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,
      2007 or





**o
      TRANSITION REPORT
      PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**


For
      the
      transition period from  to




**000-50974**


(Commission
      File Number)




bbnk


(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, 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 exchangeTitle
                  of each class
              
              on
                  which registeredCommon
                  Stock, no par value
              
              Nasdaq
                  Capital Market





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


Title
                  of each class


None





Indicate
      by check mark if the registrant is a well-known seasoned issuer, as defined
      in
      Rule 405 of the Securities Act. Yes o 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 o 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
o .





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 o     Accelerated
      filer x     Non-accelerated
      filer o





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





The
      aggregate market value of the voting stock held by non-affiliates of Bridge
      Capital Holdings was $136,677,639 as of June 30, 2007.





As
      of
      March 3, 2008, Bridge Capital Holdings had 6,501,318 shares of common stock
      outstanding.





Documents
      incorporated by reference: The Company’s Proxy Statement for its 2008 Annual
      Meeting of Shareholders is incorporated herein by reference in Part III, Items
      10 through 14.









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;
      (10) THE INVOLVEMENT OF THE UNITED STATES IN WAR OR OTHER HOSTILITIES; AND
      (11)
      THE MATTERS DISCUSSED IN THIS REPORT UNDER “ITEM 1A – RISK FACTORS” AND
“ITEM 7 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
      RESULTS OF OPERATIONS – CRITICAL ACCOUNTING POLICIES.
      THEREFORE,* **** *THE
      INFORMATION IN THIS ANNUAL REPORT SHOULD BE CAREFULLY CONSIDERED AGAINST THESE
      UNCERTAINTIES AND RISKS 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





**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, National Association.





Bridge
      Capital Holdings was formed for the purpose of serving as the holding company
      for Bridge Bank, National Association 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, National Association received one share of common stock of Bridge Capital
      Holdings for every one share of common stock of Bridge Bank, National
      Association 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 offer
      trust services, 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.





At
      December 31, 2007, the Company had total assets of approximately $774.8 million,
      total gross loans of $652.7 million and total deposits of $671.4 million. At
      December 31, 2007, the Company had 170 full-time equivalent
      employees.




3




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, such
      as
      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 7(a) and 504 loan 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 23.




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.





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, 2007, the Bank's unsecured legal
      lending limit to a single borrower and such borrower's related parties was
      $12.9
      million based on regulatory capital of $85.7 million. 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.




4




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. In certain lines of business
      the
      Bank has extended beyond its primary service area. While the SBA line of
      business operates primarily in Santa Clara County it also maintains loan
      production offices in Sacramento County and Southern California.





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**




**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, Bridge Capital
      Holdings is subject to examination by the Federal Reserve Board (“FRB”).
      Pursuant to the BHCA, the Company is also subject to limitations on the kinds
      of
      businesses in which it can engage directly or through subsidiaries. The Company
      may, of course, manage or control banks. Generally, however, the Company 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 the
      section titled “Regulation and Supervision – Regulatory Capital
      Requirements”. 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**




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 obtain additional resources
      for assisting the subsidiary bank.




5




**Securities
      and Exchange Commission**




Under
      Section 13 of the Securities Exchange Act of 1934 (“Exchange Act”) and the
      Securities and Exchange Commission’s (SEC’s) rules, the Company must
      electronically file periodic and current reports as well as proxy statements
      with 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 .




**Sarbanes-Oxley
      Act**




The
      Sarbanes-Oxley Act of 2002 implemented legislative reforms intended to address
      corporate and accounting fraud. In addition to the establishment of an
      accounting oversight board to enforce auditing, quality control and independence
      standards, the law 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 assigned to the company
      must
      be rotated every five years. 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 the certification requirement. In addition,
      under
      the Act legal counsel are 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.




In
      addition, 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 the 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.





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 both management and the external auditors 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 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 and the rules and regulations of the SEC.





The
      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 Company’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.




**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 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.




6




Statutes,
      regulations and policies affecting the banking industry are frequently under
      review by Congress and by the federal bank regulatory agencies that are 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.




A.  Effect
      of
      State Law




The
      laws
      of the State of California 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. In general, 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, when the Interstate Banking Act was enacted 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).




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 acquirer 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 (other state)
      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 (other state) bank’s
      home state may establish such branches.




7




California
      law 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 has contributed to the accelerated consolidation of
      the
      banking industry in that a number of the largest bank holding companies have
      expanded into different parts of the country that were previously restricted.
      The Interstate Banking Act and California law are expected to continue to
      increase competition in the environment in which the Bank operates to the extent
      that out-of-state financial institutions may directly or indirectly enter the
      Bank’s market areas.




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
      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
      FRB
      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. However, 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 and under Regulation W.





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. The Comptroller may impose additional
      capital requirements on banks based on market risk. The Comptroller requires
      a
      leverage ratio of 8.0% for new banks during the first three years of operation.




8




After
      the
      first three years of operations, the Comptroller requires a minimum leverage
      ratio of 3.0% 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 3.0%
      minimum.




The
      Comptroller's regulations also require national banks to maintain a minimum
      ratio of qualifying total capital to risk-weighted assets of 8.0%. 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 1.




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 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, are required to 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 10.0% or more of total assets or trading activity of $1.0 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.




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 10.0% or greater, a Tier 1 risk-based capital ratio of 6.0% or greater
      and a leverage ratio of 5.0% 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 8.0% or greater, a Tier 1 risk-based
      capital of 4.0% or greater and a leverage ratio of 4.0% 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 8.0%, a Tier 1 risk-based capital ratio of less
      than 4.0%, or a leverage ratio of less than 4.0%; (4) ”Significantly
      undercapitalized,” consisting of institutions with a total risk-based capital
      ratio of less than 6.0%, a Tier 1 risk-based capital ratio of less than
      3.0%, or a leverage ratio of less than 3.0%; and (5) ”Critically
      undercapitalized,” consisting of institutions with a ratio of tangible equity to
      total assets that is equal to or less than 2.0%.





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.




9




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” for additional
      discussion regarding regulations.




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” for additional discussion regarding
      federal banking agency supervision.




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.




At
      December 31, 2007, 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 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. See “Supervision and Regulation – Capital
      Adequacy Requirements” for additional discussion regarding capital
      adequacy.





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 10.0% 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.




10




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 $250.0 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 $500.0 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 to 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 Deposit Insurance
      Fund (the “DIF”) to insure that there will be sufficient assessment income for
      repayment of DIF obligations and for any other purpose which it deems necessary.
      The FDIC is authorized to set semi-annual assessment rates for DIF members
      at
      levels sufficient to maintain the DIF’s reserve ratio to a designated level of
      1.25% of insured deposits.




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 DIF member institution an annual FDIC assessment rate
      on
      DIF insured deposits.




In
      December 2006, the FDIC issued amended rules intended to make the deposit
      insurance assessment system react more quickly and more accurately to changes
      in
      institutions’ risk profiles, create a new system for risk-based assessments, and
      set assessment rates for the period beginning January 1, 2007. Among other
      things, the amendments provide that (i) deposit insurance assessments will
      be
      collected for one quarter at the end of the next quarter, (ii) an existing
      institution with $1.0 billion or more in assets and any institution that becomes
      insured on or after January 1, 2007 will have its assessment base determined
      using average daily balances, (iii) the float deduction previously used to
      determine the assessment base is eliminated, (iv) the nine assessment rate
      categories that were used previously were consolidated into four new categories,
      and (v) the designated reserve ratio is being maintained at 1.25%, subject
      to
      annual review. The amended rules also establish that effective January 1, 2007
      the assessment rates will range from 5 to 7 basis points for Risk Category
      I
      institutions and will be 10 basis points for Risk Category II institutions,
      28
      basis points for Risk Category III institutions, and 43 basis points for Risk
      Category IV institutions.




11




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.




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.




12




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.  USA
      PATRIOT Act




Pursuant
      to 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:





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





·
            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;





·
            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





·
            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.




The
      USA
      PATRIOT Act, requires financial institutions to establish anti-money laundering
      programs and sets forth minimum standards for these programs,
      including:





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





·
            The
                designation of a compliance
                officer;





·
            An
                ongoing employee training program;
                and





·
            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.




N.  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 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.




13




O.  Gramm-Leach-Bliley
      Act





The
      Gramm-Leach-Bliley Act, adopted in 1999, eliminated many of the barriers that
      separated the insurance, securities and banking industries since the Great
      Depression. 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 federal
      bank regulatory agencies have established standards for safeguarding nonpublic
      personal information about customers that implement provisions of the
      Gramm-Leach Bliley Act (the “Guidelines”). Among other things, the Guidelines
      require each financial institution, under the supervision and ongoing oversight
      of its Board of Directors or an appropriate committee thereof, to develop,
      implement and maintain a comprehensive written information security program
      designed to ensure the security and confidentiality of customer information,
      to
      protect against any anticipated threats or hazards to the security or integrity
      of such information, and to protect against unauthorized access to or use of
      such information that could result in substantial harm or inconvenience to
      any
      customer.





*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.




14




P.  Fair
      Credit Reporting




The
      Fair
      Credit Reporting Act (the “FCRA”) was adopted 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.




Q.  Consumer
      Laws and Regulations




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.




S.  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 requires 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.




15




T.  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.




U.  Programs
      to Mitigate Identity Theft





In
      November 2007, federal banking agencies together with the NCUA and FTC adopted
      regulations under the Fair and Accurate Credit Transactions Act of 2003 to
      require financial institutions and other creditors to develop and implement
      a
      written identity theft prevention program to detect, prevent and mitigate
      identity theft in connection with certain new and existing accounts. Covered
      accounts generally include consumer accounts and other accounts that present
      a
      reasonably foreseeable risk of identity theft. Each institution’s program must
      include policies and procedures designed to: (i) identify indicators, or “red
      flags,” of possible risk of identity theft; (ii) detect the occurrence of “red
      flags”; (iii) respond appropriately to “red flags” that are detected; and (iv)
      ensure that the program is updated periodically as appropriate to address
      changing circumstances. The regulations include guidelines that each institution
      must consider and, to the extent appropriate, include in this
      program.




**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 Company or the Bank.





During
      2007 major banks and securities firms announced substantial losses on sub-prime
      related investments. In December 2007, the Bush administration announced a
      proposal to freeze interest rates on certain sub-prime mortgages at
      pre-adjustment levels for up to five years in an effort to minimize residential
      foreclosures and bring some stability to home prices. As currently described,
      the proposal would benefit residential owner-occupants who are not yet in
      default but are likely to default after interest rate and payment adjustments
      are put into effect; those already in default and those who are presumed able
      to
      afford their adjusted payments would not be covered. No assurance can be given
      whether this proposal will ultimately be adopted, what revision might be made
      before adoption, how many borrowers will be affected by it or what effect it
      may
      have on foreclosures and home prices. In addition to the Bush administration
      proposal, various state and federal legislative proposals are pending and could
      be enacted. The Company does not originate sub-prime mortgages or hold sub-prime
      investments, but the value of real estate collateral securing its commercial
      mortgages may be affected by residential real estate values in its service
      area.




**Conclusion**




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 Company 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.





16




**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 FRB. 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 the Company.




***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 affect Bridge Capital Holdings.




17




***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***




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.





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.





See
      “Supervision and Regulation – Legislation and Proposed Changes” for
      additional discussion regarding adverse effects of, or changes in, banking
      or
      other laws and regulations and governmental fiscal or monetary
      policies.




**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 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.





18





***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




**Item
      2. Properties**




At
      December 31, 2007, the Company’s operations included facilities as
      follows:





The
      principal executive office and a full service banking office are located at
      55
      Almaden Boulevard, City of San Jose, County of Santa Clara, State of California.
      The office consists of approximately 42,337 square feet on three floors of
      an
      eight-story office building. 24,767 square feet of the space was originally
      sublet from a prior tenant in a sublease which commenced December 26, 2003
      and
      terminated December 31, 2006. The sublease provided for an initial base rent
      of
      $28,730 with annual escalations to $45,819 in the final year of the sublease.
      The Bank has entered into a direct lease with the landlord, which commenced
      immediately following the expiration of 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 $47,305 beginning
      on January 1, 2008 and increasing 3.0% on each anniversary date thereafter.
      The
      Bank has also entered into an additional direct lease with the landlord to
      occupy 17,570 square feet, which commenced November 1, 2006 and terminates
      on
      December 31, 2016. The direct lease provides for an initial twelve-month period
      with no rent followed by an initial base rent of $36,897 with annual escalations
      to $48,142 in the final year of the lease. The foregoing description is
      qualified by reference to the lease agreement dated November 1, 2006 attached
      as
      Exhibit 10.16 herein.





A
      non-banking administrative office 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 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 base rent
      of
      $13,583 per month from the commencement date until the first anniversary of
      the
      sublease. On each anniversary date of the commencement of the sublease, the
      base
      rent will be increased by 4.0% 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 $17,186 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 10.3 to this Report.





An
      additional full service banking office is located at 525 University Avenue,
      City
      of Palo Alto, County of Santa Clara, State of California. The office consists
      of
      approximately 6,495 square feet located in Suite 31 in the building known as
      the
      Palo Alto Office Center. The Lease is an amendment to a lease which ended
      November 30, 2006 and is for a term of 86 months commencing on February 1,
      2007
      and ending on January 31, 2014. The Lease provides for a base rent of $29,228
      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. The foregoing description is qualified by reference
      to
      the lease agreement dated October 15, 2001 attached as exhibit 10.6 to this
      Report and the amendment to this lease agreement dated March 9, 2006 attached
      as
      exhibit 10.17 to this Report.





19




In
      addition, the Bank operates loan production offices in Redwood City, San Ramon,
      Sacramento, and Southern California as well as Dallas, Texas and Reston,
      Virginia.




**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 5.0% 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.




20


**PART
      II**





**Item
      5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer
      Purchases of Equity Securities**





The
      Company's Common Stock trades on the Nasdaq Capital Market under the symbol
      “BBNK”. The following table summarizes those trades of which the Company has
      knowledge, setting forth the high and low sales prices for the periods
      indicated.




Sales
                Price ofCommon
                Stock (1)Three
                Months Ended
            
            Low
            
            HighMarch
                31, 2006
            
            $
            17.40
            
            $
            19.97June
                30, 2006
            
            $
            19.00
            
            $
            20.49September
                30, 2006
            
            $
            19.15
            
            $
            22.70December
                31, 2006
            
            $
            20.10
            
            $
            22.98March
                31, 2007
            
            $
            20.00
            
            $
            22.60June
                30, 2007
            
            $
            21.25
            
            $
            23.70September
                30, 2007
            
            $
            20.86
            
            $
            24.58December
                31, 2007
            
            $
            21.00
            
            $
            23.00




(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 288 shareholders of record as of December 31, 2007.





The
      Company's shareholders are entitled to receive dividends, when and as declared
      by its Board of Directors, out of funds legally available, subject to statutory
      and regulatory restrictions. See “Supervision and Regulation – Payment of
      Dividends” for additional discussion regarding dividends.





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 Capital Holdings 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 reflects the total return performance of the Company’s common
      stock for the years ended December 31, 2007, 2006, 2005, 2004, and 2003,
      including the performance of shares of common stock of the Bank prior to the
      formation of the Company as holding company for the Bank on October 1,
      2004.





21




BBNK


***Period
                  Ending******Index***
              
              **12/31/02**
              
              **12/31/03**
              
              **12/31/04**
              
              **12/31/05**
              
              **12/31/06**
              
              **12/31/07**Bridge
                  Capital Holdings
              
              
              100.00
              
              
              209.52
              
              
              257.74
              
              
              298.39
              
              
              329.68
              
              
              346.45NASDAQ
                  Composite
              
              
              100.00
              
              
              150.01
              
              
              162.89
              
              
              165.13
              
              
              180.85
              
              
              198.60SNL
                  Western Bank Index
              
              
              100.00
              
              
              135.46
              
              
              153.94
              
              
              160.27
              
              
              180.84
              
              
              151.05




22




**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.


(dollars
                  in thousands, except per share data)
              
              As
                  of and for the year endedDecember
                  31,2007
              
              2006
              
              2005
              
              2004
              
              2003**Statement
                  of Operations Data:**Interest
                  income
              
              $
              66,745
              
              $
              52,962
              
              $
              34,118
              
              $
              19,457
              
              $
              12,133Interest
                  expense
              
              
              19,160
              
              
              14,271
              
              
              6,615
              
              
              2,896
              
              
              2,235Net
                  interest income
              
              
              47,585
              
              
              38,691
              
              
              27,503
              
              
              16,561
              
              
              9,898Provision
                  for credit losses
              
              
              (2,275
              )
              
              (1,372
              )
              
              (2,162
              )
              
              (1,671
              )
              
              (843
              )Net
                  interest income after provision for credit losses
              
              
              45,310
              
              
              37,319
              
              
              25,341
              
              
              14,890
              
              
              9,055Other
                  income
              
              
              6,713
              
              
              3,837
              
              
              4,197
              
              
              3,855
              
              
              2,664Other
                  expenses
              
              
              (33,574
              )
              
              (27,279
              )
              
              (19,981
              )
              
              (13,596
              )
              
              (10,214
              )Income
                  before income taxes
              
              
              18,449
              
              
              13,877
              
              
              9,557
              
              
              5,149
              
              
              1,505Income
                  taxes
              
              
              (7,583
              )
              
              (5,243
              )
              
              (3,832
              )
              
              (2,112
              )
              
              1,868Net
                  income (loss)
              
              $
              10,866
              
              $
              8,634
              
              $
              5,725
              
              $
              3,037
              
              $
              3,373**Per
                  Share Data:**Basic
                  income (loss) per share
              
              $
              1.70
              
              $
              1.38
              
              $
              0.93
              
              $
              0.50
              
              $
              0.56Diluted
                  income (loss) per share
              
              
              1.57
              
              
              1.27
              
              
              0.85
              
              
              0.46
              
              
              0.53Shareholders'
                  equity per share
              
              
              10.04
              
              
              7.77
              
              
              6.36
              
              
              5.43
              
              
              4.95Cash
                  dividend per common share
              
              
              -
              
              
              -
              
              
              -
              
              
              -**Balance
                  Sheet Data:**Balance
                  sheet totals:Assets
              
              $
              774,832
              
              $
              721,979
              
              $
              536,520
              
              $
              402,037
              
              $
              278,579Loans,
                  net
              
              
              642,265
              
              
              531,956
              
              
              432,667
              
              
              289,467
              
              
              191,053Deposits
              
              
              671,356
              
              
              644,987
              
              
              468,158
              
              
              352,456
              
              
              246,394Shareholders'
                  equity
              
              
              65,084
              
              
              49,094
              
              
              39,714
              
              
              33,122
              
              
              29,954Average
                  balance sheet amounts:Assets
              
              $
              750,538
              
              $
              606,506
              
              $
              465,944
              
              $
              341,466
              
              $
              222,454Loans,
                  net
              
              
              581,253
              
              
              458,648
              
              
              348,592
              
              
              240,465
              
              
              156,587Deposits
              
              
              665,925
              
              
              535,472
              
              
              411,678
              
              
              307,471
              
              
              193,765Shareholders'
                  equity
              
              
              56,192
              
              
              44,646
              
              
              36,017
              
              
              30,768
              
              
              27,075**Selected
                  Ratios:**Return
                  on average equity
              
              
              19.34
              %
              
              19.34
              %
              
              15.90
              %
              
              9.87
              %
              
              12.46
              %Return
                  on average assets
              
              
              1.45
              %
              
              1.42
              %
              
              1.23
              %
              
              0.89
              %
              
              1.52
              %Efficiency
                  ratio
              
              
              61.83
              %
              
              64.14
              %
              
              63.03
              %
              
              66.59
              %
              
              81.31
              %Risk
                  based capital ratio
              
              
              11.67
              %
              
              11.74
              %
              
              11.58
              %
              
              13.77
              %
              
              14.68
              %Net
                  chargeoffs (recoveries) to average gross loans
              
              
              0.17
              %
              
              0.00
              %
              
              0.06
              %
              
              0.08
              %
              
              -0.05
              %Allowance
                  for loan losses to total gross loans
              
              
              1.32
              %
              
              1.36
              %
              
              1.35
              %
              
              1.41
              %
              
              1.38
              %Average
                  equity to average assets
              
              
              7.49
              %
              
              7.36
              %
              
              7.73
              %
              
              9.01
              %
              
              12.17
              %




23


**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 2. 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 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, economic conditions,
      historical loss experience, and 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.




**Deferred
      Tax Assets**




Our
      deferred tax assets are explained in Note 8 to the Consolidated Financial
      Statements. The Company has sufficient taxable income from current and prior
      periods to support our position that the benefit of our deferred tax assets
      will
      be realized. As such, we have provided no valuation allowance against our
      deferred tax assets.




24




**Operating
      Results**




For
      the
      year ended December 31, 2007, the Company reported net income of $10.9 million
      or $1.70 basic and $1.57 diluted earnings per share, compared with net income
      of
      $8.6 million or $1.38 basic and $1.27 diluted earnings per share for the year
      ended December 31, 2006 and $5.7 million or $0.93 basic and $0.85 diluted
      earnings per share for the year ended December 31, 2005. The improvement in
      net
      income for 2007 resulted primarily from an increase of $8.9 million in net
      interest income and an increase of $2.9 million in non-interest income, offset,
      in part, by and increase in provision for credit losses of $900,000 and an
      increase of $6.3 million in other expense. See the specific sections below
      for
      details regarding these changes.





Net
      income for 2006 represented an increase of $2.9 million compared to 2005
      primarily due to an increase of $11.2 million in net interest income and by
      a
      decrease of $800,000 in provision for credit losses, offset, in part, by an
      increase of $7.3 million in other expense.




**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, 2007, 2006
      and 2005.




25




(dollars
                in thousands)
            
            Year
                Ended December 31,2007
            
            2006
            
            2005Interest
            
            
            
            
            
            Interest
            
            
            
            
            
            InterestAverage
            
            Income/
            
            Yields/
            
            Average
            
            Income/
            
            Yields/
            
            Average
            
            Income/
            
            Yields/Balance
            
            Expense
            
            Rates
            
            Balance
            
            Expense
            
            Rates
            
            Balance
            
            Expense
            
            Rates**Assets**Interest
                earning assets (2):Loans
                (1)
            
            $
            590,443
            
            $
            61,008
            
            
            10.3
            %
            $
            466,529
            
            $
            48,248
            
            
            10.3
            %
            $
            354,552
            
            $
            31,983
            
            
            9.0
            %Federal
                funds sold
            
            
            52,166
            
            
            2,648
            
            
            5.1
            %
            
            78,946
            
            
            3,990
            
            
            5.1
            %
            
            52,234
            
            
            1,703
            
            
            3.3
            %Investment
                securities
            
            
            60,901
            
            
            3,089
            
            
            5.1
            %
            
            17,523
            
            
            724
            
            
            4.1
            %
            
            18,712
            
            
            432
            
            
            2.3
            %Total
                earning assets
            
            
            703,510
            
            
            66,745
            
            
            9.5
            %
            
            562,998
            
            
            52,962
            
            
            9.4
            %
            
            425,498
            
            
            34,118
            
            
            8.0
            %Noninterest
                earning assets:Cash
                and due from banks
            
            
            25,284
            
            
            
            
            
            
            
            
            27,748
            
            
            
            
            
            
            
            
            27,767All
                other assets (3)
            
            
            21,744
            
            
            
            
            
            
            
            
            15,760
            
            
            
            
            
            
            
            
            12,679TOTAL
            
            $
            750,538
            
            
            
            
            
            
            
            $
            606,506
            
            
            
            
            
            
            
            $
            465,944**Liabilities
                  and shareholders' equity**Interest-bearing
                liabilities:Deposits:Demand
            
            $
            5,382
            
            
            40
            
            
            0.7
            %
            $
            3,902
            
            
            34
            
            
            0.9
            %
            $
            3,363
            
            
            25
            
            
            0.7
            %Savings
            
            
            371,371
            
            
            13,783
            
            
            3.7
            %
            
            261,251
            
            
            8,858
            
            
            3.4
            %
            
            193,088
            
            
            4,192
            
            
            2.2
            %Time
            
            
            88,542
            
            
            4,281
            
            
            4.8
            %
            
            99,924
            
            
            4,290
            
            
            4.3
            %
            
            56,183
            
            
            1,657
            
            
            2.9
            %Other
            
            
            17,802
            
            
            1,056
            
            
            5.9
            %
            
            19,106
            
            
            1,089
            
            
            5.7
            %
            
            13,426
            
            
            741
            
            
            5.5
            %Total
                  interest-bearingLiabilities
            
            
            483,097
            
            
            19,160
            
            
            4.0
            %
            
            384,183
            
            
            14,271
            
            
            3.7
            %
            
            266,060
            
            
            6,615
            
            
            2.5
            %Noninterest-bearing
                liabilities:Demand
                deposits
            
            
            200,630
            
            
            
            
            
            
            
            
            170,395
            
            
            
            
            
            
            
            
            159,044Accrued
                  expenses andother
                  liabilities
            
            
            10,619
            
            
            
            
            
            
            
            
            7,282
            
            
            
            
            
            
            
            
            4,823Shareholders'
                equity
            
            
            56,192
            
            
            
            
            
            
            
            
            44,646
            
            
            
            
            
            
            
            
            36,017TOTAL
            
            $
            750,538
            
            
            
            
            
            
            
            $
            606,506
            
            
            
            
            
            
            
            $
            465,944**Net
                  interest income****and
                  margin**
            
            
            
            
            $
            47,585
            
            
            6.8
            %
            
            
            
            $
            38,691
            
            
            6.9
            %
            
            
            
            $
            27,503
            
            
            6.5
            %




1)
            Includes
                amortization of loan fees of $5.9 million for 2007, $4.2 million
                for 2006
                and $3.5 million for 2005. Nonperforming loans have been included
                in
                average loan balances.





2)
            Interest
                income is reflected on an actual basis, not on a fully taxable equivalent
                basis. Yields are based on amortized
                cost.





3)
            Net
                of average allowance for credit losses of $7.7 million and average
                deferred loan fees of $1.5 million for 2007, average allowance for
                credit
                losses of $6.5 million and deferred loan fees of $1.4 million for
                2006 and
                average allowance for credit losses of $4.9 million and deferred
                loan fees
                of $1.1 million for 2005.





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, 2007, 2006 and 2005:





26





(dollars
                in thousands)
            
            Year
                Ended December 31,2007
                vs. 2006
            
            2006
                vs. 2005Increase
                (decrease)
            
            Increase
                (decrease)due
                to change in
            
            due
                to change inAverage
            
            Average
            
            Total
            
            Average
            
            Average
            
            TotalVolume
            
            Rate
            
            Change
            
            Volume
            
            Rate
            
            ChangeInterest
                income:Loans
            
            $
            12,804
            
            $
            (44
            )
            $
            12,760
            
            $
            11,581
            
            $
            4,684
            
            $
            16,265Federal
                funds sold
            
            
            (1,359
            )
            
            17
            
            
            (1,342
            )
            
            1,350
            
            
            937
            
            
            2,287Investment
                securities
            
            
            2,200
            
            
            165
            
            
            2,365
            
            
            (49
            )
            
            341
            
            
            292Total
                interest income
            
            
            13,645
            
            
            138
            
            
            13,783
            
            
            12,882
            
            
            5,962
            
            
            18,844Interest
                expense:Demand
            
            
            11
            
            
            (5
            )
            
            6
            
            
            5
            
            
            4
            
            
            9Savings
            
            
            4,087
            
            
            838
            
            
            4,925
            
            
            2,312
            
            
            2,354
            
            
            4,666Time
            
            
            (550
            )
            
            541
            
            
            (9
            )
            
            1,878
            
            
            755
            
            
            2,633Other
            
            
            (77
            )
            
            44
            
            
            (33
            )
            
            324
            
            
            24
            
            
            348Total
                interest expense
            
            
            3,471
            
            
            1,418
            
            
            4,889
            
            
            4,518
            
            
            3,138
            
            
            7,656Change
                in net interest income
            
            $
            10,174
            
            $
            (1,280
            )
            $
            8,894
            
            $
            8,363
            
            $
            2,824
            
            $
            11,188




Net
      interest income was $47.6 million in 2007, comprised of $66.8 million in
      interest income and $19.2 million in interest expense. Net interest income
      in
      2006 was $38.7 million, comprised of $53.0 million in interest income and $14.3
      million in interest expense. The increase of $8.9 million in net interest income
      in 2007 was primarily due to an increase of $13.8 million in interest income
      offset, in part, by an increase of $4.9 million in interest expense.





Net
      interest income for the year ended December 31, 2006 represented an increase
      of
      $11.2 million over $27.5 million for the year ended December 31,
      2005. The
      increase in net interest income was primarily a result of an increase of $18.9
      million in interest income offset, in part, by an increase of $7.7 million
      in
      interest expense.





The
      net
      interest margin (net interest income divided by average earning assets) was
      6.8%
      for the year ended December 31, 2007, as compared to 6.9% for the year ended
      December 31, 2006 and 6.5% for 2005. The decline in net interest margin in
      2007
      compared to 2006 was primarily the result of growth in the volume of average
      interest bearing liabilities and decreased balance sheet leverage. The
      improvement in net interest margin in 2006 compared to 2005 was primarily the
      result of increases in the prime rate during the year, a shift in the mix of
      loans toward higher yielding product lines and an increase in Federal funds
      sold. Average loans represented 83.9% of average earning assets in 2007 compared
      to 82.9% in 2006 and 83.3% in 2005. In addition, in 2007 the Bank’s ratio of
      average loans to average deposits was 88.7%, up from 87.1% in 2006 and 86.1%
      in
      2005 reflecting slightly faster loan growth relative to deposit funding.





Significant
      factors affecting net interest income include the volumes and mix of the loan,
      investment and deposit portfolios and changes in short-term interest rates.
      The
      interest rate earned on a majority of the Company’s assets, specifically the
      loan portfolio, adjust with changes in short-term market rates. As such, the
      nature of the Company’s balance sheet is that, over time as short-term interest
      rates change, income on interest earning assets has a greater impact on net
      interest income than interest paid on liabilities. The Company’s prime rate
      averaged 8.05%, 7.96%, and 6.17% for the years ended 2007, 2006, and 2005,
      respectively.




**Interest
      Income**




For
      the
      year ended December 31, 2007, the Company reported interest income of $66.8
      million, an increase of $13.8 million or 26.0% over $53.0 million reported
      in
      2006. The increase in interest income primarily reflects an increase in the
      volume of average earning assets in 2007 compared to 2006. Average earning
      assets were $703.5 million for the year ended December 31, 2007 an increase
      of
      $140.5 million or 25.0% over $563.0 million for the year ended December 31,
      2006.




27




For
      the
      year ended December 31, 2006, the Company reported interest income of $53.0
      million, an increase of $18.9 million or 55.4% over $34.1 million reported
      in
      2005. The increase in interest income primarily reflects an increase in the
      volume of average earning assets in 2006 compared to 2005. Average earning
      assets were $563.0 million for the year ended December 31, 2006 an increase
      of
      $137.5 million or 32.3% over $425.5 million for the year ended December 31,
      2005. 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 2006, each of these indices increased
      by 100 basis points.




**Interest
      Expense**




Interest
      expense was $19.2 million for the year ended December 31, 2007, which
      represented an increase of $4.9 million or 34.3% compared to $14.3 million
      for
      the year ended December 31, 2006. The increase in interest expense reflects
      an
      increase in the rate on and volume of average interest-bearing liabilities
      in
      2007 compared to 2006. Average interest-bearing liabilities were $483.1 million
      for the year ended December 31, 2007, an increase of $98.9 million or 25.7%
      from
      $384.2 million for the year ended December 31, 2006.





Interest
      expense was $14.3 million for the year ended December 31, 2006, which
      represented an increase of $7.7 million or 116.7% compared to $6.6 million
      for
      the year ended December 31, 2005. The increase in interest expense reflects
      an
      increase in the rate on and volume of average interest-bearing liabilities
      in
      2006 compared to 2005. Average interest-bearing liabilities were $384.2 million
      for the year ended December 31, 2006, an increase of $118.1 million or 44.4%
      from $266.1 million for the year ended December 31, 2005.




**Credit
      Risk and Provision for Credit Losses**




The
      Bank
      maintains an allowance for credit losses which is based, in part, on the 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 evaluation of
      such risks, additions of $2.3 million, $1.4 million and $2.2 million were made
      to the allowance for credit losses in 2007, 2006 and 2005, respectively. During
      2007, the Bank had $1.3 million in charge offs and had recoveries of $259,000
      as
      compared to no charge offs and $21,000 in recoveries in 2006 and $384,000 in
      charge offs and $12,000 in recoveries in 2005. The allowance for credit losses
      was $8.6 million representing 1.32% of total loans at December 31, 2007 as
      compared to $7.3 million representing 1.36% of total loans at December 31,
      2006
      and $5.9 million representing 1.35% of total loans at December 31,
      2005.





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 $256.4 million in real estate loans,
      representing approximately 39.3% 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
      Other Real Estate Owned (“OREO”) and the level of the allowance for loan losses,
      which could adversely affect the Bank's future growth and
      profitability.





See
      “Allowance for Loan Losses” for additional discussion regarding the allowance
      for credit losses and nonperforming assets.




**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, 2007, 2006 and
      2005:




28




(dollars
                in thousands)
            
            Year
                Ended December 31,2007
            
            2006
            
            2005Amount
            
            Percent
            
            Amount
            
            Percent
            
            Amount
            
            PercentGain
                on sale of SBA loans
            
            $
            3,564
            
            
            53.1
            %
            $
            1,734
            
            
            45.2
            %
            $
            2,290
            
            
            54.6
            %Service
                charges on deposit accounts
            
            
            672
            
            
            10.0
            %
            
            498
            
            
            13.0
            %
            
            354
            
            
            8.4
            %International
                fee income
            
            
            658
            
            
            9.8
            %
            
            234
            
            
            6.1
            %
            
            78
            
            
            1.9
            %SBA
                loan servicing fee income
            
            
            442
            
            
            6.6
            %
            
            548
            
            
            14.3
            %
            
            528
            
            
            12.6
            %Warrant
                income
            
            
            441
            
            
            6.6
            %
            
            29
            
            
            0.8
            %
            
            -
            
            
            0.0
            %Increase
                in value-bank owned life insurance
            
            
            402
            
            
            6.0
            %
            
            320
            
            
            8.3
            %
            
            377
            
            
            9.0
            %Other
                non-interest income
            
            
            534
            
            
            8.0
            %
            
            474
            
            
            12.4
            %
            
            570
            
            
            13.6
            %$
            6,713
            
            
            100.0
            %
            $
            3,837
            
            
            100.0
            %
            $
            4,197
            
            
            100.0
            %




Non-interest
      income totaled $6.7 million in 2007, an increase of $2.9 million or 75.0% over
      $3.8 million in 2006. Non-interest income decreased $360,000, or 8.5% from
      2005
      to 2006. Non-interest income consists primarily of gains recognized on sales
      of
      SBA loans, service charge income on deposit accounts, and international fee
      income. The increase in non-interest income in 2007 compared to 2006 was
      primarily due to increased SBA loan sales, international fee income, and warrant
      income. The decrease in non-interest income in 2006 compared to 2005 was
      primarily due to decreased SBA loan sales, partially offset by increases in
      depositor service charges, international fee income, the amortization of the
      SBA
      valuation allowance, and warrant income.





Revenue
      from sales of SBA loans is dependant on consistent origination and funding
      of
      new loan volumes, the timing of which may be impacted, from time to time, by
      (1)
      increased competition from other lenders; (2) the relative attractiveness of
      SBA
      borrowing to other financing options; (3) adjustment of programs by the SBA;
      (4)
      changes in activities of secondary market participants and; (5) other factors.
      Gains recognized on sales of SBA loans were $3.6 million in 2007 which
      represented an increase of $2.3 million or 170.0% compared to $1.3 million
      the
      same period one year earlier. The increase was attributed to a higher volume
      of
      loans sold during the year. During 2007 the Company’s SBA group funded $86.4
      million in new loans and sold $90.3 million which compared to $66.3 million
      funded and $51.4 million sold in 2006 and $69.8 million funded and $66.6 million
      sold in 2005.




**Non-interest
      Expenses**




The
      components of other expense are set forth in the following table for the years
      ended December 31, 2007, 2006 and 2005.





Other
                Expense as a Percent of Average Assets




Year
                Ended December 31,(dollars
                in thousands)
            
            2007
            
            2006
            
            2005Amount
            
            Percent
            
            Amount
            
            Percent
            
            Amount
            
            PercentSalaries
                and benefits
            
            $
            20,990
            
            
            2.8
            %
            $
            17,417
            
            
            2.9
            %
            $
            12,127
            
            
            2.6
            %Occupancy
            
            
            3,390
            
            
            0.5
            %
            
            2,132
            
            
            0.4
            %
            
            1,652
            
            
            0.4
            %Data
                services
            
            
            1,917
            
            
            0.3
            %
            
            1,528
            
            
            0.3
            %
            
            1,085
            
            
            0.2
            %Marketing
            
            
            1,350
            
            
            0.2
            %
            
            1,081
            
            
            0.2
            %
            
            925
            
            
            0.2
            %Professional
                services
            
            
            1,150
            
            
            0.2
            %
            
            825
            
            
            0.1
            %
            
            746
            
            
            0.2
            %Furniture
                and equipment
            
            
            947
            
            
            0.1
            %
            
            701
            
            
            0.1
            %
            
            583
            
            
            0.1
            %Director/Shareholder
                expenses
            
            
            837
            
            
            0.1
            %
            
            530
            
            
            0.1
            %
            
            458
            
            
            0.1
            %Deposit
                services/supplies
            
            
            605
            
            
            0.1
            %
            
            525
            
            
            0.1
            %
            
            401
            
            
            0.1
            %Third
                party services
            
            
            350
            
            
            0.0
            %
            
            925
            
            
            0.2
            %
            
            1,065
            
            
            0.2
            %Other
            
            
            2,038
            
            
            0.3
            %
            
            1,615
            
            
            0.3
            %
            
            939
            
            
            0.2
            %$
            33,574
            
            
            4.5
            %
            $
            27,279
            
            
            4.5
            %
            $
            19,981
            
            
            4.3
            %





29




Non-interest
      expenses were $33.6 million in 2007 as compared to $27.3 million in 2006 and
      $20.0 million in 2005. Non-interest
      expense increased approximately $6.3 million in 2007 compared to 2006. This
      increase was primarily attributable to increased salaries and benefits cost,
      occupancy cost, data services, marketing, professional services, director and
      shareholder cost, and loan related charges. Non-interest expense increased approximately $7.3 million in 2006 compared
      to
      2005. This increase was primarily attributable to increased salaries and
      benefits cost, occupancy cost, data services, director and shareholder cost,
      and
      loan related charges. Non-interest expenses measured as a percentage of average
      assets were 4.5% in 2007, as compared to 4.5% in 2006 and 4.3% in 2005.





The
      increases in non-interest expenses reflect the impact of expansion of the
      business during 2007, 2006 and 2005. During 2007, the Bank expanded its
      headquarters location to accommodate the expansion of the business and opened
      a
      loan production office in Sacramento, California. During 2006, the Bank opened
      loan production offices in Dallas, Texas and Reston, Virginia. During
      2005, the Bank launched a technology banking division and opened a loan
      production office in San Ramon, California to serve the East Bay region.





Salaries
      and related benefits is the largest component of the Bank’s non-interest
      expense. Salaries and benefits were $21.0 million for the year ended December
      31, 2007 as compared to $17.4 million and $12.1 million for the years ended
      December 31, 2006 and 2005, respectively. The increases in 2007 compared to
      2006, and 2006 compared to 2005 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
      170 FTE at December 31, 2007 as compared to 134 FTE at December 31, 2006 and
      103
      FTE at December 31, 2005.





Occupancy
      expense for the year ended December 31, 2007 was $3.4 million and represented
      an
      increase of approximately $1.3 million over $2.1 million for the prior year.
      The
      increase was primarily due to additional rent expense related to the facility
      at
      55 Almaden Boulevard, San Jose, California and the addition of a loan production
      office in the commercial lending group. Occupancy expense for the year ended
      December 31, 2006 was $2.1 million and represented an increase of approximately
      $400,000 over $1.7 million for the prior year. The increase was primarily due
      to
      additional rent expense related to the facility at 55 Almaden Boulevard, San
      Jose, California and the addition of a loan production office in the technology
      banking and asset-based lending groups.





The
      Company contracts with third-party vendors for most data processing needs and
      to
      support technical infrastructure. Data processing expense in 2007 was $1.9
      million which represented an increase of approximately $400,000 over $1.5
      million one year earlier. Data processing expense in 2006 was $1.5 million
      which
      represented an increase of approximately $400,000 over $1.1 million one year
      earlier. 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 $1.2 million for the year ended December 31, 2007
      which represented an increase of $325,000 over $825,000 in 2006. The increase
      in
      2007 was primarily due to legal costs relating to general corporate matters
      and
      increases in ongoing accounting and auditing services. Legal and professional
      expenses were $825,000 for the year ended December 31, 2006 which represented
      an
      increase of $79,000 over $746,000 in 2005. The increase in 2006 was primarily
      due to increases in ongoing accounting and auditing services.




Furniture,
      fixtures and equipment (FF&E) expense of $947,000 for the year ended
      December 31, 2007 represented an increase of $246,000 compared to $701,000
      in
      the same period one year earlier. The increase in 2007 was primarily related
      to
      the increase in FTE. Furniture, fixtures and equipment (FF&E) expense of
      $701,000 for the year ended December 31, 2006 represented an increase of
      $118,000 compared to $583,000 in the same period one year earlier. The increase
      in 2006 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
      Company’s effective tax rate was 41.1% for the year ended December 31, 2007,
      37.8% for the year ended December 31, 2006 and 40.1% for the year ended December
      31, 2005. See Note 8 to the financial statements for additional information
      on
      income taxes.




30




**Quarterly
      Income**




The
      unaudited 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 2007, 2006, and
      2005.





(dollars
                in thousands, except share amounts)
            
            Three
                Months EndedMarch
                31
            
            June
                30
            
            September
                30
            
            December
                31**Year
                Ended December 31, 2007:**Interest
                income
            
            $
            15,378
            
            $
            16,936
            
            $
            17,627
            
            $
            16,804Interest
                expense
            
            
            4,426
            
            
            5,010
            
            
            5,295
            
            
            4,429Net
                interest income
            
            
            10,952
            
            
            11,926
            
            
            12,332
            
            
            12,375Provision
                for credit losses
            
            
            200
            
            
            1,000
            
            
            475
            
            
            600Other
                income
            
            
            1,294
            
            
            2,612
            
            
            1,435
            
            
            1,372Other
                expense
            
            
            7,854
            
            
            8,422
            
            
            8,715
            
            
            8,583Income
                before income taxes
            
            
            4,192
            
            
            5,116
            
            
            4,577
            
            
            4,564Income
                taxes
            
            
            1,748
            
            
            2,133
            
            
            1,825
            
            
            1,877Net
                income
            
            $
            2,444
            
            $
            2,983
            
            $
            2,752
            
            $
            2,687Earnings
                per share - basic
            
            $
            0.38
            
            $
            0.47
            
            $
            0.43
            
            $
            0.42Earnings
                per share - diluted
            
            $
            0.35
            
            $
            0.43
            
            $
            0.40
            
            $
            0.39**Year
                Ended December 31, 2006:**Interest
                income
            
            $
            10,928
            
            $
            12,479
            
            $
            14,329
            
            $
            15,226Interest
                expense
            
            
            2,386
            
            
            3,221
            
            
            4,239
            
            
            4,425Net
                interest income
            
            
            8,542
            
            
            9,258
            
            
            10,090
            
            
            10,801Provision
                for credit losses
            
            
            222
            
            
            450
            
            
            100
            
            
            600Other
                income
            
            
            1,083
            
            
            1,078
            
            
            799
            
            
            877Other
                expense
            
            
            6,338
            
            
            6,630
            
            
            7,066
            
            
            7,245Income
                before income taxes
            
            
            3,065
            
            
            3,256
            
            
            3,723
            
            
            3,833Income
                taxes
            
            
            1,134
            
            
            1,237
            
            
            1,415
            
            
            1,457Net
                income
            
            $
            1,931
            
            $
            2,019
            
            $
            2,308
            
            $
            2,376Earnings
                per share - basic
            
            $
            0.31
            
            $
            0.32
            
            $
            0.37
            
            $
            0.38Earnings
                per share - diluted
            
            $
            0.29
            
            $
            0.29
            
            $
            0.34
            
            $
            0.35**Year
                Ended December 31, 2005:**Interest
                income
            
            $
            6,615
            
            $
            7,915
            
            $
            9,173
            
            $
            10,415Interest
                expense
            
            
            1,188
            
            
            1,637
            
            
            1,749
            
            
            2,041Net
                interest income
            
            
            5,427
            
            
            6,278
            
            
            7,424
            
            
            8,374Provision
                for credit losses
            
            
            333
            
            
            429
            
            
            800
            
            
            600Other
                income
            
            
            784
            
            
            1,136
            
            
            994
            
            
            1,283Other
                expense
            
            
            4,315
            
            
            4,642
            
            
            5,123
            
            
            5,901Income
                before income taxes
            
            
            1,563
            
            
            2,343
            
            
            2,495
            
            
            3,156Income
                taxes
            
            
            606
            
            
            964
            
            
            990
            
            
            1,272Net
                income
            
            $
            957
            
            $
            1,379
            
            $
            1,505
            
            $
            1,884Earnings
                per share - basic
            
            $
            0.16
            
            $
            0.22
            
            $
            0.24
            
            $
            0.31Earnings
                per share - diluted
            
            $
            0.14
            
            $
            0.21
            
            $
            0.22
            
            $
            0.28





31




**FINANCIAL
      CONDITION AND EARNING ASSETS**





As
      of
      December 31, 2007, total assets were $774.8 million, gross loans were $652.7
      million and deposits were $671.4 million. Assets increased $52.9 million, a
      7.3%
      increase from $722.0 million at December 31, 2006. Gross loans increased $111.9
      million, or 20.7% from $540.8 million at December 31, 2006. Deposits increased
      $26.4 million, a 4.1% increase from $645.0 million at December 31,
      2006.





As
      of
      December 31, 2006, total assets were $722.0 million, gross loans were $540.8
      million and deposits were $645.0 million. Assets increased $185.5 million,
      a
      34.6% increase from $536.5 million at December 31, 2005. Gross loans increased
      $100.8 million, or 22.9% from $440.0 million at December 31, 2005. Deposits
      increased $176.8 million, a 37.8% increase from $468.2 million at December
      31,
      2005.




**Federal
      Funds Sold**




Federal
      funds sold were $13.4 million at December 31, 2007 as compared to $93.8 million
      at December 31, 2006. This decrease is primarily due to a decrease in balance
      sheet leverage. The average balance of federal funds sold was $52.2 million
      in
      2007 and $78.9 million in 2006. These balances represented 7.8% and 14.7% of
      average deposits for 2007 and 2006, 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, 2007, 2006 and 2005.





(dollars
                in thousands)
            
            As
                of December 31,2007
            
            2006
            
            2005Amortized
            
            Fair
            
            Amortized
            
            Fair
            
            Amortized
            
            FairCost
            
            Value
            
            Cost
            
            Value
            
            Cost
            
            ValueU.S.
                treasury
            
            $
            201
            
            $
            202
            
            $
            200
            
            $
            200
            
            $
            199
            
            $
            199U.S.
                government agencies
            
            
            54,450
            
            
            55,280
            
            
            43,815
            
            
            43,733
            
            
            12,355
            
            
            12,184Total
                securities available for sale
            
            
            54,651
            
            
            55,482
            
            
            44,015
            
            
            43,933
            
            
            12,554
            
            
            12,383Total
                investment securities
            
            $
            54,651
            
            $
            55,482
            
            $
            44,015
            
            $
            43,933
            
            $
            12,554
            
            $
            12,383




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





Due in one
            
            Due after one year(dollars
                in thousands)
            
            
            
            year or less
            
            through five yearsWeighted
            
            
            
            WeightedAmortized
            
            
            
            Average
            
            
            
            AverageCost
            
            Amount
            
            Yield
            
            Amount
            
            Yield**As
                of December 31, 2007:**U.S.
                treasury
            
            $
            201
            
            $
            201
            
            
            4.5
            %
            $
            -
            
            
            0.0
            %U.S.
                government agencies
            
            
            54,450
            
            
            23,942
            
            
            4.5
            %
            
            30,508
            
            
            4.8
            %Total
                investment securities
            
            $
            54,651
            
            $
            24,143
            
            
            4.5
            %
            $
            30,508
            
            
            4.8
            %**As
                of December 31, 2006:**U.S.
                treasury
            
            $
            200
            
            $
            100
            
            
            4.3
            %
            $
            100
            
            
            4.3
            %U.S.
                government agencies
            
            
            43,815
            
            
            16,942
            
            
            4.0
            %
            
            26,873
            
            
            4.8
            %Total
                investment securities
            
            $
            44,015
            
            $
            17,042
            
            
            4.0
            %
            $
            26,973
            
            
            4.8
            %





32





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 gain on securities available for sale
      at
      December 31, 2007 was $831,000 as compared to a loss of ($82,000) at December
      31, 2006 and ($102,000) at December 31, 2005.




**Loan
      Portfolio**




The
      following table shows the Bank’s loans by type and their percentage distribution
      for the five years ended December 31, 2007, 2006, 2005, 2004 and 2003.





(dollars
                in thousands)
            
            As of December 31,2007
            
            2006
            
            2005
            
            2004
            
            2003Commercial
            
            $
            272,660
            
            $
            197,174
            
            $
            182,396
            
            $
            100,681
            
            $
            73,846Real
                estate other
            
            
            171,042
            
            
            115,313
            
            
            83,748
            
            
            80,044
            
            
            28,036Real
                estate construction
            
            
            85,378
            
            
            103,710
            
            
            84,792
            
            
            42,323
            
            
            35,065Factoring
                and asset based lending
            
            
            57,662
            
            
            56,924
            
            
            38,184
            
            
            22,342
            
            
            13,106SBA
            
            
            56,945
            
            
            59,888
            
            
            46,867
            
            
            45,251
            
            
            39,412Other
            
            
            9,042
            
            
            7,771
            
            
            4,011
            
            
            3,945
            
            
            4,984Total
                gross loans
            
            
            652,729
            
            
            540,780
            
            
            439,998
            
            
            294,586
            
            
            194,449Unearned
                fee income
            
            
            (1,856
            )
            
            (1,495
            )
            
            (1,395
            )
            
            (973
            )
            
            (713
            )Total
                loan portfolio
            
            $
            650,873
            
            $
            539,285
            
            $
            438,603
            
            $
            293,613
            
            $
            193,736Commercial
            
            
            41.8
            %
            
            36.5
            %
            
            41.5
            %
            
            34.2
            %
            
            38.0
            %Real
                estate other
            
            
            26.2
            %
            
            21.3
            %
            
            19.0
            %
            
            27.2
            %
            
            14.4
            %Real
                estate construction
            
            
            13.1
            %
            
            19.2
            %
            
            19.3
            %
            
            14.3
            %
            
            18.0
            %Factoring
                and asset based lending
            
            
            8.8
            %
            
            10.5
            %
            
            8.7
            %
            
            7.6
            %
            
            6.7
            %SBA
            
            
            8.7
            %
            
            11.1
            %
            
            10.7
            %
            
            15.4
            %
            
            20.3
            %Other
            
            
            1.4
            %
            
            1.4
            %
            
            0.8
            %
            
            1.3
            %
            
            2.6
            %Total
                gross loans
            
            
            100.0
            %
            
            100.0
            %
            
            100.0
            %
            
            100.0
            %
            
            100.0
            %




Gross
      loan balances increased to $652.7 million at December 31, 2007, which
      represented an increase of $111.9 million or 20.7% as compared to $540.8 million
      at December 31, 2006. 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 $540.8 million at December 31, 2006, which represented an increase
      of $100.8 million or 22.9% as compared to $440.0 million at December 31, 2005.
      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.





The
      Bank’s commercial loan portfolio represents loans to small and middle-market
      businesses primarily in the Santa Clara county region. Commercial loans were
      $272.7 million at December 31, 2007, which represented an increase of $75.5
      million or 38.3% over $197.2 million at December 31, 2006. At December 31,
      2007,
      commercial loans comprised 41.8% of total loans outstanding as compared to
      36.5%
      at December 31, 2006. Commercial loans were $197.2 million at December 31,
      2006,
      which represented an increase of $14.8 million or 8.1% over $182.4 million
      at
      December 31, 2005. At December 31, 2006, commercial loans comprised 36.5% of
      total loans outstanding as compared to 41.5% at December 31, 2005.





Other
      real estate loans consist of commercial real estate, land loans related to
      future construction credits and home equity lines of credit. Other real estate
      loans increased $55.7 million or 48.3% to $171.0 million at December 31, 2007
      as
      compared to $115.3 million at December 31, 2006. The increase was primarily
      attributable to other real estate term loans. Other real estate loans increased
      $31.6 million or 37.8% to $115.3 million at December 31, 2006 as compared to
      $83.7 million at December 31, 2005. The increase was primarily attributable
      to
      other real estate term loans. At December 31, 2007, other real estate loans
      represented 26.2% of total loans as compared to 21.3% at December 31, 2006
      and
      19.0% at December 31, 2005.





33




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 decreased $18.3 million, or 17.7%,
      to $85.4 million at December 31, 2007 as compared to $103.7 million at December
      31, 2006. Construction loan balances at December 31, 2007 comprised 13.1% of
      total loans as compared to 19.2% at December 31, 2006. Construction loans
      increased $18.9 million, or 22.3%, to $103.7 million at December 31, 2006 as
      compared to $84.8 million at December 31, 2005. Construction loan balances
      at
      December 31, 2006 comprised 19.2% of total loans as compared to 19.3% at
      December 31, 2005.





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, 2007, factoring and asset based
      loans totaled $57.7 million or 8.8% of total loans as compared to $56.9 million
      or 10.5% of total loans at December 31, 2006.





The
      SBA
      line of business operates primarily in Santa Clara County and also maintains
      loan production offices in Sacramento County and Southern California. 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, 2007, SBA loans comprised $56.9 million or 8.7% of total loans
      as
      compared to $59.9 million or 11.1% of total loans at December 31, 2006 and
      $46.9
      million or 10.7% of total loans at December 31, 2005. 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, 2007, 2006 and 2005, the fair value of SBA loans exceeded aggregate cost
      and
      therefore, SBA loans were carried at aggregate cost.





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, 2007, other loans totaled $9.0 million as
      compared to $7.8 million at December 31, 2006 and $4.0 million at December
      31,
      2005.




**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
      are 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






34




-
            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.





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





(dollars
                in thousands)
            
            Year ended December 31,2007
            
            2006
            
            2005
            
            2004
            
            2003Balance,
                beginning of period
            
            $
            7,329
            
            $
            5,936
            
            $
            4,146
            
            $
            2,683
            
            $
            1,765Loans
                charged off by category:Commercial
                and other
            
            
            562
            
            
            -
            
            
            384
            
            
            240
            
            
            -Real
                estate construction
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Real
                estate other
            
            
            16
            
            
            -
            
            
            -
            
            
            -
            
            
            -Factoring
                and asset-based lending
            
            
            677
            
            
            -
            
            
            -
            
            
            -
            
            
            -Consumer
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            10Total
                charge-offs
            
            
            1,255
            
            
            -
            
            
            384
            
            
            240
            
            
            10Recoveries
                by category:Commercial
                and other
            
            
            259
            
            
            21
            
            
            12
            
            
            32
            
            
            85Real
                estate construction
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Real
                estate other
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Factoring
                and asset-based lending
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Consumer
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Total
                recoveries
            
            
            259
            
            
            21
            
            
            12
            
            
            32
            
            
            85Net
                (recoveries) charge-offs
            
            
            996
            
            
            (21
            )
            
            372
            
            
            208
            
            
            (75
            )Provision
                charged to expense
            
            
            2,275
            
            
            1,372
            
            
            2,162
            
            
            1,671
            
            
            843Balance,
                end of year
            
            $
            8,608
            
            $
            7,329
            
            $
            5,936
            
            $
            4,146
            
            $
            2,683Ratio
                of net charge-offs during the period to average gross loans
                outstanding
            
            
            0.17
            %
            
            0.00
            %
            
            0.06
            %
            
            0.08
            %
            
            -0.05
            %Ratio
                of allowance for credit losses to gross loans outstanding at end
                of
                year
            
            
            1.32
            %
            
            1.36
            %
            
            1.35
            %
            
            1.41
            %
            
            1.38
            %Allowance
                to nonperforming loans at end of year
            
            
            175.17
            %
            
            1677.12
            %
            
            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 five
      years ended December 31:




35




(dollars
                in thousands)
            
            As of December 31,2007
            
            2006
            
            2005
            
            2004
            
            2003Commercial
                and other
            
            
            3,124
            
            
            1,831
            
            
            2,029
            
            
            998
            
            
            666Real
                estate other
            
            
            2,356
            
            
            1,152
            
            
            721
            
            
            1,132
            
            
            288Real
                estate construction
            
            
            783
            
            
            1,082
            
            
            742
            
            
            444
            
            
            400Factoring
                / asset based lending
            
            
            1,239
            
            
            1,415
            
            
            443
            
            
            312
            
            
            261SBA
            
            
            1,053
            
            
            1,803
            
            
            1,975
            
            
            1,231
            
            
            1,042Other
            
            
            53
            
            
            46
            
            
            26
            
            
            29
            
            
            26$
            8,608
            
            $
            7,329
            
            $
            5,936
            
            $
            4,146
            
            $
            2,683Commercial
                and other
            
            
            36.3
            %
            
            25.0
            %
            
            34.2
            %
            
            24.1
            %
            
            24.8
            %SBA
            
            
            27.4
            %
            
            15.7
            %
            
            12.1
            %
            
            27.3
            %
            
            10.7
            %Real
                estate construction
            
            
            9.1
            %
            
            14.8
            %
            
            12.5
            %
            
            10.7
            %
            
            14.9
            %Real
                estate other
            
            
            14.4
            %
            
            19.3
            %
            
            7.5
            %
            
            7.5
            %
            
            9.7
            %Factoring
                / asset based lending
            
            
            12.2
            %
            
            24.6
            %
            
            33.3
            %
            
            29.7
            %
            
            38.8
            %Other
            
            
            0.6
            %
            
            0.6
            %
            
            0.4
            %
            
            0.7
            %
            
            1.0
            %100.0
            %
            
            100.0
            %
            
            100.0
            %
            
            100.0
            %
            
            100.0
            %




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:





As of December 31,(dollars
                in thousands)
            
            2007
            
            2006
            
            2005
            
            2004
            
            2003Loans
                accounted for on a non-accrual basis
            
            $
            4,914
            
            $
            437
            
            $
            2,320
            
            $
            1,026
            
            $
            59Loans
                restructured and in compliance with modified terms
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Other
                loans with principal or interest contracturally past due 90 days
                or
                more
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -$
            4,914
            
            $
            437
            
            $
            2,320
            
            $
            1,026
            
            $
            59




The
      accrual of interest on loans is 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 were four non-accrual loans at December 31, 2007
      totaling $4.9 million as compared to two non-accrual loans at December 31,
      2006
      totaling $437,000 and one non-accrual loan totaling $2.3 million at December
      31,
      2005. Included in the non-accrual loans at December 31, 2007 was one loan
      totaling $3.7 million which was collateralized by undeveloped land. This loan
      had an indicated potential loss exposure of approximately $330,000 and an
      impairment reserve was included in the allowance for loan losses. The other
      significant non-accrual loan was an SBA 504 loan that totaled $713,000 and
      was
      adequately collateralized by undeveloped land. As such, no specific reserve
      was
      required for this 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, 2007, 2006, and 2005, there were no loans past due 90 days or
      more
      as to principal or interest and still accruing interest.





At
      December 31, 2007 there was one commercial property valued at $425,000 that
      was
      categorized as “other real estate owned”. At December 31, 2006 and 2005 there
      were no properties owned by the Bank acquired through the foreclosure process.




36




**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, 2007, 2006 and 2005.





(dollars
                in thousands)
            
            As
                of December 31,2007
            
            2006
            
            2005Amount
            
            Percent
            
            Amount
            
            Percent
            
            Amount
            
            PercentNoninterest-bearing
                demand
            
            $
            198,641
            
            
            29.59
            %
            $
            198,639
            
            
            30.80
            %
            $
            185,557
            
            
            39.64
            %Interest-bearing
                demand
            
            
            5,350
            
            
            0.80
            %
            
            3,901
            
            
            0.60
            %
            
            2,866
            
            
            0.61
            %Money
                market and savings
            
            
            372,923
            
            
            55.55
            %
            
            333,838
            
            
            51.76
            %
            
            210,011
            
            
            44.86
            %Certificates
                of deposit:Less
                than $100
            
            
            22,896
            
            
            3.41
            %
            
            28,918
            
            
            4.48
            %
            
            19,228
            
            
            4.11
            %$100
                and more
            
            
            71,546
            
            
            10.66
            %
            
            79,691
            
            
            12.36
            %
            
            50,496
            
            
            10.79
            %Total
                deposit portfolio
            
            $
            671,356
            
            
            100.00
            %
            $
            644,987
            
            
            100.00
            %
            $
            468,158
            
            
            100.00
            %




Deposits
      increased $26.4 million or 4.1% from $645.0 million at December 31, 2006 to
      $671.4 million at December 31, 2007. 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, 2007
      included $10.7 million, or 1.6% of the total, in title and escrow company
      account balances compared to $27.3 million, or 4.2% at December 31, 2006 and
      $70.6 million, or 15.1% at December 31, 2005. Excluding title and escrow company
      account balances, deposits increased $43.0 million or 7.0% compared to December
      31, 2006, and increased $220.1 million or 47.0% from 2005 to 2006.




**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, 2007, the Company’s capital resources
      increased $14.4 million to $88.6 million from $74.2 million at December 31,
      2006. Tier 1 capital increased $13.5 million to $80.0 million primarily due
      to
      net income of $10.9 million. Tier 2 capital increased $912,000 primarily due
      to
      the increase in the allowance for credit losses of $1.3 million.





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 8.0% of assets and commitments to extend credit, weighted by risk,
      of which at least 4.0% 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 8.0% total ratio. For example, cash and government
      securities are assigned to a 0.0% risk-weighted category, most home mortgage
      loans are assigned to a 50.0% risk-weighted category requiring a 4.0% capital
      allocation and commercial loans are assigned to a 100.0% risk-weighted category
      requiring an 8.0% capital allocation. As of December 31, 2007, the Company's
      and
      the Bank’s total risk-based capital ratios were 11.7% and 11.3%, respectively,
      (11.7% for the Company and 11.3% for the Bank at December 31,
      2006).





The
      following table reflects the Company's Leverage, Tier 1 and total risk-based
      capital ratios for the period ended December 31, 2007 and 2006.





37





(dollars
                in thousands)
            
            As
                of December 31,2007
            
            2006Amount
            
            Ratio
            
            Amount
            
            Ratio**Company
                Capital Ratios**Tier
                1 Capital
            
            $
            80,024
            
            
            10.54
            %
            $
            66,533
            
            
            10.52
            %(to
                Risk Weighted Assets)Tier
                1 capital minimum requirement
            
            $
            30,376
            
            
            4.00
            %
            $
            25,293
            
            
            4.00
            %Total
                Capital
            
            $
            88,632
            
            
            11.67
            %
            $
            74,229
            
            
            11.74
            %(to
                Risk Weighted Assets)Total
                capital minimum requirement
            
            $
            60,752
            
            
            8.00
            %
            $
            50,587
            
            
            8.00
            %Company
                leverageTier
                1 Capital
            
            $
            80,024
            
            
            10.66
            %
            $
            66,533
            
            
            10.97
            %(to
                Average Assets)Total
                capital minimum requirement
            
            $
            30,022
            
            
            4.00
            %
            $
            24,260
            
            
            4.00
            %**Bank
                Risk Based Capital Ratios**Tier
                1 Capital
            
            $
            77,096
            
            
            10.17
            %
            $
            64,145
            
            
            10.15
            %(to
                Risk Weighted Assets)Tier
                1 capital minimum requirement
            
            $
            30,328
            
            
            4.00
            %
            $
            25,272
            
            
            4.00
            %Total
                Capital
            
            $
            85,704
            
            
            11.30
            %
            $
            71,474
            
            
            11.31
            %(to
                Risk Weighted Assets)Total
                capital minimum requirement
            
            $
            60,655
            
            
            8.00
            %
            $
            50,544
            
            
            8.00
            %Bank
                leverageTier
                1 Capital
            
            $
            77,096
            
            
            10.27
            %
            $
            64,145
            
            
            10.59
            %(to
                Average Assets)Total
                capital minimum requirement
            
            $
            30,018
            
            
            4.00
            %
            $
            24,240
            
            
            4.00
            %




The
      federal banking agencies, including the OCC, have adopted regulations
      implementing a system of prompt corrective action under 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 10.0% or greater, a Tier 1 risk-based capital ratio of
      6.0% or greater and a leverage ratio of 5.0% 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 8.0% or greater, a
      Tier 1 risk-based capital of 4.0% or greater and a leverage ratio of 4.0%
      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 8.0%, a Tier 1 risk-based
      capital ratio of less than 4.0%, or a leverage ratio of less than 4.0%;
      (4) ”Significantly undercapitalized,” consisting of institutions with a
      total risk-based capital ratio of less than 6.0%, a Tier 1 risk-based
      capital ratio of less than 3.0%, or a leverage ratio of less than 3.0%; and
      (5) ”Critically undercapitalized,” consisting of institutions with a ratio
      of tangible equity to total assets that is equal to or less than
      2.0%.





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.





38




**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 the 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, 2007, liquid assets as a percentage of deposits were 14.4% as
      compared to 25.1% in 2006. 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 utilizes
      a
      monthly "Gap" report as well as a quarterly simulation model to identify
      interest rate sensitivity over the short- and long-term. Management considers
      the results of these analyses when implementing its interest rate risk
      management activities, including the utilization of certain interest rate
      hedges.





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, 2007, 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, 2007 was asset sensitive in terms of its short-term exposure to
      interest rates. That is, at December 31, 2007 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. In addition, the Bank has entered into two
      interest rate swaps to hedge the variable cash flows associated with $100
      million of existing variable-rate assets.


39
  (dollars
                  in thousands)
              
              As
                  of December 31, 2007After
                  three
              
              After
                  six
              
              After
                  oneWithin
              
              months
                  but
              
              months
                  but
              
              year
                  but
              
              Afterthree
              
              within
                  six
              
              within
                  one
              
              within
              
              fivemonths
              
              months
              
              year
              
              five
                  years
              
              years
              
              TotalFederal
                  funds sold
              
              $
              13,395
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              13,395U.S.
                    treasury and agency securities
              
              
              9,999
              
              
              4,994
              
              
              9,207
              
              
              31,282
              
              
              -
              
              
              55,482Loans
              
              
              441,555
              
              
              41,180
              
              
              30,879
              
              
              84,292
              
              
              54,823
              
              
              652,729Total
                  earning assets
              
              
              464,949
              
              
              46,174
              
              
              40,086
              
              
              115,574
              
              
              54,823
              
              
              721,606Interest
                    checking, money market and savings deposits
              
              
              378,273
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              378,273Certificates
                  of deposit:Less
                  than $100,000
              
              
              7,229
              
              
              2,566
              
              
              6,962
              
              
              6,138
              
              
              -
              
              
              22,895$100,000
                  or more
              
              
              40,101
              
              
              7,224
              
              
              15,364
              
              
              8,857
              
              
              -
              
              
              71,546Total
                  interest-bearing liabilities
              
              
              385,502
              
              
              2,566
              
              
              6,962
              
              
              6,138
              
              
              0
              
              
              472,714Interest
                  rate gap
              
              $
              79,447
              
              $
              43,608
              
              $
              33,124
              
              $
              109,436
              
              $
              54,823
              
              $
              248,892Cumulative
                  interest rate gap
              
              $
              79,447
              
              $
              123,055
              
              $
              156,179
              
              $
              265,615
              
              $
              320,438Interest
                  rate gap ratio
              
              
              0.17
              
              
              0.94
              
              
              0.83
              
              
              0.95
              
              
              1.00Cumulative
                  interest rate gap ratio
              
              
              0.17
              
              
              0.24
              
              
              0.28
              
              
              0.40
              
              
              0.44
 
 The
        following table shows maturity and interest rate sensitivity of the loan
        portfolio at December 31, 2007 and 2006. At December 31, 2007, approximately
        79.2% of the loan portfolio is priced with floating interest rates which
        limit
        the exposure to interest rate risk on long-term loans.
  40
  (dollars
                  in thousands)
              
              As
                  of December 31, 2007Due
                  after oneDue
                  one year
              
              year
                  through
              
              Due
                  afterAmount
              
              or
                  less
              
              five
                  years
              
              five
                  yearsCommercial
              
              $
              272,660
              
              $
              161,013
              
              $
              84,173
              
              $
              27,474SBA
              
              
              56,945
              
              
              12,059
              
              
              3,174
              
              
              41,712Real
                  estate construction
              
              
              85,378
              
              
              74,457
              
              
              10,921
              
              
              -Real
                  estate other
              
              
              171,042
              
              
              58,670
              
              
              42,561
              
              
              69,811Factoring
                  and asset based lending
              
              
              57,662
              
              
              55,834
              
              
              1,828
              
              
              -Other
              
              
              9,042
              
              
              8,272
              
              
              770
              
              
              -Total
                  loans
              
              $
              652,729
              
              $
              370,305
              
              $
              143,427
              
              $
              138,997
  As
                    of December 31, 2006Due
                    after oneDue
                    one year
                
                year
                    through
                
                Due
                    afterAmount
                
                or
                    less
                
                five
                    years
                
                five
                    yearsCommercial
                
                $
                197,174
                
                $
                102,870
                
                $
                82,154
                
                $
                12,150SBA
                
                
                59,888
                
                
                8,857
                
                
                186
                
                
                50,845Real
                    estate construction
                
                
                103,710
                
                
                102,005
                
                
                1,705
                
                
                -Real
                    estateother
                
                
                115,313
                
                
                44,802
                
                
                25,633
                
                
                44,878Factoring
                    and asset based lending
                
                
                56,924
                
                
                56,924
                
                
                -
                
                
                -Other
                
                
                7,771
                
                
                4,656
                
                
                3,115
                
                
                -Total
                    loans
                
                $
                540,780
                
                $
                320,114
                
                $
                112,793
                
                $
                107,873
  **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:
  •
              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”);
  •
              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;
  •
              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
  •
              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, 2007 those guarantees
        include
        the following:
 
 Financial
        Letters of Credit in the amount of $15.8 million
 
 The
        table
        below summarizes the Bank’s off-balance sheet contractual
        obligations.
 
 41
 
 (dollars
                  in thousands)
              
              As
                  of December 31, 2007Payments
                  due by periodLess
                  Than
              
              1
                  -
                  3
              
              3
                  -
                  5
              
              More
                  thanContractural
                  Obligations
              
              Total
              
              1
                  year
              
              years
              
              years
              
              5
                  yearsLong-term
                  contracts
              
              $
              2,929
              
              $
              1,026
              
              $
              1,599
              
              $
              304
              
              $
              -Operating
                  leases
              
              
              15,054
              
              
              1,825
              
              
              3,703
              
              
              3,352
              
              
              6,174Total
              
              $
              17,983
              
              $
              2,851
              
              $
              5,302
              
              $
              3,656
              
              $
              6,174
 
 42


**Item
      8. Financial Statements and Supplementary Data**





INDEX
                TO FINANCIAL STATEMENTSPageReports
                of Independent Registered Public Accounting Firm
            
            44-45Balance
                Sheets, December 31, 2007 and 2006
            
            46Statements
                of Operations for the years ended December 31, 2007, 2006 and
                2005
            
            47Statement
                of Shareholders' Equity and Comprehensive Income for the years
                endedDecember
                31, 2007, 2006 and 2005
            
            48Statements
                of Cash Flows for the years ended December 31, 2007, 2006 and 2005
            
            49Notes
                to Financial Statements
            
            50-69





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.




*
      * * *
      *


43


**Report
      of Independent Registered Public Accounting Firm**





The
      Board
      of Directors and Shareholders


Bridge
      Capital Holdings





We
      have
      audited the consolidated balance sheets of Bridge Capital Holdings and
      Subsidiary as of December 31, 2007and 2006 , and the related statements of
      operations, changes in shareholders’ equity and comprehensive income, and cash
      flows for each of the years in the three year period ended December 31, 2007.
      These consolidated financial statements are the responsibility of the Company’s
      management. Our responsibility is to express opinions on these consolidated
      financial statements based on our audits.





We
      have
      also audited, in accordance with the standards of the Public Company Oversight
      Board (United States), Bridge Capital Holdings and Subsidiary’s internal control
      over financial reporting as of December 31, 2007, based on criteria established
      in Internal Control - Integrated Framework issued by the Committee of Sponsoring
      Organizations of the Treadway Commission (COSO), and our report dated March
      3,
      2008, expressed an unqualified opinion.





We
      conducted our audits in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audits 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 audits provide a reasonable basis for our
      opinions.





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, 2007 and 2006 and the results of
      their operations and their cash flows for each of the years in the three year
      period ended December 31, 2007, in conformity with U.S. generally accepted
      accounting principles.




bbnk


Palo
      Alto, California


March
      3,
      2008




44




**Report
      of Independent Registered Public Accounting Firm**





Board
      of
      Directors and Shareholders


Bridge
      Capital Holdings and Subsidiary


San
      Jose,
      California








We
      have
      audited Bridge Capital Holdings and Subsidiary’s (the Company) internal control
      over financial reporting as of December 31, 2007, 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 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 of internal control over financial reporting included
      obtaining an understanding of internal control over financial reporting,
      assessing the risk that a material weakness exists, and testing and evaluating
      the design and operating effectiveness of internal control based on the assessed
      risk. Our audit also included 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 (1) 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.





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, the Company maintained, in all material respects, effective internal
      control over financial reporting as of December 31, 2007, based on criteria
      established in Internal Control - Integrated Framework issued by the Committee
      of Sponsoring Organizations of the Treadway Commission (COSO). 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 of the Company as of December
      31, 2007 and the related consolidated statements of operations, shareholders’
equity and comprehensive income and cash flows for the year then ended, and
      our
      report dated March 3, 2008 expressed an unqualified opinion on those financial
      statements.





bbnk


Palo
      Alto, California


March
      3,
      2008





45





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




**As
                of December 31,****2007**
            
            **2006****Assets:**Cash
                and due from banks
            
            $
            27,440
            
            $
            24,360Federal
                funds sold
            
            
            13,395
            
            
            93,845Total
                cash and equivalents
            
            
            40,835
            
            
            118,205Investment
                securities available for sale
            
            
            55,482
            
            
            43,933Loans,
                net of allowance for credit losses of $8,608 at December 31, 2007
                and
                $7,329 at December 31, 2006
            
            
            642,265
            
            
            531,956Premises
                and equipment, net
            
            
            5,005
            
            
            3,479Other
                real estate owned
            
            
            425
            
            
            -Accrued
                interest receivable
            
            
            4,400
            
            
            4,292Other
                assets
            
            
            26,420
            
            
            20,114Total
                assets
            
            $
            774,832
            
            $
            721,979**Liabilities
                and Shareholders' Equity:**Deposits:Demand
                noninterest-bearing
            
            $
            198,641
            
            $
            198,639Demand
                interest-bearing
            
            
            5,350
            
            
            3,901Savings
            
            
            372,923
            
            
            333,838Time
            
            
            94,442
            
            
            108,609Total
                deposits
            
            
            671,356
            
            
            644,987Junior
                subordinated debt securities
            
            
            17,527
            
            
            17,527Other
                borrowings
            
            
            10,000
            
            
            -Accrued
                interest payable
            
            
            210
            
            
            318Other
                liabilities
            
            
            10,655
            
            
            10,053Total
                liabilities
            
            
            709,748
            
            
            672,885Commitments
                and contingencies
            
            
            -
            
            
            -**Shareholders'
                Equity:**Preferred
                  stock, no par value; 10,000,000 shares authorized;none
                  issued
            
            
            -
            
            
            -Common
                    stock, no par value; 30,000,000 shares authorized;6,485,630
                    shares issued and outstanding at December 31, 2007; 6,318,694
                    shares issued and outstanding at December 31,
                    2006.
            
            
            35,974
            
            
            34,406Additional
                paid in capital
            
            
            1,723
            
            
            1,021Retained
                earnings
            
            
            25,409
            
            
            14,543Accumulated
                other comprehensive (loss)
            
            
            1,978
            
            
            (876
            )Total
                shareholders' equity
            
            
            65,084
            
            
            49,094Total
                liabilities and shareholders' equity
            
            $
            774,832
            
            $
            721,979




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




46


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




**Year
                Ended December 31,****2007**
            
            **2006**
            
            **2005****Interest
                Income:**Loans
            
            $
            61,008
            
            $
            48,248
            
            $
            31,983Federal
                funds sold
            
            
            2,648
            
            
            3,990
            
            
            1,703Investment
                securities available for sale
            
            
            3,089
            
            
            724
            
            
            432Total
                interest income
            
            
            66,745
            
            
            52,962
            
            
            34,118**Interest
                Expense:**Deposits
            
            
            18,104
            
            
            13,182
            
            
            5,874Other
            
            
            1,056
            
            
            1,089
            
            
            741Total
                interest expense
            
            
            19,160
            
            
            14,271
            
            
            6,615Net
                interest income
            
            
            47,585
            
            
            38,691
            
            
            27,503Provision
                for credit losses
            
            
            2,275
            
            
            1,372
            
            
            2,162Net
                    interest income after provision for credit
                    losses
            
            
            45,310
            
            
            37,319
            
            
            25,341**Non-Interest
                Income:**Gain
                on sale of SBA loans
            
            
            3,564
            
            
            1,734
            
            
            2,290Service
                charges on deposit accounts
            
            
            672
            
            
            498
            
            
            354International
                fee income
            
            
            658
            
            
            234
            
            
            78SBA
                loan servicing fee income
            
            
            442
            
            
            548
            
            
            528Warrant
                income
            
            
            441
            
            
            29
            
            
            -Increase
                in value-bank owned life insurance
            
            
            402
            
            
            320
            
            
            377Other
                non-interest income
            
            
            534
            
            
            474
            
            
            570Total
                non-interest income
            
            
            6,713
            
            
            3,837
            
            
            4,197**Operating
                Expenses:**Salaries
                and benefits
            
            
            20,990
            
            
            17,417
            
            
            12,127Occupancy
            
            
            3,390
            
            
            2,132
            
            
            1,652Data
                services
            
            
            1,917
            
            
            1,528
            
            
            1,085Marketing
            
            
            1,350
            
            
            1,081
            
            
            925Professional
                services
            
            
            1,150
            
            
            825
            
            
            746Furniture
                and equipment
            
            
            947
            
            
            701
            
            
            583Director/Shareholder
                expenses
            
            
            837
            
            
            530
            
            
            458Deposit
                services/supplies
            
            
            605
            
            
            525
            
            
            401Third
                party services
            
            
            350
            
            
            925
            
            
            1,065Other
            
            
            2,038
            
            
            1,615
            
            
            939Total
                operating expenses
            
            
            33,574
            
            
            27,279
            
            
            19,981**Income
                before income taxes**
            
            
            18,449
            
            
            13,877
            
            
            9,557Income
                taxes
            
            
            7,583
            
            
            5,243
            
            
            3,832**Net
                income**
            
            $
            10,866
            
            $
            8,634
            
            $
            5,725Basic
                earnings per share
            
            $
            1.70
            
            $
            1.38
            
            $
            0.93Diluted
                earnings per share
            
            $
            1.57
            
            $
            1.27
            
            $
            0.85Average
                common shares outstanding
            
            
            6,380,100
            
            
            6,274,051
            
            
            6,164,898Average
                    common and equivalent shares outstanding
            
            
            6,925,904
            
            
            6,816,700
            
            
            6,730,947




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




47





**Bridge
                Capital Holdings and Subsidiary****Consolidated
                Statements of Shareholders' Equity and Comprehensive
                Income****(dollars
                in thousands, except share
                data)**




**Accumulated**
            
            **Total****Common
                Stock and**
            
            
            
            **Other**
            
            **Share-****Additional
                Paid in Capital**
            
            **Retained**
            
            **Comprehensive**
            
            **holders'****Shares**
            
            **Amount**
            
            **Earnings**
            
            **Income
                (loss)**
            
            **Equity****Balance
                at December 31, 2004**
            
            
            6,097,697
            
            $
            33,057
            
            $
            184
            
            $
            (119
            )
            $
            33,122Stock
                options exercised
            
            
            129,899
            
            
            730
            
            
            -
            
            
            -
            
            
            730Tax
                benefit from exercise ofnon
                qualified stock options
            
            
            -
            
            
            120
            
            
            -
            
            
            -
            
            
            120Other
                comprehensive income
            
            
            -
            
            
            -
            
            
            -
            
            
            17
            
            
            17Net
                income for the year
            
            
            -
            
            
            -
            
            
            5,725
            
            
            -
            
            
            5,725**Balance
                at December 31, 2005**
            
            
            6,227,596
            
            $
            33,907
            
            $
            5,909
            
            $
            (102
            )
            $
            39,714Stock
                options exercised
            
            
            91,098
            
            
            619
            
            
            -
            
            
            -
            
            
            619Tax
                benefit from exercise ofnon
                qualified stock options
            
            
            -
            
            
            141
            
            
            -
            
            
            -
            
            
            141Stock
                based compensation
            
            
            -
            
            
            760
            
            
            -
            
            
            -
            
            
            760Other
                comprehensive income
            
            
            -
            
            
            -
            
            
            -
            
            
            (774
            )
            
            (774
            )Net
                income for the year
            
            
            -
            
            
            -
            
            
            8,634
            
            
            -
            
            
            8,634**Balance
                at December 31, 2006**
            
            
            6,318,694
            
            $
            35,427
            
            $
            14,543
            
            $
            (876
            )
            $
            49,094Stock
                options exercised
            
            
            105,231
            
            
            801
            
            
            -
            
            
            -
            
            
            801Tax
                benefit from exercise ofnon
                qualified stock options
            
            
            -
            
            
            316
            
            
            -
            
            
            -
            
            
            316Stock
                based compensation
            
            
            -
            
            
            1,153
            
            
            -
            
            
            -
            
            
            1,153Other
                comprehensive income
            
            
            -
            
            
            -
            
            
            -
            
            
            2,854
            
            
            2,854Net
                income for the year
            
            
            -
            
            
            -
            
            
            10,866
            
            
            -
            
            
            10,866**Balance
                at December 31, 2007**
            
            
            6,423,925
            
            $
            37,697
            
            $
            25,409
            
            $
            1,978
            
            $
            65,084The
                accompanying notes are an integral part of the financial
                statements.




48





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




**Year
                Ended December 31,****2007**
            
            **2006**
            
            **2005****Cash
                Flows From Operating Activities:**Net
                income
            
            $
            10,866
            
            $
            8,634
            
            $
            5,725Adjustments
                    to reconcile net income to net cash provided by operating
                    activities:Provision
                for credit losses
            
            
            2,275
            
            
            1,372
            
            
            2,162Depreciation
                and amortization
            
            
            1,041
            
            
            840
            
            
            853Stock
                based compensation
            
            
            1,153
            
            
            760
            
            
            -Proceeds
                from loan sales
            
            
            90,334
            
            
            51,359
            
            
            66,578Loans
                originated for sale
            
            
            (86,427
            )
            
            (66,268
            )
            
            (69,843
            )Increase
                in accrued interest receivable and other assets
            
            
            (4,700
            )
            
            (4,290
            )
            
            (4,747
            )Increase
                in accrued interest payable and other liabilities
            
            
            722
            
            
            2,478
            
            
            2,176Net
                cash provided (used in) by operating activities
            
            
            15,264
            
            
            (5,115
            )
            
            2,904**Cash
                Flows From Investing Activities:**Purchase
                of securities available for sale
            
            
            (38,462
            )
            
            (41,984
            )
            
            (50,394
            )Proceeds
                from maturities of securities available for sale
            
            
            28,100
            
            
            10,625
            
            
            64,300Net
                increase in loans
            
            
            (116,916
            )
            
            (85,752
            )
            
            (142,097
            )Purchase
                of fixed assets
            
            
            (2,841
            )
            
            (2,085
            )
            
            (935
            )Net
                cash used in investing activities
            
            
            (130,119
            )
            
            (119,196
            )
            
            (129,126
            )**Cash
                Flows From Financing Activities:**Net
                increase in deposits
            
            
            26,368
            
            
            176,830
            
            
            115,702Proceeds
                from sale of common stock
            
            
            1,117
            
            
            619
            
            
            850Increase
                in other borrowings
            
            
            10,000
            
            
            (4,473
            )
            
            10,000Net
                cash provided by financing activities
            
            
            37,485
            
            
            172,976
            
            
            126,552**Net
                (Decrease) Increase in Cash and Equivalents:**
            
            
            (77,370
            )
            
            48,665
            
            
            330Cash
                and equivalents at beginning of period
            
            
            118,205
            
            
            69,540
            
            
            69,210Cash
                and equivalents at end of period
            
            $
            40,835
            
            $
            118,205
            
            $
            69,540**Other
                Cash Flow Information:**Cash
                paid for interest
            
            $
            18,389
            
            $
            14,082
            
            $
            6,554Cash
                paid for income taxes
            
            $
            9,450
            
            $
            6,895
            
            $
            4,665




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


49




**BRIDGE
      CAPITAL HOLDINGS**





**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**FOR
      THE YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005**





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, 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. 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, N.A. 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, N.A.. As
      a
      result of the transaction, the former shareholders of Bridge Bank, N.A. received
      one share of common stock of Bridge Capital Holdings for every one share of
      common stock of Bridge Bank, N.A. 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.




***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, 2007, aggregate reserves
      (in
      the form of deposits with the Federal Reserve Bank) of $206,000 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 Company’s positive
      intent and ability to hold the securities to maturity. As of December 31, 2007
      and 2006, all of the Company’s securities were classified as available for
      sale.





50




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 gains are recognized through a valuation allowance
      by credits 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
      Comapny has adopted Statement of Financial Accounting Standard (“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.





***Servicing
      Rights*** **-** Servicing rights are recognized separately when they are acquired through sale
      of loans. For sales of SBA loans prior to January 1, 2007, a portion of the
      cost
      of the loan was allocated to the servicing right based on relative fair values.
      The Company adopted SFAS No. 156, Accounting for Servicing of Financial Assets,
      on January 1, 2007, for sales of SBA loans beginning in 2007. Servicing rights
      are initially recorded at fair value with the income statement effect recorded
      in gain on sale of loans. Fair value is based on a valuation model that
      calculates the present value of estimated future cash flows from the servicing
      assets. The valuation model uses assumptions that market participants would
      use
      in estimating cash flows from servicing assets, such as the cost to service,
      discount rates and prepayment speeds. The Company compares the valuation model
      inputs and results to published industry data in order to validate the model
      results and assumptions. All classes of servicing assets are subsequently
      measured using the amortization method which requires servicing rights to be
      amortized into non-interest income in proportion to, and over the period of,
      the
      estimated future net servicing income of the underlying loans.





Servicing
      assets are evaluated for impairment based upon the fair value of the rights
      as
      compared to the carrying amount. Impairment is determined by stratifying rights
      into groupings based on predominant risk characteristics, such as interest
      rate,
      loan type and investor type. For purposes of measuring impairment, the Company
      has identified each servicing asset with the underlying loan being serviced.
      A
      valuation allowance is recorded where the fair value is below the carrying
      amount of the asset. If the Company later determines that all or a portion
      of
      the impairment no longer exists for a particular grouping, a reduction of the
      allowance may be recorded as an increase to income. The fair values of servicing
      rights are subject to significant fluctuations as a result of changes in
      estimated and actual prepayment speeds and changes in the discount
      rates.





Servicing
      fee income which is reported on the income statement as servicing income is
      recorded for fees earned for servicing loans. The fees are based on a
      contractual percentage of the outstanding principal and recorded as income
      when
      earned. The amortization of servicing rights and changes in the valuation
      allowance are netted against loan servicing income.




***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.





51




***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.
      The Company values these properties at fair value less estimated costs to sell
      at the time it acquires them, which establishes the new cost basis. The Company
      charges against the allowance for credit losses any losses arising at the time
      of acquisition of such properties. After it acquires them, the Company carries
      such properties at the lower of cost or fair value less estimated selling costs.
      If the Company records any write-downs or losses from disposition of such
      properties after acquiring them, it includes this amount in other non-interest
      expense. Development and improvement costs relating to OREO are capitalized
      (assuming they are recoverable). At December 31, 2007 there was one commercial
      property valued at $425,000 that was categorized as “other real estate owned”.
      At December 31, 2006 there were no properties owned by the Bank acquired through
      the foreclosure process.





***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.




On
      January 1, 2007, t he Bank
      adopted Financial
      Accounting Standards Board (“FASB”) Interpretation
      No. 48, Accounting for Uncertainty in Income Taxes (“FIN 48”).  FIN 48
      clarifies the accounting for uncertainty in income taxes recognized in an
      enterprise’s financial statements in accordance with FASB Statement No. 109,
      Accounting for Income Taxes.  FIN 48 prescribes a recognition threshold and
      measurement standard for the financial statement recognition and measurement
      of
      an income tax position taken or expected to be taken in a tax return.  In
      addition, FIN 48 provides guidance on derecognition, classification, interest
      and penalties, accounting in interim periods, disclosure and
      transition.





The
      provisions of FIN 48 have been applied to all tax positions of the Bank as
      of
      January 1, 2007. Only
      tax
      positions that met the more-likely-than-not recognition threshold on
      January 1, 2007  were recognized or continue to be recognized upon adoption.  The Bank pre viously recognize d income
      tax positions based on management’s estimate of whether it was reasonably possible that a liability has been incurred for unrecognized income
      tax benefits by applying FASB Statement No. 5, Accounting for
      Contingencies.  The
      adoption of FIN 48 did not have
      a material impact on the Bank’s financial position, results of operations or cash flows. The
      adoption of FIN 48 made no impact on the balance of retained earnings as of
      January 1, 2007.





Interest
      expense associated with unrecognized tax benefits is classified as income tax
      expense in the statement of income. Penalties associated with unrecognized
      tax
      benefits are classified as income tax expense in the statement of
      income.





***Stock-Based
      Compensation*** *-* ****** On
      January 1, 2006, the Company implemented SFAS No. 123 (revised 2004) (SFAS
      No. 123R), Share-Based Payments, which addresses the accounting for
      stock-based payment transactions in which an enterprise receives employee
      services in exchange for (a) equity instruments of the enterprise or
      (b) liabilities that are based on the fair value of the enterprise’s equity
      instruments or that may be settled by the issuance of such equity instruments.
      SFAS No. 123R eliminates the ability to account for stock-based
      compensation transactions using the intrinsic value method under Accounting
      Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to
      Employees, and instead generally requires that such transactions be accounted
      for using a fair-value-based method.  The Company uses the
      Black-Scholes-Merton (“BSM”) option-pricing model to determine the fair-value of
      stock-based awards under SFAS No. 123R, consistent with that used for pro
      forma disclosures under SFAS No. 123, Accounting for Stock-Based
      Compensation. The Company has elected the modified prospective transition method
      as permitted by SFAS No. 123R and accordingly prior periods have not been
      restated to reflect the impact of SFAS No. 123R.  The modified
      prospective transition method requires that stock-based compensation expense
      be
      recorded for all new and unvested stock options, restricted stock, restricted
      stock units, and employee stock purchase plan shares that are ultimately
      expected to vest as the requisite service is rendered beginning on January
      1,
      2006, the first day of the Company’s fiscal year 2006. Stock-based compensation
      expense for awards granted prior to January 1, 2006 is based on the grant date
      fair-value as determined under the pro forma provisions of SFAS
      No. 123.  The Company has recorded an incremental $1.2 million
      ($993,000 net of tax) of stock-based compensation expense during 2007 as a
      result of the adoption of SFAS No. 123R. The impact of implementing SFAS
      No. 123R reduced basic earnings per share by $0.16 and diluted earnings per
      share by $0.10 for the year ended December 31, 2007 and reduced basic earnings
      per share by $0.11 and diluted earnings per share by $0.06 for the year ended
      December 31, 2006.





52




No
      stock-based compensation costs were capitalized as part of the cost of an asset
      as of December 31, 2007.  As of December 31, 2007, $4.1 million of total
      unrecognized compensation cost related to stock options and restricted stock
      units are expected to be recognized over a weighted-average period of 5 years. The
      total
      fair value of shares vested during the years ended December 31, 2007, 2006,
      and
      2005 was $925,000, $587,000, and $429,000, respectively.





Prior
      to
      the adoption of SFAS No. 123R, the Company measured compensation expense
      for its employee stock-based compensation plans using the intrinsic value method
      prescribed by APB Opinion No. 25. The Company applied the disclosure
      provisions of SFAS No. 123 as amended by SFAS No. 148, Accounting for
      Stock-Based Compensation - Transition and Disclosure ** as
      if the
      fair-value-based method had been applied in measuring compensation expense.
      Under APB Opinion No. 25, when the exercise price of the Company’s employee
      stock options was equal to the market price of the underlying stock on the
      date
      of the grant, no compensation expense was recognized.





The
      following table illustrates the effect on net income after taxes and net income
      per common share as if the Company had applied the fair value recognition
      provisions of SFAS No. 123R to stock-based compensation during 2005 (in
      thousands, except per share amounts):


Year
                  endedDecember
                  31,(dollars
                  in thousands, except share data)
              
              2005Net
                  income
              
              $
              5,725Stock
                    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
              )Pro
                  forma net income
              
              $
              5,408Basic
                  earnings per share:As
                  reported
              
              $
              0.93Pro
                  forma
              
              $
              0.88Diluted
                  earnings per share:As
                  reported
              
              $
              0.85Pro
                  forma
              
              $
              0.80





***Recent
      Accounting Announcements -*** In
      February 2006, the Financial Accounting standards Board released SFAS No. 155,
      “Accounting for Certain Hybrid Financial Instruments”. SFAS No. 155 is an
      amendment of SFAS No. 133, “Accounting for Derivative Instruments and Hedging
      Activities”, and SFAS No. 140, “Accounting for Transfers and Servicing of
      Financial Assets and Extinguishment of Liabilities”. SFAS No. 155 establishes,
      amount other items, the accounting for certain derivative instruments embedded
      within other types of financial instruments; and eliminates a restriction on
      the
      passive derivative instruments that a qualifying special-purpose entity may
      hold. Effective for the Company for January 1, 2007, SFAS No. 155 did not have
      any impact on our financial position, results of operations or cash
      flows.




In
      March
      2006, the Financial Accounting standards Board released SFAS No. 156,
“Accounting for Servicing of Financial Assets”, an amendment of SFAS Statement
      No. 140, “Accounting for Transfers and Servicing of Financial Assets and
      Extinguishment of Liabilities”. SFAS No. 156 amends SFAS No. 140 to require that
      all separately recognized servicing assets and liabilities in accordance with
      SFAS No. 140 be initially measured at fair value, if practicable. Furthermore,
      this standard permits, but does not require fair value measurement for
      separately recognized servicing assets and liabilities in subsequent reporting
      periods. SFAS No. 156 is also effective for the Company beginning January 1,
      2007; however, the adoption of this standard did not have a material impact
      on
      the Company’s financial position, results of operations or cash
      flows.




53




In
      September 2006, the Financial Accounting Standards Board issued SFAS No. 157,
      “Fair Value Measurement”, a standard that provides enhanced guidance for using
      fair value to measure assets and liabilities. The standard also responds to
      investors’ requests for expanded information about the extent to which a company
      measures assets and liabilities at fair value, the information used to measure
      fair value, and the effect of fair value measurements on earnings. The standard
      applies whenever other standards require (or permit) assets or liabilities
      to be
      measured at fair value. Under the standard, fair value refers to the price
      that
      would be received to sell an asset or paid to transfer a liability in an orderly
      transaction between market participants in the market in which the reporting
      entity transacts. The standard clarifies that fair value should be based on
      the
      assumptions market participants would use when pricing the asset or liability.
      In support of this principle, the standard establishes a fair value hierarchy
      that prioritizes the information used to develop those assumptions. The fair
      value hierarchy gives the highest priority to quoted prices in active markets
      and the lowest priority to unobservable data, for example, the reporting
      entity’s own data. Under the standard, fair value measurements would be
      separately disclosed by level within the fair value hierarchy. We will adopt
      SFAS No. 157 on January 1, 2008, and we do not expect the adoption of SFAS
      No.
      157 to have a material impact on our financial condition or operating
      results.




In
      February 2007, the Financial Accounting Standards Board issued SFAS No. 159,
“
The Fair Value Option for Financial Assets and Liabilities” - Including an
      amendment of FASB No. 115. This Standard permits, but does not require, entities
      to chose to measure many financial instruments and certain other itmes at fair
      value. The Statement is expected to expand the use of fair value measurement,
      which is consistent with the Board’s long-term measurement objectives for
      accounting for financial instruments. The Statement is effective for fiscal
      years beginning after November 15, 2007. We do not plan to adopt any of the
      fair
      value measurement options afforded by this Statement.




***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 the SFAS No. 158
      adjustment to fully recognize the liability associated with the supplemental
      executive retirement plan, unrealized gains and losses, net of tax, on cash
      flow
      hedges, and unrealized gains and losses, net of tax, on marketable securities
      classified as available-for-sale. The Company had an accumulated other
      comprehensive gain totaling $2.0 million, net of tax, at December 31, 2007,
      and
      accumulated other comprehensive losses of ($876,000), net of tax, at December
      31, 2006 and ($102,000), net of tax, at December 31, 2005.





(dollars
                in thousands)
            
            Year
                ended December 31,2007
            
            2006
            
            2005Net
                income
            
            $
            10,866
            
            $
            8,634
            
            $
            5,725Other
                    comprehensive earnings-Net unrealized gains (losses) on FAS 158
                    adjustment-supplemental executive retirement
                    plan
            
            
            44
            
            
            (711
            )Net
                  unrealized gains (losses) on cash flow hedges
            
            
            2,270
            
            
            (114
            )Net
                  unrealized gains (losses) on securities available for
                  sale
            
            
            540
            
            
            51
            
            
            17Total
                comprehensive income
            
            $
            13,720
            
            $
            7,860
            
            $
            5,742





***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.





54





***Derivative
      Instruments and Hedging Activities*** –
SFAS
      No. 133, “Accounting for Derivative Instruments and Hedging Activities”, as
      amended and interpreted, establishes accounting and reporting standards for
      derivative instruments, including certain derivative instruments embedded in
      other contracts, and for hedging activities. As required by SFAS 133, the
      Company records all derivatives on the balance sheet at fair value.  The
      accounting for changes in the fair value of derivatives depends on the intended
      use of the derivative and the resulting designation. Derivatives used to hedge
      the exposure to changes in the fair value of an asset, liability, or firm
      commitment attributable to a particular risk, such as interest rate risk, are
      considered fair value hedges. Derivatives used to hedge the exposure to
      variability in expected future cash flows, or other types of forecasted
      transactions, are considered cash flow hedges.




For
      derivatives designated as cash flow hedges, the effective portion of changes
      in
      the fair value of the derivative is initially reported in other comprehensive
      income (outside of earnings) and subsequently reclassified to earnings when
      the
      hedged transaction affects earnings, and the ineffective portion of changes
      in
      the fair value of the derivative is recognized directly in earnings. The Company
      assesses the effectiveness of each hedging relationship by comparing the changes
      in cash flows of the derivative hedging instrument with the changes in cash
      flows of the designated hedged item or transaction.




The
      Company’s objective in using derivatives is to add stability to interest income
      and to manage its exposure to interest rate movements or other identified
      risks.  To accomplish this objective, the Company primarily uses interest
      rate swaps as part of its cash flow hedging strategy. Interest rate swaps
      designated as cash flow hedges involve the receipt of fixed-rate amounts in
      exchange for variable-rate payments over the life of the agreements without
      exchange of the underlying principal amount.  During 2007 and 2006, this
      derivative was used to hedge the variable cash flows associated with $100.0
      million and $50.0 million, respectively, of existing variable-rate
      assets.




As
      of
      December 31, 2007 and 2006, no derivatives were designated as fair value hedges
      or hedges of net investments in foreign operations. Additionally, the Company
      does not use derivatives for trading or speculative purposes and currently
      does
      not have any derivatives that are not designated as hedges.





At
      December 31, 2007, derivatives with a fair value of $3.7 million were included
      in other assets. The change in net unrealized losses of $3.8 million (net of
      deferred income tax provision of $1.5 million) in 2007 for derivatives
      designated as cash flow hedges is separately disclosed in the statement of
      changes in comprehensive income.  No hedge ineffectiveness on cash flow
      hedges was recognized during 2007. At December 31, 2006, derivatives with a
      fair
      value of $183,000 were included in other liabilities. The change in net
      unrealized losses of $183,000 (net of income tax benefit of $69,000) in 2006
      for
      derivatives designated as cash flow hedges is separately disclosed in the
      statement of changes in comprehensive income.  No hedge ineffectiveness on
      cash flow hedges was recognized during 2006.




Amounts
      reported in accumulated other comprehensive income related to derivatives will
      be reclassified to interest income as interest payments are received on the
      Company’s variable-rate assets. The change in net unrealized gains on cash flow
      hedges reflects a reclassification of $204,000 of net unrealized gains from
      accumulated other comprehensive income to interest income during 2007. During
      2008, the Company estimates that $1.1 million will be reclassified.




**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 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):




55





(dollars
                in thousands, except share data)
            
            Year
                ended December 31,2007
            
            2006
            
            2005Net
                income
            
            $
            10,866
            
            $
            8,634
            
            $
            5,725Weighted
                average shares used in computing:Basic
                common shares
            
            
            6,380,100
            
            
            6,274,051
            
            
            6,164,898Dilutive
                    potential common shares related to stock options and restricted
                    stock,
                    using the treasury stock method
            
            
            545,762
            
            
            542,649
            
            
            566,049Total
                average common shares and equivalents
            
            
            6,925,862
            
            
            6,816,700
            
            
            6,730,947Basic
                earnings per share
            
            $
            1.70
            
            $
            1.38
            
            $
            0.93Diluted
                earnings per share
            
            $
            1.57
            
            $
            1.27
            
            $
            0.85





There
      were 429,295 options (including those issuable pursuant to contingent stock
      agreements) that could potentially dilute basic earnings per share in the future
      that were not included in the computation of diluted earnings per share because
      to do so would have been antidilutive for the period(s) presented.





**3.**
            **SECURITIES**





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





(dollars
                in thousands)
            
            As
                of December 31, 2007Amortized
            
            Gross
                Unrealized
            
            FairCost
            
            Gains
            
            Losses
            
            ValueU.S.
                government treasury securities
            
            $
            201
            
            $
            1
            
            $
            -
            
            $
            202U.S.
                government agency securities
            
            
            54,450
            
            
            831
            
            
            (1
            )
            
            55,280Total
                seurities available for sale
            
            
            54,651
            
            
            832
            
            
            (1
            )
            
            55,482Total
                investment securities
            
            $
            54,651
            
            $
            832
            
            $
            (1
            )
            $
            55,482





As
                of December 31, 2006Amortized
            
            Gross Unrealized
            
            
            
            FairCost
            
            Gains
            
            Losses
            
            ValueU.S.
                government treasury securities
            
            $
            200
            
            $
            -
            
            $
            -
            
            $
            200U.S.
                government agency securities
            
            
            43,815
            
            
            24
            
            
            (106
            )
            
            43,733Total
                seurities available for sale
            
            
            44,015
            
            
            24
            
            
            (106
            )
            
            43,933Total
                investment securities
            
            $
            44,015
            
            $
            24
            
            $
            (106
            )
            $
            43,933





As
      of
      December 31, 2007, investment securities with carrying values of approximately
      $200,000 were pledged as collateral. As of December 31, 2007, there were no
      unrealized losses attributable to securities positioned for the period greater
      than 12 months.





56




The
      scheduled maturities of securities (other than equity securities) available
      for
      sale at December 31, 2007 were as follows:




(dollars
                in thousands)
            
            December
                31, 2007Amortized
            
            FairCost
            
            ValueDue
                in one year or less
            
            $
            24,143
            
            $
            24,200Due
                after one year through five years
            
            
            30,508
            
            
            31,282Due
                after five years through ten years
            
            
            -
            
            
            -Due
                after ten years
            
            
            -
            
            
            -Total
                securities available for sale
            
            
            54,651
            
            
            55,482Total
                Investment securities
            
            $
            54,651
            
            $
            55,482





**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, 2007, 2006 and 2005.





**A
                summary of loans is as
                follows:**




(dollars
                in thousands)
            
            As
                of December 31,2007
            
            2006
            
            2005Commercial
            
            $
            272,660
            
            $
            197,174
            
            $
            182,396SBA
            
            
            56,945
            
            
            59,888
            
            
            46,867Real
                estate construction
            
            
            85,378
            
            
            103,710
            
            
            84,792Real
                estate other
            
            
            171,042
            
            
            115,313
            
            
            83,748Factoring
                and asset based lending
            
            
            57,662
            
            
            56,924
            
            
            38,184Other
            
            
            9,042
            
            
            7,771
            
            
            4,011Total
                gross loans
            
            
            652,729
            
            
            540,780
            
            
            439,998Unearned
                fee income
            
            
            (1,856
            )
            
            (1,495
            )
            
            (1,395
            )Total
                loan portfolio
            
            
            650,873
            
            
            539,285
            
            
            438,603Less
                allowance for credit losses
            
            
            (8,608
            )
            
            (7,329
            )
            
            (5,936
            )Total
                loan portfolio, net
            
            $
            642,265
            
            $
            531,956
            
            $
            432,667





**Analysis
                of the allowance for credit losses:**(dollars
                in thousands)
            
            As
                of December 31,2007
            
            2006
            
            2005Balance,
                beginning of period
            
            $
            7,329
            
            $
            5,936
            
            $
            4,146Provision
                for credit losses
            
            
            2,275
            
            
            1,372
            
            
            2,162Charge-offs
            
            
            (1,255
            )
            
            -
            
            
            (384
            )Recoveries
            
            
            259
            
            
            21
            
            
            12Balance,
                end of period
            
            $
            8,608
            
            $
            7,329
            
            $
            5,936





There
      were four loans, totaling $4.9 million, on non-accrual and deemed impaired
      at
      December 31, 2007. There were two impaired loans on non-accrual at December
      31,
      2006 totaling $437,000, and one impaired loan on non-accrual loan at December
      31, 2005 totaling $2.3 million. Included in the non-accrual loans at December
      31, 2007 was one loan totaling $3.7 million which was collateralized by
      undeveloped land. This loan had an indicated potential loss exposure of
      approximately $330,000 and an impairment reserve was included in the allowance
      for loan losses. The other significant non-accrual loan was an SBA 504 loan
      that
      totaled $713,000 and was adequately collateralized by undeveloped land. As
      such,
      no specific reserve was required for this loan. At December 31, 2006, the two
      non-accrual loans consisted of commercial loans secured by business assets
      and
      real property with values in excess of the carrying value of the loans. At
      December 31, 2005, the non-accrual loans consisted of one commercial loan
      secured by business assets and real property with values in excess of the
      carrying value of the loan.





57





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, 2007, 2006, and 2005, there were no loans past due 90 days or
      more
      as to principal or interest and still accruing interest.





At
      December 31, 2007 there was one commercial property valued at $425,000 that
      was
      categorized as “other real estate owned”. At December 31, 2006 and 2005 there
      were no properties owned by the Bank acquired through the foreclosure process.




**5.**
            **PREMISES
                AND EQUIPMENT**




Premises
      and equipment are comprised of the following:





(dollars
                in thousands)
            
            As
                of December 31,2007
            
            2006
            
            2005Leasehold
                improvements
            
            $
            4,855
            
            $
            3,374
            
            $
            1,981Furniture
                and equipment
            
            
            2,825
            
            
            2,047
            
            
            1,752Capitalized
                software
            
            
            2,285
            
            
            1,691
            
            
            1,344Premises
                and equipment
            
            
            9,965
            
            
            7,112
            
            
            5,077Less
                accumulated depreciation and amortization
            
            
            (4,960
            )
            
            (3,633
            )
            
            (2,740
            )Premises
                and equipment, net
            
            $
            5,005
            
            $
            3,479
            
            $
            2,337





Depreciation
      and amortization amounted to $1.3 million, $943,000 and $813,000 for the years
      ended December 31, 2007, 2006 and 2005, 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, 2007,
      2006 and 2005.





(dollars
                in thousands)
            
            As
                of December 31,2007
            
            2006
            
            2005Amount
            
            Percent
            
            Amount
            
            Percent
            
            Amount
            
            PercentNoninterest-bearing
                demand
            
            $
            198,641
            
            
            29.59
            %
            $
            198,639
            
            
            30.80
            %
            $
            185,557
            
            
            39.64
            %Interest-bearing
                demand
            
            
            5,350
            
            
            0.80
            %
            
            3,901
            
            
            0.60
            %
            
            2,866
            
            
            0.61
            %Money
                market and savings
            
            
            372,923
            
            
            55.55
            %
            
            333,838
            
            
            51.76
            %
            
            210,011
            
            
            44.86
            %Certificates
                of deposit:Less
                than $100
            
            
            22,896
            
            
            3.41
            %
            
            28,918
            
            
            4.48
            %
            
            19,228
            
            
            4.11
            %$100
                and more
            
            
            71,546
            
            
            10.66
            %
            
            79,691
            
            
            12.36
            %
            
            50,496
            
            
            10.79
            %Total
                deposit portfolio
            
            $
            671,356
            
            
            100.00
            %
            $
            644,987
            
            
            100.00
            %
            $
            468,158
            
            
            100.00
            %





Deposits
      at December 31, 2007 included $10.7 million, or 1.6% of the total, in title and
      escrow company account balances compared to $27.3 million, or 4.2% at December
      31, 2006 and $70.6 million, or 15.1% at December 31, 2005.




58




At
      December 31, 2007, time deposits of $100,000 or more have remaining maturities
      as follows:





(in
              thousands)3
                months or less
            
            $
            40,101Over
                3 months to 6 months
            
            
            7,224Over
                6 months to 12 months
            
            
            15,364Over
                1 year to 5 years
            
            
            8,857TOTAL
            
            $
            71,546





At
      December 31, 2007, the scheduled maturities of all time deposits are as
      follows:




(dollars
              in thousands)2008
            
            $
            81,3362009
            
            
            12,2472010
            
            
            8592011
            
            
            -$
            94,442




**7.**
            **JUNIOR
                SUBORDINATED DEBT 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, 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, and 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 or 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.





On
      March
      30, 2006 the Company issued $5,155,000 of junior subordinated debt securities
      (the “debt securities”) to Bridge Capital Trust II, a statutory trust created
      under the laws of the State of Delaware. These debt securities are subordinated
      to effectively all borrowings of the Company and are due and payable in March
      2037. Interest is payable quarterly on these debt securities at a fixed rate
      of
      6.60% for the first five years, and thereafter interest accrues at LIBOR plus
      1.38%. The debt securities can be redeemed at par at the Company’s option
      beginning in April 2011; they can also be redeemed at par if certain events
      occur that impact the tax treatment or 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, these Trusts are 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 these Trusts, 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, 2007 were comprised of one advance from the Federal
      Home Loan Bank of San Francisco for $10,000,000 with a fixed rate of 3.30%
      and a
      maturity date of January 2, 2008. The advance was secured by a blanket lien
      totaling approximately $134.0 million. There were no other borrowings at
      December 31, 2006.




59


As
      of
      December 31, 2007, the Bank had a total borrowing capacity of approximately
      $131.0 million. The Bank also has unsecured borrowing lines with correspondent
      banks totaling $27.0 million. At December 31, 2007, there were no balances
      outstanding on these lines.




**8.**
            **INCOME
                TAXES**




Income
      tax expense (benefit) consists of the following for the years ended December
      31,
      2007, 2006 and 2005:





(dollars
                in thousands)
            
            Year
                ended December 31,2007
            
            2006
            
            2005Current:Federal
            
            $
            7,357
            
            $
            5,058
            
            $
            4,081State
            
            
            2,080
            
            
            1,525
            
            
            1,057Total
                current
            
            
            9,437
            
            
            6,583
            
            
            5,138Deferred:Federal
            
            
            (1,458
            )
            
            (982
            )
            
            (1,006
            )State
            
            
            (396
            )
            
            (358
            )
            
            (300
            )Total
                deferred
            
            
            (1,854
            )
            
            (1,340
            )
            
            (1,306
            )Income
                tax provision
            
            $
            7,583
            
            $
            5,243
            
            $
            3,832





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, 2007, 2006 and 2005 are as follows:





The
      company's net deferred tax asset at December 31 is as follows:





(dollars
                in thousands)
            
            As
                of ended December 31,2007
            
            2006
            
            2005Deferred
                tax assets (liability):Deferred
                loan fee
            
            $
            650
            
            $
            523
            
            $
            488Allowance
                for credit losses
            
            
            2,788
            
            
            2,276
            
            
            1,756Deferred
                pre-opening expenses
            
            
            10
            
            
            15
            
            
            29State
                income taxes
            
            
            1,775
            
            
            1,343
            
            
            957Fixed
                assets
            
            
            300
            
            
            115
            
            
            (27
            )Other
            
            
            602
            
            
            (3
            )
            
            292Accrued
                expenses
            
            
            655
            
            
            656
            
            
            91Net
                Deferred Tax Asset
            
            $
            6,780
            
            $
            4,925
            
            $
            3,586





In
      addition to the above net deferred tax asset, the Company has additional
      deferred tax liabilities arising from adjustments to other comprehensive income
      aggregating $1.4 million as of December 31, 2007 and $575,000 as of December
      31,
      2006.





Income
      tax returns for the years ended December 31, 2006, 2005 and 2004 are open to
      audit by the federal authorities and income tax returns for the years ended
      December 31, 2006, 2005, 2004 and 2003 are open to audit by California
      authorities. Unrecognized tax benefits are not expected to significantly
      increase or decrease within the next twelve months.




60


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





Year
                ended December 31,2007
            
            2006
            
            2005Federal
                statutory rate
            
            
            35.00
            %
            
            35.00
            %
            
            35.00
            %State
                income tax, net of federal effect
            
            
            5.93
            %
            
            5.47
            %
            
            5.15
            %BOLI
                income
            
            
            -0.76
            %
            
            -0.81
            %
            
            -1.38
            %Other,
                net
            
            
            0.93
            %
            
            -1.88
            %
            
            1.33
            %Income
                taxes
            
            
            41.10
            %
            
            37.78
            %
            
            40.10
            %





**9.**
            **STOCK
                BASED COMPENSATION**




On
      May
      18, 2006, the Company’s shareholders approved the 2006 Equity Incentive Plan
      (the “Plan”) which supersedes the Stock Option Plan that was established in
      2001. The total authorized shares that are available for issuance under the
      Plan
      is 500,000 shares. The Plan provides for the following types of stock-based
      awards: incentive stock options; nonqualified stock options; stock appreciation
      rights; restricted stock awards; restricted stock units; performance units;
      and
      stock grants. As of December 31, 2007, the Company has issued incentive stock
      options, nonqualified stock options, and restricted stock awards under the
      Plan.




Options
      issued under the Plan may be granted to employees and non-employee 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.




Restricted
      stock awards issued under the Plan may be granted to employees and non-employee
      directors. The grant price of each award generally equals the market price
      of
      the Company’s stock on the date of the grant. The awards generally vest after a
      5 year period. During the period of restriction, participants holding restricted
      stock awards have full voting and dividend rights on the shares.




The
      vesting of any award granted under the plan may be accelerated in the event
      of a
      merger or sale of the Company if the acquiring entity does not assume or replace
      the awards with comparable awards.




At
      the
      time the 2006 Equity Incentive Plan was adopted, the total authorized shares
      available for issuance under the 2001 Stock Option Plan was 1,813,225 shares
      and
      the number of shares available for future grant was 253,577 shares. As the
      2006
      Equity Incentive Plan supersedes the 2001 Stock Option Plan, no further grants
      may be made under the 2001 plan and as such, the 253,577 shares that were
      available for future grant under the 2001 plan may no longer be awarded.




As
      of
      December 31, 2007, there were 1,565,763 shares underlying outstanding awards
      under the Company’s stock-based compensation plans and 265,192 shares available
      for future grants under the 2006 Equity Incentive Plan.





A
      summary
      of the Company’s stock option awards as of December 31, 2007 and changes during
      the period ended on that date are presented below:




61




Stock Option Awards OutstandingWeightedNumber
            
            Averageof
                Shares
            
            Exercise
                PriceBalances,
                December 31, 2006
            
            
            1,450,598
            
            $
            10.48Granted
            
            
            183,285
            
            $
            22.21Exercised
                (aggregate intrinsic value of $1.5 million)
            
            
            (107,575
            )
            $
            7.94Cancelled
            
            
            (38,063
            )
            $
            18.25Expired
            
            
            (437
            )
            $
            16.26Balances,
                December 31, 2007
            
            
            1,487,808
            
            $
            11.91





The
      following table summarizes information about stock options outstanding at
      December 31, 2007.





Stock
                Option Awards Outstanding
            
            Stock
                Option Awards ExercisableWeighted
            
            Weighted
            
            
            
            Weighted
            
            WeightedRemaining
            
            Exercise
            
            
            
            Remaining
            
            ExerciseExercise Price range
            
            Shares
            
            Life (Years)
            
            Price
            
            Shares
            
            Life (Years)
            
            Price$   5.00 - $   5.99
            
            
            540,525
            
            
            3.2
            
            $
            5.00
            
            
            540,525
            
            
            3.2
            
            $
            5.00$   6.00 - $ 12.99
            
            
            315,013
            
            
            5.2
            
            $
            8.74
            
            
            288,123
            
            
            5.1
            
            $
            8.36$ 13.00 - $ 15.99
            
            
            187,475
            
            
            7.3
            
            $
            14.84
            
            
            97,700
            
            
            7.3
            
            $
            14.84$ 16.00 - $ 20.99
            
            
            137,975
            
            
            8.3
            
            $
            19.20
            
            
            39,205
            
            
            8.2
            
            $
            19.00$ 21.00 - $ 22.99
            
            
            306,820
            
            
            9.3
            
            $
            22.28
            
            
            32,302
            
            
            8.8
            
            $
            22.381,487,808
            
            
            5.9
            
            $
            11.91
            
            
            997,855
            
            
            4.5
            
            $
            8.05





The
      aggregate intrinsic value of stock option awards outstanding and stock option
      awards exercisable at December 31, 2007 was $14.5 million and $13.4 million,
      respectively.





A
      summary
      of the Company’s non-vested shares of restricted stock awards as of December 31,
      2007 and changes during the period ended on that dates is presented
      below:





Non-Vested Restricted Stock AwardsWeightedNumber
            
            Average
                Grantof
                Shares
            
            Date Fair ValueBalances,
                December 31, 2006
            
            
            31,130
            
            $
            22.42Granted
            
            
            34,765
            
            $
            22.11Vested
            
            
            -
            
            $
            -Forfeited
            
            
            4,190
            
            $
            22.49Balances,
                December 31, 2007
            
            
            61,705
            
            $
            22.24




62


SFAS
      No. 123R requires the use of a valuation model to calculate the fair value
      of stock-based awards.  The Company has elected to use the BSM
      option-pricing model, which incorporates various assumptions including
      volatility, expected life, and interest rates.  The expected volatility is
      based on the historical volatility of the Company’s common stock over the most
      recent period commensurate with the estimated expected life of the Company’s
      stock options, adjusted for the impact of unusual fluctuations not reasonably
      expected to recur and other relevant factors including implied volatility in
      market traded options on the Company’s common stock. The expected life of an
      award is based on historical experience and on the terms and conditions of
      the
      stock awards granted to employees.





The
      weighted average assumptions used for 2007, 2006, and 2005 and the resulting
      estimates of weighted-average fair value per share of stock-based awards granted
      during those periods are as follows:





Year
                ended December 31,2007
            
            2006
            
            2005Expected
                life
            
            
            60
                months
            
            
            60
                months
            
            
            58
                monthsStock
                volatility
            
            
            28.4
            %
            
            32.9
            %
            
            24.8
            %Risk
                free interest rate
            
            
            4.2
            %
            
            4.7
            %
            
            3.7
            %Dividend
                yield
            
            
            0.00
            %
            
            0.00
            %
            
            0.00
            %Fair
                value per share
            
            $
            9.73
            
            $
            9.36
            
            $
            6.10




**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.




The
      following table reflects the accumulated benefit obligation and funded status
      of
      the SERP for the years ended December
      31, 2007, 2006 and 2005.




63




(dollars
                in thousands)
            
            Year
                ended December 31,2007
            
            2006
            
            2005**Change
                in benefit obligation**Benefit
                obligation at beginning of year
            
            $
            2,351
            
            $
            1,680
            
            $
            1,213Service
                cost
            
            
            345
            
            
            387
            
            
            311Interest
                cost
            
            
            133
            
            
            117
            
            
            92Amendments
            
            
            -
            
            
            -
            
            
            -Actuarial
                (gains)/losses
            
            
            68
            
            
            167
            
            
            64Acquisitions/(divestitures)
            
            
            -
            
            
            -
            
            
            -Expected
                benefits paid
            
            
            -
            
            
            -
            
            
            -Projected
                benefit obligation at end of year
            
            $
            2,897
            
            $
            2,351
            
            $
            1,680**Change
                in plan assets**Fair
                value of plan assets at beginning of year
            
            $
            -
            
            $
            -
            
            $
            -Actual
                return on plan assets
            
            
            -
            
            
            -
            
            
            -Acquisitions/(divestitures)
            
            
            -
            
            
            -
            
            
            -Employer
                contributions
            
            
            -
            
            
            -
            
            
            -Expected
                benefits paid
            
            
            -
            
            
            -
            
            
            -Fair
                value of plan assets at end of year
            
            $
            -
            
            $
            -
            
            $
            -Funded
                status
            
            $
            (2,897
            )
            $
            (2,351
            )
            $
            (1,680
            )Unrecognized
                net actuarial (gain) loss
            
            
            -
            
            
            230
            
            
            64Unrecognized
                prior service cost
            
            
            -
            
            
            852
            
            
            922Unrecognized
                net transition obligation (asset)
            
            
            -
            
            
            -
            
            
            -(Accrued)/prepaid
                benefit cost
            
            $
            (2,897
            )
            $
            (1,269
            )
            $
            (694
            )Unfunded
                projected/accumulated benefit obligation
            
            $
            (2,897
            )
            $
            (2,351
            )
            $
            (925
            )Additional
                liability
            
            $
            -
            
            $
            (1,082
            )
            $
            (231
            )Intangible
                asset
            
            $
            -
            
            $
            -
            
            $
            231Impact
                on retained earnings
            
            $
            (2,897
            )
            $
            (2,351
            )
            $
            (925
            )Weighted
                average assumptions to determine benefit obligation as of December
                31:Discount
                rate
            
            
            5.75
            %
            
            5.75
            %
            
            5.70
            %Rate
                of compensation increase
            
            
            5.00
            %
            
            5.00
            %
            
            5.00
            %





The
      components of net periodic benefit cost recognized for the years ended December
      31, 2007 and 2006 and the amounts in accumulated other comprehensive income
      expected to be recognized as components of net periodic benefit cost during
      the
      year ended December 31, 2008 are as follows:





(dollars
                in thousands)
            
            Year
                ended December 31,2008
            
            2007
            
            2006**Components
                of net periodic benefit cost**Service
                cost
            
            $
            589
            
            $
            345
            
            $
            387Interest
                cost
            
            
            167
            
            
            133
            
            
            117Expected
                return on plan assets
            
            
            -
            
            
            -
            
            
            -Amortization
                of transition obligation (asset)
            
            
            -
            
            
            -
            
            
            -Amortization
                of prior service cost
            
            
            88
            
            
            143
            
            
            70Amortization
                of actuarial (gains)/losses
            
            
            -
            
            
            -
            
            
            -Net
                periodic benefit cost
            
            $
            844
            
            $
            621
            
            $
            574Other
                comprehensive income (cost)
            
            $
            95
            
            $
            70
            
            $
            (1,185
            )




64




**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.




**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, 2016 and 2014,
      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 (dollars in
      thousands):





Future
                lease paymentsFor
                years ended December 31,2008
            
            $
            1,8262009
            
            
            1,8512010
            
            
            1,8522011
            
            
            1,6562012
            
            
            1,695Thereafter
            
            
            6,174$
            15,054





Rental
      expense under operating leases was $2.1 million in 2007, $1.3 million in 2006
      and $1.1 million in 2005.





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.





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 $299.8 million, $267.6 million and
      $188.1 million at December 31, 2007, 2006 and 2005, respectively. The Bank's
      exposure to credit loss is limited to amounts funded or drawn; however, at
      December 31, 2007, 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.




65




Undisbursed
      loan commitments were comprised of the following at December 31, 2007 (dollars
      in thousands):





Commercial
            
            $
            185,563SBA
            
            
            5,282Real
                estate construction
            
            
            64,668Real
                estate term
            
            
            27,000Factoring/ABL
            
            
            2,458Other
            
            
            14,867Total
            
            $
            299,838





**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 Company at December 31, 2007, 2006 and 2005.
      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
      3 for information regarding securities).





(dollars
                in thousands)
            
            Year
                ended December 31,2007
            
            2006Carrying
            
            Fair
            
            Carrying
            
            FairValue
            
            Value
            
            Value
            
            ValueFinancial
                assets:Cash
                and due from banks
            
            $
            27,440
            
            $
            27,440
            
            $
            24,360
            
            $
            24,360Federal
                funds sold
            
            
            13,395
            
            
            13,395
            
            
            93,845
            
            
            93,845Investments
                securities
            
            
            55,482
            
            
            55,482
            
            
            43,933
            
            
            43,933Loans
                and leases, gross
            
            
            652,729
            
            
            662,314
            
            
            540,780
            
            
            547,193Bank
                owned life insurance
            
            
            9,179
            
            
            9,179
            
            
            8,777
            
            
            8,777Cash
                flow hedge
            
            
            3,660
            
            
            3,660
            
            
            (183
            )
            
            (183
            )Financial
                liabilities:Deposits
            
            
            671,356
            
            
            666,329
            
            
            644,987
            
            
            639,784Trust
                preferred securities
            
            
            17,527
            
            
            17,610
            
            
            17,527
            
            
            17,621Other
                borrowings
            
            
            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.





66




**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 equals 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.




**14.**
            **BRIDGE
                CAPITAL HOLDINGS**




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




**BALANCE
                SHEETS**





(dollars
                in thousands)
            
            As of December 31,2007
            
            2006Assets:Cash
                and due from banks
            
            $
            2,134
            
            $
            2,790Investment
                in bank & subsidiaries
            
            
            79,740
            
            
            63,435Other
                assets
            
            
            744
            
            
            432Total
                Assets
            
            $
            82,618
            
            $
            66,657Liabilities:Junior
                Subordinated Debt
            
            $
            17,527
            
            $
            17,527Other
                liabilities
            
            
            7
            
            
            36Total
                Liabilities
            
            
            17,534
            
            
            17,563Capital:Common
                stock
            
            
            37,697
            
            
            35,428Retained
                earnings
            
            
            14,543
            
            
            5,908Current
                year net income
            
            
            10,866
            
            
            8,634Other
                Comprehensive income
            
            
            1,978
            
            
            (876
            )Total
                Capital
            
            
            65,084
            
            
            49,094Total
                Liabilities and Capital
            
            $
            82,618
            
            $
            66,657





**STATEMENTS
                OF OPERATIONS**





(dollars
                in thousands)
            
            Year
                ended December 31,2007
            
            2006
            
            2005Interest
                income
            
            $
            78
            
            $
            87
            
            $
            31Interest
                expense
            
            
            1,044
            
            
            960
            
            
            704Noninterest
                expense
            
            
            466
            
            
            200
            
            
            174Income
                before income taxes
            
            
            (1,432
            )
            
            (1,073
            )
            
            (847
            )Income
                taxes
            
            
            -
            
            
            432
            
            
            -Income
                  before undistributed income of the bank
            
            
            (1,432
            )
            
            (641
            )
            
            (847
            )Equity
                in undistributed income of the bank
            
            
            12,298
            
            
            9,275
            
            
            6,572Net
                income
            
            $
            10,866
            
            $
            8,634
            
            $
            5,725





67





**STATEMENTS
                OF CASH FLOWS**





(dollars
                in thousands)
            
            Year
                ended December 31,2007
            
            2006
            
            2005Cash
                Flow From Operating Activities:Net
                income (loss)
            
            $
            10,866
            
            $
            8,634
            
            $
            5,725Adjustments
                    to reconcile net income to net cash provided by operating
                    activities:Equity
                in undistributed (earnings) of subsidiaries
            
            
            (12,298
            )
            
            (9,275
            )
            
            (6,572
            )Net
                change in other assets
            
            
            4
            
            
            (161
            )
            
            (9
            )Net
                change in other liabilities
            
            
            (29
            )
            
            (6
            )
            
            10Net
                cash (used in) provided by operating activities
            
            
            (1,457
            )
            
            (808
            )
            
            (846
            )Cash
                Flow From Investing Activities:Investment
                in subsidiary
            
            
            -
            
            
            (4,155
            )Net
                cash provided by financing activities
            
            
            -
            
            
            (4,155
            )
            
            -Cash
                Flow From Financing Activities:Proceeds
                from sale of Common stock
            
            
            801
            
            
            619
            
            
            730Proceeds
                from issuance of junior subordinated debentures
            
            
            -
            
            
            5,155Net
                cash provided by financing activities
            
            
            801
            
            
            5,774
            
            
            730Net
                increase (decrease) in cash and equivalents
            
            
            (656
            )
            
            811
            
            
            (116
            )Cash
                and equivalents at beginning of period
            
            
            2,790
            
            
            (656
            )
            
            2,095Cash
                and equivalents at end of period
            
            $
            2,134
            
            $
            155
            
            $
            1,979Non
                Cash Transactions:Tax
                benefit from exercise of non-qualified stock options
            
            $
            316
            
            $
            141
            
            $
            (121
            )




**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 Company’s financial statements. Under capital adequacy
      guidelines and the regulatory framework for prompt corrective action, the
      Company must meet specific capital guidelines that involve quantitative measures
      of the Company’s assets, liabilities, and certain off-balance-sheet items as
      calculated under regulatory accounting practices. The Company’s capital amounts
      and classification are also subject to qualitative judgments by the regulators
      about components, risk weightings, and other factors.





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 in the regulations), and of Tier I capital (as defined in the
      regulations) to average assets (as defined in the regulations). Management
      believes, as of December 31, 2007, that the Company meets all capital adequacy
      requirements to which they are subject.





The
      following table shows the Company’s capital ratios at December 31, 2007 and 2006
      as well as the minimum capital ratios required to be deemed “well capitalized”
under the regulatory framework.





68




(dollars
                in thousands)
            
            As of December 31,2007
            
            2006Amount
            
            Ratio
            
            Amount
            
            Ratio**Company
                Capital Ratios**Tier
                1 Capital
            
            $
            80,024
            
            
            10.54
            %
            $
            66,533
            
            
            10.52
            %(to
                Risk Weighted Assets)Tier
                1 capital minimum requirement
            
            $
            30,376
            
            
            4.00
            %
            $
            25,293
            
            
            4.00
            %Total
                Capital
            
            $
            88,632
            
            
            11.67
            %
            $
            74,229
            
            
            11.74
            %(to
                Risk Weighted Assets)Total
                capital minimum requirement
            
            $
            60,752
            
            
            8.00
            %
            $
            50,587
            
            
            8.00
            %Company
                leverageTier
                1 Capital
            
            $
            80,024
            
            
            10.66
            %
            $
            66,533
            
            
            10.97
            %(to
                Average Assets)Total
                capital minimum requirement
            
            $
            30,022
            
            
            4.00
            %
            $
            24,260
            
            
            4.00
            %**Bank
                Risk Based Capital Ratios**Tier
                1 Capital
            
            $
            77,096
            
            
            10.17
            %
            $
            64,145
            
            
            10.15
            %(to
                Risk Weighted Assets)Tier
                1 capital minimum requirement
            
            $
            30,328
            
            
            4.00
            %
            $
            25,272
            
            
            4.00
            %Total
                Capital
            
            $
            85,704
            
            
            11.30
            %
            $
            71,474
            
            
            11.31
            %(to
                Risk Weighted Assets)Total
                capital minimum requirement
            
            $
            60,655
            
            
            8.00
            %
            $
            50,544
            
            
            8.00
            %Bank
                leverageTier
                1 Capital
            
            $
            77,096
            
            
            10.27
            %
            $
            64,145
            
            
            10.59
            %(to
                Average Assets)Total
                capital minimum requirement
            
            $
            30,018
            
            
            4.00
            %
            $
            24,240
            
            
            4.00
            %





69




**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, 2007, 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, 2007.




**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 or 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 the fourth
      quarter of 2007 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, 2007, 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, 2007, 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 the Company’s internal control over financial
      reporting as of, and for the year ended December 31, 2007. Vavrinek, Trine,
      Day
& Co., LLP’s audit report appears on Page 45.




**Item
      9b. Other Information** ****  ****




Not
      applicable





70




**PART
      III**




**Item
      10. Directors, Executive Officers and Corporate
      Governance**




The
      information required hereunder is incorporated by reference from the Company’s
      definitive proxy statement for the Company’s 2008 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 2008 Annual Meeting of Shareholders
      (to be filed pursuant to Regulation 14A).




**Item
      12. Security Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters**




The
      following chart provides information as of December 31, 2007 concerning the
      Company’s equity compensation plans:




(A)
            
            (B)
            
            (C)Number of SecuritiesNumber of Securities
            
            
            
            Remaining AvailableTo Be Issued Upon
            
            Weighted Average
            
            For Future IssuanceExercise of
            
            Grant Price of
            
            Under EquityOutstanding Options,
            
            Outstanding Options,
            
            Compensation PlansRestricted Stock,
            
            Restricted Stock,
            
            (Excluding SecuritiesWarrants, and Rights
            
            Warrants, and Rights
            
            Reflected in Column (A)Equity
                    compensation plans approved by security
                    holders
            
            
            1,549,513
            
            $
            12.32
            
            
            268,942Equity
                      compensation plans not approved by security
                      holders
            
            
            -
            
            
            -
            
            
            -Total
            
            
            1,549,513
            
            $
            12.32
            
            
            268,942




The
      additional information required hereunder is incorporated by reference from
      the
      Company’s definitive proxy statement for the Company’s 2008 Annual Meeting of
      Shareholders (to be filed pursuant to Regulation 14A).




**Item
      13. Certain Relationships and Related Transactions, and Director
      Independence**




The
      information required hereunder is incorporated by reference from the Company’s
      definitive proxy statement for the Company’s 2008 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 2008 Annual Meeting of Shareholders
      (to be filed pursuant to Regulation 14A).





71




**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.





(b)
            See
                (a) (3).





(c)
            See
                (a) (2).




72




**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**





Date:
            March
              6, 2008
            
            
            By:
            /s/
              Daniel P. MyersDaniel
                P. Myers, President(Principal
                Executive Officer)





73


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/Sheryle
                Bolton
            
            Director
            
            March
                6, 2008Sheryle
                Bolton/s/Richard
                M. Brenner
            
            Director
            
            March
                6, 2008Richard
                M. Brenner/s/Owen
                Brown
            
            Director
            
            March
                6, 2008Owen
                Brown/s/David
                V. Campbell
            
            Director
            
            March
                6, 2008David
                V. Campbell/s/Robert
                P. Gionfriddo
            
            Director
            
            March
                6, 2008Robert
                P. Gionfriddo/s/Robert
                B. Kaplan
            
            Director
            
            March
                6, 2008Robert
                B. KaplanChairman/s/Allan
                C. Kramer, M.D.
            
            Director
            
            March
                6, 2008Allan
                C. Kramer, M.D./s/Robert
                Latta
            
            Director
            
            March
                6, 2008Robert
                Latta/s/Thomas
                M. Quigg
            
            Director
            
            March
                6, 2008Thomas
                M. QuiggPresidentChief
                Executive Officer/s/Daniel
                P. Myers
            
            Director
            
            March
                6, 2008Daniel
                P. Myers
            
            (Principal
                Executive Officer)/s/Barry
                A. Turkus
            
            Director
            
            March
                6, 2008Barry
                A. TurkusExecutive
                Vice PresidentChief
                Administrative Officer/s/Thomas
                A. Sa
            
            Chief
                Financial Officer
            
            March
                6, 2008Thomas
                A. Sa
            
            (Principal
                Financialand
                Accounting Officer)





74




INDEX
      TO EXHIBITS


ExhibitNumber
              
              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](3.4)
              
              Amendment
                  to Registrant’s By-Laws(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)
              
              Bridge
                  Capital Holdings 2006 Equity Incentive Plan [Incorporated by reference
                  to
                  Annex A to the Registrant’s Proxy Statement dated 04/07/06](10.5)
              
              Lease
                  for banking office located at 6601 Koll Center Parkway, City of
                  Pleasanton, County of Alameda, State of California [incorporated
                  by
                  reference to Exhibit 10.10 to the Quarterly Report on Form 10-Q
                  for the
                  quarter ended September 30, 2006](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]**(10.10)
              
              Information
                  Technology Services Agreement between Fidelity National Information
                  Services and Bridge Bank, N.A. dated November 17, 2006 and the
                  schedules
                  thereto [incorporated by reference to Exhibit 10 to the Registrant’s
                  Current Report on Form 8-K, Amendment No. 1, filed
                  02/16/07]
  75
  (10.11)
              
              Employment
                  Agreements between Bridge Capital Holdings and Daniel P. Myers,
                  Thomas A.
                  Sa, Timothy W. Boothe, Robert P. Gionfriddo, and Kenneth B. Silveira
                  [incorporated by reference to Exhibits 10.1, 10.2, 10.3, 10.4,
                  and 10.5,
                  respectfully, to the Registrant’s Current Report on Form 8-K filed
                  02/16/07]**(10.12)
              
              Form
                  of Restricted Stock Purchase Award Agreement under the Bridge Capital
                  Holdings 2006 Equity Incentive Plan [incorporated by reference
                  to Exhibit
                  10.1 to the Registrant’s Current Report on Form 8-K dated
                  11/16/06]**(10.13)
              
              Form
                  of Stock Option Award Agreement under the Bridge Capital Holdings
                  2006
                  Equity Incentive Plan [incorporated by reference to Exhibit 10.2
                  to the
                  Registrant’s Current Report on Form 8-K dated
                  11/16/06]**(10.14)
              
              Amendment
                  to the Company’s 2001 Stock Option Plan to permit the net exercise of
                  nonstatutory options [incorporated by reference to Exhibit 10.3
                  to the
                  Registrant’s Current Report on Form 8-K dated
                  11/16/06]**(10.15)
              
              Lease
                  for Principal Executive Office and full service banking office
                  located at
                  55 Almaden Boulevard, Suite 200, City of San Jose, County of Santa
                  Clara,
                  State of California [incorporated by reference to Exhibit 10.16
                  to the
                  Registrant’s Annual Report on Form 10-K dated 12/31/03](10.16)
              
              Lease
                  for additional space (fourth floor) at the Principal Executive
                  Office
                  located at 55 Almaden Boulevard, Suite 200, City of San Jose, County
                  of
                  Santa Clara, State of California [incorporated by reference to
                  Exhibit
                  10.16 to the Registrant’s Annual Report on Form 10-K dated
                  12/31/06](10.17)
              
              Amendment
                  to lease for banking office located at 525 University Avenue, City
                  of Palo
                  Alto, County of Santa Clara, State of California(21)
              
              Subsidiaries(23.1)
              
              Consent
                  of Independent Registered Public Accounting Firm - Vavrinek, Trine,
                  Day
                  & Co., LLP(31.1)
              
              Certification
                  of Principal Executive Officerpursuant to Section 302 of the Sarbanes-Oxley Act of
                  2002(31.2)
              
              Certification
                  of Principal Financial Officerpursuant to Section 302 of the Sarbanes-Oxley Act of
                  2002(32.1)
              
              Certification
                  of Principal Executive Officerpursuant to 18 U.S.C. Section 1350(32.2)
              
              Certification
                  of Principal Financial Officerpursuant to 18 U.S.C. Section
                  1350




**Management
      contract or compensatory plan or arrangement




76