         In 2002, the Bank opened a full-service  branch office in Palo Alto and
established a U.S. Small Business  Administration  Lending Group that includes a
regional loan production office in Sacramento  county.  Also, it launched Bridge
Capital Finance Group, a factoring and asset-based  lending division with a loan
production  office in Santa Clara.  During the year ended December 31, 2003, the
Bank opened an office in downtown San Jose and established a U.S. Small business
Administration regional loan production office in San Diego county.

         On October 1, 2004,  Bridge  Bank,  National  Association  (the "bank")
announced  completion of a bank holding company  structure which was approved by
shareholders  at the Bank's annual  shareholders'  meeting held on May 20, 2004.
The bank holding company,  formed as a California  corporation,  is named Bridge
Capital  Holdings  (the  "Company").  Information  in this report dated prior to
September 30, 2004 is for Bridge Bank, N.A.

         Bridge  Capital  Holdings  was formed for the purpose of serving as the
holding  company for Bridge Bank and is  supervised by the Board of Governors of
the Federal Reserve System.  Effective  October 1, 2004, Bridge Capital Holdings
acquired 100% of the voting shares of Bridge Bank,  National  Association.  As a
result of the transaction,  the former  shareholders of Bridge Bank received one
share of common stock of Bridge  Capital  Holdings for every one share of common
stock of Bridge Bank owned.

         Prior to the  share  exchange,  the  common  stock of the Bank had been
registered  with the Office of Comptroller  of the Currency.  As a result of the
share  exchange,  common  stock of Bridge  Capital  Holdings  is now  considered
registered with the Securities and Exchange  Commission.  Future filings will be
made with the SEC rather than the Office of the  Comptroller of the Currency and
will be available  on the SEC's  website,  HTTP://WWW.SEC.GOV  as well as on the
Company's website http://www.bridgebank.com.

         The Bank provides the local  business and  professional  community with
banking  services  tailored to the unique needs of the Silicon Valley.  The Bank
does not intend to offer trust services initially or for the foreseeable future,
but it will  attempt to make such  services  available  to the Bank's  customers
through correspondent institutions.  The deposits of the Bank are insured by the
FDIC, up to applicable  limits,  and the Bank is a member of the Federal Reserve
System.

         In  addition,  the  Bank  provides  some  specialized  services  to its
customers.  These services  include courier deposit services to key locations or
customers  throughout  the Bank's service area,  Small  Business  Administration
(SBA) loans,  factoring and  asset-based  loans and Internet  banking.  The Bank
reserves the right to change its business  plan at any time and no assurance can
be given that, if the Bank's proposed  business plan is followed,  it will prove
successful.


                                       3


<PAGE>


         At December 31, 2005, the Bank had total assets of  approximately  $537
million,  total gross loans of $440 million and total deposits of  approximately
$468 million.  At December 31, 2005,  the Company had 103  full-time  equivalent
employees.


DEPOSITS

         The Bank  offers a wide range of deposit  accounts  designed to attract
small and medium size  commercial  businesses as well as business  professionals
and  retail  customers,  including  a  complete  line of  checking  and  savings
products,  including  passbook  savings,  "Money Market Deposit"  accounts which
require minimum balances and frequency of withdrawal limitations,  NOW accounts,
and  bundled  accounts.   Other  accounts  offered  by  the  Bank  include  term
certificates of deposit.

         Other  deposit  services  include  a  full  complement  of  convenience
oriented  services,  including  direct  payroll  and  social  security  deposit,
post-paid  bank-by-mail,  and  Internet  banking,  including  on-line  access to
account  information.  However,  at this time,  the Bank does not open  accounts
through the Internet. Any plans to offer online account opening must be approved
in advance by the  Comptroller.  No assurance can be given that, if applied for,
such approval will be obtained.

         As the Bank has no automated teller  machines,  the Bank may refund all
or portion of  transaction  charges  incurred by its  customers for their use of
another  bank's ATM.  The  majority of the Bank's  deposits  are  obtained  from
businesses located in the Bank's primary service area.


LENDING ACTIVITIES

         The Bank engages in a full range of lending  products  designed to meet
the specialized needs of its customers, including commercial lines of credit and
term  loans,   constructions   loans,   equipment  loans,  and  mortgage  loans.
Additionally,  the Bank extends  accounts  receivable,  factoring  and inventory
financing  to  qualified  customers.  Loans are also  offered  through the Small
Business Administration  guarantee loan programs, both the 7(a) and 504 programs
(described  below  under  "Item  7.  Management's  Discussion  and  Analysis  of
Financial Condition and Results of  Operations--FINANCIAL  CONDITION AND EARNING
ASSETS--Loan Portfolio").

         The Bank finances real estate construction projects,  primarily for the
construction  of owner  occupied and 1 to 4 unit  residential  developments  and
commercial buildings under $3 million in loan size.

         The Bank directs its commercial  lending  principally toward businesses
whose  demands  for credit fall within the Bank's  lending  limit.  In the event
there are customers  whose  commercial  loan demands  exceed the Bank's  lending
limits,  the Bank seeks to arrange for such loans on a participation  basis with
other financial institutions.

         The Bank also  extends  lines of credit to  individual  borrowers,  and
provides homeowner equity loans, home improvement loans, auto financing,  credit
and debit cards and overdraft/cash reserve accounts.


BUSINESS HOURS

         In order to attract loan and deposit business, the Bank maintains lobby
hours currently between 9:00 a.m. and 5:00 p.m. Monday through Friday.

         For additional  information concerning the Bank, see Selected Financial
Data under Item 6 on page 11.


COMPETITION

         The banking  business  in Santa Clara  County,  as it is  elsewhere  in
California,  is  highly  competitive,  and  each  of the  major  branch  banking
institutions  has one or more  offices  in the  Bank's  service  area.  The Bank
competes in the  marketplace for deposits and loans,  principally  against these
banks,  independent  community banks, savings and loan associations,  thrift and
loan  companies,   credit  unions,  mortgage  banking  companies,  and  non-bank
institutions  such as mutual fund companies and investment  brokerage firms that
claim a portion of the market.


                                       4


<PAGE>


         Larger banks may have a competitive advantage because of higher lending
limits  and  major  advertising  and  marketing  campaigns.  They  also  perform
services, such as trust services,  international banking, discount brokerage and
insurance  services,  which  the Bank is not  authorized  or  prepared  to offer
currently.  The Bank has made arrangements with its correspondent banks and with
others to provide such services for its customers. For borrowers requiring loans
in excess of the Bank's legal lending limit,  the Bank has offered,  and intends
to  offer  in  the  future,  such  loans  on  a  participating  basis  with  its
correspondent  banks and with other independent banks,  retaining the portion of
such loans  which is within its lending  limit.  As of December  31,  2005,  the
Bank's  unsecured  legal lending limit to a single  borrower and such borrower's
related  parties was  $8,353,000  based on  regulatory  capital of  $55,684,000.
However,  for  risk  management  purposes,  the Bank  has  established  internal
policies,  which at present provide lending limits that are less than the Bank's
legal lending limit.

         The  Bank's  business  is  concentrated  in  its  service  area,  which
primarily encompasses Santa Clara County, and also includes, to a lesser extent,
the contiguous areas of Alameda, San Mateo and Santa Cruz counties. During 2002,
the Bank  established  an SBA loan  production  office in Sacramento  county and
during 2003, a SBA loan production office in San Diego county.

         In order to compete with major  financial  institutions  in its primary
service area, the Bank uses to the fullest extent possible the flexibility  that
is accorded by its independent  status. This includes an emphasis on specialized
services,  local  promotional  activity,  and  personal  contacts  by the Bank's
officers,  directors  and  employees.  The Bank also  seeks to  provide  special
services  and  programs  for  individuals  in its primary  service  area who are
employed in the  agricultural,  professional and business fields,  such as loans
for  equipment,  furniture,  and tools of the trade or expansion of practices or
businesses.

         Banking is a business that depends on interest rate  differentials.  In
general, the difference between the interest rate paid by the Bank to obtain its
deposits and its other  borrowings and the interest rate received by the Bank on
loans extended to its customers and on securities  held in the Bank's  portfolio
comprises the major portion of the Bank's earnings.

         Commercial  banks  compete with savings and loan  associations,  credit
unions, other financial institutions and other entities for funds. For instance,
yields on corporate and government  debt securities and other  commercial  paper
affect the ability of commercial banks to attract and hold deposits.  Commercial
banks also compete for loans with savings and loan associations,  credit unions,
consumer finance companies, mortgage companies and other lending institutions.

         The  interest  rate  differentials  of  the  Bank,  and  therefore  its
earnings,  are affected not only by general economic  conditions,  both domestic
and foreign,  but also by the monetary and fiscal  policies of the United States
as set by statutes and as  implemented  by federal  agencies,  particularly  the
Federal  Reserve  Board.  This agency can and does implement  national  monetary
policy,  such as seeking to curb  inflation  and combat  recession,  by its open
market  operations in United States  government  securities,  adjustments in the
amount of interest free reserves that banks and other financial institutions are
required to maintain,  and  adjustments  to the  discount  rates  applicable  to
borrowing by banks from the Federal Reserve Board.  These  activities  influence
the growth of bank loans,  investments  and  deposits  and also affect  interest
rates charged on loans and paid on deposits.


SUPERVISION AND REGULATION


INTERSTATE BANKING

         The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994
(the "Interstate Banking Act") regulates the interstate  activities of banks and
bank holding  companies and  establishes a framework for  nationwide  interstate
banking and  branching.  Since June 1, 1997,  a bank in one state has  generally
been  permitted  to merge  with a bank in  another  state  without  the need for
explicit  state law  authorization.  However,  states  were given the ability to
prohibit  interstate  mergers  with  banks in their  own  state by  "opting-out"
(enacting state legislation  applying to all out-of-state banks prohibiting such
mergers) prior to June 1, 1997.


                                       5


<PAGE>


         Since 1995,  adequately  capitalized and managed bank holding companies
have been  permitted  to acquire  banks  located  in any  state,  subject to two
exceptions:  first,  a state may still  prohibit  bank  holding  companies  from
acquiring a bank which is less than five years old;  and second,  no  interstate
acquisition  can be consummated by a bank holding  company if the acquiror would
control more than 10% of the deposits  held by insured  depository  institutions
nationwide  or  30%  or  more  of  the  deposits  held  by  insured   depository
institutions in any state in which the target bank has branches.

         A bank may also  establish and operate de novo branches in any state in
which the bank does not maintain a branch if that state has enacted  legislation
to expressly permit all out-of-state banks to establish branches in that state.

         Among other things,  the  Interstate  Banking Act amended the Community
Reinvestment  Act to require that in the event a bank has  interstate  branches,
the  appropriate  federal  banking  regulatory  agency  must  prepare  for  that
institution a written evaluation of (i) the bank's record of CRA performance and
(ii) the bank's CRA performance in each applicable  state.  Interstate  branches
are now  prohibited  from being  used as deposit  production  offices.  Also,  a
foreign bank is permitted to establish branches in any state other than its home
state to the same extent that a bank  chartered by the foreign bank's home state
may establish such branches.

         The Caldera,  Weggeland,  and Killea California  Interstate Banking and
Branching  Act of 1995  (the  "Caldera  Weggeland  Act")  implemented  important
provisions  of  the  Interstate   Banking  Act  discussed   above  and  repealed
California's  previous  interstate banking laws, which were largely preempted by
the  Interstate  Banking Act.  (Prior  California  law  prohibited,  among other
things,  an  out-of-state  bank  holding  company  from  establishing  a de novo
California  bank except for the purpose of taking over the  deposits of a closed
bank. This restriction has been eliminated.)

         As indicated above, the Interstate Banking Act generally permits a bank
in one state to merge with a bank in another state without the need for explicit
state law authorization.  However, the Caldera Weggeland Act expressly prohibits
a foreign  (other  state) bank which does not already have a  California  branch
office from (i)  purchasing a branch office of a California  bank (as opposed to
purchasing the entire bank) and thereby  establishing a California branch office
or (ii) establishing a California branch on a de novo basis.

         The Interstate Banking Act also requires,  among other things, approval
of the state bank  supervisor  of the target  bank's  home state for  interstate
acquisitions  of banks by bank  holding  companies.  The Caldera  Weggeland  Act
authorizes  the  Commissioner  to approve such an interstate  acquisition if the
Commissioner  finds that the  transaction  is consistent  with certain  criteria
specified by law.

         The changes  effected by Interstate  Banking Act and Caldera  Weggeland
Act are expected to continue to increase competition in the environment in which
the Bank will operate to the extent that out-of-state financial institutions may
directly  or  indirectly  enter the Bank's  market  areas.  It appears  that the
Interstate  Banking Act has contributed to the accelerated  consolidation of the
banking  industry in that a number of the largest  bank  holding  companies  are
expanding into different parts of the country that were  previously  restricted.
While some large  out-of-state  banks have already entered the California market
as a result of this  legislation,  it is not  possible  to predict  the  precise
impact of this legislation on the Bank and the competitive  environment in which
it operates.


REGULATION W

         The  Federal  Reserve  has  adopted  Regulation  W  to  comprehensively
implement sections 23A and 23B of the Federal Reserve Act.

         Sections  23A and 23B and  Regulation  W limit the risks to a bank from
transactions between the bank and its affiliates and limit the ability of a bank
to transfer to its  affiliates  the benefits  arising from the bank's  access to
insured deposits,  the payment system and the discount window and other benefits
of the Federal  Reserve  system.  The statute and rule impose  quantitative  and
qualitative  limits on the  ability of a bank to extend  credit to, or engage in
certain  other  transactions  with,  an  affiliate  (and a  non-affiliate  if an
affiliate  benefits from the transaction).  However,  certain  transactions that
generally  do not  expose  a bank to  undue  risk or abuse  the  safety  net are
exempted from coverage under Regulation W.

         Historically,  a subsidiary  of a bank was not  considered an affiliate
for purposes of Sections  23A and 23B,  since their  activities  were limited to
activities   permissible  for  the  bank  itself.  The   Gramm-Leach-Bliley  Act
authorized   "financial   subsidiaries"   that  may  engage  in  activities  not
permissible for a bank. These financial subsidiaries are now considered


                                       6


<PAGE>


affiliates.  Certain  transactions  between a financial  subsidiary  and another
affiliate of a bank are also covered by sections 23A and 23B under Regulation W.

Regulation W has certain exemptions, including:

     o    For  state-chartered  banks,  an exemption for  subsidiaries  lawfully
          conducting non-bank activities before issuance of the final rule.

     o    An  exemption  for  extensions  of  credit  by a bank  under a general
          purpose  credit  card where the  borrower  uses the credit to purchase
          goods or services  from an affiliate of the bank, so long as less than
          25% of the aggregate  amount of purchases  with the card are purchases
          from an affiliate of the bank (a bank that does not have non-financial
          affiliates is exempt from the 25% test).

     o    An  exemption  for  loans  by a  bank  to a  third  party  secured  by
          securities issued by a mutual fund affiliate of the bank (subject to a
          number of conditions).

     o    Subject to a number of  conditions,  an exemption  that would permit a
          banking   organization  to  engage  more   expeditiously  in  internal
          reorganization transactions involving a bank's purchase of assets from
          an affiliate.

The final rule contains new  valuation  rules for a bank's  investments  in, and
acquisitions of, affiliates.

         The Federal Reserve expects  examiners and other  supervisory  staff to
review  inter-company  transactions closely for compliance with the statutes and
Regulation W and to resolve any violations or potential violations quickly.


     TYING ARRANGEMENTS AND TRANSACTIONS WITH AFFILIATED PERSONS

         A bank is prohibited  from tie-in  arrangements  in connection with any
extension of credit,  sale or lease of property or furnishing  of services.  For
example,  with some exceptions,  a bank may not condition an extension of credit
on a promise  by its  customer  to obtain  other  services  provided  by it, its
holding company or other  subsidiaries (if any), or on a promise by its customer
not to obtain other services from a competitor.

         Directors,  officers and principal  shareholders  of the Bank,  and the
companies with which they are associated, may have banking transactions with the
Bank in the  ordinary  course of  business.  Any loans and  commitments  to loan
included in these  transactions must be made in compliance with the requirements
of applicable law, on substantially the same terms, including interest rates and
collateral,  as those  prevailing at the time for comparable  transactions  with
other persons of similar creditworthiness,  and on terms not involving more than
the normal risk of collectibility or presenting other unfavorable features.


BANK HOLDING COMPANY ACT

         The Company is  registered  as a bank  holding  company  under the Bank
Holding  Company Act of 1956, as amended  ("BHCA").  As a bank holding  company,
Capital Corp is subject to examination by the FRB. Pursuant to the BHCA, Capital
Corp is also subject to  limitations  on the kinds of businesses in which it can
engage directly or through  subsidiaries.  It may, of course,  manage or control
banks.  Generally,  however,  it is prohibited,  with certain  exceptions,  from
acquiring  direct or indirect  ownership or control of more than five percent of
any class of  voting  shares of an entity  engaged  in  non-banking  activities,
unless the FRB finds such activities to be "so closely related to banking" as to
be deemed "a proper incident  thereto" within the meaning of the BHCA. As a bank
holding  company,  the  Company may not  acquire  more than five  percent of the
voting shares of any domestic bank without the prior  approval of (or, for "well
managed" companies, prior written notice to) the FRB.

         The  BHCA  includes  minimum  capital  requirements  for  bank  holding
companies.  See section titled  "Regulation and Supervision - Regulatory Capital
Requirements".  Regulations  and policies of the FRB also require a bank holding
company  to  serve as a source  of  financial  and  managerial  strength  to its
subsidiary  banks.  It is the FRB's  policy that a bank holding  company  should
stand ready to use available  resources to provide  adequate  capital funds to a
subsidiary  bank during  periods of financial  stress or  adversity  and that it
should maintain the financial flexibility and capital-raising capacity needed to


                                       7


<PAGE>


obtain  additional  resources for assisting the subsidiary  bank.  Under certain
conditions, the FRB may conclude that certain actions of a bank holding company,
such as the payment of a cash dividend,  would  constitute an unsafe and unsound
banking practice.


"SOURCE OF STRENGTH" POLICY

         According to FRB policy,  bank holding companies are expected to act as
a source of financial  strength to each subsidiary bank and to commit  resources
to support such subsidiary.


SECURITIES AND EXCHANGE COMMISSION FILINGS

         Under  Section 13 of the  Securities  Exchange  Act of 1934  ("Exchange
Act") and the SEC's rules,  the Company must  electronically  file  periodic and
current  reports as well as proxy  statements  with the  Securities and Exchange
Commission (the "SEC"). The Company  electronically  files the following reports
with the SEC: Form 10-K (Annual Report),  Form 10-Q (Quarterly Report), and Form
8-K (Current Report).  The Company may prepare  additional  filings as required.
The SEC maintains an Internet site, http://www.sec.gov, at which all forms filed
electronically  may be  accessed.  Our SEC  filings  are also  available  on our
website at http://www.bridgebank.com.


REGULATION OF THE BANK

         The Bank is regulated and supervised by the Comptroller of the Currency
and is subject to  periodic  examination  by the  Comptroller.  Deposits  of the
Bank's  customers  are insured by the FDIC up to the maximum  limit of $100,000,
and, as an insured bank, the Bank is subject to certain regulations of the FDIC.
As a national  bank,  the Bank is a member of the Federal  Reserve System and is
also subject to the regulations of the Federal Reserve Board (the "FRB").

         The regulations of those federal bank  regulatory  agencies govern most
aspects of the Bank's  business and  operations,  including  but not limited to,
requiring the maintenance of non-interest bearing reserves on deposits, limiting
the nature and amount of investments and loans which may be made, regulating the
issuance of securities, restricting the payment of dividends and regulating bank
expansion and bank activities.  The Bank also is subject to the requirements and
restrictions of various consumer laws and regulations.

         Statutes,  regulations and policies  affecting the banking industry are
frequently  under  review  by  Congress  and by the  federal  and  charged  with
supervisory and examination authority over banking institutions.  Changes in the
banking and financial services industry are likely to occur in the future.  Some
of the changes  may create  opportunities  for the Bank to compete in  financial
markets  with less  regulation.  However,  these  changes  also may  create  new
competitors  in  geographic  and product  markets which have  historically  been
limited by law to insured  depository  institutions such as the Bank. Changes in
the statutes,  regulations,  or policies that affect the Bank cannot necessarily
be predicted and may have a material effect on the Bank's business and earnings.
In addition,  the regulatory agencies which have jurisdiction over the Bank have
broad discretion in exercising their supervisory powers.

         The OCC can pursue an  enforcement  action  against the Bank for unsafe
and unsound practices in conducting its business,  or for violations of any law,
rule or  regulation  or  provision,  any  consent  order  with any  agency,  any
condition  imposed in writing by the agency,  or any written  agreement with the
agency.  Enforcement  actions may include the  imposition  of a  conservator  or
receiver,  cease-and-desist  orders and written  agreements,  the termination of
insurance of deposits,  the imposition of civil money  penalties and removal and
prohibition orders against institution-affiliated parties.

         In addition to the regulation and  supervision  outlined  above,  banks
must  be  prepared  for  judicial  scrutiny  of  their  lending  and  collection
practices.  For  example,  some  banks have been  found  liable  for  exercising
remedies which their loan documents authorized upon the borrower's default. This
has occurred in cases where the exercise of those  remedies was determined to be
inconsistent  with the  previous  course  of  dealing  between  the bank and the
borrower.  As a result,  banks must  exercise  caution,  incur  expense and face
exposure to liability when dealing with delinquent loans.

         The  following   description  of  selected   statutory  and  regulatory
provisions  and proposals is not intended to be a complete  description of these
provisions or of the many laws and regulations to which the Bank is subject, and
is  qualified  in its  entirety by  reference  to the  particular  statutory  or
regulatory provisions discussed.


                                       8


<PAGE>


A.       Effect of State Law


         The laws of the State of California also affect the Bank's business and
operations.  For  example,  under 12 U.S.C.  36, as amended  by the  Riegle-Neal
Interstate  Banking and Branching  Efficiency Act of 1994,  state laws regarding
community reinvestment,  consumer protection,  fair lending and establishment of
intrastate  branches may affect the operations of national banks in states other
than their home states.  On a similar  basis,  12 U.S.C.  85 provides that state
law, in most  circumstances,  determines  the maximum  rate of interest  which a
national   bank  may  charge  on  a  loan.   As   California   law  exempts  all
state-chartered  and  national  banks from the  application  of its usury  laws,
national banks are also provided such an exemption by 12 U.S.C. 85.


B.       Interstate Banking


         The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994
(the "Interstate Banking Act") regulates the interstate  activities of banks and
bank holding  companies and  establishes a framework for  nationwide  interstate
banking and  branching.  Since June 1, 1997,  a bank in one state has  generally
been  permitted  to merge  with a bank in  another  state  without  the need for
explicit  state law  authorization.  However,  states  were given the ability to
prohibit  interstate  mergers  with  banks in their  own  state by  "opting-out"
(enacting state legislation  applying to all out-of-state banks prohibiting such
mergers) prior to June 1, 1997.

         Since 1995,  adequately  capitalized and managed bank holding companies
have been  permitted  to acquire  banks  located  in any  state,  subject to two
exceptions:  first,  a state may still  prohibit  bank  holding  companies  from
acquiring a bank which is less than five years old;  and second,  no  interstate
acquisition  can be consummated by a bank holding  company if the acquiror would
control more than 10% of the deposits  held by insured  depository  institutions
nationwide  or  30%  or  more  of  the  deposits  held  by  insured   depository
institutions in any state in which the target bank has branches.

         A bank may also  establish and operate DE NOVO branches in any state in
which the bank does not maintain a branch if that state has enacted  legislation
to expressly permit all out-of-state banks to establish branches in that state.

         Among other things,  the  Interstate  Banking Act amended the Community
Reinvestment  Act to require that in the event a bank has  interstate  branches,
the  appropriate  federal  banking  regulatory  agency  must  prepare  for  that
institution a written evaluation of (i) the bank's record of CRA performance and
(ii) the bank's CRA performance in each applicable  state.  Interstate  branches
are now  prohibited  from being  used as deposit  production  offices.  Also,  a
foreign bank is permitted to establish branches in any state other than its home
state to the same extent that a bank  chartered by the foreign bank's home state
may establish such branches.

         The Caldera,  Weggeland,  and Killea California  Interstate Banking and
Branching  Act of 1995  (the  "Caldera  Weggeland  Act")  implemented  important
provisions  of  the  Interstate   Banking  Act  discussed   above  and  repealed
California's  previous  interstate banking laws, which were largely preempted by
the  Interstate  Banking Act.  (Prior  California  law  prohibited,  among other
things,  an  out-of-state  bank  holding  company  from  establishing  a de novo
California  bank except for the purpose of taking over the  deposits of a closed
bank. This restriction has been eliminated.)

         As indicated above, the Interstate Banking Act generally permits a bank
in one state to merge with a bank in another state without the need for explicit
state law authorization.  However, the Caldera Weggeland Act expressly prohibits
a foreign  (other  state) bank which does not already have a  California  branch
office from (i)  purchasing a branch office of a California  bank (as opposed to
purchasing the entire bank) and thereby  establishing a California branch office
or (ii) establishing a California branch on a DE NOVO basis.

         The Interstate Banking Act also requires,  among other things, approval
of the state bank  supervisor  of the target  bank's  home state for  interstate
acquisitions  of banks by bank  holding  companies.  The Caldera  Weggeland  Act
authorizes  the  Commissioner  to approve such an interstate  acquisition if the
Commissioner  finds that the  transaction  is consistent  with certain  criteria
specified by law.


                                       9


<PAGE>


         The changes  effected by Interstate  Banking Act and Caldera  Weggeland
Act are expected to continue to increase competition in the environment in which
the Bank will operate to the extent that out-of-state financial institutions may
directly  or  indirectly  enter the Bank's  market  areas.  It appears  that the
Interstate  Banking Act has contributed to the accelerated  consolidation of the
banking  industry in that a number of the largest  bank  holding  companies  are
expanding into different parts of the country that were  previously  restricted.
While some large  out-of-state  banks have already entered the California market
as a result of this  legislation,  it is not  possible  to predict  the  precise
impact of this legislation on the Bank and the competitive  environment in which
it operates.


C.       Change in Bank Control

         The Bank  Holding  Company Act of 1956,  as amended,  and the Change in
Bank Control Act of 1978, as amended,  together with  regulations of the FRB and
the Comptroller, require that, depending on the particular circumstances, either
FRB approval must be obtained or notice must be furnished to the Comptroller and
not disapproved prior to any person or company acquiring "control" of a national
bank, such as the Bank, subject to exemptions for some transactions.  Control is
conclusively  presumed to exist if an  individual or company (i) acquires 25% or
more of any class of  voting  securities  of the bank or (ii) has the  direct or
indirect  power to direct or cause the direction of the  management and policies
of the Bank,  whether  through  ownership of voting  securities,  by contract or
otherwise; provided that no individual will be deemed to control the Bank solely
on accord of being  director,  officer  or  employee  of the  Bank.  Control  is
rebuttably  presumed to exist if a person acquires 10% or more but less than 25%
of any  class of  voting  securities  and  either  the  company  has  registered
securities  under Section 12 of the Securities  Exchange Act of 1934, as amended
(the "Exchange  Act"), or no other person will own a greater  percentage of that
class of voting securities immediately after the transaction.


D. Regulation W

         The  Federal  Reserve  has  adopted  Regulation  W  to  comprehensively
implement sections 23A and 23B of the Federal Reserve Act.

         Sections  23A and 23B and  Regulation  W limit the risks to a bank from
transactions between the bank and its affiliates and limit the ability of a bank
to transfer to its  affiliates  the benefits  arising from the bank's  access to
insured deposits,  the payment system and the discount window and other benefits
of the Federal  Reserve  system.  The statute and rule impose  quantitative  and
qualitative  limits on the  ability of a bank to extend  credit to, or engage in
certain  other  transactions  with,  an  affiliate  (and  a  nonaffiliate  if an
affiliate  benefits from the transaction).  However,  certain  transactions that
generally  do not  expose  a bank to  undue  risk or abuse  the  safety  net are
exempted from coverage under Regulation W.

         Historically,  a subsidiary  of a bank was not  considered an affiliate
for purposes of Sections  23A and 23B,  since their  activities  were limited to
activities   permissible  for  the  bank  itself.  The   Gramm-Leach-Bliley  Act
authorized   "financial   subsidiaries"   that  may  engage  in  activities  not
permissible  for  a  bank.  These  financial  subsidiaries  are  now  considered
affiliates.  Certain  transactions  between a financial  subsidiary  and another
affiliate of a bank are also covered by sections 23A and 23B under Regulation W.

Regulation W has certain exemptions, including:

     o    For  state-chartered  banks,  an exemption for  subsidiaries  lawfully
          conducting nonbank activities before issuance of the final rule.

     o    An  exemption  for  extensions  of  credit  by a bank  under a general
          purpose  credit  card where the  borrower  uses the credit to purchase
          goods or services  from an affiliate of the bank, so long as less than
          25% of the aggregate  amount of purchases  with the card are purchases
          from an affiliate of the bank (a bank that does not have non-financial
          affiliates is exempt from the 25% test).

     o    An  exemption  for  loans  by a  bank  to a  third  party  secured  by
          securities issued by a mutual fund affiliate of the bank (subject to a
          number of conditions).


                                       10


<PAGE>


     o    Subject to a number of  conditions,  an exemption  that would permit a
          banking   organization  to  engage  more   expeditiously  in  internal
          reorganization transactions involving a bank's purchase of assets from
          an affiliate.

The final rule contains new  valuation  rules for a bank's  investments  in, and
acquisitions of, affiliates.

         The Federal Reserve expects  examiners and other  supervisory  staff to
review  intercompany  transactions  closely for compliance with the statutes and
Regulation W and to resolve any violations or potential violations quickly.


E.       Tying Arrangements and Transactions with Affiliated Persons


         A bank is prohibited  from tie-in  arrangements  in connection with any
extension of credit,  sale or lease of property or furnishing  of services.  For
example,  with some exceptions,  a bank may not condition an extension of credit
on a promise  by its  customer  to obtain  other  services  provided  by it, its
holding company or other  subsidiaries (if any), or on a promise by its customer
not to obtain other services from a competitor.

         Directors,  officers and principal  shareholders  of the Bank,  and the
companies with which they are associated, may have banking transactions with the
Bank in the  ordinary  course of  business.  Any loans and  commitments  to loan
included in these  transactions must be made in compliance with the requirements
of applicable law, on substantially the same terms, including interest rates and
collateral,  as those  prevailing at the time for comparable  transactions  with
other persons of similar creditworthiness,  and on terms not involving more than
the normal risk of collectibility or presenting other unfavorable features.


F.       Capital Adequacy Requirements


         The Bank is  subject  to the  Comptroller  's  capital  guidelines  and
regulations  governing capital adequacy for national banks.  Additional  capital
requirements  may be imposed on banks based on market risk.  The FDIC requires a
Tier 1  capital/1/  ratio to total  assets ratio of 8% for new banks during the
first three years of operation.

         After the first three years of operations,  the Comptroller  requires a
minimum  leverage  ratio of 3% of Tier 1 capital to total  assets  for  national
banks that have received the highest  composite  regulatory rating (a regulatory
measurement of capital, assets, management,  earnings, liquidity and sensitivity
to risk) and that are not anticipating or experiencing  any significant  growth.
All other institutions will be required to maintain a leverage ratio of at least
100 to 200 basis points above the 3% minimum.

         The Comptroller's regulations also require national banks to maintain a
minimum ratio of  qualifying  total  capital to  risk-weighted  assets of 8.00%.
Risk-based capital ratios are calculated with reference to risk-weighted assets,
including  both on and  off-balance  sheet  exposures,  which are  multiplied by
certain risk  weights  assigned by the  Comptroller  to those  assets.  At least
one-half of the qualifying capital must be in the form of Tier 1 capital.

         The risk-based capital ratio focuses principally on broad categories of
credit risk,  and may not take into account many other factors that can affect a
bank's  financial  condition.  These factors include overall  interest rate risk
exposure;  liquidity,  funding  and  market  risks;  the  quality  and  level of
earnings;   concentrations   of  credit  risk;   certain   risks   arising  from
nontraditional   activities;   the  quality  of  loans  and   investments;   the
effectiveness of loan and investment policies;  and management's overall ability
to monitor  and  control  financial  and  operating  risks,  including  the risk
presented  by  concentrations  of  credit  and  nontraditional  activities.  The


__________________

/1/ Tier 1 capital is generally  defined as the sum of the core capital elements
less goodwill and certain  intangibles.  The following items are defined as core
capital   elements:   (i)   common   stockholders'   equity;   (ii)   qualifying
non-cumulative perpetual preferred stock and related surplus; and (iii) minority
interests in the equity accounts of consolidated subsidiaries.


                                       11


<PAGE>


Comptroller has addressed many of these areas in related rule-making  proposals.
In addition to  evaluating  capital  ratios,  an overall  assessment  of capital
adequacy  must  take  account  of each of  these  other  factors  including,  in
particular,  the level and severity of problem and adversely  classified assets.
For this reason, the final supervisory judgment on a bank's capital adequacy may
differ  significantly  from the conclusions  that might be drawn solely from the
absolute level of the bank's  risk-based  capital  ratio.  The  Comptroller  has
stated that banks generally are expected to operate above the minimum risk-based
capital ratio. Banks contemplating significant expansion plans, as well as those
institutions  with  high or  inordinate  levels  of risk,  should  hold  capital
consistent with the level and nature of the risks to which they are exposed.

         Further,  the  banking  agencies  have  adopted  modifications  to  the
risk-based  capital  regulations  to include  standards  for interest  rate risk
exposures.  Interest  rate risk is the  exposure of a bank's  current and future
earnings and equity  capital  arising from  movements in interest  rates.  While
interest rate risk is inherent in a bank's role as a financial intermediary,  it
introduces  volatility to bank  earnings and to the economic  value of the bank.
The banking agencies have addressed this problem by implementing  changes to the
capital standards to include a bank's exposure to declines in the economic value
of its  capital  due to changes in  interest  rates as a factor that the banking
agencies  consider  in  evaluating  an  institution's  capital  adequacy.   Bank
examiners  consider a bank's historical  financial  performance and its earnings
exposure to interest rate movements as well as  qualitative  factors such as the
adequacy of a bank's internal interest rate risk management.

         Finally,  institutions with significant trading activities must measure
and hold capital for exposure to general  market risk arising from  fluctuations
in interest rates,  equity prices,  foreign  exchange rates and commodity prices
and exposure to specific risk associated  with debt and equity  positions in the
trading portfolio.  General market risk refers to changes in the market value of
on-balance-sheet  assets and off-balance-sheet items resulting from broad market
movements.  Specific  market  risk  refers to  changes  in the  market  value of
individual  positions  due to  factors  other than broad  market  movements  and
includes such risks as the credit risk of an instrument's issuer. The additional
capital  requirements  apply to institutions with trading assets and liabilities
equal to 10% or more of total assets or trading  activity of $1 billion or more.
The federal banking  agencies may apply the market risk regulations on a case by
case basis to institutions not meeting the eligibility criteria if necessary for
safety and soundness reasons.

         The  federal  banking  agencies  will  evaluate an  institution  in its
periodic  examination on the degree to which changes in interest rates,  foreign
exchange  rates,  commodity  prices  or equity  prices  can  affect a  financial
institution's  earnings or  capital.  In  addition,  the  agencies  focus in the
examination on an  institution's  ability to monitor and manage its market risk,
and will  provide  management  with a clearer  and more  focused  indication  of
supervisory concerns in this area.

         Under certain  circumstances,  the  Comptroller  may determine that the
capital ratios for a national bank must be maintained at levels which are higher
than the minimum levels required by the  guidelines.  A national bank which does
not achieve and maintain  required  capital levels may be subject to supervisory
action by the Comptroller  through the issuance of a capital directive to ensure
the maintenance of required capital levels. In addition, the Bank is required to
meet certain  guidelines of the  Comptroller  concerning  the  maintenance of an
adequate allowance for loan and lease losses.

         The  federal  banking   agencies,   including  the  OCC,  have  adopted
regulations  implementing a system of prompt corrective action under the Federal
Deposit  Insurance  Corporation  Improvement  Act  ("FDICIA").  The  regulations
establish five capital categories with the following characteristics:  (1) "Well
capitalized,"  consisting of institutions with a total risk-based  capital ratio
of 10% or  greater,  a Tier 1  risk-based  capital  ratio of 6% or greater and a
leverage  ratio of 5% or  greater  and which are not  operating  under an order,
written agreement,  capital directive or prompt corrective action directive; (2)
"Adequately  capitalized,"  consisting of institutions  with a total  risk-based
capital ratio of 8% or greater, a Tier 1 risk-based capital of 4% or greater and
a leverage  ratio of 4% or  greater  and which do not meet the  definition  of a
"well   capitalized"   institution;   (3)   "Undercapitalized,"   consisting  of
institutions  with a total  risk-based  capital  ratio of less than 8%, a Tier 1
risk-based  capital ratio of less than 4%, or a leverage  ratio of less than 4%;
(4)  "Significantly  undercapitalized,"  consisting of institutions with a total
risk-based  capital ratio of less than 6%, a Tier 1 risk-based  capital ratio of
less  than  3%,  or a  leverage  ratio  of less  than  3%;  and (5)  "Critically
undercapitalized," consisting of institutions with a ratio of tangible equity to
total assets that is equal to or less than 2%.

         The  regulations   establish   procedures  for  the  classification  of
financial  institutions within the capital categories,  for filing and reviewing
capital  restoration plans required under the regulations,  and for the issuance
of directives by the appropriate  regulatory  agency,  among other matters.  See
"SUPERVISION AND REGULATION -- Prompt Corrective Action."


                                       12


<PAGE>


         The appropriate federal banking agency, after notice and an opportunity
for a hearing, is authorized to treat a well capitalized, adequately capitalized
or  undercapitalized  insured  depository  institution  as  if it  had  a  lower
capital-based  classification  if it is in an unsafe and  unsound  condition  or
engaging in an unsafe and unsound  practice.  Thus,  an  adequately  capitalized
institution  can be subjected  to the  restrictions  (described  below) that are
imposed on  undercapitalized  institutions  (provided that a capital restoration
plan cannot be required of the institution), and an undercapitalized institution
can be  subjected to the  restrictions  (also  described  below)  applicable  to
significantly  undercapitalized institutions. See "SUPERVISION AND REGULATION --
Prompt Corrective Action."

         An insured depository  institution  cannot make a capital  distribution
(as broadly defined to include, among other things,  dividends,  redemptions and
other  repurchases of stock),  or pay  management  fees to any person or persons
that control the  institution,  if it would be  undercapitalized  following  the
distribution. However, a federal banking agency may (after consultation with the
FDIC) permit an insured depository institution to repurchase,  redeem, retire or
otherwise  acquire its shares if (i) the action is taken in connection  with the
issuance of additional  shares or obligations  in at least an equivalent  amount
and (ii) the action  will  reduce the  institution's  financial  obligations  or
otherwise improve its financial  condition.  An undercapitalized  institution is
generally  prohibited  from  increasing  its average total  assets,  and is also
generally  prohibited from making  acquisitions,  establishing new branches,  or
engaging  in  any  new  line  of  business  except  under  an  accepted  capital
restoration  plan or with the  approval  of the  FDIC.  In  addition,  a federal
banking  agency  has  authority  with  respect  to  undercapitalized  depository
institutions  to take any of the  actions  it is  required  to or may take  with
respect to a significantly  undercapitalized institution (as described below) if
it  determines  "that those  actions are  necessary to carry out the purpose" of
FDICIA.

         The  federal  banking  agencies  have  adopted  a joint  agency  policy
statement to provide  guidance on managing  interest  rate risk.  The  statement
indicates  that the adequacy and  effectiveness  of a bank's  interest rate risk
management  process and the level of its interest  rate  exposures  are critical
factors in the agencies'  evaluation of the bank's capital  adequacy.  If a bank
has  material  weaknesses  in its risk  management  process  or high  levels  of
exposure relative to its capital, the agencies will direct it to take corrective
action.  These  directives  may include  recommendations  or directions to raise
additional  capital,   strengthen  management   expertise,   improve  management
information  and  measurement  systems,  or  reduce  levels of  exposure,  or to
undertake some combination of these actions.

         The federal  banking  agencies have also issued an  interagency  policy
statement that,  among other things,  establishes  benchmark ratios of loan loss
reserves to specified classified assets. The benchmark established by the policy
statement is the sum of (a) 100% of assets  classified  loss;  (b) 50% of assets
classified doubtful; (c) 15% of assets classified substandard; and (d) estimated
credit  losses on other  assets  over the  upcoming  12 months.  This  amount is
neither a "floor" nor a "safe harbor" level for an  institution's  allowance for
loan losses.

     At December  31, 2004,  the Bank is in  compliance  with the  Comptroller's
risk-based  and  leverage  ratios.  See  Footnote  15 to  the  Bank's  Financial
Statements included under Item 8. of this Annual Report.


G.       Payment of Dividends

         The  ability of the  Company to make  dividend  payments  is subject to
statutory and regulatory restrictions. FDIC policies generally preclude dividend
payments  during the first three years of operation,  allow cash dividends to be
paid only from net  operating  income,  and do not permit  dividends  to be paid
until an appropriate  allowance for loans and lease losses has been  established
and overall capital is adequate. The FDIC requires that a depository institution
maintain a Tier 1 capital  to assets  ratio of not less than 8% during the first
three years of operation.  See  "SUPERVISION  AND REGULATION - Capital  Adequacy
Requirements."

         After the first three years of operations,  the Board of Directors of a
national bank may declare the payment of dividends  depending upon the earnings,
financial condition and cash needs of the bank and general business  conditions.
A national bank may not pay dividends  from its capital.  All dividends  must be
paid out of net profits then on hand,  after  deducting  losses and bad debts. A
national bank is further  prohibited  from declaring a dividend on its shares of
common stock until its surplus fund equals the amount of capital  stock or until
10% of the  bank's  net  profits  of the  preceding  half  year  in the  case of
quarterly or semiannual  dividends,  or the preceding two consecutive  half-year
periods in the case of an annual dividend,  are transferred to the surplus fund.
The approval of the  Comptroller is required for the payment of dividends if the
total of all  dividends  declared by the bank in any calendar  year would exceed
the total of its net profits of that year combined with its retained net profits


                                       13


<PAGE>


of the two preceding years, less any required transfers to surplus or a fund for
the retirement of any preferred stock.

         In  addition  to the  above  requirements,  guidelines  adopted  by the
Comptroller  set forth  factors which are to be considered by a national bank in
determining the payment of dividends.  A national bank, in assessing the payment
of dividends,  is to evaluate the bank's capital position, its maintenance of an
adequate  allowance for loan and lease losses, and the need to revise or develop
a comprehensive capital plan.

         The  Comptroller  also has broad  authority to prohibit a national bank
from engaging in banking  practices  which it considers to be unsafe or unsound.
It is possible,  depending upon the financial  condition of the national bank in
question and other factors,  that the Comptroller may assert that the payment of
dividends or other payments by a bank is considered an unsafe or unsound banking
practice and therefore, implement corrective action to address such a practice.

         Accordingly,  the future  payment of cash dividends by the Company will
not only depend upon the Bank's  earnings during any fiscal period but will also
depend upon the assessment of its Board of Directors of capital requirements and
other factors,  including dividend guidelines and the maintenance of an adequate
allowance for loan and lease losses.


H.       Community Reinvestment Act

         Under the Community  Reinvestment Act ("CRA") regulations,  the federal
banking agencies  determine a bank's CRA rating by evaluating its performance on
lending,  service and  investment  tests,  with the lending  test being the most
important. The tests are applied in an "assessment context" that is developed by
the agency for the particular  institution.  The  assessment  context takes into
account  demographic data about the community,  the community's  characteristics
and needs,  the  institution's  capacities and  constraints,  the  institution's
product offerings and business  strategy,  the institution's  prior performance,
and data on similarly  situated lenders.  Since the assessment  context for each
bank is developed by the bank  regulatory  agencies,  a particular bank does not
know  until it is  examined  whether  its CRA  programs  and  efforts  have been
sufficient.

         Institutions,  like the Bank,  with $250  million or more in assets are
required to compile and report data on their  lending  activities to measure the
performance of their loan portfolio. Some of this data is already required under
other laws,  such as the Equal Credit  Opportunity  Act.  Institutions  have the
option of being evaluated for CRA purposes in relation to their own pre-approved
strategic  plan.  A  strategic  plan  must  be  submitted  to the  institution's
regulator  three months  before its  effective  date and must be  published  for
public comment.


I.       Audit Requirements

         Depository  institutions are required to have an annual  examination of
their financial records.  Depository  institutions with assets greater than $500
million  are  required  to have  annual,  independent  audits and to prepare all
financial   statements  in  compliance   with  generally   accepted   accounting
principles.  Depository  institutions  are also required to have an  independent
audit  committee  comprised  entirely of outside  directors,  independent of the
institution's management.

         The Bank's  accounting  and reporting  policies  conform with generally
accepted  accounting  principles  and the  practices  prevalent  in the  banking
industry.


J.       Insurance Premiums and Assessments

         The FDIC has authority to impose a special assessment on members of the
Bank  Insurance  Fund (the  "BIF")  to  insure  that  there  will be  sufficient
assessment  income for  repayment of BIF  obligations  and for any other purpose
which it deems necessary.  The FDIC is authorized to set semi-annual  assessment
rates for BIF members at levels  sufficient  to maintain the BIF's reserve ratio
to a designated  level of 1.25% of insured  deposits.  Congress  has  considered
various proposals to merge the BIF with the Savings  Association  Insurance Fund
or otherwise to require banks to  contribute to the insurance  funds for savings


                                       14


<PAGE>


associations.  Adoption of any of these  proposals  might  increase  the cost of
deposit insurance for all banks, including the Bank.

         Under FDICIA,  the FDIC has developed a risk-based  assessment  system,
which provides that the assessment  rate for an insured  depository  institution
will  vary  according  to the  level  of risk  incurred  in its  activities.  An
institution's  risk  category  is based upon  whether  the  institution  is well
capitalized,  adequately capitalized or less than adequately  capitalized.  Each
insured  depository  institution  is  also  to  be  assigned  to  one  of  three
"supervisory   subgroups":   Subgroup  A  institutions  are  financially   sound
institutions  with  a  few  minor   weaknesses;   Subgroup  B  institutions  are
institutions that demonstrate  weaknesses which, if not corrected,  could result
in significant  deterioration;  and Subgroup C institutions are institutions for
which  there is a  substantial  probability  that the FDIC will suffer a loss in
connection with the institution  unless effective action is taken to correct the
areas of weakness.  The FDIC assigns each BIF member  institution an annual FDIC
assessment rate on BIF insured deposits.


K.       Prompt Corrective Action

         The FDIC has authority:  (a) to request that an  institution's  primary
regulatory  agency (in the case of the Bank,  the OCC) take  enforcement  action
against it based upon an examination by the FDIC or the agency, (b) if no action
is taken within 60 days and the FDIC  determines  that the  institution is in an
unsafe and unsound  condition  or that failure to take the action will result in
continuance  of unsafe and  unsound  practices,  to order  that  action be taken
against the institution,  and (c) to exercise this  enforcement  authority under
"exigent  circumstances"  merely upon notification to the institution's  primary
regulatory  agency.  This authority gives the FDIC the same  enforcement  powers
with respect to any  institution  and its  subsidiaries  and  affiliates  as the
primary regulatory agency has with respect to those entities.

         An  undercapitalized  institution  is required to submit an  acceptable
capital restoration plan to its primary federal bank regulatory agency. The plan
must  specify  (a) the steps  the  institution  will  take to become  adequately
capitalized,  (b) the  capital  levels to be  attained  each  year,  (c) how the
institution will comply with any regulatory sanctions then in effect against the
institution  and (d) the types and levels of activities in which the institution
will engage. The banking agency may not accept a capital restoration plan unless
the agency determines,  among other things, that the plan "is based on realistic
assumptions,  and is likely to succeed in restoring the  institution's  capital"
and "would not  appreciably  increase the risk . . . to which the institution is
exposed." A requisite element of an acceptable  capital  restoration plan for an
undercapitalized  institution is a guaranty by its parent  holding  company that
the institution will comply with the capital  restoration  plan.  Liability with
respect to this guaranty is limited to the lesser of (i) 5% of the institution's
assets  at the  time  when it  becomes  undercapitalized  and  (ii)  the  amount
necessary to bring the  institution  into  capital  compliance  with  applicable
capital  standards as of the time when the institution  fails to comply with the
plan.  The  guaranty   liability  is  limited  to  companies   controlling   the
undercapitalized  institution and does not affect other affiliates. In the event
of a bank  holding  company's  bankruptcy,  any  commitment  by the bank holding
company  to a federal  bank  regulatory  agency to  maintain  the  capital  of a
subsidiary  bank will be assumed  by the  bankruptcy  trustee  and  entitled  to
priority of payment over the claims of other creditors, including the holders of
the company's long-term debt.

         FDICIA provides that the  appropriate  federal  regulatory  agency must
require   an   insured    depository    institution    that   is   significantly
undercapitalized,  or that is  undercapitalized  and  either  fails to submit an
acceptable capital restoration plan within the time period allowed by regulation
or fails in any  material  respect  to  implement  a  capital  restoration  plan
accepted by the appropriate  federal banking agency,  to take one or more of the
following  actions:  (a) sell enough shares,  including voting shares, to become
adequately  capitalized;  (b) merge with (or be sold to) another institution (or
holding  company),  but only if grounds exist for  appointing a  conservator  or
receiver;  (c) restrict specified transactions with banking affiliates as if the
"sister  bank"  exception  to the  requirements  of Section  23A of the  Federal
Reserve Act did not exist;  (d)  otherwise  restrict  transactions  with bank or
non-bank  affiliates;  (e) restrict  interest rates that the institution pays on
deposits to "prevailing rates" in the institution's "region"; (f) restrict asset
growth or reduce total assets; (g) alter,  reduce or terminate  activities;  (h)
hold a new election of directors;  (i) dismiss any director or senior  executive
officer  who  held  office  for  more  than  180  days  immediately  before  the
institution became  undercapitalized,  provided that in requiring dismissal of a
director or senior  executive  officer,  the agency must comply with  procedural
requirements,  including the  opportunity for an appeal in which the director or
officer will have the burden of proving his or her value to the institution; (j)
employ "qualified" senior executive officers;  (k) cease accepting deposits from
correspondent  depository  institutions;  (l) divest  non-depository  affiliates
which pose a danger to the  institution;  (m) be  divested  by a parent  holding
company;  and (n) take any other action which the agency determines would better
carry out the purposes of the prompt corrective action provisions.


                                       15


<PAGE>


         In addition to the foregoing  sanctions,  without the prior approval of
the  appropriate  federal  banking  agency,  a  significantly   undercapitalized
institution  may not pay any bonus to any senior  executive  officer or increase
the rate of  compensation  for a senior  executive  officer  without  regulatory
approval.  If an undercapitalized  institution has failed to submit or implement
an acceptable capital restoration plan the appropriate federal banking agency is
not permitted to approve the payment of a bonus to a senior executive officer.

         Not  later  than  90  days  after  an  institution  becomes  critically
undercapitalized,  the institution's primary federal bank regulatory agency must
appoint a receiver or a conservator,  unless the agency, with the concurrence of
the  FDIC,  determines  that  the  purposes  of  the  prompt  corrective  action
provisions  would be better served by another course of action.  Any alternative
determination  must be  documented  by the agency and  reassessed  on a periodic
basis.  Notwithstanding  the foregoing,  a receiver must be appointed  after 270
days unless the FDIC  determines that the institution has positive net worth, is
in compliance  with a capital  plan,  is profitable or has a sustainable  upward
trend in earnings,  and is reducing its ratio of  non-performing  loans to total
loans,  and unless the head of the  appropriate  federal  banking agency and the
chairperson of the FDIC certify that the  institution is viable and not expected
to fail.
         The  FDIC  is  required,  by  regulation  or  order,  to  restrict  the
activities of critically  undercapitalized  institutions.  The restrictions must
include  prohibitions on the  institution's  doing any of the following  without
prior FDIC approval:  entering into any material  transactions  not in the usual
course of  business,  extending  credit  for any highly  leveraged  transaction;
engaging in any "covered  transaction" (as defined in Section 23A of the Federal
Reserve Act) with an affiliate;  paying "excessive compensation or bonuses"; and
paying  interest  on  "new or  renewed  liabilities"  that  would  increase  the
institution's  average  cost  of  funds  to  a  level  significantly   exceeding
prevailing rates in the market.


L.       Potential Enforcement Actions; Supervisory Agreements

         Under  federal  law,  national  banks and their  institution-affiliated
parties  may be the  subject  of  potential  enforcement  actions by the OCC for
unsafe and unsound practices in conducting their  businesses,  or for violations
of any law, rule or regulation or provision,  any consent order with any agency,
any condition imposed in writing by the agency or any written agreement with the
agency.  Enforcement  actions may include the  imposition  of a  conservator  or
receiver,  cease-and-desist  orders and written  agreements,  the termination of
insurance of deposits,  the imposition of civil money  penalties and removal and
prohibition orders against institution-affiliated parties.


M.       Sarbanes-Oxley Act

         The Sarbanes-Oxley Act of 2002 implemented legislative reforms intended
to address  corporate and accounting  fraud. In addition to the establishment an
accounting oversight board to enforce auditing, quality control and independence
standards, the bill restricts provision of both auditing and consulting services
by accounting  firms.  To ensure auditor  independence,  any non-audit  services
being provided to an audit client require  pre-approval  by the company's  audit
committee  members.  In addition,  the audit  partners must be rotated.  The Act
requires  chief  executive  officers  and  chief  financial  officers,  or their
equivalent,  to certify to the accuracy of periodic  reports filed with the SEC,
subject to civil and criminal  penalties if they knowingly or willfully  violate
this certification  requirement.  In addition, under the Act, legal counsel will
be required to report evidence of a material violation of the securities laws or
a breach of fiduciary  duty by a company to its chief  executive  officer or its
chief legal officer,  and, if such officer does not  appropriately  respond,  to
report such evidence to the audit  committee or other  similar  committee of the
board of directors or the board itself.

         Longer  prison  terms  and  increased   penalties  apply  to  corporate
executives who violate federal  securities laws, the period during which certain
types of suits can be brought against a company or its officers is extended, and
bonuses issued to top executives  prior to restatement of a company's  financial
statements are subject to disgorgement if such  restatement was due to corporate
misconduct.   Executives  are  also   prohibited  from  insider  trading  during
retirement  plan  "blackout"  periods,  and  loans  to  company  executives  are
restricted.  The Act  accelerates  the time  frame  for  disclosures  by  public
companies,  as they must  immediately  disclose  any  material  changes in their
financial  condition or operations.  Directors and executive  officers must also
provide  information  for most changes in  ownership  in a company's  securities
within two business days of the change.


                                       16


<PAGE>


         The Act also  prohibits  any  officer or  director  of a company or any
other person acting under their direction from taking any action to fraudulently
influence,  coerce,  manipulate or mislead any  independent  public or certified
accountant  engaged in the audit of the company's  financial  statements for the
purpose of rendering the financial statement's  materially  misleading.  The Act
requires the SEC to prescribe rules requiring  inclusion of an internal  control
report and  assessment by management  in the annual report to  stockholders.  In
addition, the Act requires that each financial report required to be prepared in
accordance with (or reconciled to) accounting  principles  generally accepted in
the  United  States of  America  and filed  with the SEC  reflect  all  material
correcting  adjustments that are identified by a "registered  public  accounting
firm" in accordance with accounting  principles generally accepted in the United
States of America and the rules and regulations of the SEC.

         A company's  chief executive  officer and chief  financial  officer are
each required to certify that the Company's  quarterly and annual reports do not
contain  any  untrue  statement  of a  material  fact.  The rules  have  several
requirements, including having these officers certify that: they are responsible
for establishing,  maintaining and regularly evaluating the effectiveness of the
Bank's  internal  controls;  they have made  certain  disclosures  to the Bank's
auditors and the audit  committee of the Board of Directors  about the company's
internal controls; and they have included information in the Company's quarterly
and  annual  reports  about  their   evaluation  and  whether  there  have  been
significant  changes in the Bank's  internal  controls or in other  factors that
could significantly affect internal controls subsequent to the evaluation.


N. USA PATRIOT Act

         In the wake of the tragic  events of  September  11th,  on October  26,
2001, the President  signed the Uniting and  Strengthening  America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT) Act
of 2001.  Under the USA  PATRIOT  Act,  financial  institutions  are  subject to
prohibitions against specified financial  transactions and account relationships
as well as enhanced due  diligence and "know your  customer"  standards in their
dealings with foreign financial institutions and foreign customers. For example,
the enhanced due diligence policies,  procedures, and controls generally require
financial institutions to take reasonable steps:

     o    To conduct enhanced scrutiny of account relationships to guard against
          money laundering and report any suspicious transaction;

     o    To ascertain the identity of the nominal and beneficial owners of, and
          the source of funds  deposited  into,  each account as needed to guard
          against money laundering and report any suspicious transactions;

     o    To  ascertain  for any  foreign  bank,  the  shares  of which  are not
          publicly  traded,  the identity of the owners of the foreign bank, and
          the nature and extent of the  ownership  interest  of each such owner;
          and

     o    To ascertain whether any foreign bank provides  correspondent accounts
          to other foreign banks and, if so, the identity of those foreign banks
          and related due diligence information.

         Under the USA PATRIOT Act,  financial  institutions were given 180 days
from enactment to establish anti-money laundering programs.  The USA PATRIOT Act
sets forth minimum standards for these programs, including:

     o    The development of internal policies, procedures, and controls;

     o    The designation of a compliance officer;

     o    An ongoing employee training program; and

     o    An independent audit function to test the programs.

         The Bank has adopted  comprehensive  policies and procedures to address
the  requirements of the USA PATRIOT Act, and management  believes that the Bank
is currently in compliance with the Act.


                                       17


<PAGE>


O.       GRAMM-LEACH-BLILEY ACT

         The  Gramm-Leach-Bliley  Act  eliminated  many  of  the  barriers  that
separated  the  insurance,  securities  and banking  industries  since the Great
Depression.  The  Gramm-Leach-Bliley  Act is the result of a decade of debate in
the Congress  regarding a  fundamental  reformation  of the  nation's  financial
system. The law is subdivided into seven titles, by functional area.

     The major provisions of the Gramm-Leach-Bliley Act are: . FINANCIAL HOLDING
COMPANIES  AND  FINANCIAL  ACTIVITIES.   Title  I  establishes  a  comprehensive
framework to permit  affiliations among commercial banks,  insurance  companies,
securities  firms,  and  other  financial  service  providers  by  revising  and
expanding the BHC Act framework to permit a holding  company system to engage in
a full range of financial activities through qualification as a new entity known
as a financial holding company.

     Activities   permissible  for  financial  subsidiaries  of  national  banks
include,  but are not  limited  to,  the  following:  (a)  Lending,  exchanging,
transferring,  investing for others,  or safeguarding  money or securities;  (b)
Insuring,  guaranteeing,  or indemnifying  against loss, harm, damage,  illness,
disability,  or  death,  or  providing  and  issuing  annuities,  and  acting as
principal,  agent,  or broker for purposes of the foregoing,  in any State;  (c)
Providing  financial,  investment,  or  economic  advisory  services,  including
advising an investment company; (d) Issuing or selling instruments  representing
interests in pools of assets  permissible  for a bank to hold directly;  and (e)
Underwriting, dealing in, or making a market in securities.

SECURITIES ACTIVITIES.  Title II narrows the exemptions from the securities laws
previously enjoyed by banks.

INSURANCE ACTIVITIES. Title III restates the proposition that the states are the
functional  regulators  for all  insurance  activities,  including the insurance
activities of  federally-chartered  banks,  and bars the states from prohibiting
insurance activities by depository institutions.

PRIVACY.  Under Title V, federal banking regulators were required to adopt rules
that have  limited  the  ability of banks and other  financial  institutions  to
disclose non-public  information about consumers to nonaffiliated third parties.
These  limitations  require  disclosure of privacy policies to consumers and, in
some  circumstances,  allow consumers to prevent  disclosure of certain personal
information  to  a  nonaffiliated  third  party.  Under  the  rules,   financial
institutions must provide:

*    initial notices to customers about their privacy  policies,  describing the
     conditions under which they may disclose nonpublic personal  information to
     nonaffiliated third parties and affiliates;

*    annual notices of their privacy policies to current customers; and

*    a  reasonable   method  for  customers  to  "opt  out"  of  disclosures  to
     nonaffiliated third parties.

SAFEGUARDING  CONFIDENTIAL CUSTOMER INFORMATION.  Under Title V, federal banking
regulators  were required to adopt rules  requiring  financial  institutions  to
implement  a program  to  protect  confidential  customer  information,  and the
federal   banking   agencies  have  adopted   guidelines   requiring   financial
institutions to establish an information security program.

The Bank implemented a security  program  appropriate to its size and complexity
and the nature and scope of its  operations  prior to the July 1, 2001 effective
date of the  regulatory  guidelines,  and since initial  implementation  has, as
necessary updated and improved that program.

COMMUNITY REINVESTMENT ACT SUNSHINE  REQUIREMENTS.  The federal banking agencies
have adopted regulations implementing Section 711 of Title VII, the CRA Sunshine
Requirements.  The regulations require  nongovernmental  entities or persons and
insured  depository  institutions  and  affiliates  that are  parties to written
agreements  made in connection  with the  fulfillment of the  institution's  CRA
obligations to make available to the public and the federal  banking  agencies a
copy of each  agreement.  The Bank is not a party to any agreement that would be
the subject of reporting pursuant to the CRA Sunshine Requirements.

         The   Bank   intends   to   comply   with   all   provisions   of   the
Gramm-Leach-Bliley   Act  and  all  implementing   regulations  as  they  become
effective.


                                       18


<PAGE>


P.       FAIR CREDIT REPORTING

         In 1970, the U. S. Congress the Fair Credit  Reporting Act (the "FCRA")
in  order  to  ensure  the  confidentiality,   accuracy,  relevancy  and  proper
utilization of consumer  credit report  information.  Under the framework of the
FCRA,  the United  States has developed a highly  advanced and efficient  credit
reporting  system.  The  information  contained  in that broad system is used by
financial institutions,  retailers and other creditors of every size in making a
wide variety of decisions regarding financial transactions.  Employers,  and law
enforcement  agencies have also made wide use of the  information  collected and
maintained  in  databases  made  possible  by the FCRA.  The FCRA  affirmatively
preempts  state law in a number of areas,  including  the  ability  of  entities
affiliated by common  ownership to share and exchange  information  freely,  the
requirements  on credit  bureaus to  reinvestigate  the  contents  of reports in
response to consumer  complaints,  among others.  By its terms,  the  preemption
provision of the FCRA will terminate as of December 31, 2003. Termination of the
preemption  provisions  could  significantly  impact the ability of the existing
credit bureau system to continue operating.

         The Bank may incur  additional  costs,  and be  required  to  implement
additional  costly  procedures  and  systems  in the event  that the  preemption
provisions of the FCRA  terminate at the end of 2003, and  California,  or other
states,  adopts  legislation  that  would  have the  effect of  prohibiting  the
continued  sharing of  information  such as that  currently  collected by credit
bureaus  throughout  the United States.  The  likelihood of the FCRA  preemption
provisions  terminating by their terms,  and of the adoption of such restrictive
provisions by state legislatures, cannot be estimated at this time.


Q.       CONSUMER LAWS AND REGULATIONS

         In  addition  to the  other  laws  and  regulations  discussed  in this
Offering Circular,  the Bank must also comply with consumer laws and regulations
that are designed to protect  consumers in  transactions  with banks.  While the
list is not exhaustive,  these laws and regulations include the Truth in Lending
Act, the Truth in Savings Act, the Electronic  Funds Transfer Act, the Expedited
Funds  Availability Act, the Equal Credit  Opportunity Act, and the Fair Housing
Act, among others.  These laws and regulations  mandate disclosure  requirements
and regulate the manner in which financial institutions must deal with customers
when taking  deposits or making loans.  The Bank must comply with the applicable
provisions of these  consumer  protection  laws and  regulations  as part of its
ongoing regulatory compliance and customer relations efforts.


R. EXPOSURE TO AND MANAGEMENT OF RISK

         The federal banking agencies  examine banks and bank holding  companies
with respect to their  exposure to and  management  of different  categories  of
risk.  Categories  of  risk  identified  by the  agencies  include  legal  risk,
operational  risk,  market risk,  credit risk,  interest rate risk,  price risk,
foreign exchange risk, transaction risk, compliance risk, strategic risk, credit
risk, liquidity risk, and reputation risk. This examination approach causes bank
regulators to focus on risk management procedures,  rather than simply examining
every asset and  transaction.  This  approach  supplements  rather than replaces
existing  rating  systems based on the evaluation of an  institution's  capital,
assets, management, earnings and liquidity. It is not clear what effect, if any,
this examination approach will have on the Bank.


S.       MONEY LAUNDERING CONTROL ACT

         The Money  Laundering  Control Act of 1986  provides  sanctions for the
failure  to  report  high  levels  of  cash   deposits  to  non-bank   financial
institutions. Federal banking regulators possess the power to revoke the charter
or appoint a  conservator  for any  institution  convicted of money  laundering.
Offending  state-chartered banks could lose their federal deposit insurance, and
bank officers  could face lifetime bans from working in financial  institutions.
The Community  Development Act, which includes a number of provisions that amend
the Bank Secrecy Act,  allows the Secretary of the Treasury to exempt  specified
currency  transactions from reporting  requirements and permits the federal bank
regulatory  agencies to impose civil money  penalties on banks for violations of
the currency transaction reporting requirements.


                                       19


<PAGE>


T.       SAFETY AND SOUNDNESS STANDARDS

         Federal banking regulators have adopted a Safety and Soundness Rule and
Interagency  Guidelines  Prescribing  Standards  for Safety and  Soundness.  The
guidelines  create  standards  for a wide range of  operational  and  managerial
matters including (a) internal controls, information systems, and internal audit
systems;  (b) loan  documentation;  (c) credit  underwriting;  (d) interest rate
exposure; (e) asset growth; (f) compensation and benefits; and (g) asset quality
and earnings.

         The  Community  Development  Act required  the federal bank  regulatory
agencies to prescribe  standards  prohibiting as an unsafe and unsound  practice
the payment of excessive  compensation  that could result in material  financial
loss to an  institution,  and to specify  when  compensation,  fees or  benefits
become excessive.  These guidelines characterize compensation as excessive if it
is unreasonable or  disproportionate  to the services actually  performed by the
executive   officer,   employee,   director  or  principal   shareholder   being
compensated.

         Federal  regulators  have  stated that the  guidelines  are meant to be
flexible and general enough to allow each institution to develop its own systems
for  compliance.  With the  exception  of the  standards  for  compensation  and
benefits,  a  failure  to  comply  with  the  guidelines'   standards  does  not
necessarily constitute an unsafe and unsound practice or condition. On the other
hand, an institution in conformance  with the standards may still be found to be
engaged  in an unsafe and  unsound  practice  or to be in an unsafe and  unsound
condition.

         Although meant to be flexible,  an institution  that falls short of the
guidelines'  standards  may be  requested  to  submit  a  compliance  plan or be
subjected to regulatory  enforcement  actions.  Generally,  the federal  banking
agencies will request a compliance plan if an institution's  failure to meet one
or more of the  standards  is of  sufficient  severity to threaten  the safe and
sound operation of the  institution.  An institution must file a compliance plan
within 30 days of request by its primary federal regulator,  which is the OCC in
the  case of the  Bank.  The  guidelines  provide  for  prior  notice  of and an
opportunity to respond to the agency's proposed order. An enforcement action may
be commenced  if, after being  notified  that it is in violation of a safety and
soundness  standard,  the institution  fails to submit an acceptable  compliance
plan or fails in any material respect to implement an accepted plan. The Federal
Deposit  Insurance  Act provides the agencies  with a wide range of  enforcement
powers. An agency may, for example, obtain an enforceable cease and desist order
in the United States District Court, or may assess civil money penalties against
an institution or its affiliated parties.


U.       LEGISLATION AND PROPOSED CHANGES

         From time to time,  legislation  is  enacted  which  has the  effect of
increasing  the  cost of  doing  business,  limiting  or  expanding  permissible
activities  or  affecting  the  competitive  balance  between  banks  and  other
financial  institutions.  Proposals to change the laws and regulations governing
the operations and taxation of banks, bank holding companies and other financial
institutions  are frequently made in Congress and before various bank regulatory
agencies.  For  example,  from  time to time  Congress  has  considered  various
proposals to eliminate the federal thrift  charter,  create a uniform  financial
institutions charter, conform holding company regulation, and abolish the Office
of Thrift Supervision.  Typically,  the intent of this type of legislation is to
strengthen the banking industry, even if it may on occasion prove to be a burden
on  management's  plans.  No prediction  can be made as to the likelihood of any
major changes or the impact that new laws or regulations might have on the Bank.


V.       IMPACT OF GOVERNMENT MONETARY POLICY

         The  earnings of the Bank are and will be  affected by the  policies of
regulatory authorities,  including the Federal Reserve. An important function of
the Federal Reserve is to regulate the national supply of bank credit. Among the
instruments  used to implement  these  objectives are open market  operations in
U.S.  Government  securities,  changes  in  reserve  requirements  against  bank
deposits,  and changes in the discount rate which banks pay on advances from the
Federal Reserve System.  These  instruments are used in varying  combinations to
influence  overall  growth  and  distribution  of bank  loans,  investments  and
deposits,  and their use may also  affect  interest  rates on loans or  interest
rates paid for deposits. The monetary policies of the FRB have had a significant
effect on the operating results of commercial banks in the past and are expected
to continue to do so in the future.  The effect,  if any, of such  policies upon
the future business earnings of the Bank cannot be predicted.


                                       20


<PAGE>


W.       CONCLUSIONS

         It is impossible to predict with any certainty the  competitive  impact
the laws and  regulations  described  above will have on  commercial  banking in
general and on the business of the Bank in particular,  or to predict whether or
when any of the proposed  legislation  and  regulations  described above will be
adopted.  It is anticipated  that banking will continue to be a highly regulated
industry.  Additionally,  there has been a continued lessening of the historical
distinction  between the services  offered by financial  institutions  and other
businesses  offering  financial  services,   and  the  trend  toward  nationwide
interstate banking is expected to continue.  As a result of these factors, it is
anticipated banks will experience  increased  competition for deposits and loans
and, possibly, further increases in their cost of doing business.


ITEM 1A.  RISK FACTORS


                                  RISK FACTORS

         Readers and prospective  investors in our securities  should  carefully
consider the following risk factors as well as the other  information  contained
or incorporated by reference in this report.

         The  risks  and  uncertainties  described  below  are not the only ones
facing us. Additional risks and uncertainties that management is not aware of or
focused on or that  management  currently  deems  immaterial may also impair our
business  operations.  This report is  qualified  in its  entirety by these risk
factors.

         If any of the following risks actually occur,  the Company's  financial
condition and results of operations could be materially and adversely  affected.
If this were to happen,  the value of the  Company's  securities  could  decline
significantly, and you could lose all or part of your investment.


MARKET AND INTEREST RATE RISK


CHANGES IN INTEREST RATES COULD REDUCE INCOME AND CASH FLOW

         The  discussion  in  this  report  under  "Item  7a  Quantitative   and
Qualitative  Disclosures About Market Risk" is incorporated by reference in this
paragraph.  The  Company's  income and cash flow depend to a great extent on the
difference between the interest earned on loans and investment  securities,  and
the interest paid on deposits and other borrowings. We cannot control or prevent
changes in the level of interest  rates.  They  fluctuate in response to general
economic  conditions  and the policies of various  governmental  and  regulatory
agencies, in particular,  the Federal Reserve Board. Changes in monetary policy,
including  changes in interest  rates,  will influence the origination of loans,
the purchase of  investments,  the generation of deposits and the rates received
on loans and investment securities and paid on deposits and other liabilities.


RISKS  RELATED  TO THE  NATURE  AND  GEOGRAPHICAL  LOCATION  OF  BRIDGE  CAPITAL
HOLDINGS' BUSINESS


BRIDGE CAPITAL  HOLDINGS'  INVESTS IN LOANS THAT CONTAIN  INHERENT  CREDIT RISKS
THAT MAY CAUSE US TO INCUR LOSSES

         The Company  closely  monitors  the  markets in which it  conducts  its
lending  operations  and adjusts its strategy to control  exposure to loans with
higher  credit risk.  Asset reviews are  performed  using grading  standards and
criteria similar to those employed by bank regulatory  agencies.  We can provide
no assurance  that the credit  quality of our loans will not  deteriorate in the
future and that such deterioration will not adversely affect Bridge Capital.


                                       21


<PAGE>



BRIDGE  CAPITAL   HOLDINGS'   OPERATIONS  ARE  CONCENTRATED   GEOGRAPHICALLY  IN
CALIFORNIA, AND POOR ECONOMIC CONDITIONS MAY CAUSE US TO INCUR LOSSES.

         Substantially  all of Bridge Capital  Holdings'  business is located in
California.  Bridge Capital Holdings'  financial condition and operating results
will be subject to changes in economic conditions in California. In the early to
mid-1990s,  California  experienced a significant and prolonged  downturn in its
economy, which adversely affected financial institutions. Economic conditions in
California  are subject to various  uncertainties  at this time,  including  the
decline in the technology sector,  the California state  government's  budgetary
difficulties and continuing fiscal difficulties.  The company will be subject to
changes in economic  conditions.  We can provide no assurance that conditions in
the  California  economy  will not  deteriorate  in the  future  and  that  such
deterioration will not adversely effect Bridge Capital Holdings.


THE MARKETS IN WHICH BRIDGE CAPITAL HOLDINGS OPERATES ARE SUBJECT TO THE RISK OF
EARTHQUAKES AND OTHER NATURAL DISASTERS

         Most of the  properties  of Bridge  Capital  Holdings  are  located  in
California.  Also,  most of the real and  personal  properties  which  currently
secure the  company's  loans are located in  California.  California  is a state
which  is  prone  to  earthquakes,  brush  fires,  flooding  and  other  natural
disasters.  In addition to possibly sustaining damage to its own properties,  if
there is a major  earthquake,  flood or other natural  disaster,  Bridge Capital
Holdings  faces the risk that many of its  borrowers  may  experience  uninsured
property losses, or sustained job interruption  and/or loss which may materially
impair  their  ability  to meet the  terms of their  loan  obligations.  A major
earthquake,  flood or other natural disaster in California could have a material
adverse  effect on  Bridge  Capital  Holdings'  business,  financial  condition,
results of operations and cash flows.


SUBSTANTIAL  COMPETITION IN THE CALIFORNIA BANKING MARKET COULD ADVERSELY AFFECT
US

         Banking is a highly competitive business. We compete actively for loan,
deposit,  and other financial  services business in California.  Our competitors
include a large  number of state and national  banks,  thrift  institutions  and
credit  unions,  as well as many  financial and  non-financial  firms that offer
services  similar  to those  offered  by us.  Other  competitors  include  large
financial  institutions that have substantial capital,  technology and marketing
resources.  Such large financial institutions may have greater access to capital
at a lower  cost than us,  which may  adversely  affect  our  ability to compete
effectively.


REGULATORY RISKS


RESTRICTIONS ON DIVIDENDS AND OTHER DISTRIBUTIONS COULD LIMIT AMOUNTS PAYABLE TO
US

         As a holding company, a substantial  portion of our cash flow typically
comes from  dividends  our bank and  non-bank  subsidiaries  pay to us.  Various
statutory  provisions  restrict the amount of dividends our subsidiaries can pay
to us without regulatory approval.  In addition,  if any subsidiary of ours were
to  liquidate,   that  subsidiary's   creditors  will  be  entitled  to  receive
distributions from the assets of that subsidiary to satisfy their claims against
it  before  we, as a holder of an equity  interest  in the  subsidiary,  will be
entitled to receive any of the assets of the subsidiary.


ADVERSE  EFFECTS OF, OR CHANGES  IN,  BANKING OR OTHER LAWS AND  REGULATIONS  OR
GOVERNMENTAL FISCAL OR MONETARY POLICIES COULD ADVERSELY AFFECT US

         We  are  subject  to  significant  federal  and  state  regulation  and
supervision,  which is primarily for the benefit and protection of our customers
and not for the  benefit  of  investors.  In the  past,  our  business  has been
materially  affected by these  regulations.  This trend is likely to continue in
the future.  Laws,  regulations or policies,  including accounting standards and
interpretations  currently affecting us and our subsidiaries,  may change at any
time.  Regulatory  authorities  may also change  their  interpretation  of these
statutes and regulations.  Therefore,  our business may be adversely affected by
any  future  changes  in  laws,  regulations,  policies  or  interpretations  or
regulatory  approaches to compliance and enforcement,  including legislative and
regulatory  reactions to the  terrorist  attack on September 11, 2001 and future
acts of  terrorism,  and  major  U.S.  corporate  bankruptcies  and  reports  of
accounting irregularities at U.S. public companies.


                                       22


<PAGE>


         Additionally,  our business is affected significantly by the fiscal and
monetary  policies  of  the  federal   government  and  its  agencies.   We  are
particularly  affected  by the  policies  of the Federal  Reserve  Board,  which
regulates the supply of money and credit in the U.S. Under long-standing  policy
of the Federal  Reserve  Board,  a bank holding  company is expected to act as a
source of  financial  strength  for its  subsidiary  banks.  As a result of that
policy,  we may be  required  to commit  financial  and other  resources  to our
subsidiary bank in  circumstances  where we might not otherwise do so. Among the
instruments of monetary  policy  available to the Federal  Reserve Board are (a)
conducting open market operations in U.S.  government  securities,  (b) changing
the discount rates of borrowings by depository institutions, and (c) imposing or
changing  reserve  requirements  against  certain  borrowings by banks and their
affiliates.  These  methods  are used in varying  degrees  and  combinations  to
directly  affect the  availability  of bank loans and  deposits,  as well as the
interest  rates  charged  on loans and paid on  deposits.  The  policies  of the
Federal  Reserve Board may have a material  effect on our  business,  results of
operations and financial condition.


SYSTEMS, ACCOUNTING AND INTERNAL CONTROL RISKS


THE ACCURACY OF THE  COMPANY'S  JUDGMENTS  AND  ESTIMATES  ABOUT  FINANCIAL  AND
ACCOUNTING MATTERS WILL IMPACT OPERATING RESULTS AND FINANCIAL CONDITION

         The discussion  under "Critical  Accounting  Policies and Estimates" in
this report and the  information  referred to in that discussion is incorporated
by reference in this  paragraph.  The  Company's  makes  certain  estimates  and
judgments in preparing  its  financial  statements.  The quality and accuracy of
those  estimates  and judgments  will have an impact on the Company's  operating
results and financial condition.


THE COMPANY'S  INFORMATION  SYSTEMS MAY EXPERIENCE AN  INTERRUPTION OR BREACH IN
SECURITY

         The Company relies heavily on communications and information systems to
conduct its business.  Any failure,  interruption or breach in security of these
systems  could  result in  failures or  disruptions  in the  Company's  customer
relationship  management  and systems.  There can be no assurance  that any such
failures,  interruptions  or  security  breaches  will not  occur or, if they do
occur, that they will be adequately  corrected by the Company. The occurrence of
any such failures, interruptions or security breaches could damage the Company's
reputation,  result in a loss of  customer  business,  subject  the  Company  to
additional regulatory scrutiny, or expose the Company to litigation and possible
financial  liability,  any of which could have a material  adverse effect on the
Company's financial condition and results of operations.


THE COMPANY'S CONTROLS AND PROCEDURES MAY FAIL OR BE CIRCUMVENTED

         Management regularly reviews and updates the Company's internal control
over financial  reporting,  disclosure  controls and  procedures,  and corporate
governance  policies  and  procedures.  Any system of controls  and  procedures,
however well designed and operated,  is based in part on certain assumptions and
can provide only reasonable, not absolute, assurances that the objectives of the
system are met.  Any failure or  circumvention  of the  Company's  controls  and
procedures  or failure  to comply  with  regulations  related  to  controls  and
procedures  could  have a material  adverse  effect on the  Company's  business,
results of operations and financial condition.


ITEM 1B.  UNRESOLVED STAFF COMMENTS

         None


                                       23


<PAGE>


ITEM 2.  PROPERTIES


         At December 31, 2005,  the Bank's  operations  included  facilities  as
follows:

         The first office,  which is also the principal  executive office of the
Bank, is located at 2120 El Camino Real,  in the City of Santa Clara,  County of
Santa  Clara,  State of  California.  The office is  located in a  freestanding,
two-story building, consisting of 5,430 square feet, located at the intersection
of El Camino Real and McCormick  Drive.  The building was previously a branch of
Washington  Mutual  Bank,  and includes a vault and teller  lines.  The premises
include 42 parking spaces situated on a 35,719 square foot parcel.  The premises
are sublet from Washington  Mutual Bank. The sublease  provides for a basic rent
of $13,582.50 per month from the commencement  date until the first  anniversary
of the sublease.  On each  anniversary date of the commencement of the sublease,
the basic rent will be  increased  by 4% of the amount of the basic rent  during
the prior year. The Bank is also responsible for real estate taxes and insurance
costs. The sublease is for a period of ten (10) years,  terminating on September
30, 2010.  There is no option to extend the sublease  beyond that date.  Current
lease  payments  are  $14,690.83  per  month  through  the  anniversary  of  the
commencement  date.  The  foregoing  description  of the office is  qualified by
reference  to the lease  agreement  dated  August 31, 2000  exhibit 10.4 to this
Report.

         The second  facility  is a banking  office  located  at 525  University
Avenue,  City of Palo Alto,  County of Santa  Clara,  State of  California.  The
office consists of approximately  2,975 square feet consisting of Suites 101 and
103 on the first floor of the building known as the Palo Alto Office Center. The
lease is for a term of 60 months  commencing  on  December 1, 2001 and ending on
November 30, 2006. The Lease provides for a basic rent of $12,197.50 through the
first  anniversary of the lease date.  Effective with the first anniversary date
the lease  payments  will be adjusted  by a factor that is tied to the  Consumer
Price Index.  Current lease  payments are  $16,147.39 per month through the 2004
anniversary of the commencement date. The foregoing  description is qualified by
reference  to the lease  agreement  dated  October 15, 2001  attached as exhibit
10.12 to this Report.

         The third  facility is an  administrative  office located at 55 Almaden
Boulevard,  City of San Jose,  County of Santa Clara,  State of California.  The
office  consists  of  approximately  24,767  square  feet  on two  floors  of an
eight-story office building. The facility is being sublet from a prior tenant in
a sublease which commenced  December 26, 2003 and terminates  December 31, 2006.
The  sublease  provides  for  an  initial  base  rent  of  $28,730  with  annual
escalations  to  $45,819 in the final  year of the  sublease.  The Bank has also
entered into a direct lease with the landlord,  which will commence  immediately
following the sublease term on January 1, 2007 for 120 months ending on December
31,  2016.  The direct  lease  provides  for an initial  twelve-month  period of
reduced rent followed by a base rent of $47,304.97  beginning on January 1, 2008
and increasing 3% on each anniversary date thereafter.

         The  fourth  facility  is a loan  production  office  located  at  3035
Prospect Park Drive,  Suite 100, City of Rancho  Cordova,  County of Sacramento,
State of  California.  The office  consists of  approximately  1,964 square feet
consisting  of  Suite  100 in the real  estate  development  known as  "Prospect
Center".  The lease is for a term of 36 months commencing on October 1, 2002 and
ending on September 30, 2005.  The Lease  provides for a basic rent of $1,865.80
through the first anniversary of the lease date. The basic rent will increase to
$1,940.43  effective  with the  first  anniversary  date and  then  increase  to
$2,018.01 on the second anniversary date. The foregoing description is qualified
by reference to the lease  agreement  dated August 13, 2002  attached as exhibit
10.13 herein.

         In addition, the Bank operates loan production offices in Redwood City,
San Ramon and Fresno and loan sales offices in Bakersfield and San Diego.


                                       24


<PAGE>


ITEM 3.  LEGAL PROCEEDINGS

         The Company is not a defendant in any pending legal  proceedings and no
such proceedings are known to be contemplated.  No director, officer, affiliate,
more than 5%  shareholder  of the Company or any associate of these persons is a
party adverse to the Company or has a material  interest  adverse to the Company
in any material legal proceeding.


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         No matter was  submitted  during the fourth  quarter of the fiscal year
covered  by this  Annual  Report  to a vote of  security  holders,  through  the
solicitation of proxies or otherwise.


                                       25


<PAGE>


                                     PART II


ITEM 5. MARKET FOR THE REGISTRANT'S  COMMON EQUITY,  RELATED SHAREHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES.

         There is limited  trading in and no  established  public trading market
for the Company's  Common Stock. On January 27, 2003, the Company's Common Stock
began trading on the Nasdaq Capital Market under the symbol "BBNK".  Previously,
it was traded on the  Over-the-Counter  Bulletin  Board (OTCBB) under the symbol
"BBSV". Hoefer and Arnett, Incorporated,  Knight Securities, LLP, Schwab Capital
Markets, and Baird Patrick & Co. make markets in the Company's Common Stock.

         The following  table  summarizes  those trades of which the Company has
knowledge, setting forth the approximate high and low bid prices for the periods
indicated.  The prices  indicated  below may not  necessarily  represent  actual
transactions.


                                                   Bid Price of
                                                 Common stock (1)
                          Quarter ended          Low        High
                        __________________      _____       _____

                        March 31, 2004          12.00       13.24
                        June 30, 2004           11.06       12.95
                        September 30, 2004      10.75       13.76
                        December 31, 2004       13.07       17.65
                        March 31, 2005          14.14       16.26
                        June 30, 2005           14.35       15.95
                        September 30, 2005      15.75       19.76
                        December 31, 2005       16.25       19.34


(1) Prices represent the actual trading  history on the Nasdaq  Capital  Market.
Additionally,  since trading in the Company's common stock is limited, the range
of prices stated is not necessarily  representative of prices which would result
from a more active market.

The Company had 359 shareholders of record as of January 6, 2006.

         The Company's  shareholders are entitled to receive  dividends when and
as declared by its Board of Directors, out of funds legally available therefore,
subject to  statutory  and  regulatory  restrictions.  FDIC  policies  generally
preclude dividend payments during the first three years of operation, allow cash
dividends to be paid only from net operating income, and do not permit dividends
to be paid until an  appropriate  allowance  for loans and lease losses has been
established and overall capital is adequate. The FDIC requires that a depository
institution maintain a Tier 1 capital to assets ratio of not less than 8% during
the first three years of operation.  See  "SUPERVISION  AND REGULATION - Capital
Adequacy Requirements."

         After the first three years of operations,  the Board of Directors of a
national bank may declare the payment of dividends  depending upon the earnings,
financial condition and cash needs of the bank and general business  conditions.
A national bank may not pay dividends  from its capital.  All dividends  must be
paid out of net profits then on hand,  after  deducting  losses and bad debts. A
national bank is further  prohibited  from declaring a dividend on its shares of
common stock until its surplus fund equals the amount of capital  stock or until
10% of the  bank's  net  profits  of the  preceding  half  year  in the  case of
quarterly or semiannual  dividends,  or the preceding two consecutive  half-year
periods in the case of an annual dividend,  are transferred to the surplus fund.
The approval of the  Comptroller is required for the payment of dividends if the
total of all  dividends  declared by the bank in any calendar  year would exceed
the total of its net profits of that year combined with its retained net profits
of the two preceding years, less any required transfers to surplus or a fund for
the retirement of any preferred stock.

         In  addition  to the  above  requirements,  guidelines  adopted  by the
Comptroller set forth factors,  which are to be considered by a national bank in
determining the payment of dividends.  A national bank, in assessing the payment
of dividends,  is to evaluate the bank's capital position, its maintenance of an
adequate  allowance for loan and lease losses, and the need to revise or develop
a comprehensive capital plan.


                                       26


<PAGE>


         The  Comptroller  also has broad  authority to prohibit a national bank
from engaging in banking  practices  which it considers to be unsafe or unsound.
It is possible,  depending upon the financial  condition of the national bank in
question and other factors,  that the Comptroller may assert that the payment of
dividends or other payments by a bank is considered an unsafe or unsound banking
practice and therefore, implement corrective action to address such a practice.

         A California  corporation  such as Bridge  Capital  Holdings may make a
distribution to its shareholders if the corporation's retained earnings equal at
least the amount of the proposed distribution.  In the event sufficient retained
earnings  are  not  available  for  the  proposed  distribution,   a  California
corporation may  nevertheless  make a distribution to its shareholders if, after
giving effect to the distribution,  the corporation's  assets equal at least 125
percent of its liabilities  and certain other  conditions are met. Since the 125
percent ratio is equivalent to a minimum capital ratio of 20 percent,  most bank
holding  companies,  including  Bridge  Bancorp  based on its current  projected
capital  ratios,  are unable to meet this last test and so must have  sufficient
retained earnings to fund the proposed distribution.

         In a policy statement,  the FRB has advised bank holding companies that
it believes  that payment of cash  dividends in excess of current  earnings from
operations is inappropriate and may be cause for supervisory action. As a result
of this policy,  banks and their holding  companies may find it difficult to pay
dividends  out of retained  earnings from  historical  periods prior to the most
recent fiscal year or to take advantage of earnings  generated by  extraordinary
items such as sales of  buildings  or other  large  assets in order to  generate
profits to enable payment of future dividends.  Additionally, the FRB's position
that  holding  companies  are  expected  to provide a source of  managerial  and
financial  strength  to their  subsidiary  banks  potentially  restricts  a bank
holding company's ability to pay dividends.

         The Company has not declared  dividends  since  inception of the Bank's
existence.  In the future,  the Company may consider  cash and stock  dividends,
subject to the restrictions on the payment of cash dividends as described above,
depending upon the level of earnings,  management's assessment of future capital
needs and other factors considered by the Board of Directors.

         The  following  chart  provides  information  as of  December  31, 2005
concerning the Bank's Stock Option Plan, the Company's only equity  compensation
plan:

<TABLE>
<CAPTION>

                          Number of securities       Weighted average        Number of securities
                           to be issued upon        exercise price of         remaining available
                              exercise of          outstanding options,       for future issuance
                          outstanding options,     warrants, and rights          under equity
                          warrants, and rights                                compensation plans
                                                                            (excluding securities
                                                                            reflected in column (a)
                                  (a)                      (b)                        (c)
                          ____________________     ____________________     _______________________
<S>                            <C>                        <C>                       <C>

Equity compensation
plans approved by
security holders               1,335,337                  $ 8.30                    294,376

Equity compensation
plans not approved by
security holders                       -                       -                          -
                               _________                  ______                    _______

Total                          1,335,337                  $ 8.30                    294,376
                               =========                  ======                    =======

</TABLE>


                                       27


<PAGE>


ITEM 6.  SELECTED FINANCIAL DATA


         The following table presents certain consolidated financial information
concerning  the  business of the  Company.  This  information  should be read in
conjunction   with  the  Financial   Statements  and  the  notes  thereto,   and
Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations contained elsewhere herein.

<TABLE>
<CAPTION>

STATEMENT OF OPERATIONS DATA:
(dollars in thousands, except per share data)           As of and for the years ended
                                                                December 31,
                                                        2005         2004        2003
                                                        __________________________________
<S>                                                     <C>          <C>          <C>

Interest income                                         $ 34,118     $ 19,457     $ 12,133
Interest expense                                           6,615        2,896        2,235
                                                        __________________________________
Net interest income                                       27,503       16,561        9,898
Provision for credit losses                               (2,162)      (1,671)        (843)
Net interest income after provision
  for credit losses                                       25,341       14,890        9,055
                                                        __________________________________
Other income                                               4,197        3,855        2,664
Other expenses                                           (19,981)     (13,596)     (10,214)
                                                        __________________________________
Income before income taxes                                 9,557        5,149        1,505
Income taxes                                              (3,832)      (2,112)       1,868
                                                        __________________________________
Net income (loss)                                       $  5,725     $  3,037     $  3,373
                                                        ==================================

PER SHARE DATA:
Basic income (loss) per share                           $   0.93     $   0.50     $   0.56
Diluted income (loss) per share                             0.85         0.46         0.53
Shareholders' equity per share                              6.36         5.43         4.95
Cash dividend per common share                                 -            -            -

BALANCE SHEET DATA:
Balance sheet totals-end of year:
  Assets                                                $536,520     $402,037     $278,579
  Loans, net                                             432,667      289,467      191,053
  Deposits                                               468,158      352,456      246,394
  Shareholders' equity                                    39,714       33,122       29,954

Average balance sheet amounts:
  Assets                                                $465,944     $341,466     $222,454
  Loans, net                                             348,592      240,465      156,587
  Deposits                                               411,678      307,471      193,765
  Shareholders' equity                                    36,017       30,768       27,075

SELECTED RATIOS:
Return on average equity                                   15.90%        9.87%       12.46%
Return on average assets                                    1.23%        0.89%        1.52%
Efficiency ratio                                           63.03%       66.59%       81.31%
Leverage capital ratio                                      8.52%        9.70%       13.47%
Net chargeoffs (recoveries) to average loans                0.06%        0.08%       -0.05%
Allowance for loan losses to total loans                    1.35%        1.41%        1.38%
Average equity to average assets                            7.73%        9.01%       12.17%
__________________________________________________________________________________________

</TABLE>


                                       28


<PAGE>


ITEM 7. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

         Certain  matters  discussed or incorporated by reference in this Annual
Report on Form 10-K are forward-looking statements that are subject to risks and
uncertainties  that could cause actual results to differ  materially  from those
projected.  Please see  "Forward-Looking  Statements" on page 1. Therefore,  the
information  set forth therein should be carefully  considered  when  evaluating
business prospects of the Company.


CRITICAL ACCOUNTING POLICIES

         Our  accounting  policies  are  integral to  understanding  the results
reported.  Accounting  policies  are  described  in  detail  in  Note  1 to  the
Consolidated Financial Statements.  Our most complex accounting policies require
management's  judgment  to  ascertain  the  valuation  of  assets,  liabilities,
commitments and contingencies. We have established detailed policies and control
procedures that are intended to ensure valuation methods are well controlled and
applied  consistently  from period to period.  In  addition,  the  policies  and
procedures  are intended to ensure that the process for  changing  methodologies
occurs in an  appropriate  manner.  The following is a brief  description of our
current  accounting   policies  involving   significant   management   valuation
judgments.


ALLOWANCE FOR LOAN LOSSES

         The allowance for loan losses represents  management's best estimate of
losses inherent in the existing loan portfolio. The allowance for loan losses is
increased  by the  provision  for loan losses  charged to expense and reduced by
loans  charged  off,  net of  recoveries.  The  provision  for  loan  losses  is
determined  based on  management's  assessment of several  factors:  reviews and
evaluation  of  specific  loans,  changes  in the  nature and volume of the loan
portfolio,  current  economic  conditions  and the  related  impact on  specific
borrowers and industry groups,  historical loan loss  experiences,  the level of
classified and nonperforming loans and the results of regulatory examinations.

         Loans are  considered  impaired  if, based on current  information  and
events, it is probable that we will be unable to collect the scheduled  payments
of principal or interest when due according to the contractual terms of the loan
agreement.  The  measurement of impaired loans is generally based on the present
value of  expected  future cash flows  discounted  at the  historical  effective
interest   rate   stipulated   in  the   loan   agreement,   except   that   all
collateral-dependent  loans are measured for impairment  based on the fair value
of the  collateral.  In measuring the fair value of the  collateral,  management
uses assumptions and methodologies  consistent with those that would be utilized
by unrelated third parties.

Changes  in  the  financial  condition  of  individual  borrowers,  in  economic
conditions,  in historical  loss  experience and in the condition of the various
markets in which collateral may be sold may all affect the required level of the
allowance for loan losses and the associated provision for loan losses.


SALE OF SBA LOANS

         In  calculating  gain on the sale of SBA loans,  the Bank  performs  an
allocation  based on the  relative  fair values of the sold portion and retained
portions of the loan.  The company  assumptions  are  validated  by reference to
external market information.


AVAILABLE-FOR-SALE SECURITIES

     The fair value of most securities classified as available-for-sale is based
on quoted market prices. If quoted market prices are not available,  fair values
are extrapolated from the quoted prices of similar instruments.


                                       29


<PAGE>


DEFERRED TAX ASSETS

         Our  deferred  tax assets are  explained  in the section  below  titled
"Income Tax" and in Note 8 to the Consolidated Financial Statements presented in
our 2005 10-K.  We use an  estimate of future  earnings to support our  position
that the benefit of our deferred tax assets will be realized.  If future  income
should  prove  non-existent  or less than the amount of the  deferred tax assets
within  the tax  years  to which  they may be  applied,  the  asset  will not be
realized and our net income will be reduced.


SECONDARY STOCK OFFERING

         The Bank filed a Registration  Statement on Form SB-2 on March 22, 2002
with  respect to a proposed  public  offering of the Bank's  Common stock for an
aggregate consideration of $12,000,001.  The registration statement was declared
effective by the Comptroller on April 15, 2002. A second registration statement,
registering  additional  shares to cover  over-subscriptions  was filed with the
Comptroller  on June 14, 2002,  and became  effective as of that date.  The Bank
completed the offering of 2,215,384 shares of Common Stock,  $2.50 par value, at
a price of $6.50 per share,  for an aggregate  consideration  of  $14,399,996 on
June 17, 2002.


OPERATING RESULTS

         For the year ended December 31, 2005,  the Company  reported net income
of $5,725,000 or $0.93 basic and $0.85 diluted earnings per share, compared with
net income of $3,037,000 or $0.50 basic and $0.46 diluted earnings per share for
the year ended December 31, 2004 and $3,373,000 or $0.56 basic and $0.53 diluted
earnings per share for the year ended December 31, 2003. The  improvement in net
income for 2005  resulted  primarily  from an increase  of $10.9  million in net
interest  income,  offset,  in part, by an increase of $0.5 million in provision
for credit losses and $6.4 million in other expense.  See the specific  sections
below for details regarding these changes.

         Net income for 2004 represented a decrease of $336,000 compared to 2003
primarily due to a one-time  benefit of $1.9 million  related to the recognition
of deferred tax assets in 2003.  The impact was offset,  in part, by an increase
of $6.7 million in net interest  income and an increase of $1.2 million in other
income,  offset, in part, by an increase of $0.8 million in provision for credit
losses and $3.4 million in other expense.


                                       30


<PAGE>


NET INTEREST INCOME AND MARGIN

         Net interest income is the principal source of the Company's  operating
earnings. Net interest income is affected by changes in the nature and volume of
earning  assets  held during the year,  the rates  earned on such assets and the
rates  paid on  interest-bearing  liabilities.  The  following  table  shows the
composition  of average  earning  assets and average  funding  sources,  average
yields and rates and the net interest  margin for the three years ended December
31, 2005, 2004 and 2003.

<TABLE>
<CAPTION>


AVERAGE BALANCES, RATES AND YIELDS
                                                                         December 31,
                                              2005                           2004                          2003
                                  ____________________________   ____________________________   ___________________________
                                                                                              (dollars in thousands)
                                            INTEREST  YIELDS/              INTEREST  YIELDS/              INTEREST  YIELDS/
                                   AVERAGE    INCOME/   RATES     AVERAGE    INCOME/   RATES     AVERAGE    INCOME/  RATES
                                   BALANCE    EXPENSE    PAID     BALANCE    EXPENSE   PAID      BALANCE    EXPENSE   PAID
                                  ____________________________   ____________________________   ___________________________
<S>                               <C>         <C>         <C>    <C>         <C>         <C>    <C>         <C>        <C>

ASSETS

Interest earning assets:
  Loans (1)                       $ 354,552   $31,983     9.0%   $ 244,600   $18,378     7.5%   $ 159,346   $11,587    7.3%
  Federal funds sold                 52,234     1,703     3.3%      43,000       546     1.3%      38,982       407    1.0%
  Investment securities (2)          18,712       432     2.3%      30,002       533     1.8%      12,061       139    1.2%
  Interest bearing deposits
     in other banks                       -         -     0.0%           -         -     0.0%           -         -    0.0%
                                  ____________________________   ____________________________   ___________________________
      Total earning assets          425,498    34,118     8.0%     317,602    19,457     6.1%     210,389    12,133    5.8%
                                              _______                        _______                        _______
Noninterest earning assets:
  Cash and due from banks            27,767                         18,272                         10,734
  Other assets (3)                   12,679                          5,592                          1,331
                                  _________                      _________                   ------------
TOTAL ASSETS                      $ 465,944                      $ 341,466                      $ 222,454
                                  =========                      =========                   ============
LIABILITIES AND
  SHAREHOLDERS' EQUITY

Interest-bearing liabilities:
  Deposits:
    Demand                        $   3,363        25     0.7%   $   3,543        21     0.6%   $   4,201        30    0.7%
    Savings                         193,088     4,192     2.2%     138,776     1,833     1.3%      69,209     1,040    1.5%
    Time                             56,183     1,657     2.9%      47,008     1,020     2.2%      47,612     1,165    2.4%
    Other                            13,426       741     5.5%         361        22     6.1%           1         -    0.0%
                                  ____________________________   ____________________________   ___________________________
       Total interest-bearing
         deposits:                  266,060     6,615     2.5%     189,688     2,896     1.5%     121,023     2,235    1.8%
                                              _______                        _______                        _______
Noninterest-bearing liabilities:
  Demand deposits                   159,044                        118,144                         72,744
  Accrued expenses and
    other liabilities                 4,823                          2,866                          1,612
Shareholders' equity                 36,017                         30,768                         27,075
                                  _________                      _________                      _________
TOTAL SHAREHOLDERS'
  EQUITY AND LIABILITIES          $ 465,944                      $ 341,466                      $ 222,454
                                  =========                      =========                      =========
Net interest income and margin                $27,503     6.5%               $16,561     5.2%               $ 9,898    4.7%
                                              ================               ================               ===============

<FN>

(1) Includes  amortization of loan fees of $3,507 for 2005,  $2,010 for 2004 and
$1,159  for  2003.  Nonperforming  loans  have been  included  in  average  loan
balances.
(2)  Interest  income  is  reflected  on an  actual  basis,  not  fully  taxable
equivalent basis. Yields are based on amortized cost.
(3) Net of average  allowance for credit  losses of $4,870 and average  deferred
loan fees of $1,090 for 2005, average allowance for credit losses of $ 3,347 and
deferred  loan fees of $787 for 2004 and average  allowance for credit losses of
$2,209 and deferred loan fees of $549 for 2003.

</FN>
</TABLE>


                                       31


<PAGE>

         Interest  differential  is  affected  by changes in volume,  changes in
rates and a  combination  of changes in volume and  rates.  Volume  changes  are
caused by changes in the levels of average  earning assets and average  interest
bearing  deposits and  borrowings.  Rate  changes  result from changes in yields
earned on assets and rates paid on liabilities.  Changes not solely attributable
to volume or rates have been allocated to the rate component.

         The following  table shows the effect on the interest  differential  of
volume and rate changes for the years ended December 31, 2005, 2004 and 2003:

<TABLE>
<CAPTION>


VOLUME/RATE ANALYSIS
(dollars in thousands)
                                                 2005 vs. 2004                      2004 vs. 2003
                                         _______________________________________________________________
                                                 Increase (decrease)                Increase (decrease)
                                                   due to change in                   due to change in
                                         _______________________________________________________________
                                         Average    Average     Total       Average    Average    Total
                                         Volume      Rate      Change       Volume      Rate     Change
                                         _______________________________________________________________
<S>                                       <C>       <C>        <C>           <C>        <C>      <C>

 Interest income:
   Loans                                  $9,919    $ 3,686    $13,605       $6,406     $ 385    $ 6,791
   Federal funds sold                        301        856      1,157           51        88        139
   Investment securities                    (261)       160       (101)         319        75        394
    Other                                      -          -          -            -         -          -
                                          ____________________________       ___________________________
      Total interest income                9,959      4,702     14,661        6,776       548      7,324
                                          ____________________________       ___________________________

 Interest expense:
   Demand                                     (1)         5          4           (4)       (5)        (9)
   Savings                                 1,180      1,179      2,359          919      (126)       793
   Time                                      271        366        637          (13)     (132)      (145)
   Other                                     722         (2)       719           22         0         22
                                          ____________________________       ___________________________
       Total interest expense              2,170      1,549      3,719          925      (263)       661
                                          ____________________________       ___________________________

 Change in net interest income            $7,789    $ 3,153    $10,942       $5,851     $ 811    $ 6,663
                                          ============================       ===========================

</TABLE>


         Net interest income was  $27,503,000 in 2005,  comprised of $34,118,000
in interest  income and $6,615,000 in interest  expense.  Net interest income in
2005 compared to  $16,561,000,  comprised of $19,457,000 in interest  income and
$2,896,000  in interest  expense,  for the year ended  December  31,  2004.  The
increase of $10,942,000  in net interest  income in 2005 was primarily due to an
increase of  $14,661,000 in interest  income offset,  in part, by an increase of
$3,719,000 in interest expense.

         Net interest income for the year ended December 31, 2004 represented an
increase of $6,663,000 over $9,898,000 for the year ended December 31, 2003. The
increase  in net  interest  income  was  primarily  a result of an  increase  of
$7,324,000  in interest  income  offset,  in part, by an increase of $661,000 in
interest expense.

         The net interest margin (net interest income divided by average earning
assets) was 6.5% for the year ended  December 31, 2005,  as compared to 5.2% for
the year ended  December  31,  2004 and 4.7% for 2003.  The  improvement  in net
interest  margin in 2005  compared to 2004 was primarily the result of increases
in the prime rate during the year and a shift in the mix of loans toward  higher
yielding  product lines. The improvement in net interest margin in 2004 compared
to 2003 was  primarily  the result of  increases  in the prime  rate  during the
second  half of the year,  a shift in the mix of loans  toward  higher  yielding
product lines, and a shift in the mix of deposits toward  lower-cost  sources of
funds.  Average loans represented 83% of average earning assets in 2005 compared
to 77% in 2004 and 76% in 2003. In addition, in 2005 the Bank's ratio of average
loans to average deposits was 83%, up from 80% in 2004 and 82% in 2003.


                                       32


<PAGE>


         Significant  factors affecting net interest income are: rates,  volumes
and mix of the loan, investment and deposit portfolios. Due to the nature of the
Bank's  lending  markets,  in which the majority of loans are generally  tied to
Prime Rate,  we believe  that an increase in interest  rates  should  positively
affect the Bank's future earnings,  while a decline will have a negative impact.
However,  it is not  feasible  to provide an  accurate  measure of such a change
because  of the many  factors  (many  of them  uncontrollable)  influencing  the
result.


INTEREST INCOME

         For the year ended  December 31, 2005,  the Company  reported  interest
income of  $34,118,000,  an increase of  $14,661,000  or 75.4% over  $19,457,000
reported in 2004. The increase in interest income primarily reflects an increase
in the  volume of  average  earning  assets in 2005  compared  to 2004.  Average
earning  assets  were $425  million  for the year  ended  December  31,  2005 an
increase of $107  million or 34% over $318  million for the year ended  December
31, 2004.  In  addition,  the  majority of the Bank's  earning  assets have rate
structures that re-price with movements in short-term interest rates,  primarily
the prime rate and fed funds rate.  During 2005, each of these indices increased
by 2.00%.

         For the year ended  December 31, 2004,  the Company  reported  interest
income  of  $19,457,000,  an  increase  of  $7,324,000  or 60% over  $12,133,000
reported in 2003. The increase in interest income primarily reflects an increase
in the  volume of  average  earning  assets in 2004  compared  to 2003.  Average
earning  assets  were $318  million  for the year  ended  December  31,  2004 an
increase of $107  million or 51% over $210  million for the year ended  December
31, 2003.


INTEREST EXPENSE

         Interest  expense was  $6,615,000 for the year ended December 31, 2005,
which  represented  an increase of $3,719,000 or 128% compared to $2,896,000 for
the year ended December 31, 2004. The increase in interest  expense  reflects an
increase in the rate on and volume of average  interest-bearing  liabilities  in
2005 compared to 2004.  Average  interest-bearing  liabilities were $266 million
for the year ended  December  31,  2005,  an increase of $76 million or 40% from
$190 million for the year ended December 31, 2004.

         Interest  expense was  $2,896,000 for the year ended December 31, 2004,
which  represented an increase of $661,000 or 30% compared to $2,235,000 for the
year ended  December  31,  2003.  The  increase  in interest  expense  primarily
reflects an increase in average interest-bearing liabilities in 2004 compared to
2003. Average interest-bearing  liabilities were $190 million for the year ended
December 31,  2004,  an increase of $69 million or 57% from $121 million for the
year ended  December 31, 2003.  Partially  offsetting  the impact of the greater
volume of interest-bearing liabilities was a decrease in the average rate paid.


CREDIT RISK AND PROVISION FOR CREDIT LOSSES

         The Bank  maintains an allowance for credit  losses which is based,  in
part, on loss experience of the Bank and the California  banking  industry,  the
impact of economic conditions within the Bank's market area, and, as applicable,
the State of California,  the value of underlying  collateral,  loan performance
and  inherent  risks  in  the  loan  portfolio.  The  allowance  is  reduced  by
charge-offs  and increased by provisions  for credit losses charged to operating
expense and recoveries of previously  charged-off  loans.  Based on management's
current  evaluation  of such risks,  additions  of  $2,162,000,  $1,671,000  and
$843,000 were made to the  allowance  for credit losses in 2005,  2004 and 2003,
respectively.  During  2005,  the Bank had charge  offs  totaling  $384,000  and
recoveries  of $12,000 as  compared  to  $240,000  in charge offs and $32,000 in
recoveries  in 2004 and $10,000  charged off and $85,000 in  recoveries in 2003.
The resulting  allowance for credit losses was $5,936,000  representing 1.35% of
total loans at December 31, 2005 as compared to $4,146,000 representing 1.41% of
total loans at  December  31, 2004 and  $2,683,000  representing  1.38% of total
loans at December 31, 2003.

         The accrual of interest on loans would be discontinued  and any accrued
and unpaid  interest is reversed  when, in the opinion of  management,  there is
significant doubt as to the  collectibility of interest or principal or when the
payment of principal  or interest is ninety days past due,  unless the amount is
well-secured and in the process of collection. There was one non-accrual loan at
December 31, 2005 totaling  $2,320,000 as compared to two  non-accrual  loans at


                                       33


<PAGE>


December 31, 2004 totaling  $1,026,000 and one loan totaling $59,000 at December
31, 2003. At December 31, 2005,  non-accrual  loans  consisted of one commercial
loan totaling $2,320,000,  which is secured by business assets and real property
with values in excess of the loan's carrying value.

         In addition,  at December 31, 2005, 2004 and 2003,  there were no loans
past  due 90 days or  more  as to  principal  or  interest  and  still  accruing
interest.

         At December 31, 2005,  2004 and 2003 there were no properties  owned by
the Bank acquired through the foreclosure process.

         Management  is of the opinion that the  allowance  for credit losses is
maintained  at a level  adequate  for  inherent  losses  in the loan  portfolio.
However, the Bank's loan portfolio, which includes approximately $169,000,000 in
real estate loans,  representing  approximately  38% of the portfolio,  could be
adversely affected if California  economic conditions and the real estate market
in the Bank's  market area were to weaken.  The effect of such events,  although
uncertain  at  this  time,   could  result  in  an  increase  in  the  level  of
non-performing  loans and OREO and the level of the  allowance  for loan losses,
which could adversely affect the Bank's future growth and profitability.


NON-INTEREST INCOME

The following table sets forth the components of other income and the percentage
distribution of such income for the years ended December 31, 2005, 2004 and 2003

<TABLE>
<CAPTION>


 Other Income
 (dollars in thousands)                          2005                     2004                     2003
                                          __________________       __________________       __________________
                                          Amount     Percent       Amount     Percent       Amount     Percent
                                          __________________       __________________       __________________
<S>                                       <C>          <C>         <C>          <C>         <C>          <C>

 Gain on sale of SBA loans                $2,290       54.6%       $2,737       71.0%       $2,095       80.2%
 SBA loan servicing income                   528       12.6%          358        9.3%          181        6.9%
 Increase in value of bank owned
   life insurance                            377        9.0%          181        4.7%            -
 Depositor service charges                   354        8.4%          362        9.4%          194        7.4%
 Other operating income                      648       15.4%          217        5.6%          194        5.4%
                                          __________________       __________________       __________________

                                          $4,197      100.0%       $3,855      100.0%       $2,664      100.0%
                                          ======                   ======                   ======

</TABLE>



Non-interest  income  totaled  $4,197,000 in 2005, an increase of $342,000 or 9%
over $3,855,000 in 2004.  Non-interest income increased $1,191,000,  or 45% from
2003 to 2004.  Non-interest  income  consists  primarily of gains  recognized on
sales of SBA loans,  SBA loan  packaging  fees and servicing  income and service
charge income on deposit accounts.  The increases in non-interest income in 2005
compared to 2004 are primarily due to increased SBA loan servicing income and an
increase  in the value of Bank owned  life  insurance,  offset by a decrease  in
gains recognized on sale of SBA loans. In 2004 compared to 2003 the increase was
primarily  due to higher  volumes of SBA loan sales as a result of  expansion of
the SBA lending operation.  The company established its SBA lending operation in
March 2002.


                                       34


<PAGE>



NON-INTEREST EXPENSES


         The  components of other  expense are set forth in the following  table
for the years ended December 31, 2005, 2004 and 2003.

<TABLE>
<CAPTION>


 Other Expense as a Percent of Average Assets
(dollars in thousands)                          2005                     2004                     2003
                                          __________________       __________________       __________________
                                          Amount     Percent       Amount     Percent       Amount     Percent
                                          __________________       __________________       __________________
<S>                                       <C>          <C>         <C>          <C>         <C>          <C>

 Salaries and benefits                   $12,127       2.6%        $8,081        2.4%      $ 6,594        3.0%
 Occupancy                                 1,652       0.4%         1,420        0.4%          890        0.4%
 Data processing                           1,085       0.2%           763        0.2%          536        0.2%
 Third party services                      1,065       0.2%            95        0.0%           35        0.0%
 Marketing and advertising                   925       0.2%           612        0.2%          370        0.2%
 Professional services                       746       0.2%           645        0.2%          340        0.2%
 Furniture and equipment                     583       0.1%           585        0.2%          561        0.3%
 Deposit services/supplies                   401       0.1%           311        0.1%          193        0.1%
 Other                                     1,397       0.3%         1,084        0.3%          695        0.3%
                                          __________________       __________________       __________________

                                         $19,981       4.3%       $13,596        4.0%      $10,214        4.6%
                                         =======                  =======                  =======

</TABLE>


         Non-interest  expenses  were  approximately  $20.0  million  in 2005 as
compared  to  approximately  $13.6  million  in 2004 and $10.2  million in 2003.
Non-interest  expense increased  approximately  $6.4 million in 2005 compared to
2004.  This  increase  was  primarily  attributable  to  increased  salaries and
benefits cost and third party services expense.  Non-interest expenses increased
approximately  $3.4 million the year ended  December 31, 2004  compared to 2003.
This increase was primarily attributable to increased salaries and benefits cost
and occupancy expense as well as increases in marketing, data processing expense
and professional  services.  Non-interest  expenses  measured as a percentage of
average  earning  assets were 4.3% in 2005, as compared to 4.0% in 2004 and 4.6%
in 2003.

         The increases in non-interest  expenses reflect the impact of expansion
of the business during 2005,  2004 and 2003.  During the year ended December 31,
2005,  the  Bank  launched  a  technology  banking  division  and  opened a loan
production office in San Ramon to serve the East Bay region.

         During 2004, the Bank  consolidated  offices and moved its headquarters
to a larger facility in San Jose; launched two new product lines,  international
trade finance and investment services; and added a SBA loan production office in
Fresno, California. During 2003, the Bank opened a SBA loan production office in
San Diego to cover  Southern  California  and added staff in all major  business
lines.

         Salaries  and related  benefits is the largest  component of the Bank's
non-interest  expense.  Salaries  and benefits  were $12.1  million for the year
ended  December  31, 2005 as compared to $8.1  million and $6.6  million for the
years ended  December  31, 2004 and 2003,  respectively.  The  increases in 2005
compared to 2004 and 2004  compared to 2003 are  primarily  attributable  to the
increase in full time  equivalent  employees  (FTE)  related to expansion of the
business and to higher  incentive  compensation  related to  performance  of the
Bank.  The  Bank  had 103 FTE at  December  31,  2005 as  compared  to 80 FTE at
December 31, 2004 and 60 FTE at December 31, 2003.

         Occupancy  expense for the year ended  December 31, 2005 was $1,652,000
and  represented an increase of $232,000 over $1,420,000 for the prior year. The
increase in occupancy expense in 2005 is primarily due to expense related to the
facility at 55 Almaden Blvd,  San Jose,  California and the new facility at 2010
Crow Canyon Place, Suite 100 San Ramon,  California.  In 2004, occupancy expense
increased  $530,000  to  $1,420,000  compared  to  $890,000  for the year  ended
December 31, 2003.  The increase in 2004 was primarily due to the  consolidation
of offices of the Company in a new, larger headquarters facility in downtown San
Jose and the addition of two loan production offices in the SBA group.


                                       35



<PAGE>


         The Company contracts with third-party vendors for most data processing
needs and to support technical  infrastructure.  Data processing expense in 2005
was $1,085,000, which represented an increase of $322,000 over $763,000 one year
earlier.  In 2004, data processing costs increased $227,000 to $763,000 compared
to  $536,000  in 2003.  The  increases  in data  processing  in both  years  are
primarily  due to  increases  in  deposit  transaction  volumes in  addition  to
increases in FTE.

         Legal  and  professional  expenses  were  $746,000  for the year  ended
December 31, 2005,  which  represented  an increase of $101,000 over $645,000 in
2004. The increase in 2005 was due, in part, to nonrecurring legal costs related
to expansion of business  lines as well as increases in ongoing  accounting  and
audit services.  In 2004, legal and professional  expenses increased $305,000 to
$645,000 compared to $340,000 in 2003. The increase in 2004 was due, in part, to
nonrecurring legal costs related to the formation of the holding company as well
as increases in ongoing accounting and audit services.

         Furniture,  fixtures and equipment  (FF&E)  expense of $583,000 for the
year ended December 31, 2005 represented a slight decrease of $2,000 compared to
$585,000 in the same period one year earlier.  In 2003,  FF&E expense  increased
$24,000 to $585,000  compared to $561,000 for the year ended  December 31, 2004.
The decrease in 2005 was due primarily to a decrease in depreciation  expense as
a result of fully depreciated  assets,  offset, in part, by purchase of new FF&E
related to the increase in FTE. The  increase in 2004 was  primarily  related to
the increase in FTE.

         As pressure  continues  on net interest  margins and net asset  growth,
management of operating expenses will continue to be a priority.


INCOME TAXES

         The Bank's effective tax rate was 40.1% for the year ended December 31,
2005 and 41% for the year ended  December 31, 2004.  For 2003 the  effective tax
rate was  -124.03% as a result of the  one-time  recognition  of $1.9 million of
deferred  tax assets.  See Note 8 to the  financial  statements  for  additional
information on income taxes.


                                       36


<PAGE>


QUARTERLY INCOME


         The  un-audited  income  statement  data of the Bank, in the opinion of
management,  includes all normal and  recurring  adjustments  necessary to state
fairly the  information  set forth  herein.  The results of  operations  are not
necessarily  indicative of results for any future  period.  The following  table
shows the Bank's  unaudited  quarterly income statement data for the years 2005,
2004 and 2003.

<TABLE>
<CAPTION>


                                                   Three Months Ended
                                  _____________________________________________________
                                  March 31     June 30     September 30     December 31
                                      (Dollars in thousands, except share amounts)
<S>                               <C>          <C>           <C>              <C>

YEAR ENDED DECEMBER 31, 2005:

Interest income                   $ 6,615      $ 7,915       $ 9,173          $10,415
Interest expense                    1,188        1,637         1,749            2,041
                                  ___________________________________________________
Net interest income                 5,427        6,278         7,424            8,374
Provision for credit losses           333          429           800              600
Other income                          784        1,136           994            1,283
Other expense                       4,315        4,642         5,123            5,901
                                  ___________________________________________________
Income before income taxes          1,563        2,343         2,495            3,156
Income taxes                          606          964           990            1,272
                                  ___________________________________________________
Net income                        $   957      $ 1,379       $ 1,505          $ 1,884
                                  ===================================================

Earnings per share - basic        $  0.16      $  0.22       $  0.24          $  0.31
Earnings per share - diluted      $  0.14      $  0.21       $  0.22          $  0.28

YEAR ENDED DECEMBER 31, 2004:

Interest income                   $ 3,873      $ 4,397       $ 5,154          $ 6,033
Interest expense                      682          655           684              875
                                  ___________________________________________________
Net interest income                 3,191        3,742         4,470            5,158
Provision for credit losses           405          369           611              286
Other income                        1,122          779           834            1,120
Other expense                       3,115        3,094         3,308            4,079
                                  ___________________________________________________
Income before income taxes            793        1,058         1,385            1,913
Income taxes                          327          434           568              783
                                  ___________________________________________________
Net income                        $   466      $   624       $   817          $ 1,130
                                  ===================================================

Earnings per share - basic        $  0.08      $  0.10       $  0.13          $  0.19
Earnings per share - diluted      $  0.07      $  0.09       $  0.12          $  0.18

</TABLE>


                                       37



<PAGE>


FINANCIAL CONDITION AND EARNING ASSETS

         As of December 31,  2005,  assets were $536  million,  gross loans were
$439 million and deposits were $468 million.  Assets  increased $134 million,  a
33% increase from $402 million at December 31, 2004.  Gross loans increased $145
million,  or 49% from $295 million at December 31, 2004. Deposits increased $116
million, a 33% increase from $352 million at December 31, 2004.

         As of December 31,  2004,  assets were $402  million,  gross loans were
$294 million and deposits were $352 million.  Assets  increased $123 million,  a
44% increase from $279 million at December 31, 2003.  Gross loans increased $100
million,  or 52% from $194 million at December 31, 2003. Deposits increased $106
million, a 43% increase from $246 million at December 31, 2003.


FEDERAL FUNDS SOLD

         Federal  funds sold were $46.7 million at December 31, 2005 as compared
to $62.7  million at December 31,  2004.  This  decrease is  primarily  due to a
decrease in short term  deposits,  primarily in the money market  category.  The
average  balance  of  federal  funds  sold was $52.2  million  in 2005 and $43.0
million in 2004. These balances  represented 13.0% and 14.0% of average deposits
for  2005  and  2004,  respectively.  They  are  maintained  primarily  for  the
short-term liquidity needs of the Bank.


SECURITIES

         The following table shows the  composition of the securities  portfolio
at December 31, 2005, 2004 and 2003.

<TABLE>
<CAPTION>


Investment Securities Composition                                      December 31,
(dollars in thousands)                              2005                   2004                   2003
                                             ________________________________________________________________
                                                         Fair                   Fair                   Fair
                                              Cost       Value       Cost       Value       Cost       Value
                                             ________________________________________________________________
<S>                                          <C>        <C>         <C>        <C>         <C>        <C>

Available for sale:
  U. S. Treasury Securities                  $   199    $   199     $   100    $   100     $   100    $   100
  U. S. Government Agencies                   12,355     12,184      26,400     26,198      14,236     14,247
  Money Market Mutual Funds                        -          -           -          -      10,000     10,000
                                             ________________________________________________________________
Total available for sale                      12,554     12,383      26,500     26,298      24,336     24,347
                                             ________________________________________________________________

Total investment securities portfolio        $12,554    $12,383     $26,500    $26,298     $24,336    $24,347
                                             ================================================================

</TABLE>



                                       38


<PAGE>


         The maturities and yields of the investment portfolio is shown below:

<TABLE>
<CAPTION>


MATURITY AND YIELDS OF INVESTMENT SECURITIES
                                                                            After one year
(dollars in thousands)                               Within 1 year         within five years
                                                   __________________     __________________
                                                             Weighted               Weighted
                                      Carrying                Average                Average
At December 31, 2005                   Value       Amount      Yield      Amount      Yield
_____________________________________________________________________     __________________
<S>                                      <C>         <C>        <C>       <C>          <C>

  U. S. Treasury Securities              $ 199       $ 199      3.41%        ----       ----
  U. S. Government Agencies             12,355      10,336      2.47%       2,018      3.31%
                                       ___________________                _______
    Total                              $12,554     $10,535      0.92%     $ 2,018
                                       ===================                =======
At December 31, 2004
_______________________________________
  U. S. Treasury Securities              $ 100       $ 100      1.64%        ----       ----
  U. S. Government Agencies             26,400      14,016      2.21%      12,384      2.61%
                                       ___________________                _______
    Total                              $26,500     $14,116      0.92%     $12,384
                                       ===================                =======

</TABLE>


         Investment  securities  are  classified  as  available  for  sale.  Any
unrealized gain or loss on investment securities available for sale is reflected
in the  carrying  value of the  security and reported net of income taxes in the
equity section of the balance sheet.  The pre-tax  unrealized loss on securities
available for sale at December 31, 2005 was ($102,000) as compared to ($119,000)
at December 31, 2004 and a pre-tax  unrealized gain on securities  available for
sale at December 31, 2003 of $11,000.


LOAN PORTFOLIO

         The following table shows the Bank's loans by type and their percentage
distribution for the three years ended December 31, 2005, 2004 and 2003.

<TABLE>
<CAPTION>


LOAN PORTFOLIO
(dollars in thousands)
                                     2005               2004                 2003
                                   ________________________________________________
<S>                                <C>                <C>                 <C>

Commercial and other               $ 182,396          $ 100,681           $  73,846
Real estate construction              84,792             42,323              35,065
Other real estate                     83,748             80,044              28,036
SBA                                   46,867             45,251              39,412
Factoring and Asset based             38,184             22,342              13,106
Other                                  4,011              3,945               4,984
                                   ________________________________________________
Total gross loans                    439,998            294,586             194,449
Unearned fee income                   (1,395)              (973)               (713)
                                   ________________________________________________
  Total loan portfolio             $ 438,603          $ 293,613           $ 193,736
                                   ================================================

Commercial and other                    41.5%              34.2%               38.0%
Real estate construction                19.3%              14.3%               18.0%
Other real estate                       19.0%              27.2%               14.4%
SBA                                     10.7%              15.4%               20.3%
Factoring and Asset based                8.7%               7.6%                6.7%
Other                                    0.9%               1.3%                2.6%
                                   ________________________________________________
Total gross loans                      100.0%             100.0%              100.0%
                                   ================================================

</TABLE>


                                       39


<PAGE>


         Gross loan balances  increased to $440.0  million at December 31, 2005,
which  represented  an increase of $145.0 million or 49.4% as compared to $294.6
million at December 31, 2004.  The increase in loans was primarily in commercial
and real estate term  (includes  longer term real estate  loans,  land loans and
home equity  lines),  without a  concentration  in any one specific  category of
loans.  The  increase  was a result of  general  marketing  efforts.  Gross loan
balances  increased to $294.6 million at December 31, 2004, which represented an
increase of $100.1  million or 51.5% as  compared to $194.5  million at December
31, 2003.  The increase in loans was  primarily  in  commercial  and real estate
term,  without a  concentration  in any one  specific  category  of  loans.  The
increase was a result of general marketing efforts.

         The Bank's  commercial  loan  portfolio  represents  loans to small and
middle-market businesses primarily in the Santa Clara county region.  Commercial
loans were $182.4 million at December 31, 2005, which represented an increase of
$81.7 million or 81.2% over $100.7 million at December 31, 2004. At December 31,
2005,  commercial loans comprised 42% of total loans  outstanding as compared to
34% at December 31, 2004.

         Commercial  loans were  $100.7  million at  December  31,  2004,  which
represented an increase of $26.8 million or 36.3% over $73.8 million at December
31, 2003. At December 31, 2004,  commercial  loans  comprised 34% of total loans
outstanding as compared to 38% at December 31, 2003.

         In March of 2002,  the Bank  established  an SBA lending group in Santa
Clara with a loan production  office in Sacramento  County.  In October of 2003,
the Bank established a loan production office in San Diego county.  The Bank, as
a Preferred Lender,  originates SBA loans and participates in the SBA 7A and 504
SBA lending  programs.  Under the 7A program,  a loan is made for  commercial or
real estate purposes. The SBA guarantees these loans and the guarantee may range
from 70% to 90% of the total loan. In addition, the loan could be collateralized
by a deed of trust on real estate.

         Under the 504  program,  the Bank lends  directly to the  borrower  and
takes a first  deed of trust  to the  subject  property.  In  addition  the SBA,
through a Community  Development  Corporation  makes an  additional  loan to the
borrower and takes a deed of trust  subject to the Bank's  position.  The Bank's
position in relation to the real estate  "piggyback" loans can range from 50% to
70% loan to value.

         At December 31, 2005,  SBA loans  comprised  $46.9  million or 10.7% of
total loans as compared to $45.3 million or 15.4% of total loans at December 31,
2004 and $39.4  million or 20.3% of total loans at December 31,  2003.  The Bank
has the intent to sell all or a portion of the SBA loans and,  as such,  carries
the saleable  portion of SBA loans at the lower of aggregate cost or fair value.
At  December  31,  2005,  2004 and 2003,  the fair  value of SBA loans  exceeded
aggregate cost and therefore, SBA loans were carried at aggregate cost.

         The Bank's  construction loan portfolio  primarily consists of loans to
finance individual single-family residential homes,  approximately half of which
are  owner-occupied  projects.  Construction  loans increased $42.5 million,  or
100.3%,  to $84.8  million at December 31, 2005 as compared to $42.3  million at
December 31, 2004.  Construction  loan  balances at December 31, 2005  comprised
19.2% of total loans as compared to 14.3% at  December  31,  2004.  Construction
loans increased $7.2 million, or 20.7%, to $42.3 million at December 31, 2004 as
compared to $35.1  million at December 31, 2003.  Construction  loan balances at
December  31,  2004  comprised  14.4% of total  loans  as  compared  to 18.0% at
December 31, 2003.

         Other real estate loans consists of commercial real estate,  land loans
related to future  construction  credits and home equity lines of credit.  Other
real estate loans  increased  $3.7 million or 4.6% to $83.7  million at December
31, 2005 as compared to $80.0 million at December 31, 2004 and  increased  $52.0
million or 185.5% from $28.0  million at December  31, 2002 to $80.0  million at
December 31, 2004. In 2005, the increase was primarily in other real estate term
loans. The increase in 2004 in other real estate loans was approximately equally
split  between  home  equity  lines of  credit,  land  loans  related  to future
construction  credits and other real estate term loans.  At December  31,  2005,
other real estate loans represented 19.0% of total loans as compared to 27.2% at
December 31, 2004 and 14.4% at December 31, 2003.


                                       40


<PAGE>


         Factoring  and  asset-based   lending  represents   purchased  accounts
receivable  (factoring)  and a structured  accounts  receivable  lending program
where the Bank receives client specific payment for client  invoices.  Under the
factoring  program,  the Bank purchases  accounts  receivable  invoices from its
clients and then  receives  payment  directly  from the party  obligated for the
receivable. In most cases the Bank purchases the receivables subject to recourse
from the Bank's  factoring  client.  The asset-based  lending program requires a
security  interest in all of a client's  accounts  receivable.  At December  31,
2005,  Factoring/Asset  Based loans totaled $38.2 million or 8.7% of total loans
as compared to $22.3 million or 7.6% of total loans at December 31, 2004.

         Other loans  consist  primarily  of loans to  individuals  for personal
uses, such as installment purchases, overdraft protection loans and a variety of
other consumer purposes.  At December 31, 2005, other loans totaled $4.0 million
as compared to $3.9  million at December  31, 2004 and $5.0  million at December
31, 2003.


ALLOWANCE FOR LOAN LOSSES

         A consequence  of lending  activities  is the  potential for loss.  The
amount  of such  losses  will vary  from  time to time  depending  upon the risk
characteristics of the loan portfolio as affected by economic conditions, rising
interest rates and the financial experience of the borrowers.  The allowance for
loan  losses,  which  provides  for the risk of losses  inherent  in the  credit
extension  process,  is increased by the  provision  for loan losses  charged to
expense and decreased by the amount of charge-offs  net of recoveries.  There is
no precise method of estimating  specific  losses or amounts that ultimately may
be charged off on  particular  segments of the loan  portfolio.  Similarly,  the
adequacy of the allowance for loan losses and the level of the related provision
for loan losses is determined in  management's  judgment based on  consideration
of:

     -    Economic conditions,
     -    Borrowers' financial condition
     -    Loan impairment
     -    Evaluation of industry trends
     -    Historic losses, migrations and delinquency trends
     -    Industry and other concentrations
     -    Loans  which  are  contractually  current  as  to  payment  terms  but
          demonstrate a higher degree of risk as identified by management
     -    Continuing evaluation of the performing loan portfolio
     -    Periodic review and evaluation of problem loans
     -    Off balance sheet risks
     -    Assessments by regulators and other third parties

         In addition to the internal assessment of the loan portfolio,  the Bank
 also retains a consultant  who performs  credit  reviews on a regular basis and
 then  provides an  assessment of the adequacy of the allowance for loan losses.
 The federal banking regulators also conduct  examinations of the loan portfolio
 periodically.


                                       41


<PAGE>


         The following  table  summarizes the activity in the allowance for loan
losses.


                                                  Period ended
(dollars in thousands)                            December 31,
                                         2005        2004         2003
                                        ________________________________

Balance, beginning of period            $ 4,146     $ 2,683      $ 1,765
Loans charged off by category:
  Commercial and other                      384         240            -
  Real estate Construction                    -           -            -
  Real estate term                            -           -            -
  Factoring and asset-based                   -           -            -
  Consumer                                    -           -           10
                                        ________________________________
    Total charge-offs                       384         240           10
                                        ________________________________
Recoveries by category:
  Commercial and other                       12          32           85
  Real estate Construction                    -           -            -
  Real estate term                            -           -            -
  Factoring and asset-based                   -           -            -
  Consumer                                    -           -            -
                                        ________________________________
    Total recoveries                         12          32           85
                                        ________________________________
Net (recoveries) charge-offs                372         208          (75)
Provision charged to expense              2,162       1,671          843
                                        ________________________________
Balance, end of year                    $ 5,936     $ 4,146      $ 2,683
                                        ================================

Ratio of net charge-offs during
  the period to average loans
  outstanding                             0.10%       0.08%       -0.05%
Ratio of allowance for credit
  losses to loans outstanding
  at end of year                          1.35%       1.41%        1.38%
Allowance to nonperforming loans
  at end of year                        255.87%     404.09%     4547.46%


         Based on an evaluation of the  individual  credits,  historical  credit
loss experienced by loan type and economic conditions,  management has allocated
the allowance for loan losses as follows for the three years ended December 31:

<TABLE>
<CAPTION>


                                   December 31, 2005         December 31, 2004    December 31, 2003
                                 _____________________     ____________________ _______________________
                                          Percent of               Percent of              Percent of
                                         loans in each            loans in each           loans in each
                                         category to              category to             category to
(dollars in thousands)           Amount   total loans      Amount  total loans  Amount     total loans
                                 _____________________     ____________________ _______________________
<S>                               <C>        <C>              <C>     <C>          <C>        <C>

Commercial and other              2,029      41.5%            998     34.2%        666        38.0%
SBA                               1,975      19.3%          1,231     15.4%      1,042        20.3%
Real estate construction            742      19.0%            444     14.3%        400        18.0%
Real estate term                    721      10.7%          1,132     27.2%        288        14.4%
Factoring/ABL                       443       8.7%            312      7.6%        261         6.7%
Other                                26       0.9%             29      1.3%         26         2.6%
                                 _________________         ________________     ___________________
                                 $5,936     100.0%         $4,146    100.0%     $2,683       100.0%
                                 =================         ================     ===================

</TABLE>


                                       42


<PAGE>


RISK ELEMENTS

         Loans  for  which  the   accrual  of  interest   has  been   suspended,
restructured loans and other loans with principal or interest contractually past
due 90 days or more as set forth in the  following  table as of  December  31 of
each year:

<TABLE>
<CAPTION>


Nonperforming Loans
(dollars in thousands)                                                  2005          2004            2003
                                                                      ____________________________________
<S>                                                                   <C>            <C>              <C>

Loans accounted for on a non-accrual basis                            $ 2,320        $ 1,026          $ 59
Loans restructured and in compliance with modified terms                    -              -             -
Other loans with principal or interest contracturally past due
  90 days or more                                                           -              -             -
                                                                      ____________________________________
                                                                      $ 2,320        $ 1,026          $ 59
                                                                      ====================================

</TABLE>


         There was one non-accrual loan at December 31, 2005 totaling $2,320,000
as compared to two  non-accrual  loans at December 31, 2004 totaling  $1,026,000
and one loan at December 31, 2003 totaling $59,000.

          At December 31, 2005, the non-accrual loan consisted of one commercial
loan totaling  $2,320,000  which is secured by business assets and real property
with values in excess of the loan's carrying value.


FUNDING

         Deposits  represent the Bank's principal  source of funds.  Most of the
Bank's  deposits  are  obtained  from  professionals,  small-  to  medium  sized
businesses  and  individuals  within the Bank's market area.  The Bank's deposit
base consists of non-interest and interest-bearing demand deposits,  savings and
money  market  accounts  and  certificates  of  deposit.   The  following  table
summarizes the composition of deposits as of December 31, 2005, 2004 and 2003.

<TABLE>
<CAPTION>


DEPOSIT CATEGORIES
(dollars in thousands)                       2005                      2004                      2003
                                     ____________________      ____________________      ____________________
                                                  Percent                   Percent                   Percent
                                      Total      of total       Total      of total       Total      of total
                                      Amount     deposits       Amount     deposits       Amount     deposits
                                     ____________________      ____________________      ____________________
<S>                                  <C>           <C>         <C>           <C>         <C>           <C>

Noninterest-bearing  demand          $185,557      39.64%      $126,895      36.00%      $ 76,510      31.05%
Interest-bearing demand                 2,866       0.61%         3,946       1.12%         6,954       2.82%
Money market and savings              210,011      44.86%       169,801      48.18%       115,930      47.05%
Certificates of deposit:
  Less than $100                       19,228       4.11%        16,182       4.59%        16,006       6.50%
  $100 and more                        50,496      10.79%        35,632      10.11%        30,994      12.58%
                                     ____________________      ____________________      ____________________
Total                                $468,158     100.00%      $352,456     100.00%      $246,394     100.00%
                                     ====================      ====================      ====================

</TABLE>


                                       43


<PAGE>


         Deposits  increased  $115.7  million  or 32.8% from  $352.5  million at
December  31,  2004 to $468.2  million at December  31,  2005.  The  increase in
deposits  was  primarily  in  non-interest  bearing  demand,  money  market  and
certificates  of deposit  raised from the Bank's  primary  market in Santa Clara
County. The increase can be attributed to marketing efforts from the Bank's main
office in San Jose and branch  office in Palo Alto and  certificates  of deposit
raised from institutions in order to manage balance sheet liquidity. Deposits at
December 31, 2005 included  $70.6 million,  or 15.1% of the total,  in title and
escrow company account balances compared to $55.3 million,  or 15.6% at December
31, 2004 and $28.4 million,  or 11.5% at December 31, 2003.  Excluding title and
escrow company  account  balances,  deposits  increased  $100.4 million or 33.8%
compared to December 31, 2004, and increased $79.2 million or 36.3% from 2003 to
2004.


CAPITAL RESOURCES

         The Company's capital resources consist of shareholders'  equity, trust
preferred  securities  and (for  regulatory  purposes)  the allowance for credit
losses  (subject to  limitations).  At December 31, 2005, the Company's  capital
resources  increased  $8,382,000 to $57,650,000 from $49,268,000 at December 31,
2004.  Tier 1 capital  increased  6,592,000 to $51,714,000  primarily due to net
income of $5,725,000 and issuance of stock. Tier 2 capital increased  $1,790,000
solely due to the increase in the allowance for credit losses of $1,790.000.

         The  Company is subject to capital  adequacy  guidelines  issued by the
Board of  Governors  and the OCC.  The Company is  required  to  maintain  total
capital  equal  to at least 8% of  assets  and  commitments  to  extend  credit,
weighted by risk,  of which at least 4% must consist  primarily of common equity
including  retained  earnings  (Tier 1 capital) and the remainder may consist of
subordinated debt,  cumulative  preferred stock or a limited amount of allowance
for credit losses.  Certain assets and commitments to extend credit present less
risk  than  others  and  will be  assigned  to  lower  risk-weighted  categories
requiring less capital allocation than the 8% total ratio. For example, cash and
government  securities are assigned to a 0%  risk-weighted  category,  most home
mortgage  loans are  assigned  to a 50%  risk-weighted  category  requiring a 4%
capital  allocation  and commercial  loans are assigned to a 100%  risk-weighted
category  requiring  an 8% capital  allocation.  As of December  31,  2005,  the
Company's  and the Bank's total  risk-based  capital  ratios were  approximately
11.6% and 11.7%, respectively,  (13.8% for the Company and 13.2% for the Bank at
December 31, 2004).

         The Board of Governors and other federal Banking  agencies have adopted
a revised minimum leverage ratio for Companying organizations as a supplement to
the  risk-weighted  capital  guidelines.  The old rule  established a 3% minimum
leverage standard for well-run Banking organizations (Bank holding companies and
Banks)  with  diversified  risk  profiles.  Banking  organizations  that did not
exhibit  such  characteristics  or had greater risk due to  significant  growth,
among other factors, were required to maintain a minimum leverage ratio 1% to 2%
higher.  The old rule did not take into account the implementation of the market
risk capital measure set forth in the federal regulatory agency capital adequacy
guidelines.  The revised leverage ratio establishes a minimum Tier 1 ratio of 3%
(Tier 1 capital to total  assets) for the highest  rated Bank holding  companies
and Banks.  All other Bank  holding  companies  must  maintain a minimum  Tier 1
leverage ratio of 4% with higher  leverage  capital ratios  required for Banking
organizations that have significant financial and/or operational  weaknesses,  a
high risk profile, or are undergoing or anticipating rapid growth.


                                       44


<PAGE>


         The following table reflects the Company's  Leverage,  Tier 1 and total
risk-based capital ratios for the period ended December 31, 2005 and 2004.

<TABLE>
<CAPTION>


                                                          As of December 31,
             (in thousands)                         2005                     2004
                                             ___________________      ____________________
                                              Amount      Ratio        Amount       Ratio
                                             ___________________      ____________________
<S>                                          <C>          <C>         <C>           <C>

COMPANY CAPITAL RATIOS

Tier 1 Capital                               $ 51,593     10.38%      $ 44,172      12.34%
(to Risk Weighted Assets)
Tier 1 capital minimum requirement           $ 19,879      4.00%      $ 14,313       4.00%

Total Capital                                $ 57,529     11.58%      $ 49,268      13.77%
(to Risk Weighted Assets)
Total capital minimum requirement            $ 39,758      8.00%      $ 28,625       8.00%

Company leverage
Tier 1 Capital                               $ 51,593     11.07%      $ 44,172      12.94%
(to Average Assets)
Total capital minimum requirement            $ 18,638      4.00%      $ 13,659       4.00%

BANK RISK BASED CAPITAL RATIOS

Tier 1 Capital                               $ 49,748     10.49%      $ 43,058      12.03%
(to Risk Weighted Assets)
Tier 1 capital minimum requirement           $ 18,970      3.82%      $ 14,313       4.00%
To be well capitalized under
  prompt corrective action provisions        $ 28,455      6.00%      $ 21,469       6.00%

Total Capital                                $ 55,684     11.74%      $ 47,204      13.19%
(to Risk Weighted Assets)
Total capital minimum requirement            $ 37,939      7.63%      $ 28,625       8.00%
To be well capitalized under
  prompt corrective action provisions        $ 47,424      9.54%      $ 35,781      10.00%

Bank leverage
Tier 1 Capital                               $ 49,748      9.98%      $ 43,058      12.61%
(to Average Assets)
Total capital minimum requirement            $ 19,931      4.00%      $ 13,659       4.00%
To be well capitalized under
  prompt corrective action provisions        $ 24,914      5.00%      $ 17,073       5.00%

</TABLE>


         On  December  19,  1991,  the  Federal  Deposit  Insurance  Corporation
Improvement  Act of 1991 (the  "FDICIA") was signed into law. The FDICIA,  among
other matters,  substantially  revised  banking  regulations  and  established a
framework for determination of capital adequacy of financial institutions. Under
the FDICIA,  financial institutions are placed into one of five capital adequacy
categories as follows:  (1) "Well capitalized" - consisting of institutions with
a total risk-based  capital ratio of 10% or greater, a Tier 1 risk-based capital
ratio  of 6% or  greater  and a  leverage  ratio  of  5%  or  greater,  and  the
institution is not subject to an order, written agreement,  capital directive or
prompt corrective action directive; (2) "Adequately capitalized" - consisting of
institutions  with a total risk-based  capital ratio of 8% or greater,  a Tier 1
risk-based capital ratio of 4% or greater and a leverage ratio of 4% or greater,
and the  institution  does  not  meet  the  definition  of a "well  capitalized"
institution;  (3)  "Undercapitalized"  - consisting of institutions with a total
risk-based capital ratio less than 8%, a Tier 1 risk-based capital ratio of less
than  4%,   or  a   leverage   ratio  of  less  than  4%;   (4)   "Significantly
undercapitalized"  - consisting of institutions with a total risk-based  capital
ratio of less than 6%, a Tier 1 risk-based  capital  ratio of less than 3%, or a
leverage ratio of less than 3%; (5) "Critically  undercapitalized"  - consisting
of an institution  with a ratio of tangible equity to total assets that is equal
to or less than 2%.


                                       45


<PAGE>


         Financial  institutions  classified  as  undercapitalized  or below are
subject  to  various  limitations  including,   among  other  matters,   certain
supervisory actions by bank regulatory  authorities and restrictions  related to
(i) growth of assets,  (ii)  payment of interest on  subordinated  indebtedness,
(iii) payment of dividends or other capital  distributions,  and (iv) payment of
management  fees to a parent  holding  company.  The  FDICIA  requires  the bank
regulatory   authorities  to  initiate  corrective  action  regarding  financial
institutions  that fail to meet minimum  capital  requirements.  Such action may
result in orders to,  among other  matters,  augment  capital  and reduce  total
assets. Critically  undercapitalized  financial institutions may also be subject
to appointment of a receiver or implementation of a capitalization plan.


ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK


LIQUIDITY/INTEREST RATE SENSITIVITY

         The Bank strives to manage its liquidity to provide  adequate  funds at
an acceptable cost to support  borrowing  requirements  and deposit flows of its
customers.  Liquidity  requirements  are evaluated by taking into  consideration
factors such as deposit  concentrations,  seasonality and  maturities,  loan and
lease demand,  capital  expenditures  and  prevailing and  anticipated  economic
conditions.   The  Bank's  business  is  generated  primarily  through  customer
referrals and employee business development efforts.

         The Bank is  primarily a business and  professional  bank and, as such,
its deposit base is more susceptible to economic fluctuations.  The Bank strives
to  maintain a balanced  position  of liquid  assets to  volatile  and  cyclical
deposits.  At December 31, 2005,  liquid assets as a percentage of deposits were
18% as compared to 27% in 2004.  In addition to cash and due from banks,  liquid
assets include  interest-bearing  deposits with other banks,  federal funds sold
and unpledged securities available for sale.

         Management regularly reviews general economic and financial conditions,
both  external and internal,  and  determines  whether the positions  taken with
respect to liquidity and interest rate  sensitivity  continue to be appropriate.
The Bank also utilizes a monthly "Gap" report as well as a quarterly  simulation
model to identify rate sensitivity over the short- and long-term.

         The  following   table  sets  forth  the   distribution   of  repricing
opportunities,  based on contractual  terms, of the Company's earning assets and
interest-bearing liabilities at December 31, 2005, the interest rate sensitivity
gap  (i.e.   interest  rate  sensitive   assets  less  interest  rate  sensitive
liabilities),  the cumulative  interest rate  sensitivity gap, the interest rate
sensitivity gap ratio (i.e. interest rate gap divided by interest rate sensitive
assets) and the cumulative interest rate sensitivity gap ratio.

         Based on the  contractual  terms of its  assets  and  liabilities,  the
Bank's  balance  sheet at December 31, 2005 was asset  sensitive in terms of its
short-term  exposure to interest rates. That is, at December 31, 2005 the volume
of assets  that  might  reprice  within  the next year  exceeded  the  volume of
liabilities  that might reprice.  This position  provides a hedge against rising
interest rates, but has a detrimental effect during times of rate decreases. Net
interest  income is  negatively  impacted  by a decline  in  interest  rates and
positively  impacted by an increase in interest rates. To partially mitigate the
adverse impact of declining  rates,  the majority of variable rate loans made by
the Bank have been written with a minimum "floor" rate.


                                       46


<PAGE>

<TABLE>
<CAPTION>



DISTRIBUTION OF REPRICING OPPORTUNITIES
December 31, 2005
(dollars in thousands)                              After three   After six    After one
                                          Within     months but   months but   year but      After
                                          three      within six   within one    within       five
                                          months      months         year     five years     years      Total
                                         _____________________________________________________________________
<S>                                      <C>                                                          <C>

Federal funds sold                       $ 46,660        -----        -----       -----       -----   $ 46,660
Treasury/agency securities                  3,265        3,225        3,939       1,954       -----     12,383
Loans                                     384,431        1,538        1,156      44,267       8,606    439,998
                                         _____________________________________________________________________
 Total earning assets                     434,356        4,763        5,095      46,221       8,606    499,041
                                         _____________________________________________________________________
Interest checking, money market
  and savings                             212,877        -----        -----       -----       -----    212,877
Certificates of deposit:
 Less than $100,000                        19,228        1,040        4,138       7,565       -----     31,971
  $100,000 or more                         50,496        1,905        8,224       1,679       -----     62,304
FHLB Borrowings                            10,000        -----        -----       -----       -----     10,000
                                         _____________________________________________________________________
 Total interest-bearing liabilities       282,601        2,945       12,362       9,244           0    317,152
                                         _____________________________________________________________________
Interest rate gap                        $151,755     $  1,818     $ (7,267)   $ 36,977    $  8,606   $181,889
                                         =====================================================================
Cumulative interest rate gap             $151,755     $153,573     $146,306    $183,283    $191,889
                                         ==========================================================
Interest rate gap ratio                      0.35         0.38        (1.43)       0.80        1.00
                                         ==========================================================
Cumulative interest rate gap ratio           0.35         0.35         0.33        0.37        0.38
                                         ==========================================================

</TABLE>


         The following table shows maturity and interest rate sensitivity of the
loan   portfolio  at  December  31,  2005  and  2004.   At  December  31,  2005,
approximately  72% of the loan portfolio is priced with floating  interest rates
which limit the exposure to interest rate risk on long-term loans.

<TABLE>
<CAPTION>


                                  Balances at                       Due after one
                                  December 31,     Due one year     year through      Due after
(dollars in thousands)                2005           or less         five years      five years
______________________________________________________________________________________________
<S>                                 <C>               <C>              <C>              <C>

Commercial and other                $ 182,396         $99,900          $76,216          $6,280
SBA                                    46,867           5,976              135          40,756
Real estate construction               84,792          80,609            4,183               -
Real estate-other                      83,748          28,215            6,627          48,906
Factoring/ABL                          38,184          37,134            1,050               -
Other                                   4,011           3,755              256               -
                                    __________________________________________________________
TOTAL                                $439,998        $255,589          $88,467         $95,942
                                    ==========================================================

<CAPTION>

                                  Balances at                       Due after one
                                  December 31,     Due one year     year through      Due after
(dollars in thousands)                2004           or less         five years      five years
______________________________________________________________________________________________
<S>                                 <C>               <C>              <C>              <C>

Commercial and other                 $100,681         $40,649          $46,138         $13,894
SBA                                    45,251           9,411                -          35,840
Real estate construction               42,323          37,623            4,700               -
Real estate-other                      80,044          38,014           12,585          29,445
Factoring/ABL                          22,342          19,638            2,704               -
Other                                   3,945           3,715              230               -
                                    __________________________________________________________
TOTAL                                $294,586        $149,050          $66,357         $79,179
                                    ==========================================================

</TABLE>




                                       47


<PAGE>


OFF-BALANCE SHEET ARRANGEMENTS AND AGGREGATE CONTRACTUAL OBLIGATIONS


         The  definition  of  "off-balance  sheet  arrangements"   includes  any
transaction,  agreement or other contractual arrangement to which an entity is a
party under which we have:

o    Any obligation under a guarantee  contract that has the  characteristics as
     defined  in  paragraph  3  of  FASB  Interpretation  No.  45,  "Guarantor's
     Accounting and Disclosure  Requirements  for Guarantee  including  Indirect
     Guarantees of Indebtedness to Others" ("FIN 45");

o    A  retained   or   contingent   interest  in  assets   transferred   to  an
     unconsolidated  entity  or  similar  arrangement  that  serves  as  credit,
     liquidity or market risk support to that entity for such assets,  such as a
     subordinated  retained interest in a pool of receivables  transferred to an
     unconsolidated entity,

o    Any obligation,  including a contingent  obligation,  under a contract that
     would be accounted for as a derivative  instrument,  except that it is both
     indexed  to the  registrant's  own stock and  classified  in  stockholders'
     equity; or

o    Any obligation, including contingent obligations, arising Out of a material
     variable interest, as defined in FASB Interpretation No. 46, "Consolidation
     of Variable Interest Entities" ("FIN 46"), in an unconsolidated entity that
     provides  financing,  liquidity,  market risk or credit risk support to the
     registrant,  or engages in  leasing,  hedging or research  and  development
     services with the registrant.

         In the ordinary course of business,  we have issued certain  guarantees
which qualify as off-balance sheet  arrangements,  as of December 31, 2005 those
guarantees include the following:

            Financial Letters of Credit in the amount of $8,901,000.

The table below summarizes the Bank's off-balance sheet contractual obligations.

<TABLE>
<CAPTION>


Off-balance Sheet Arrangement and Aggregate Contractual Obligations

                                                         Payments due by period
                                  _____________________________________________________________________
   Contractural Obligations                       Less than       1 - 3         3 - 5        More than
                                     Total         1 year         years         years         5 years
_______________________________________________________________________________________________________
<S>                               <C>            <C>           <C>           <C>            <C>

Long-term contracts               $   247,000    $   170,000   $    77,000   $         -    $         -

Operating leases                    8,252,000      1,028,000     1,659,000     1,132,000      4,433,000
                                  _____________________________________________________________________
Total                             $ 8,499,000    $ 1,198,000   $ 1,736,000   $ 1,132,000    $ 4,433,000
                                  =====================================================================

</TABLE>


                                       48


<PAGE>



ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

<TABLE>
<CAPTION>




                             INDEX TO FINANCIAL STATEMENTS

                                                                                                    PAGE
<S>                                                                                                <C>

Reports of Independent Registered Public Accounting Firm                                           50-53

Balance Sheet, December 31, 2005 and 2004                                                            54

Statement of operations for the years ended December 31, 2005, 2004 and  2003                        55

Statement of Shareholders' Equity and Comprehensive Income for the
Years ended December 31, 2005, 2004 and 2003                                                         56

Statement of Cash Flows for the years ended December 31, 2005, 2004 and 2003                         57

Notes to Financial Statements                                                                      58-78

</TABLE>


         All schedules  have been omitted since the required  information is not
present or not  present  in amounts  sufficient  to  require  submission  of the
schedule or because  the  information  required  is  included  in the  Financial
Statements or notes thereto.

                                    * * * * *




                                       49


<PAGE>


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

THE BOARD OF DIRECTORS AND SHAREHOLDERS
BRIDGE CAPITAL HOLDINGS


We have audited the  consolidated  balance sheet of Bridge Capital  Holdings and
Subsidiary as of December 31, 2005,  and the related  statements of  operations,
changes in stockholders' equity and comprehensive income, and cash flows for the
year then ended. These consolidated  financial statements are the responsibility
of the Bank's  management.  Our responsibility is to express an opinion on these
consolidated financial statements based on our audit.

We conducted  our audit in accordance  with the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and  perform  the  audit  to  obtain  reasonable  assurance  about  whether  the
consolidated  financial statements are free of material  misstatement.  An audit
includes  examining,  on a test  basis,  evidence  supporting  the  amounts  and
disclosures in the  consolidated  financial  statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall consolidated  financial statement
presentation.  We believe  that our audit  provides a  reasonable  basis for our
opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects,  the consolidated financial position of Bridge
Capital Holdings and Subsidiary as of December 31, 2005 and the results of their
operations and their cash flows for the year then ended, in conformity with U.S.
generally accepted accounting principles.

Vavrinek, Trine, Day & Co.  LLP

Palo Alto, California
February 27, 2006


                                       50


<PAGE>


             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of Bridge Capital Holdings:

In our opinion,  the accompanying  consolidated balance sheet as of December 31,
2004  and  the  related  consolidated   statements  of  income,  of  changes  in
shareholders'  equity, of comprehensive income and of cash flows present fairly,
in all material respects,  the financial position of Bridge Capital Holdings and
its  subsidiaries at December 31, 2004 , and the results of their operations and
their  cash  flows for each of the two years in the period  ended  December  31,
2004, in conformity with accounting  principles generally accepted in the United
States of America.  These  financial  statements are the  responsibility  of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
financial  statements  based on our  audits.  We  conducted  our audits of these
statements in accordance  with the  standards of the Public  Company  Accounting
Oversight  Board  (United  States).  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements,  assessing the accounting  principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.



PricewaterhouseCoopers LLP
March 8, 2005


                                       51


<PAGE>


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders
Bridge Capital Holdings and Subsidiary
San Jose, California


We have audited management's assessment,  included in the accompanying Report of
Management,   that  Bridge  Capital  Holdings  and  Subsidiary  (the  "Company")
maintained  effective  internal control over financial  reporting as of December
31,  2005,  based on  criteria  established  in  Internal  Control -  Integrated
Framework  issued by the Committee of Sponsoring  Organizations  of the Treadway
Commission  (COSO).  The Company's  management is  responsible  for  maintaining
effective  internal  control over financial  reporting and for its assessment of
the   effectiveness   of  internal   control  over  financial   reporting.   Our
responsibility  is to  express  an opinion  on  management's  assessment  and an
opinion on the  effectiveness  of the Company's  internal control over financial
reporting based on our audit.

We conducted  our audit in accordance  with the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain  reasonable  assurance  about whether  effective
internal  control  over  financial  reporting  was  maintained  in all  material
respects. Our audit included obtaining an understanding of internal control over
financial reporting,  evaluating management's assessment, testing and evaluating
the design and operating  effectiveness of internal control, and performing such
other  procedures as we considered  necessary in the  circumstances.  We believe
that our audit provides a reasonable basis for our opinion.

A company's  internal control over financial  reporting is a process designed to
provide reasonable  assurance  regarding the reliability of financial  reporting
and the preparation of financial  statements for external purposes in conformity
with U.S. generally accepted accounting principles. A company's internal control
over financial reporting includes those policies and procedures that (1) pertain
to the maintenance of records that, in reasonable detail,  accurately and fairly
reflect the  transactions  and  dispositions  of the assets of the company;  (2)
provide  reasonable  assurance  that  transactions  are recorded as necessary to
permit  preparation of financial  statements in accordance  with U.S.  generally
accepted accounting principles, and the receipts and expenditures of the company
are  being  made  only in  accordance  with  authorizations  of  management  and
directors  of the  company;  and  (3)  provide  reasonable  assurance  regarding
prevention or timely detection of unauthorized acquisition,  use, or disposition
of the  company's  assets  that could have a  material  effect on the  financial
statements.


                                       52


<PAGE>



Because of its inherent  limitations,  internal control over financial reporting
may not prevent or detect misstatements.  Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate  because of changes in  conditions,  or that the degree of compliance
with the policies or procedures may deteriorate.

In our  opinion,  management's  assessment  that  Bridge  Capital  Holdings  and
Subsidiary  maintained effective internal control over financial reporting as of
December 31, 2005, is fairly stated, in all material respects, based on criteria
established in Internal  Control - Integrated  Framework issued by the Committee
of  Sponsoring  Organizations  of the Treadway  Commission  (COSO).  Also in our
opinion,  the Company maintained,  in all material respects,  effective internal
control over  financial  reporting  as of December  31, 2005,  based on criteria
established in Internal  Control - Integrated  Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO).

We have also  audited,  in accordance  with the standards of the Public  Company
Accounting  Oversight Board,  the consolidated  balance sheet as of December 31,
2005 and the related consolidated statements of income,  stockholders equity and
cash flows for the year then  ended,  and our report  dated  February  27,  2006
expressed an unqualified opinion.


/s/ VAVRINEK, TRINE, DAY & Co., LLP
Palo Alto, California
February 27, 2006


                                       53


<PAGE>

<TABLE>
<CAPTION>


                    Bridge Capital Holdings and Subsidiary
                          Consolidated Balance Sheet
                            (dollars in thousands)

                                                                               As of December 31,
ASSETS                                                                       2005             2004
                                                                           __________________________
<S>                                                                        <C>              <C>

CASH AND DUE FROM BANKS                                                    $  22,880        $   6,535
FEDERAL FUNDS SOLD                                                            46,660           62,675
                                                                           __________________________
  Total cash and equivalents                                                  69,540           69,210
                                                                           __________________________

INVESTMENT SECURITIES AVAILABLE FOR SALE                                      12,383           26,298
LOANS, net of allowance for credit losses of $5,936 in 2005 and
  $4,146 in 2004                                                             432,667          289,467

PREMISES AND EQUIPMENT, net                                                    2,337            2,215
ACCRUED INTEREST RECEIVABLE                                                    2,202            1,366
OTHER ASSETS                                                                  17,391           13,481
                                                                           __________________________
   TOTAL                                                                   $ 536,520        $ 402,037
                                                                           ==========================

LIABILITIES AND SHAREHOLDERS' EQUITY

DEPOSITS:
  Demand noninterest-bearing                                               $ 185,557        $ 126,895
  Demand interest-bearing                                                      2,866            3,946
  Savings                                                                    210,011          169,801
  Time                                                                        69,724           51,814
                                                                           __________________________
     Total deposits                                                          468,158          352,456
                                                                           __________________________

JUNIOR SUBORDINATED DEBT SECURITIES                                           12,372           12,372
OTHER BORROWINGS                                                              10,000                -
ACCRUED INTEREST PAYABLE                                                         130               69
OTHER LIABILITIES                                                              6,146            4,018
                                                                           __________________________
     Total liabilities                                                       496,806          368,915
                                                                           __________________________

COMMITMENTS AND CONTINGENCIES                                                      -                -

SHAREHOLDERS' EQUITY
  Preferred stock, $2.50 par value; 10,000,000 shares authorized;
    none issued
  Common stock, $2.50 par value; 10,000,000 shares authorized;
     6,227,596 shares issued and outstanding at December 31, 2005.
     6,097,697 shares issued and outstanding at December 31, 2004.            33,907           33,057
  Retained earnings                                                            5,909              184
  Accumulated other comprehensive loss (net of tax)                             (102)            (119)
                                                                           __________________________
     Total shareholders' equity                                               39,714           33,122
                                                                           __________________________
     TOTAL                                                                 $ 536,520        $ 402,037
                                                                           ==========================

The accompanying notes are an integral part of the financial statements.

</TABLE>

                                       54


<PAGE>

<TABLE>
<CAPTION>


                     Bridge Capital Holdings and Subsidiary
                      Consolidated Statements of Operations
                (dollars in thousands, except per share amounts)

                                                                               Year ended
                                                                              December 31,
                                                                  2005            2004             2003
                                                                _________________________________________
<S>                                                             <C>             <C>              <C>

INTEREST INCOME:
  Loans                                                         $ 31,983        $ 18,378         $ 11,587
  Federal funds sold                                               1,703             546              407
  Investment securities available for sale                           432             533              139
                                                                _________________________________________
    Total interest income                                         34,118          19,457           12,133
                                                                _________________________________________

INTEREST EXPENSE:
  Deposits:
    Interest-bearing demand                                           25              21               30
    Money market and savings                                       4,192           1,833            1,040
    Certificates of deposit                                        1,657           1,020            1,165
    Other                                                            741              22                -
                                                                _________________________________________
    Total interest expense                                         6,615           2,896            2,235
                                                                _________________________________________

Net interest income                                               27,503          16,561            9,898
  Provision for credit losses                                      2,162           1,671              843
                                                                _________________________________________
NET INTEREST INCOME AFTER PROVISION
 FOR CREDIT LOSSES                                                25,341          14,890            9,055
                                                                _________________________________________

OTHER INCOME:
  Gain on sale of SBA loans                                        2,290           2,737            2,095
  SBA loan servicing fee income                                      528             358              181
  Increase in value-bank owned life insurance                        377             181                -
  Service charges on deposit accounts                                354             362              194
  Other non interest income                                          648             217              194
                                                                _________________________________________
     Total other income                                            4,197           3,855            2,664
                                                                _________________________________________

OTHER EXPENSES:
  Salaries and benefits                                           12,127           8,081            6,594
  Occupancy                                                        1,652           1,420              890
  Data services                                                    1,085             763              536
  Third party services                                             1,065              95               35
  Marketing                                                          925             612              370
  Professional services                                              746             645              340
  Furniture and equipment                                            583             585              561
  Deposit services/supplies                                          401             311              193
  Other                                                            1,397           1,084              695
                                                                _________________________________________
     Total other expenses                                         19,981          13,596           10,214
                                                                _________________________________________
INCOME BEFORE INCOME TAXES                                         9,557           5,149            1,505
Income taxes                                                       3,832           2,112           (1,868)
                                                                _________________________________________
NET INCOME                                                       $ 5,725         $ 3,037          $ 3,373
                                                                =========================================



Basic earnings per share                                           $0.93           $0.50            $0.56
                                                                =========================================
Diluted earnings per share                                         $0.85           $0.46            $0.53
                                                                =========================================
Average common shares outstanding                              6,164,898       6,063,028        6,050,826
                                                                =========================================
Average common share equivalents outstanding                   6,730,947       6,595,413        6,375,399
                                                                =========================================

The accompanying notes are an integral part of the financial statements.

</TABLE>

                                       55

<PAGE>

<TABLE>
<CAPTION>


                     Bridge Capital Holdings and Subsidiary
     Consolidated Statement of Shareholders' Equity and Comprehensive Income
                 Periods ended December 31, 2003, 2004 and 2005
                    (dollars in thousands, except share data)

                                                                                                 Accumulated          Total
                                                                                                   Other             Share-
                                                         Common Stock              Retained      Comprehensive       holders'
                                                    Shares           Amount        Earnings      Income (loss)        Equity
______________________________________________________________________________________________________________________________
<S>                                                 <C>              <C>            <C>                     <C>        <C>

Balances, December 31, 2002                         6,049,959        $32,790        $(6,226)                $0         $26,564
==============================================================================================================================

Stock options exercised                                 1,687             10           ----               ----              10

Other comprehensive income- unrealized
  loss on securities available for sale, net             ----  ----                    ----                  7               7

Net income for the year                                  ----           ----          3,373                              3,373

______________________________________________________________________________________________________________________________
Balances, December 31, 2003                         6,051,646        $32,800        $(2,853)                $7         $29,954
==============================================================================================================================

Stock options exercised                                46,051            257           ----               ----             257

Other comprehensive income- unrealized
  loss on securities available for sale, net             ----  ----                    ----               (126)           (126)

Net income for the year                                  ----           ----          3,037                              3,037

______________________________________________________________________________________________________________________________
Balances, December 31, 2004                         6,097,697        $33,057           $184              $(119)        $33,122
==============================================================================================================================

Stock options exercised                               129,899            730                                               730

Tax benefit from exercise of
  non qualified stock options                                            120                                               120

Other comprehensive income- unrealized
  gain on securities available for sale, net                                                                17              17

Net income for the year                                                               5,725                              5,725


______________________________________________________________________________________________________________________________
Balances, December 31, 2005                         6,227,596         33,907          5,909               (102)         39,714
==============================================================================================================================

The accompanying notes are an integral part of the financial statements.

</TABLE>


                                       56


<PAGE>

<TABLE>
<CAPTION>


                Bridge Capital Holdings and Subsidiary
                 Consolidated Statements of Cash Flows
                        (dollars in thousands)

                                                                                       Year ended
                                                                                      December 31,
                                                                               2005        2004         2003
                                                                             ________________________________
<S>                                                                          <C>         <C>          <C>

CASH FLOWS FROM OPERATING ACTIVITIES:

  Net income                                                                 $ 5,725     $ 3,037      $ 3,373
  Adjustments to reconcile net income to net cash
    provided by operating activities:
      Provision for credit losses                                              2,162       1,671          843
      Depreciation and amortization                                              853         908          691
      Proceeds from loan sales                                                66,578      84,889       41,469
      Loans originated for sale                                              (69,843)    (68,459)     (57,329)
      Increase in accrued interest receivable and other assets                (4,747)     (3,102)      (2,440)
      Increase in accrued interest payable and other liabilities               2,176       2,314          962
                                                                             ________________________________
          Net cash provided by operating activities                            2,904      21,258      (12,431)
                                                                             ________________________________

CASH FLOWS FROM INVESTING ACTIVITIES:

  Purchase of securities available for sale                                  (50,394)    (17,554)     (20,000)
  Proceeds from maturities of securities available for sale                   64,300      15,200       12,277
  Net increase in loans                                                     (142,097)   (116,515)     (49,691)
  Purchase of life insurance                                                       -      (8,000)           -
  Purchase of fixed assets                                                      (935)     (1,417)        (499)
                                                                             ________________________________
          Net cash used in investing activities                             (129,126)   (128,286)     (57,913)
                                                                             ________________________________

CASH FLOW FROM FINANCING ACTIVITIES:
  Net increase in deposits                                                   115,702     106,062       93,035
  Proceeds from sale of common stock                                             850         257           10
  Increase in other borrowings                                                10,000      12,372            -
                                                                             ________________________________
         Net cash provided by financing activities                           126,552     118,691       93,045
                                                                             ________________________________

         Net increase in cash and equivalents                                    330      11,663       22,701
Cash and equivalents at beginning of period                                   69,210      57,547       34,846
                                                                             ________________________________
Cash and equivalents at end of period                                       $ 69,540    $ 69,210     $ 57,547
                                                                             ================================

OTHER CASH FLOW INFORMATION:
  Cash paid for interest                                                     $ 5,538     $ 2,694      $ 2,112
                                                                             ================================
  Cash paid for income taxes                                                 $ 4,665     $ 2,101          $ -
                                                                             ================================

The accompanying notes are an integral part of the financial statements.

</TABLE>


                                       57


<PAGE>


BRIDGE CAPITAL HOLDINGS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003


1.       SIGNIFICANT ACCOUNTING POLICIES


         PRINCIPLES  OF  CONSOLIDATION  - The financial  statements  include the
         accounts of Bridge Capital  Holdings and its  subsidiary,  Bridge Bank,
         N.A. ("the Bank") collectively referred to herein as "the Company".

         BUSINESS  - Bridge  Bank,  N.A.  commenced  business  in  Santa  Clara,
         California  on May 14,  2001.  Its main office is located at 55 Almaden
         Blvd, San Jose,  California,  95113.  The Bank conducts  commercial and
         retail banking business,  which includes accepting demand,  savings and
         time deposits and making commercial, real estate and consumer loans. It
         also issues cashier's checks, sells travelers checks and provides other
         customary banking services.

         On  October  1,  2004,  Bridge  Bank,  National  Association  announced
         completion of a bank holding  company  structure  which was approved by
         shareholders at the Bank's annual shareholders' meeting held on May 20,
         2004. The bank holding company, formed as a California corporation,  is
         named Bridge Capital  Holdings.  Information in this report dated prior
         to September 30, 2004 is for Bridge Bank, N.A.

         Bridge Capital  Holdings (the  "Company") was formed for the purpose of
         serving as the holding company for Bridge Bank and is supervised by the
         Board of Governors of the Federal Reserve System.  Effective October 1,
         2004,  Bridge  Capital  Holdings  acquired 100% of the voting shares of
         Bridge Bank, National Association. As a result of the transaction,  the
         former  shareholders  of Bridge Bank received one share of common stock
         of Bridge  Capital  Holdings  for  every  one share of common  stock of
         Bridge Bank owned.

         Prior to the  share  exchange,  the  common  stock of the Bank had been
         registered with the Office of Comptroller of the Currency.  As a result
         of the share exchange,  common stock of Bridge Capital  Holdings is now
         registered with the Securities and Exchange  Commission.  Filings under
         the  federal  securities  laws are made  with the SEC  rather  than the
         Office of the  Comptroller  of the  Currency  and are  available on the
         SEC's website,  http://www.sec.gov  as well as on the Company's website
         http://www.bridgebank.com.

         BASIS OF PRESENTATION - The accounting and reporting policies of Bridge
         Capital  Holdings and Bridge Bank, N.A.  conform to generally  accepted
         accounting  principles  and  prevailing  practices  within the  banking
         industry.

         USE  OF  ESTIMATES  -  The  preparation  of  financial   statements  in
         conformity  with  generally  accepted  accounting  principles  requires
         management  to make  estimates  and  assumptions  that affect  reported
         amounts of assets,  liabilities,  revenues and expenses, and disclosure
         of  contingent  assets  and  liabilities  as of the  dates  and for the
         periods presented.  A significant estimate included in the accompanying
         financial  statements is the allowance for loan losses.  Actual results
         could differ from those estimates.

         EARNINGS PER SHARE - Basic net income per share is computed by dividing
         net income  applicable to common  shareholders by the weighted  average
         number of common  shares  outstanding  during the  period.  Diluted net
         income per share is  determined  using the weighted  average  number of
         common shares outstanding during the period,  adjusted for the dilutive
         effect of common stock equivalents,  consisting of shares that might be
         issued upon exercise of common stock options.  Common stock equivalents
         are  included in the diluted  net income per share  calculation  to the
         extent  these  shares  are  dilutive.  See  Note  2  to  the  financial
         statements for additional information on earnings per share.


                                       58


<PAGE>



         CASH EQUIVALENTS - For purposes of reporting cash flows,  cash and cash
         equivalents include cash on hand, amounts due from banks, Federal Funds
         sold and highly  liquid  debt  instruments  purchased  with an original
         maturity of three  months or less.  The Company is required to maintain
         non-interest  earning  cash  reserves  against  certain of the  deposit
         accounts.  As of December 31, 2005,  aggregate reserves (in the form of
         deposits with the Federal Reserve Bank) of $1,466,000 were maintained.

         SECURITIES - The Company classifies its investment  securities into two
         categories,  available  for sale and held to  maturity,  at the time of
         purchase. Securities available for sale are reported at fair value with
         net  unrealized  holding  gains or losses,  net of tax,  recorded  as a
         separate component of shareholders' equity. Securities held to maturity
         are measured at amortized cost based on the Bank's  positive intent and
         ability to hold the securities to maturity.

         Premiums and  discounts  are amortized or accreted over the life of the
         related security as an adjustment to yield using the effective interest
         method.  Dividend and interest income is recognized when earned.  Gains
         and  losses  on  sales  of  securities   are  computed  on  a  specific
         identification basis.

         LOANS - Loans are stated at the principal  amount  outstanding less the
         allowance  for credit  losses and net deferred  loan fees.  Interest on
         loans is credited to income as earned.  Loans are  generally  placed on
         nonaccrual  status and any accrued and unpaid interest is reversed when
         the  payment of  principal  or  interest is 90 days past due unless the
         loan is both well  secured and in the process of  collection.  Interest
         accruals  are resumed on such loans only when they are brought  current
         with respect to interest  and  principal  and when,  in the judgment of
         management,  the loans are estimated to be fully collectible as to both
         principal and interest.

         Loan origination fees and costs are deferred and amortized to income at
         the instrument  level using the effective  interest method based on the
         contractual lives adjusted for prepayments.

         LOANS  HELD  FOR SALE - Small  Business  Administration  ("SBA")  loans
         originated and intended for sale in the secondary market are carried at
         the  lower of cost or  estimated  market  value in the  aggregate.  Net
         unrealized  losses are  recognized  through a  valuation  allowance  by
         charges to income.  Gains or losses  realized on the sales of loans are
         recognized  at the time of sale and are  determined  by the  difference
         between  the net sales  proceeds  and the  carrying  value of the loans
         sold,  adjusted for any servicing asset or liability.  Gains and losses
         on sales of loans are included in non-interest income.

         The Bank has  adopted  SFAS  No.  140  "Accounting  for  Transfers  and
         Servicing of Financial Assets and  Extinguishments of Liabilities." The
         Statement provides accounting and reporting standards for transfers and
         servicing of financial assets and extinguishments of liabilities. Under
         this  Statement,  after a  transfer  of  financial  assets,  an  entity
         recognizes   the  financial  and  servicing   assets  it  controls  and
         liabilities it has incurred, derecognizes financial assets when control
         has been surrendered, and derecognizes liabilities when extinguished.

         To calculate the gain (loss) on sale of loans, the Bank's investment in
         the loan is  allocated  among the  retained  portion  of the loan,  the
         servicing retained, the interest-only strip and the sold portion of the
         loan,  based on the relative  fair market value of each  portion.  That
         portion  of the excess  servicing  fees that  represents  contractually
         specified  servicing  fees  (contractual  servicing)  is reflected as a
         servicing  asset  which is  amortized  over an  estimated  life using a
         method  approximating  the level  yield  method.  The portion of excess
         servicing fees in excess of the contractual servicing fees is reflected
         as an  interest-only  (I/O) strip  receivable,  which is  classified as
         available  for sale and carried at fair  value.  The gain (loss) on the
         sold portion of the loan is recognized at the time of sale based on the
         difference between the sale proceeds and the allocated investment. As a
         result of the relative fair value allocation, the carrying value of the
         retained portion is discounted,  with the discount accreted to interest
         income over the life of the loan.


                                       59


<PAGE>


         ALLOWANCE  FOR  CREDIT  LOSSES - The  allowance  for  credit  losses is
         established  through a provision charged to expense.  Loans are charged
         off against the allowance when management  believes that the collection
         of principal is unlikely.  The  allowance is an amount that  management
         believes  will be adequate to absorb known and  probable  losses in the
         loan portfolio. The allowance is based on a number of factors including
         prevailing economic trends,  industry experience,  estimated collateral
         values,   management's  assessment  of  credit  risk  inherent  in  the
         portfolio,  delinquency  trends,  historical loss experience,  specific
         problem  loans and other  relevant  factors.  Because the allowance for
         loan  losses  is based on  estimates,  ultimate  losses  may vary  from
         current estimates.

         ACCOUNTING FOR IMPAIRED  LOANS - A loan is considered  impaired when it
         is probable that interest and principal will not be collected according
         to the  contractual  terms  of the loan  agreement.  Any  allowance  on
         impaired loans is generally based on three methods. 1) present value of
         expected future cash flows discounted at the loan's effective  interest
         rate or, 2) as a practical  expedient,  at the loan's observable market
         price or 3) the fair value of the  collateral if the loan is collateral
         dependent.  Income recognition on impaired loans is consistent with the
         policy for income recognition on non-accrual loans described above.

         PREMISES AND EQUIPMENT - Premises and equipment are stated at cost less
         accumulated    depreciation   and   amortization.    Depreciation   and
         amortization are computed on a straight-line  basis over the shorter of
         the lease term or the estimated  useful lives of the assets,  which are
         generally three years for computer  equipment,  three to five years for
         furniture,  fixtures and  equipment and five to ten years for leasehold
         improvements.

         OTHER REAL ESTATE OWNED - Other real estate owned  ("OREO")  consist of
         properties acquired through  foreclosure.  We value these properties at
         the lower of cost or fair  value  less  estimated  costs to sell at the
         time we acquire them,  which  establishes the new cost basis. We charge
         against the allowance for credit losses any losses  arising at the time
         of acquisition of such properties. After we acquire them, we carry such
         properties  at the lower of cost or fair value less  estimated  selling
         costs. If we record any write-downs or losses from  disposition of such
         properties  after  acquiring  them,  we  include  this  amount in other
         non-interest  expense.  Development and  improvement  costs relating to
         OREO are capitalized  (assuming they are recoverable).  The Bank has no
         OREO at December 31, 2005 or 2004.

         INCOME TAXES - Deferred tax assets and  liabilities  are  recognized at
         currently  enacted rates applicable to the period in which the deferred
         tax assets and  liabilities  are  expected to be realized  and settled.
         Deferred  income  taxes  are  provided  on  income  and  expense  items
         recognized  in  different  periods  for  financial  statement  and  tax
         reporting purposes. The Company eliminated its valuation allowance with
         respect to its net deferred tax asset of approximately  $2.0 million as
         of December  31,  2003.  During 2003,  it was  determined  that the net
         deferred  tax asset meets the  realizability  standards of SFAS No. 109
         and, as such the  valuation  allowance  was  eliminated.  No  valuation
         allowance was deemed necessary based on the judgment of management that
         future  earnings  would be  sufficient to realize the benefit of all of
         its deferred tax assets. The reduction in valuation  allowance resulted
         in a credit to income tax expense of approximately $1.9 million for the
         tax year ended December 31, 2003.

         STOCK-BASED  AWARDS  -  In  October  1995,  the  Financial   Accounting
         Standards  Board  issued  SFAS No.  123  "Accounting  for  Stock  Based
         Compensation"  as amended by SFAS No. 148  "Accounting for Stock -Based
         Compensation.  Under the  provisions  of SFAS No.  123,  the Company is
         encouraged,  but not required, to measure compensation costs related to
         its employee stock  compensation  plan under the fair value method.  If
         the Company  elects not to recognize  compensation  expense  under this
         method,  it is required  to  disclose  the pro forma net income and net
         income per share effects based on SFAS No. 123 fair value  methodology.
         The  Company  has elected to adopt the  disclosure  provisions  of this
         statement.  See  Note 9 to the  financial  statements  for  information
         regarding stock-based awards.

         RECENT  ACCOUNTING  ANNOUNCEMENTS - In December 2004, FASB revised SFAS
         123 and  issued  it under  its new name,  "SHARE-BASED  PAYMENT."  This
         statement  eliminates  the  alternative  to use APB  Opinion  No.  25's
         intrinsic  value  method  of  accounting   discussed  in  the  previous
         paragraph.  Instead,  this  Statement  generally  requires  entities to
         recognize the cost of employee services received in exchange for awards
         of stock options, or other equity instruments,  based on the grant-date
         fair  value of those  awards.  This  cost will be  recognized  over the
         period  during  which an employee  is  required  to provide  service in
         exchange for the award, generally the vesting period.


                                       60


<PAGE>


         The Company must adopt this  Statement in 2006 for all new stock option
         awards as well as any existing awards that are modified, repurchased or
         cancelled.  In addition,  the unvested  portion of  previously  awarded
         options will also be recognized as expense.  The Company estimates that
         the adoption of this Statement will result in a reduction in net income
         of  approximately  $347  thousand in 2006,  based on  unvested  options
         outstanding  as of  December  31,  2005.  The  decision  to grant stock
         options is made annually on a case-by-case basis and, accordingly,  the
         Company cannot estimate the amount or financial statement impact of any
         stock options that might be granted in 2006.

         RECLASSIFICATIONS - Certain reclassifications were made to prior years'
         presentations to conform to the current year.  These  reclassifications
         had no effect on net income or earnings per share.

         COMPREHENSIVE INCOME - SFAS No. 130, "Reporting  Comprehensive  Income"
         requires  that all  items  recognized  under  accounting  standards  as
         components of comprehensive earnings be reported in an annual financial
         statement  that is displayed  with the same  prominence as other annual
         financial  statements.  This  Statement  also  requires  that an entity
         classify  items of other  comprehensive  earnings by their nature in an
         annual  financial  statement.   Other  comprehensive  earnings  include
         unrealized  gains and  losses,  net of tax,  on  marketable  securities
         classified as  available-for-sale.  The Company had  accumulated  other
         comprehensive  income  (loss)  totaling  ($102,000),  net  of  tax,  at
         December  31,  2005,  ($119,000),  net of tax, at December 31, 2004 and
         $7,000, net of tax, at December 31, 2003.


                                                        Period ended
                                                         December 31,
(dollars in thousands)                          2005         2004          2003
                                              ______       ______       _______

Net income                                    $5,725       $3,037       $ 3,373

Other comprehensive earnings-
 Net unrealized gains (losses) on
 securities available for sale                    17         (126)            7
                                              ______       ______       _______

Total comprehensive income                    $5,742       $2,911       $ 3,380
                                              ======       ======       =======


         SEGMENTS  OF AN  ENTERPRISE  AND  RELATED  INFORMATION  - SFAS No. 131,
         "Disclosure  about Segments of an Enterprise  and Related  Information,
         requires  certain  information  about  the  operating  segments  of the
         Company.  The objective of requiring  disclosures  about segments of an
         enterprise and related  information is to provide information about the
         different types of business  activities in which an enterprise  engages
         and the  different  economic  environment  in which it operates to help
         users of financial statements better understand its performance, better
         assess  its  prospects  for future  cash  flows and make more  informed
         judgments  about the enterprise as a whole.  The Company has determined
         that it has one segment,  general commercial banking,  and therefore it
         is  appropriate  to aggregate  the Company's  operations  into a single
         operating segment.


2.       EARNINGS PER SHARE

         Basic net  earnings  per share is  computed by  dividing  net  earnings
         applicable to common  shareholders  by the weighted  average  number of
         common shares outstanding  during the period.  Diluted net earnings per
         share is determined  using the weighted average number of common shares
         outstanding  during the period,  adjusted  for the  dilutive  effect of
         common  stock  equivalents,  consisting  of shares that might be issued
         upon exercise of common stock  options.  Common stock  equivalents  are
         included in the diluted net earnings per share


                                       61


<PAGE>


         calculation to the extent these shares are dilutive.  A  reconciliation
         of the numerator and  denominator  used in the calculation of basic and
         diluted net earnings per share  available to common  shareholders is as
         follows (in thousands, except for per share amounts):



Earnings per share calculation (dollars in thousands, except per share amounts)

<TABLE>
<CAPTION>

                                                              Year ended December 31,
                                                    ____________________________________________
                                                       2005             2004            2003
                                                    ___________      ___________     ___________
<S>                                                 <C>              <C>             <C>

Net income                                          $ 5,725,000      $ 3,037,000     $ 3,373,000
                                                    ___________      ___________     ___________
Weighted average shares used in computing:

Basic earnings per share                              6,164,898        6,063,028       6,050,826
Dilutive potential common shares related to stock
  options, using the treasury stock method              566,049          532,385         324,573
                                                    ___________      ___________     ___________
Total average shares and equivalents                  6,730,947        6,595,413       6,375,399

Basic income  per share                             $      0.93      $      0.50     $      0.56
                                                    ===========      ===========     ===========
Diluted income per share                            $      0.85      $      0.46     $      0.53
                                                    ===========      ===========     ===========

</TABLE>


         There  were  34,700  options  (including  those  issuable  pursuant  to
         contingent stock agreements) that could potentially dilute basic EPS in
         the future  that were not  included in the  computation  of diluted EPS
         because  to do so  would  have  been  antidilutive  for  the  period(s)
         presented.


                                       62



<PAGE>


3.       SECURITIES


         The amortized  cost and estimated fair values of securities at December
         31 are as follows:

<TABLE>
<CAPTION>


(dollars in thousands)                                    as of December 31, 2005
                                                 _________________________________________
                                                              Gross Unrealized
                                                             _________________     Fair
                                                   Cost       Gains    Losses      Value
                                                 _________________________________________
<S>                                              <C>           <C>     <C>        <C>

  U. S. Government Treasuries                    $   199       $ -     $    -     $    199
  U. S. Government Agencies                        12,355        -       (171)      12,184
                                                 _________________________________________
Total available for sale                           12,554        -       (171)      12,383
                                                 _________________________________________
  Total investment securities portfolio          $ 12,554      $ -     $ (171)    $ 12,383
                                                 =========================================


                                                          as of December 31, 2004
                                                 _________________________________________
                                                              Gross Unrealized
                                                              ________________     Fair
                                                   Cost       Gains    Losses      Value
                                                 _________________________________________
  U. S. Government Treasuries                    $    100      $ -     $    -     $    100
  U. S. Government Agencies                        26,400        -       (202)      26,198
                                                 _________________________________________
Total available for sale                           26,500        -       (202)      26,298
                                                 _________________________________________
  Total investment securities portfolio          $ 26,500      $ -     $ (202)    $ 26,298
                                                 =========================================

</TABLE>


         As of December 31, 2005,  investment securities with carrying values of
         approximately  $199,000 were pledged as collateral.  As of December 31,
         2005,  $171,000 in  unrealized  losses was  attributable  to securities
         positioned for the period greater than 12 months. The unrealized losses
         on investments in U.S.  Government agency securities which have been in
         an  unrealized  loss position for one year or longer as of December 31,
         2005 (a total of 12  securities),  were caused by market  interest rate
         increases  subsequent  to the purchase of the  securities.  Because the
         Bank has the ability to hold these investments until a recovery in fair
         value,   which  may  be  maturity,   the  unrealized  losses  on  these
         investments are not considered to be other-than-temporarily impaired as
         of December 31, 2005.

         The scheduled  maturities of securities (other than equity  securities)
         available for sale at December 31, 2005 and 2004 were as follows:


(dollars in thousands)                                 December 31, 2005
                                                   ________________________
                                                  Amortized          Fair
       Securities available for sale                Cost             Value
                                                   ________________________

Due in one year or less                            $ 10,536        $ 10,429
Due after one year through five years                 2,018           1,954
Due after five years through ten years                    -               -
Due after ten years                                       -               -
                                                   ________________________
  Total securities available for sale                12,554          12,383
                                                   ________________________
    Total Investment securities                    $ 12,554        $ 12,383
                                                   ========================


                                                       December 31, 2004
                                                   ________________________
                                                  Amortized          Fair
       Securities available for sale                Cost             Value
                                                   ________________________

Due in one year or less                            $ 14,116        $ 14,074
Due after one year through five years                12,384          12,224
Due after five years through ten years                    -               -
Due after ten years                                       -               -
                                                   ________________________
  Total securities available for sale                26,500          26,298
                                                   ________________________
    Total Investment securities                    $ 26,500        $ 26,298
                                                   ========================


                                       63


<PAGE>


4.       LOANS AND ALLOWANCES FOR CREDIT LOSSES


         The following  summarizes  loans and activity in the allowance for loan
         losses for the years ended December 31, 2005, 2004 and 2003.

A SUMMARY OF LOANS IS AS FOLLOWS:
(dollars in thousands)
                                             2005         2004         2003
                                           __________________________________

Commercial and other                       $182,396     $100,681      $73,846
SBA                                          46,867       45,251       39,412
Real estate construction                     84,792       42,323       35,065
Real estate term                             83,748       80,044       28,036
Factoring/asset based lending                38,184       22,342       13,106
Other                                         4,011        3,945        4,984
________________________________           __________________________________
  Loans, gross                              439,998      294,586      194,449
Unearned fee income                          (1,395)        (973)        (713)
________________________________           __________________________________
  Total loan portfolio                      438,603      293,613      193,736
Less allowance for credit losses             (5,936)      (4,146)      (2,683)
________________________________           __________________________________
     Loans, net                            $432,667     $289,467     $191,053
================================           ==================================


ANALYSIS OF THE ALLOWANCE FOR CREDIT LOSSES:
(dollars in thousands)
                                             2005         2004         2003
                                           __________________________________
Balance, beginning of period                $ 4,146      $ 2,683      $ 1,765
Provision for credit losses                   2,162        1,671          843
Charge-offs                                    (384)        (240)         (10)
Recoveries                                       12           32           85
                                           __________________________________
Balance, end of period                      $ 5,936      $ 4,146      $ 2,683
                                           ==================================

         There  was  one   non-accrual   loan  at  December  31,  2005  totaling
         $2,320,000,  two  non-accrual  loans  at  December  31,  2004  totaling
         $1,026,000 and one  non-accrual  loan totaling  $59,000 at December 31,
         2003.  At December 31, 2005,  the  non-accrual  loans  consisted of one
         commercial loan totaling $2,320,000 secured by business assets and real
         property  with values in excess of the carrying  value of the loan.  At
         December 31, 2004,  the  non-accrual  loans  consisted of two SBA loans
         totaling   $1,026,000   of  which   $712,000  is   guaranteed   by  the
         U.S.Government.  The  remaining  balance  of  $314,000  is  secured  by
         business  assets and real  property.  Of the two loans on nonaccrual at
         December  31,  2004,  one loan was  determined  to be impaired  and its
         carrying value  reflects the fair value of the collateral  securing the
         loan.

         Income on such  loans is only  recognized  to the  extent  that cash is
         received  and where the future  collection  of  principal  is probable.
         Accrual of interest is resumed  only when  principal  and  interest are
         brought  fully  current  and  when  such  loans  are  considered  to be
         collectible as to both principal and interest.

         At December 31, 2005 and 2004,  there were no loans past due 90 days or
         more as to principal or interest and still accruing interest.

         There was no Other Real Estate Owned at December 31, 2005 or 2004.


                                       64



<PAGE>



5.       PREMISES AND EQUIPMENT


         Premises and  equipment at December 31, are  comprised of the following
         (dollars in thousands):


PREMISES AND EQUIPMENT
(dollars in thousands)
                                      2005           2004         2003
                                     ___________________________________

Leasehold improvements               $ 1,981        $ 1,590        $ 981
Furniture and Equipment                1,752          1,488        1,181
Capitalized Software                   1,344          1,066          655
                                     ___________________________________
     Premises and equipment            5,077          4,144        2,817
Less accumulated depreciation
   and amortization                   (2,740)        (1,929)      (1,302)
                                     ___________________________________
     Premises and equipment, net     $ 2,337        $ 2,215      $ 1,515
                                     ===================================



         Depreciation  and  amortization  amounted  to  $813,000,  $717,000  and
         $674,000  for the  years  ended  December  31,  2005,  2004  and  2003,
         respectively,  and have been included in occupancy and/or furniture and
         equipment  expense,  depending  on the  nature of the  expense,  in the
         accompanying statements of operations.


6.       DEPOSITS

         The Bank's deposit base consists of non-interest  and  interest-bearing
         demand deposits,  savings and money market accounts and certificates of
         deposit.  The following table summarizes the composition of deposits as
         of December 31, 2005, 2004 and 2003.

<TABLE>
<CAPTION>


DEPOSIT CATEGORIES
(dollars in thousands)                      2005                      2004                      2003
                                     ___________________       ___________________       ___________________
                                                 Percent                   Percent                   Percent
                                      Total      of total       Total      of total       Total      of total
                                      Amount     deposits       Amount     deposits       Amount     deposits
                                     ___________________       ___________________       ___________________
<S>                                  <C>           <C>         <C>           <C>         <C>           <C>

Noninterest-bearing  demand          $185,557      39.64%      $126,895      36.00%      $ 76,510      31.05%
Interest-bearing demand                 2,866       0.61%         3,946       1.12%         6,954       2.82%
Money market and savings              210,011      44.86%       169,801      48.18%       115,930      47.05%
Certificates of deposit:
  Less than $100                       19,228       4.11%        16,182       4.59%        16,006       6.50%
  $100 and more                        50,496      10.79%        35,632      10.11%        30,994      12.58%
                                     ___________________       ___________________       ___________________
Total                                $468,158     100.00%      $352,456     100.00%      $246,394     100.00%
                                     ===================       ===================       ===================

</TABLE>


         Deposits at December 31, 2005 included $70.6  million,  or 15.1% of the
         total, in title and escrow company account  balances  compared to $55.3
         million,  or 15.6% at December 31, 2004 and $28.4 million,  or 11.5% at
         December 31, 2003.

         The aggregate amount of time deposits, each with a minimum denomination
         of $100,000  at  December  31,  2005,  2004 and 2003 was  approximately
         $40,692,000, $35,632,000 and $30,994,000, respectively.


                                       65


<PAGE>


At  December  31,  2005,  time  deposits  of  $100,000  or more  have  remaining
maturities as follows:

(in thousands)

3 months or less                                     $ 22,085
Over 3 months to 6 months                               5,028
Over 6 months to 12 months                             11,462
Over 1 year to 5 years                                  2,117
                                                     _________
    TOTAL                                            $ 40,692
                                                     =========

At December 31,  2005,  the  scheduled  maturities  of all time  deposits are as
follows:

(dollars in thousands)

                         2006                          64,879
                         2007                           3,648
                         2008                           1,097
                         2009                             100
                                                     _________
                                                     $ 69,724
                                                     =========


7.       JUNIOR SUBORDINATED DEBIT SECURITIES AND OTHER BORROWINGS


         JUNIOR SUBORDINATED DEBT SECURITIES

         On  December  21,  2004,  the  Company  issued  $12,372,000  of  junior
         subordinated debt securities (the "debt  securities") to Bridge Capital
         Trust I ("the Trust"),  a statutory trust created under the laws of the
         State  of  California.   These  debt  securities  are  subordinated  to
         effectively  all  borrowings  of the Company and are due and payable in
         March, 2035.  Interest is payable quarterly on these debt securities at
         a fixed  rate of 5.9% for the  first  five  years  thereafter  interest
         accrues at LIBOR plus 1.98%. The debt securities can be redeemed at par
         at the  Company's  option  beginning in March,  2010;  they can also be
         redeemed at par if certain  events occur that impact the tax  treatment
         of the capital treatment of the issuance.

         The Company  also  purchased a 3% minority  interest in the Trust.  The
         balance  of the  equity  of  the  Trust  is  comprised  of  mandatorily
         redeemable preferred  securities.  Under FASB Interpretation No.46 (FIN
         46), "Consolidation of Variable Interest Entities, an interpretation of
         ARB No. 51," the Trust is not consolidated into the company's financial
         statements.  Prior to the  issuance of FIN 46, bank  holding  companies
         typically  consolidated  these entities.  The Federal Reserve Board has
         ruled that subordinated notes payable to unconsolidated special purpose
         entities ("SPE's") such as the Trust, net of the bank holding company's
         investment  in the SPE,  qualify as Tier 1 Capital,  subject to certain
         limits.


         OTHER BORROWINGS

         Other borrowings at December 31, 2005 are comprised of one advance from
         the  Federal  Home  Loan Bank of San  Francisco  for  $10,000,000.  The
         advance is at a fixed rate of 4.38% with a maturity  date of January 6,
         2006.

         The advance is secured by loans totaling  approximately $16 million. As
         of  December  31,  2005,  the Bank had a total  borrowing  capacity  of
         approximately $80 million.

         The Bank also has unsecured  borrowing lines with  correspondent  banks
         totaling  $27 million.  At December  31,  2005,  there were no balances
         outstanding on these lines.


                                       66



<PAGE>



8.       INCOME TAXES


         Income tax expense  (benefit)  consists of the  following for the years
         ended December 31, 2005, 2004 and 2003 (dollars in thousands):


                                   2005           2004          2003
                                  _____________________________________
Current:
  Federal                         $ 4,081        $ 1,826       $     25
  State                             1,057            489            185
                                  _____________________________________
     Total current                  5,138          2,315            210
                                  _____________________________________

Deferred:
  Federal                          (1,006)          (211)        (1,587)
  State                              (300)             8           (491)
                                  _____________________________________
    Total deferred                 (1,306)          (203)        (2,078)
                                  _____________________________________
       Income tax provision       $ 3,832        $ 2,112       $ (1,868)
                                  =====================================



         Deferred   income  taxes  reflect  the  net  tax  effect  of  temporary
         differences  between  carrying  amount of assets  and  liabilities  for
         financial  reporting  purposes  and the  amount  used  for  income  tax
         purposes.  The tax effects of temporary  differences  that gave rise to
         significant  portions of deferred tax assets at December 31, 2005, 2004
         and 2003 are as follows:


                                        2005           2004           2003
                                     ________________________________________
Deferred tax assets (liability):
  Deferred Loan Fee                   $ 488,000      $ 340,000      $ 250,000
  Allowance for credit losses         1,756,000      1,246,000        597,000
  Deferred Pre-opening expenses          29,000        153,000        240,000
  State income taxes                    957,000        536,000        467,000
  Fixed assets                          (27,000)      (113,000)       (91,000)
  Other                                 292,000              -          7,000
  Accrued expenses                       91,000        119,000         47,000
Net operating loss                            -              -        561,000
                                     ________________________________________
Deferred tax asset                    3,586,000      2,281,000      2,078,000
                                     ________________________________________
Valuation Allowance                           -              -              -
                                     ________________________________________
Net Deferred Tax Asset               $3,586,000     $2,281,000     $2,078,000
                                     ========================================


         The Bank  eliminated  its valuation  allowance  with respect to its net
         deferred  tax asset of  approximately  $2.0  million as of December 31,
         2003.  During 2003, it was determined that the deferred tax asset meets
         realizability  standards  of SFAS No.  109 and,  as such the  valuation
         allowance was eliminated.  No valuation  allowance was deemed necessary
         based on the judgment of Bank  management that future earnings would be
         sufficient  to realize the benefit of all its deferred tax assets.  The
         reduction  in  valuation  allowance  resulted in a credit to income tax
         expense of  approximately  $1.9 million for the tax year ended December
         31, 2003.


                                       67


<PAGE>


         Rate Reconciliation


The effective tax rate differs from the federal statutory rate as follows:

                                   2005           2004          2003
                                  ____________________________________

Federal statutory rate            35.00%         35.00%         35.00%
State income tax, net of
   federal effect                  5.15%          6.27%        -20.40%
BOLI income                       -1.38%
Other, net                         1.33%         -0.25%          2.30%
Valuation allowance                0.00%          0.00%       -141.00%
                                  ____________________________________
     Income taxes                 40.10%         41.02%       -124.10%
                                 =====================================


9.       STOCK OPTION PLAN


         At December 31, 2005 the total  authorized  shares  issuable  under the
         Bridge   Capital   Holdings   Stock   Option  Plan  (the   "Plan")  was
         approximately  1,813,225  shares and the number of shares available for
         future grant was approximately 294,376 shares.

         Options  issued  under  the  Plan  may  be  granted  to  employees  and
         nonemployee directors and may be either incentive or nonqualified stock
         options as defined under current tax laws.  The exercise  price of each
         option must equal the market price of the  Company's  stock on the date
         of the  grant.  The term of the  option  may not  exceed  10 years  and
         generally vests over a 4 year period.


                                       68


<PAGE>


         A summary of the Bank's stock options as of December 31, 2005, 2004 and
         2003 and  changes  during  the period  ended on that date is  presented
         below:

                                                   Options Outstanding
                                              _____________________________
                                               Number      Weighted Average
                                              of Shares     Exercise Price
                                              _____________________________

Balances, December 31, 2002                   1,047,750         $ 5.41

Granted                                          76,800         $ 6.35
(weighted average value of $1.76)
Exercised                                        (1,687)        $ 5.00
Cancelled                                       (13,938)        $ 5.59
Expired                                               -
                                              _________

Balances, December 31, 2003                   1,108,925         $ 5.65

Granted                                         193,850         $13.14
(weighted average value of $3.49)
Exercised                                       (46,051)        $ 5.58
Cancelled                                          (750)        $ 6.44
Expired                                               -
                                              _________

Balances, December 31, 2004                   1,255,974         $ 6.81

Granted                                         235,750         $15.30
(weighted average value of $6.09)
Exercised                                      (129,899)        $ 5.62
Cancelled                                       (26,488)        $14.08
Expired                                               -
                                              _________

Balances, December 31, 2005                   1,335,337         $ 8.30


         Options  exercisable  at December  31,  2005 and 2004 were  884,769 and
         503,638 respectively.  The following table summarizes information about
         stock options outstanding at December 31, 2005.

<TABLE>
<CAPTION>



                                     Options Outstanding            Options Exercisable
                           ______________________________________________________________
                                          Weighted     Weighted                  Weighted
                              Number      Average      average       Number      average
                           Outstanding   remaining     exercise   exercisable    exercise
   Exercise Price range      (000's)    life (years)    price       (000's)       price
_________________________________________________________________________________________

<S>    <C>     <C>           <C>            <C>        <C>          <C>           <C>
       $5.00 - $5.75         616,574        5.3        $ 5.017      616,574       $ 5.017
       $5.76 - $6.50         245,638        6.3        $ 6.318      193,825       $ 6.308
       $6.51 - $13.00        217,050        8.2        $11.702       69,020       $11.264
      $13.01 - $16.00        210,375        9.4        $14.848        5,350       $14.771
      $16.01 - $19.00         45,700        9.8        $17.660            0       $ 0.000
                           ____________________                     _____________________
                           1,335,337        6.7                     884,769       $ 5.850

</TABLE>


         In October,  1995, the Financial Accounting Standards Board issued SFAS
         No. 123, "Accounting for Stock-Based  Compensation" ("SFAS 123"). Under
         the  provisions  of SFAS No. 123,  the Company is  encouraged,  but not
         required,  to measure  compensation costs related to its employee stock
         compensation  plan under the fair value method.  If the Company  elects
         not to recognize compensation expense under this method, it is required
         to disclose  the pro forma net income and net income per share  effects
         based on SFAS No. 123 fair value  methodology.  The Company has elected
         to adopt the disclosure provisions of this statement.


                                       69


<PAGE>


         The Company applies Accounting Principles Board ("APB") Opinion No. 25,
         "Accounting for Stock Issued to Employees" and related  interpretations
         in its accounting for stock options.  Accordingly, no compensation cost
         has been recognized for its stock option plan.

         Under SFAS 123,  the fair value of  stock-based  awards to employees is
         calculated  through the use of option pricing  model,  even though such
         models were  developed to estimate  the fair value of freely  tradable,
         fully   transferable   options  without  vesting   restriction,   which
         significantly  differ from the  Company's  stock option  awards.  These
         models also  require  subjective  assumptions,  including  future stock
         price  volatility  and expected time to exercise,  which greatly affect
         the calculated values.  The Company's  calculations were made using the
         Black-Scholes  option pricing model with the following weighted average
         assumptions:


Weighted Average Assumptions
                              2,005        2,004      2,003
                            __________________________________

Expected life               58 months    60 months   60 months
Stock Volatility               24.76%       21.90%      14.00%
Risk free interest rate         3.74%        3.18%       2.70%
Dividend yield                  0.00%        0.00%       0.00%




         The Bank's stock options  generally vest annually over a period of 3 to
         4 years.  If the computed fair value of the 2005,  2004 and 2003 awards
         had been  amortized to expense  over the vesting  period of the awards,
         pro forma net income would have been as follows:

<TABLE>
<CAPTION>


                                           Year ended        Year ended          Year ended
                                          December 31,      December 31,        December 31,
                                              2005              2004                2003
                                          __________________________________________________
<S>                                        <C>               <C>                 <C>

Net income:
  As reported                              $ 5,725,000       $ 3,037,000         $ 3,373,000

  Stock based employee
  compensation, net of tax, that
  would have been included in
  the determination of net
  income if the fair value method
  had been applied to all awards           $ (317,000)       $ (214,000)         $ (414,000)

  Pro forma                                $ 5,408,000       $ 2,823,000         $ 2,959,000

Basic income per share:
  As reported                              $      0.93       $      0.50         $      0.56
  Pro forma                                $      0.88       $      0.47         $      0.49
Diluted income per share:
  As reported                              $      0.85       $      0.46         $      0.53
  Pro forma                                $      0.80       $      0.43         $      0.46

</TABLE>


                                       70


<PAGE>



10.      PENSION BENEFIT PLANS


         Effective  August  1,  2004,  the  Bank  established  the  Supplemental
         Executive Retirement Plan (SERP), an unfunded  noncontributory  defined
         benefit pension plan. The SERP provides retirement benefits to a select
         group of key executives  and senior  officers based on years of service
         and final average salary.  The Bank uses a December 31 measurement date
         for this plan.


Obligations and Funded Status                             Fiscal Year
                                                       2005           2004
                                                   __________________________
Change in benefit obligation
Benefit obligation at beginning of year             $ 1,213,358           $ -
Service cost                                            311,438       150,312
Interest cost                                            91,488        35,341
Plan participants' contributions                                            -
Amendments (plan initiation)                                  -     1,027,706
Plan (gain) loss                                         63,885             -
Settlements/Curtailments                                      -             -
Benefits paid                                                 -             -
                                                   __________________________
Projected benefit obligation at end of year         $ 1,680,169   $ 1,213,359
                                                   ==========================

Change in plan assets
Fair value of plan assets at beginning of year                -             -
Actual return on plan assets
Settlements/Curtailments
Employer contribution
Plan participants' contributions
Benefits paid
                                                   __________________________
Fair value of plan assets at end of year                    $ -           $ -
                                                   ==========================

Reconciliation of funded status
Funded status                                        (1,680,169)   (1,213,359)
Unrecognized net actuarial (gain) loss                   63,885             -
Unrecognized prior service cost                         922,342       992,585
Unrecognized net transition obligation (asset)                -             -
                                                   __________________________
Net amount recognized                                $ (693,942)   $ (220,774)
                                                   ==========================

Amounts recognized in the statement of
financial position consist of:
Prepaid benefit cost                                   $ -           $ -
Accrued benefit liability                              (983,421)     (750,812)
Intangible asset                                        289,479       530,038
Accumulated other comprehensive income                        -             -
                                                   __________________________
Net periodic benefit cost                          $ (693,942)     $ (220,774)
                                                   ==========================

Assumptions used to determine  benefit
   obligations at December 31,
Discount rate                                             5.70%         6.00%
Rate of compensation increase                             5.00%         5.00%

Assumptions used to determine  net periodic
   benefit cost
Discount rate                                             6.00%         6.00%
Rate of compensation increase                             5.00%         5.00%


                                       71


<PAGE>


11.      RELATED PARTY TRANSACTIONS


         There are no existing or proposed  material  interests or  transactions
         between the Bank and/or any of its  officers or  directors  outside the
         ordinary course of the Bank's business except as indicated.

         Bank  Director  Barry A.  Turkus  is a  principal  in the  real  estate
         brokerage firm of BT Commercial.  An agent of BT Commercial represented
         the Bank in  sublease  negotiations  for the Bank's  offices at 2120 El
         Camino Real,  Santa Clara,  California.  The property,  which is master
         leased to Washington  Mutual Bank,  was listed with CB Commercial  real
         estate  services.  A leasing  fee was paid by  Washington  Mutual to CB
         Commercial in  accordance  with the  Exclusive  Listing and  Commission
         Agreement.  CB Commercial in turn paid  $34,076.18 to BT Commercial for
         the  procuring  portion of the leasing fee. In addition,  BT Commercial
         received a fee of $16,100 in connection with locating and executing the
         Bank's  lease at 525  University  Avenue  in Palo  Alto.  The  Board of
         Directors  determined that the fees paid to BT Commercial in connection
         with real estate  transactions  were no less favorable to the Bank then
         could have been obtained from disinterested third parties.

         The Bank had  entered  into a  consulting  agreement  with The  Brenner
         Group, Inc. (the "Consulting Agreement"), pursuant to which The Brenner
         Group,  Inc.  provided the Bank with  accounting  services prior to the
         opening.  Organizing  Director  Richard Brenner is also Chief Executive
         Officer of The Brenner  Group,  Inc. No service was provided  under the
         contract from June 1, 2001 through December 31, 2001, however, the Bank
         may, from time to time,  again make use of The Brenner Group's services
         under the  agreement.  No expense was  incurred by the Bank in 2003.  A
         total of  $1,800  and  $22,400  were  incurred  by the Bank  under  the
         Consulting  Agreement for the years ending  December 31, 2002 and 2001,
         respectively.  The Board of Directors has determined  that the fees are
         no  less   favorable  to  the  Bank  than  could  be  obtained  from  a
         disinterested third party.

         Some of the  officers and  directors of the Bank  borrowed a portion of
         the  purchase  price of the  shares  subscribed  by them in the  Bank's
         initial Stock Offering. These borrowings were obtained from one or more
         of the Bank's  correspondent  banks in accordance  with applicable laws
         and  were  not  conditioned  upon  the use of  inter-bank  deposits  as
         compensating  balances.  Federal law prohibits the Bank from lending on
         the security of its own capital stock.


12.      COMMITMENTS AND CONTINGENT LIABILITIES


         Lease Commitments

         The Bank's Santa  Clara,  San Jose and Palo Alto  locations  are leased
         under  non-cancelable  operating  leases that expire in 2010,  2006 and
         2006,  respectively.  The Bank has renewal options with  adjustments to
         the lease payments based on changes in the consumer price index.

         Future minimum annual lease payments are as follows:

For years ended December 31,

                          2006      1,028,000
                          2007        795,000
                          2008        864,000
                          2009        225,000
                          2010        907,000
                    thereafter      4,433,000
                                   __________
                                   $8,252,000
                                   ==========


         Rental expense under operating leases was $1,053,000 in 2005,  $977,000
         in 2004 and $574,000 in 2003.


                                       72


<PAGE>


         Other Commitments

         In the normal course of business,  there are outstanding commitments to
         extend credit,  which are not reflected in the  consolidated  financial
         statements.  These commitments involve, to varying degrees, credit risk
         in excess of the amount recognized as either an asset or a liability in
         the balance sheet. The Bank controls the credit risk through its credit
         approval process.  The same credit policies are used when entering into
         such  commitments.  Amounts  committed  to extend  credit  under normal
         lending   agreements   aggregated   approximately    $179,213,000   for
         undisbursed variable loan commitments and approximately  $8,901,000 for
         commitments under unused letters of credit at December 31, 2005.

         The Bank is party to financial instruments with  off-balance-sheet risk
         in the normal  course of  business to meet the  financing  needs of its
         customers.  These  financial  instruments  include loan  commitments of
         $188,114,000,  $99,556,000  and  $61,748,000 at December 31, 2005, 2004
         and 2003,  respectively.  The Bank's exposure to credit loss is limited
         to amounts  funded or drawn;  however,  at December 31, 2005, no losses
         are anticipated as a result of these commitments.

         Loan  commitments are typically  contingent upon the borrowers  meeting
         certain  financial and other covenants and such  commitments  typically
         have fixed  expiration  dates and require  payment of a fee. As many of
         these  commitments are expected to expire without being drawn upon, the
         total   commitments   do  not   necessarily   represent   future   cash
         requirements.  The  Bank  evaluates  each  potential  borrower  and the
         necessary collateral on an individual basis. Collateral varies, and may
         include real property, bank deposits, or business or personal assets.

         Undisbursed  loan  commitments  were  comprised  of  the  following  at
         December 31, 2005:


UNDISBURSED LOAN COMMITMENTS
(dollars in thousands)

Loan Category                       Amount

Commercial                         $75,701
SBA                                  7,381
Real estate construction            65,663
Real estate term                    16,997
Factoring/ABL                       15,289
Other                                7,083
                                 _________
Total                            $ 188,114
                                 =========


                                       73


<PAGE>


13.      DISCLOSURE OF FAIR VALUE OF FINANCIAL INSTRUMENTS


         The  following  estimated  fair value  amounts have been  determined by
         using  available   market   information   and   appropriate   valuation
         methodologies.  However, considerable judgment is required to interpret
         market data to develop the  estimates of fair value.  Accordingly,  the
         estimates presented are not necessarily  indicative of the amounts that
         could be realized in a current  market  exchange.  The use of different
         market  assumptions  and/or  estimation  techniques may have a material
         effect on the estimated fair value amounts.

         The following  table  presents the carrying  amount and estimated  fair
         value of certain  assets and  liabilities  of the Bank at December  31,
         2005,  2004 and 2003.  The  carrying  amounts  reported  in the balance
         sheets approximate fair value for the following financial  instruments:
         cash and due from banks,  federal funds sold, interest bearing deposits
         in other banks, demand and savings deposits (See Note 5 for information
         regarding securities).


FAIR VALUE OF FINANCIAL INSTRUMENTS

                                          2005                     2004
                                 _______________________________________________
(dollars in thousands)            Carrying     Fair        Carrying      Fair
                                   Value       Value         Value       Value
                                 _______________________________________________
Financial Assets:
  Cash and due from banks          $22,880     $22,880       $ 6,535     $ 6,535
  Federal funds sold                46,660      46,660        62,675      62,675
  Investments securities            12,383      12,383        26,298      26,298
  Loans and leases, gross          439,998     445,798       293,612     300,962
  Bank owned life insurance          8,457       8,457         8,080       8,080
Financial liabilities:
  Deposits                         468,158     464,000       352,456     351,119
  Trust Preferred                   12,372      11,998        12,372      12,372
  Other Borrowing                   10,000      10,000             -           -


         LOANS

         The fair value of loans with fixed rates is  estimated  by  discounting
         the future cash flows using  current rates at which similar loans would
         be made to  borrowers  with  similar  credit  ratings.  For loans  with
         variable  rates that adjust with  changes in market  rates of interest,
         the carrying amount is a reasonable estimate of fair value.


         TIME DEPOSITS

         The fair value of fixed maturity  certificates  of deposit is estimated
         using  rates  currently  offered  for  deposits  of  similar  remaining
         maturities.


         COMMITMENTS TO EXTEND CREDIT AND STANDBY LETTERS OF CREDIT

         Commitments  to extend credit and standby  letters of credit are issued
         in the normal  course of  business by the Bank.  Commitments  to extend
         credit are issued with variable  interest rates tied to market interest
         rates at the time the  commitments  are  funded  and the  amount of the
         commitments  equal  their  fair  value.  Standby  letters of credit are
         supported by commitments to extend credit with variable  interest rates
         tied to market interest rates at the time the commitments are funded.


                                       74


<PAGE>


14.      BRIDGE CAPITAL HOLDINGS


         The following are the financial  statements of Bridge Capital  Holdings
(parent company only):



                                  BALANCE SHEET
(dollars in thousands)
                                             December 31,       December 31,
ASSETS:                                          2005               2004
                                             ____________       ____________

Cash and due from banks                        $  1,979           $  2,095
Investment in bank & subsidiaries                50,018             43,430
Other assets                                        130                  -
                                               ________           ________
Total Assets                                   $ 52,126           $ 45,525
                                               ========           ========

LIABILITIES:
Balances due to subsidiaries                   $ 12,372           $ 12,372
Other liabilities                                    41                 31
                                               ________           ________
Total Liabilities                                12,413             12,403
                                               ________           ________
CAPITAL:
Common stock                                     33,907             33,057
Retained earnings                                 5,908                184
Current year net income                               -                  -
Other Comprehensive loss                           (102)              (119)
                                               ________           ________
Total Capital                                    39,713             33,122
                                               ________           ________

Total Liabilities and Capital                  $ 52,126           $ 45,525
                                               ========           ========

                             STATEMENT OF OPERATIONS

                                                      Period ended
(dollars in thousands)                                December 31,
                                               ___________________________
                                                 2005               2004
                                               ________           ________

Interest Income                                $     31           $      4
Interest expense                                    704                 22
Total noninterest expenses                          174                106
                                               ________           ________

Loss before income taxes                           (847)              (124)
Income taxes                                          0                  0
                                               ________           ________
Loss before undistributed income
  of the bank                                      (847)              (124)
Equity in undistributed income
 of the bank                                      6,572              3,161
                                               ________           ________
Net income                                      $ 5,725            $ 3,037
                                               ========           ========


                                       75


<PAGE>

<TABLE>
<CAPTION>



                 STATEMENTS OF CASH FLOWS
                  (dollars in thousands)
                                                                Period ended       Period ended
                                                                December 31,       December 31,
                                                                    2005               2004
                                                                ____________       ____________
<S>                                                                <C>                <C>

CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income (loss)                                                $ 5,725            $ 3,037
  Adjustments to reconcile net income to net cash
    provided by operating activities:
      Equity in undistributed (earnings) of subsidiaries            (6,572)            (3,161)
      Net change in other assets                                        (9)
      Net change in other liabilities                                   10                 31
                                                                   _______            _______
Net cash (used in) provided by operating activities                   (846)               (93)
                                                                   _______            _______


CASH FLOW FROM INVESTING ACTIVITIES:
Investment in subsidiaries                                                            (10,441)
                                                                   _______            _______
Net cash provided by financing activities                                -            (10,441)
                                                                   _______            _______

CASH FLOW FROM FINANCING ACTIVITIES:
  Proceeds from sale of Common stock                                   730                257
  Proceeds from issuance of junior subordinated
    debentures                                                                         12,372
                                                                   _______            _______
Net cash provided by financing activities                              730             12,629
                                                                   _______            _______

Net increase (decrease) in cash and equivalents                       (116)             2,095
Cash and equivalents at beginning of period                          2,095                  -
                                                                   _______            _______
Cash and equivalents at end of period                              $ 1,979            $ 2,095
                                                                   =======            =======

NON CASH TRANSACTIONS:

Tax benefit from exercise of non qualified
  stock options

Other assets                                                          -121
                                                                   _______
                                                                      -121
                                                                   =======

Common stock                                                           121
                                                                   _______
                                                                       121
                                                                   =======

</TABLE>


15.      REGULATORY MATTERS


         The Bank and the  Holding  Company  are  subject to various  regulatory
         capital requirements administered by federal banking agencies.  Failure
         to meet minimum capital  requirements can initiate  certain  mandatory,
         and possibly additional,  discretionary  actions by regulators that, if
         undertaken, could have a direct material effect on the Bank's financial
         statements.  Under  capital  adequacy  guidelines  and  the  regulatory
         framework  for prompt  corrective  action,  the Bank must meet specific
         capital  guidelines  that involve  quantitative  measures of the Bank's
         assets, liabilities,  and certain off-balance-sheet items as calculated
         under regulatory accounting  practices.  The Bank's capital amounts and
         classification  are  also  subject  to  qualitative  judgments  by  the
         regulators about components, risk weightings, and other factors.


                                       76


<PAGE>


         Quantitative  measures  established  by  regulation  to ensure  capital
         adequacy  require the Bank to maintain  minimum amounts and ratios (set
         forth in the table  below) of total and Tier 1 capital  (as  defined in
         the  regulations) to risk-weighted  assets (as defined),  and of Tier I
         capital  (as  defined)  to  average  assets  (as  defined).  Management
         believes,  as of  December  31,  2005,  that the Bank meets all capital
         adequacy requirements to which they are subject.

         The  following  table shows the Bank's  capital  ratios at December 31,
         2005 and 2004 as well as the  minimum  capital  ratios  required  to be
         deemed "well capitalized" under the regulatory framework.

<TABLE>
<CAPTION>




                                                           As of December 31,
             (in thousands)                        2005                       2004
                                             ___________________      ____________________
                                              Amount      Ratio        Amount       Ratio
                                             ___________________      ____________________
<S>                                          <C>          <C>         <C>           <C>

Company Capital Ratios
_____________________________________
Tier 1 Capital                               $ 51,593     10.38%      $ 44,172      12.34%
(to Risk Weighted Assets)
Tier 1 capital minimum requirement           $ 19,879      4.00%      $ 14,313       4.00%

Total Capital                                $ 57,529     11.58%      $ 49,268      13.77%
(to Risk Weighted Assets)
Total capital minimum requirement            $ 39,758      8.00%      $ 28,625       8.00%

Company leverage
Tier 1 Capital                               $ 51,593     11.07%      $ 44,172      12.94%
(to Average Assets)
Total capital minimum requirement            $ 18,638      4.00%      $ 13,659       4.00%

Bank Risk Based Capital Ratios
_____________________________________
Tier 1 Capital                               $ 49,748     10.49%        $ 43,058    12.03%
(to Risk Weighted Assets)
Tier 1 capital minimum requirement           $ 18,970      3.82%        $ 14,313     4.00%
To be well capitalized under
  prompt corrective action provisions        $ 28,455      6.00%        $ 21,469     6.00%

Total Capital                                $ 55,684     11.74%        $ 47,204    13.19%
(to Risk Weighted Assets)
Total capital minimum requirement            $ 37,939      7.63%        $ 28,625     8.00%
To be well capitalized under
  prompt corrective action provisions        $ 47,424      9.54%        $ 35,781    10.00%

Bank leverage
Tier 1 Capital                               $ 49,748      9.98%        $ 43,058    12.61%
(to Average Assets)
Total capital minimum requirement            $ 19,931      4.00%        $ 13,659     4.00%
To be well capitalized under
  prompt corrective action provisions        $ 24,914      5.00%        $ 17,073     5.00%

</TABLE>


                                       77


<PAGE>


ITEM  9.  CHANGES  IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
FINANCIAL DISCLOSURE.


There  are  no  current  or  anticipated  changes  in,  or  disagreements  with,
accountants  on any matter of  accounting  principles  or  practices,  financial
statement disclosure or auditing scope or procedure


ITEM 9A. CONTROLS AND PROCEDURES


DISCLOSURE CONTROLS AND PROCEDURES

As required by SEC rules, the Company's  management evaluated the effectiveness,
as of December 31, 2005, of the Company's  disclosure  controls and  procedures.
The Company's chief executive officer and chief financial  officer  participated
in the  evaluation.  Based on this  evaluation,  the Company's  chief  executive
officer and chief  financial  officer  concluded  that the Company's  disclosure
controls and procedures were effective as of December 31, 2005.


INTERNAL CONTROL OVER FINANCIAL REPORTING

Internal  control  over  financial   reporting  is  defined  in  Rule  13a-15(f)
promulgated under the Securities  Exchange Act of 1934 as a process designed by,
or under the  supervision  of, the company's  principal  executive and principal
financial officers and effected by the company's board of directors,  management
and other personnel,  to provide reasonable  assurance regarding the reliability
of financial reporting and the preparation of financial  statements for external
purposes  in  accordance  with  generally  accepted  accounting  principles  and
includes those policies and procedures that:

Pertain to the maintenance of records that in reasonable  detail  accurately and
fairly  reflect the  transactions  and  dispositions  of assets of the  company;
Provide  reasonable  assurance  that  transactions  are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting  principles,  and that receipts and  expenditures  of the company are
being made only in accordance with authorizations of management and directors of
the company;  and Provide reasonable  assurance  regarding  prevention or timely
detection of  unauthorized  acquisition,  use of  disposition  of the  company's
assets that could have a material effect on the financial statements.

Because of its inherent  limitations,  internal control over financial reporting
may not  prevent  or detect  misstatements.  Projections  of any  evaluation  of
effectiveness to future periods are subject to the risk that controls may become
inadequate  because of changes in  conditions,  or that the degree of compliance
with the policies or  procedures  may  deteriorate.  No change  occurred  during
fourth quarter 2005 that has  materially  affected,  or is reasonably  likely to
materially  affect,  the Company's  internal  control over financial  reporting.
Management's  report on internal  control over financial  reporting is set forth
below, and should be read with these limitations in mind.


MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The  Company's  management  is  responsible  for  establishing  and  maintaining
adequate internal control over financial  reporting for the Company.  Management
assessed the  effectiveness  of the Company's  internal  control over  financial
reporting as of December 31, 2005, using the criteria set forth by the Committee
of  Sponsoring  Organizations  of the  Treadway  Commission  (COSO) in  Internal
Control - Integrated Framework.  Based on this assessment,  management concluded
that as of December 31, 2005,  the  Company's  internal  control over  financial
reporting was effective.

Vavrinek,  Trine, Day & Co., LLP, the independent  registered  public accounting
firm that  audited the  Company's  financial  statements  included in the Annual
Report,  issued an audit  report on  management's  assessment  of the  Company's
internal control over financial  reporting.  Vavrinek,  Trine, Day & Co.'s audit
report appears on the following page.


ITEM 9B.  OTHER INFORMATION          Not applicable


                                       78


<PAGE>


                                   PART III


ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

The  information  required  hereunder  is  incorporated  by  reference  from the
Company's  definitive  proxy  statement for the Company's 2006 Annual Meeting of
Shareholders (to be filed pursuant to Regulation 14A).


ITEM 11.  EXECUTIVE COMPENSATION.

The  information  required  hereunder  is  incorporated  by  reference  from the
Company's  definitive  proxy  statement for the Company's 2006 Annual Meeting of
Shareholders (to be filed pursuant to Regulation 14A).


ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

The  information  required  hereunder  is  incorporated  by  reference  from the
Company's  definitive  proxy  statement for the Company's 2006 Annual Meeting of
Shareholders (to be filed pursuant to Regulation 14A).


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

The  information  required  hereunder  is  incorporated  by  reference  from the
Company's  definitive  proxy  statement for the Company's 2006 Annual Meeting of
Shareholders (to be filed pursuant to Regulation 14A).


ITEM 14.  PRINCIPAL ACCOUNTING FEES AND SERVICES.

The  information  required  hereunder  is  incorporated  by  reference  from the
Company's  definitive  proxy  statement for the Company's 2006 Annual Meeting of
Shareholders (to be filed pursuant to Regulation 14A).


                                     PART IV


ITEM 15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES.


(a) (1) Financial Statements. This information is included in Part II, Item 8.

(a) (2) Financial Statement Schedules. All schedules have been omitted since the
required  information is not present or is not present in amounts  sufficient to
require  submission  of the  schedule  or because  the  information  required is
included in Consolidated Financial Statements or notes thereto.

(a) (3)  Exhibits.  The exhibit list  required by this item is  incorporated  by
reference to the accompanying Exhibit Index filed as part of this report.


                                       79


<PAGE>


                                       SIGNATURES

Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934,  the  registrant  has duly  caused  this report to be signed on its
behalf by the undersigned, thereunto duly authorized.


                                 BRIDGE CAPITAL HOLDINGS



                                 By:  /s/ DANIEL P. MYERS
                                 _____________________________________
                                          Daniel P. Myers, President
                                          (Principal ExecutiveOfficer)

Date:     March 9, 2006


                                       80


<PAGE>


Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following  persons on behalf of the  registrant and
in the capacities and on the dates indicated.


          Name                          Title                      Date
__________________________       ____________________       ____________________



/s/ RICHARD M. BRENNER                Director                March 9, 2006
__________________________       ____________________       ____________________
Richard M. Brenner


/s/ OWEN BROWN                        Director                March 9, 2006
__________________________       ____________________       ____________________
Owen Brown


/s/ DAVID V. CAMPBELL                 Director                March 9, 2006
__________________________       ____________________       ____________________
David V. Campbell


/s/ DAVID K. CHUI                     Director                March 9, 2006
__________________________       ____________________       ____________________
David K. Chui


/s/ ROBERT P. GIONFRIDDO              Director                March 9, 2006
__________________________       ____________________       ____________________
Robert P. Gionfriddo

                                      Chairman
/s/ ALLAN C. KRAMER                   Director                March 9, 2006
__________________________       ____________________       ____________________
Allan C. Kramer, M.D.


/s/ ROBERT P. LATTA                   Director                March 9, 2006
__________________________       ____________________       ____________________
Robert Latta


/s/ THOMAS M. QUIGG                   Director                March 9, 2006
__________________________       ____________________       ____________________
Thomas M. Quigg
                                  President, Chief
                                  Executive Officer
/s/ DANIEL P. MYERS                   Director                March 9, 2006
__________________________       ____________________       ____________________
Daniel P. Myers                     (Principal Executive
                                 Officer)


/s/ BARRY A. TURKUS                   Director                March 9, 2006
__________________________       ____________________       ____________________
Barry A. Turkus
                                   Executive Vice
                                  President, Chief
/s/ THOMAS A. SA                  Financial Officer           March 9, 2006
__________________________       ____________________       ____________________
Thomas A. Sa                        (Principal Financial
                                  and Accounting Officer)



                                       81

<PAGE>


                                INDEX TO EXHIBITS


Exhibit
Number                            Description of Exhibit


(2.1)      Agreement and Plan of Reorganization among Bridge Capital Holdings
           and  Bridge  Bank  dated  as of  October  1,  2004  [incorporated  by
           reference to Exhibit 2.1 to the  registrant's  Current Report on Form
           8-K dated 10/1/04]

(3.1)      Articles of Incorporation of the registrant [incorporated by
           reference to Exhibit  3(i)(a) to the  registrant's  Current Report on
           Form 8-K dated 10/1/04]

(3.2)      Amendment to the registrant's  Articles of Incorporation dated
           August 27, 2004  [incorporated by reference to Exhibit 3(i)(b)
           to the registrant's Current Report on Form 8-K dated 10/1/04]

(3.3)      Registrant's By-Laws [incorporated by reference to Exhibit 3(i)(c) to
           the registrant's Current Report on Form 8-K dated 10/1/04]

(4.1)      Indenture dated as of December 21, 2004 between Bridge Capital
           Holdings  and JP  Morgan  Chase  Bank  as  Trustee  [incorporated  by
           reference to Exhibit 4.1 to the  registrant's  Annual  Report on Form
           10-K dated 12/31/04]

(4.2)      Amended and Restated Declaration of trust of Bridge Capital Holdings
           Trust I dated December 21, 2004 Trustee [incorporated by reference to
           Exhibit  4.2 to the  registrant's  Annual  Report on Form 10-K  dated
           12/31/04]

(10.1)     Bridge Bank Amended and Restated 2001 Stock Option Plan [Incorporated
           by  reference to Exhibit 10.1 to the  Registrant's  Annual  Report on
           Form 10-K dated 12/31/04]**

(10.2)     Bridge  Bank,  National  Association   Supplemental  Executive
           Retirement Plan  [Incorporated by reference to Exhibit 10.2 to
           the Registrant's Annual Report on Form 10-K dated 12/31/04]

(10.3)     Sublease  for  premises at 2120 El Camino  Real,  Santa Clara,
           California  [Incorporated  by reference to Exhibit 10.3 to the
           Registrant's Annual Report on Form 10-K dated 12/31/04].

(10.4)     Organizers'  Acknowledgement  of Liability on Lease California
           [Incorporated by reference to Exhibit 10.4 to the Registrant's
           Annual Report on Form 10-K dated 12/31/04].

(10.5)     Organizers' Acknowledgement of Liability on Lease and Letter of
           Credit Lease California [Incorporated by reference to Exhibit 10.5 to
           the Registrant's Annual Report on Form 10-K dated 12/31/04].

(10.6)     Lease for banking  office  located at 525  University  Avenue,
           City of Palo Alto, County of Santa Clara,  State of California
           [Incorporated by reference to Exhibit 10.6 to the Registrant's
           Annual Report on Form 10-K dated 12/31/04].**

(10.7)     Lease for banking office located at 3035 Prospect Park Drive, Suite
           100,  Rancho  Cordova,  County  of  Sacramento,  State of  California
           [Incorporated by reference to Exhibit 10.7 to the Registrant's Annual
           Report on Form 10-K dated 12/31/04].**

(10.8)     Wire  Transfer  Service  Agreement  with  BankServ,  Inc dated
           6/25/02 California  [Incorporated by reference to Exhibit 10.8
           to  the   Registrant's   Annual  Report  on  Form  10-K  dated
           12/31/04].

(10.9)     Performance Incentive Compensation Plan California [Incorporated by
           reference to Exhibit 10.9 to the  Registrant's  Annual Report on Form
           10-K dated 12/31/04.


                                       82


<PAGE>


(21)       Subsidiaries

(23.1)     Consent of Independent  Registered  Public  Accounting  Firm -
           Vavrinek, Trine, Day & Co., LLP

(23.2)     Consent of Independent  Registered  Public  Accounting  Firm -
           PricewaterhouseCoopers LLP

(31.1)     Certification of Principal Executive Officer pursuant to Section 302
           of the Sarbanes-Oxley Act of 2002

(31.2)     Certification of Principal Financial Officer pursuant to Section 302
           of the Sarbanes-Oxley Act of 2002

(32.1)     Certification of Principal Executive Officer pursuant to 18 U.S.C.
           Section 1350

(32.2)     Certification of Principal Financial Officer pursuant to 18 U.S.C.
           Section 1350


    **Management contract or compensatory plan or arrangement


                                       83