UNITED
      STATES


SECURITIES
      AND EXCHANGE COMMISSION


**Washington,
      D.C. 20549**





**FORM
      10-Q**





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


**For
      the Quarterly Period Ended: March 31, 2008**





**OR**





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


**For
      the Transition Period From ____________ to _____________**





**000-50914**


(Commission
      File Number)





Bridge
      Capital Holdings


(Exact
      name of registrant as specified in its charter)





**California**
            
            **80-0123855**(State
                or other jurisdiction of
            
            (I.R.S.
                Employer Identification Number)incorporation
                or organization)





**55
      Almaden Boulevard, San Jose, CA 95113**


(Address
      of principal executive offices, including zip code)





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





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





Yes x No  ̈




Indicate
      by checkmark whether registrant is a large accelerated filer, an accelerated
      filer, or a non-accelerated filer. See definition of “accelerated file and large
      accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):





Large
      accelerated filer  ̈ Accelerated
      filer x Non-accelerated
      filer  ̈





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


Yes  ̈ No x




The
      number of shares of Common Stock outstanding as of May 7, 2008:
      6,518,371





**TABLE
      OF CONTENTS**





**PART
                I - FINANCIAL INFORMATION**Item
                1
            Financial
                StatementsInterim
                Consolidated Balance Sheets
            
            4Interim
                Consolidated Statements of Operations
            
            5Interim
                Consolidated Statements of Cash Flows
            
            6Notes
                to Interim Consolidated Financial Statements
            
            7Item
                2
            Management's
                Discussion and Analysis of Financial Condition and Results
                of Operations
            
            14Item
                3
            Quantitative
                and Qualitative Disclosures About Market Risk
            
            26Item
                4
            Controls
                and Procedures
            
            28**PART
                II - OTHER INFORMATION**Item
                1
            Legal
                Proceedings
            
            29Item
                1A
            Risk
                Factors
            
            29Item
                2
            Unregistered
                Sales of Equity Securities and Use of Proceeds
            
            29Item
                3
            Defaults
                Upon Senior Securities
            
            29Item
                4
            Submission
                of Matters to a Vote of Security Holders
            
            29Item
                5
            Other
                Information
            
            29Item
                6
            Exhibits
            
            29Signatures
            
            30Index
                to Exhibits
            
            31


2


**FORWARD-LOOKING
      STATEMENTS**





*IN
      ADDITION TO THE HISTORICAL INFORMATION, THIS QUARTERLY 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 QUARTERLY 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 MARGIN; (3) GENERAL ECONOMIC CONDITIONS, EITHER NATIONALLY OR
      REGIONALLY, ARE LESS FAVORABLE THAN EXPECTED, RESULTING IN, AMONG OTHER THINGS,
      A DETERIORATION IN CREDIT QUALITY; (4) CHANGES IN THE REGULATORY ENVIRONMENT;
      (5) CHANGES IN BUSINESS CONDITIONS AND INFLATION; (6) COSTS AND EXPENSES OF
      COMPLYING WITH THE INTERNAL CONTROL PROVISIONS OF THE SARBANES-OXLEY ACT AND
      OUR
      DEGREE OF SUCCESS IN ACHIEVING COMPLIANCE; (7) CHANGES IN SECURITIES MARKETS;
      (8) FUTURE CREDIT LOSS EXPERIENCE; (9) CIVIL DISTURBANCES OR TERRORIST THREATS
      OR ACTS, OR APPREHENSION ABOUT POSSIBLE FUTURE OCCURANCES OF ACTS OF THIS TYPE;
      AND (10) THE INVOLVEMENT OF THE UNITED STATES IN WAR OR OTHER HOSTILITIES.
      THEREFORE,* **** *THE
      INFORMATION IN THIS QUARTERLY REPORT SHOULD BE CAREFULLY CONSIDERED WHEN
      EVALUATING THE BUSINESS PROSPECTS OF THE COMPANY.*





*Forward-looking
      statements are generally identifiable by the use of terms such as "believe",
      "expect", "intend", "anticipate", "estimate", "project", "assume," "plan,"
      "predict," "forecast," “in management’s opinion,” “management considers” or
      similar expressions. Wherever such phrases are used, such statements are as
      of
      and based upon the knowledge of Management, at the time made and are subject
      to
      change by the passage of time and/or subsequent events, and accordingly such
      statements are subject to the same risks and uncertainties noted above with
      respect to forward-looking statements.*





*The
      Company’s primary 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.*





*The
      reader should refer to the more complete discussion of such risks in the
      Company’s Annual Reports on Form 10-K.*


3


**PART
      I - FINANCIAL INFORMATION**





**ITEM
      1 – FINANCIAL STATEMENTS**





**BRIDGE
      CAPITAL HOLDINGS AND SUBSIDIARY**


**Interim
      Consolidated Balance Sheets**


(dollars
      in thousands)





**(unaudited)****March 31,**
            
            **December 31,****2008**
            
            **2007****ASSETS**Cash
                and due from banks
            
            $
            25,138
            
            $
            27,440Federal
                funds sold
            
            
            16,880
            
            
            13,395Total
                cash and equivalents
            
            
            42,018
            
            
            40,835Investment
                securities available for sale
            
            
            46,823
            
            
            55,482Loans,
                net of allowance for credit losses of $10,978 at
              March
                31, 2008 and $8,608 at December 31, 2007
            
            
            658,665
            
            
            642,265Premises
                and equipment, net
            
            
            5,045
            
            
            5,005Other
                real estate owned
            
            
            348
            
            
            425Accrued
                interest receivable
            
            
            4,074
            
            
            4,400Other
                assets
            
            
            28,033
            
            
            26,420Total
                assets
            
            $
            785,006
            
            $
            774,832**LIABILITIES
                AND SHAREHOLDERS' EQUITY**Deposits:Demand
                noninterest-bearing
            
            $
            200,567
            
            $
            198,641Demand
                interest-bearing
            
            
            4,587
            
            
            5,350Savings
            
            
            386,369
            
            
            372,923Time
            
            
            97,719
            
            
            94,442Total
                deposits
            
            
            689,242
            
            
            671,356Junior
                subordinated debt securities
            
            
            17,527
            
            
            17,527Other
                borrowings
            
            
            -
            
            
            10,000Accrued
                interest payable
            
            
            190
            
            
            210Other
                liabilities
            
            
            9,176
            
            
            10,655Total
                liabilities
            
            
            716,135
            
            
            709,748Commitments
                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;
              6,512,371
                shares issued and outstanding at March 31, 2008;
              6,485,630
                shares issued and outstanding at December 31, 2007.
            
            
            38,040
            
            
            37,697Retained
                earnings
            
            
            26,931
            
            
            25,409Accumulated
                other comprehensive (loss)
            
            
            3,900
            
            
            1,978Total
                shareholders' equity
            
            
            68,871
            
            
            65,084Total
                liabilities and shareholders' equity
            
            $
            785,006
            
            $
            774,832





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


4


**BRIDGE
      CAPITAL HOLDINGS AND SUBSIDIARY**


**Interim
      Consolidated Statements of Operations (unaudited)**


(dollars
      in thousands)





**Three
                months ended****March
                31,****2008**
            
            **2007****INTEREST
                INCOME:**Loans
            
            $
            15,227
            
            $
            14,184Federal
                funds sold
            
            
            177
            
            
            524Investment
                securities available for sale
            
            
            617
            
            
            670Total
                interest income
            
            
            16,021
            
            
            15,378**INTEREST
                EXPENSE:**Deposits:Interest-bearing
                demand
            
            
            4
            
            
            13Money
                market and savings
            
            
            2,581
            
            
            2,997Certificates
                of deposit
            
            
            1,088
            
            
            1,156Other
            
            
            315
            
            
            260Total
                interest expense
            
            
            3,988
            
            
            4,426Net
                interest income
            
            
            12,033
            
            
            10,952Provision
                for credit losses
            
            
            2,370
            
            
            200Net
                interest income after provision for credit losses
            
            
            9,663
            
            
            10,752**NON-INTEREST
                INCOME:**Service
                charges on deposit accounts
            
            
            229
            
            
            152Gain
                on sale of SBA loans
            
            
            283
            
            
            731Other
                non interest income
            
            
            1,159
            
            
            411Total
                non-interest income
            
            
            1,671
            
            
            1,294**OPERATING
                EXPENSES:**Salaries
                and benefits
            
            
            5,650
            
            
            5,001Premises
                and fixed assets
            
            
            1,105
            
            
            949Other
            
            
            1,981
            
            
            1,904Total
                operating expenses
            
            
            8,736
            
            
            7,854Income
                before income taxes
            
            
            2,598
            
            
            4,192Income
                taxes
            
            
            1,076
            
            
            1,748Net
                income
            
            $
            1,522
            
            $
            2,444Basic
                earnings per share
            
            $
            0.24
            
            $
            0.38Diluted
                earnings per share
            
            $
            0.22
            
            $
            0.35Average
                common shares outstanding
            
            
            6,434,900
            
            
            6,330,610Average
                common and equivalent shares outstanding
            
            
            6,954,014
            
            
            6,882,435





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


5


**BRIDGE
      CAPITAL HOLDINGS AND SUBSIDIARY**


**Interim
      Consolidated Statements of Cash Flows (unaudited)**


(dollars
      in thousands)





**Three months ended March 31,****2008**
            
            **2007**CASH
                FLOWS FROM OPERATING ACTIVITIES:Net
                income
            
            $
            1,522
            
            $
            2,444Adjustments
                to reconcile net income to net cash
              provided
                by operating activities:Provision
                for credit losses
            
            
            2,370
            
            
            200Depreciation
                and amortization
            
            
            349
            
            
            203Stock
                based compensation
            
            
            366
            
            
            276Loans
                originated for sale
            
            
            (12,042
            )
            
            (19,108
            )Proceeds
                from loan sales
            
            
            8,612
            
            
            25,283Decrease
                in accrued interest receivable and other assets
            
            
            342
            
            
            (324
            )Decrease
                in accrued interest payable and other liabilities
            
            
            (1,713
            )
            
            (2,446
            )Net
                cash (used in) provided by operating activities
            
            
            (194
            )
            
            6,528CASH
                FLOWS FROM INVESTING ACTIVITIES:Purchase
                of securities available for sale
            
            
            -
            
            
            (17,816
            )Proceeds
                from maturity of securities available for sale
            
            
            10,000
            
            
            8,000Net
                increase in loans
            
            
            (15,363
            )
            
            (40,440
            )Purchase
                of interest bearing deposits in other banks
            
            
            (693
            )
            
            -Purchase
                of fixed assets
            
            
            (430
            )
            
            (845
            )Net
                cash used in investing activities
            
            
            (6,486
            )
            
            (51,101
            )CASH
                FLOW FROM FINANCING ACTIVITIES:Net
                increase in deposits
            
            
            17,886
            
            
            8,410(Decrease)
                in other borrowings
            
            
            (10,000
            )
            
            -Common
                stock issued
            
            
            (23
            )
            
            251Net
                cash provided by financing activities
            
            
            7,863
            
            
            8,661NET
                INCREASE (DECREASE) IN CASH AND EQUIVALENTS:
            
            
            1,183
            
            
            (35,912
            )Cash
                and equivalents at beginning of period
            
            
            40,835
            
            
            118,205Cash
                and equivalents at end of period
            
            $
            42,018
            
            $
            82,293OTHER
                CASH FLOW INFORMATION:Cash
                paid for interest
            
            $
            4,066
            
            $
            4,466Cash
                paid for income taxes
            
            $
            356
            
            $
            2,100





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


6


**BRIDGE
      CAPITAL HOLDINGS AND SUBSIDIARY**


**Notes
      to Interim Consolidated Financial Statements (Unaudited)**





**1.**  **Summary
      of Significant Accounting Policies**





**Basis
      of Presentation**





The
      accompanying unaudited financial statements of Bridge Capital Holdings and
      Bridge Bank, N.A. have been prepared in accordance with generally accepted
      accounting principles and pursuant to the rules and regulations of the SEC.
      The
      interim financial data as of March 31, 2008 and for the three months ended
      March
      31, 2008 is unaudited; however, in the opinion of the Company, the interim
      data
      includes all adjustments, consisting only of normal recurring adjustments,
      necessary for a fair statement of the results for the interim periods. Certain
      information and note disclosures normally included in annual financial
      statements have been omitted pursuant to SEC rules and regulations; however,
      the
      Company believes the disclosures made are adequate to ensure that the
      information presented is not misleading. Results of operations for the quarter
      ended March 31, 2008 are not necessarily indicative of full year results.





The
      comparative balance sheet information as of December 31, 2007 is derived from
      the audited financial statements; however, it does not include all disclosures
      required by accounting principles generally accepted in the United States of
      America.





**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 and vesting of restricted stock.
      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.





**Stock-Based
      Compensation**





On
      January 1, 2006, the Company adopted 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.
      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 recorded an incremental
      $366,000 ($305,000 net of tax) of stock-based compensation expense during the
      three months ended March 31, 2008 as a result of the adoption of SFAS
      No. 123R.





No
      stock-based compensation costs were capitalized as part of the cost of an asset
      as of March 31, 2008.  As of March 31, 2008, $3.9 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 4 years.





The
      impact of implementing SFAS No. 123R reduced basic earnings per share by $0.05
      and diluted earnings per share by $0.04 for the three months ended March 31,
      2008.


7


**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 cumulative other comprehensive
      income totaling $3.9 million, net of tax, as of March 31, 2008 and $2.0 million,
      net of tax, as of December 31, 2007.





Three
                months ended(dollars
                in thousands)
            
            March
                31,2008
            
            2007Net
                income
            
            $
            1,522
            
            $
            2,444Other
                comprehensive earnings-Net
                unrealized gains (losses) on
              securities
                available for sale
            
            
            351
            
            
            62Net
                unrealized gains (losses) on
              FAS
                158 adjustment - supplemental executive retirement plan
            
            
            33
            
            
            10Net
                unrealized gains (losses) on
              cash
                flow hedges
            
            
            1,538
            
            
            322Total
                comprehensive income
            
            $
            3,444
            
            $
            2,838





**Segment
      Information**





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





**2.**  **Earnings
      Per Share**





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


8





Three
                months endedMarch
                31,2008
            
            2007Net
                income
            
            $
            1,522
            
            $
            2,444Weighted
                average shares used in computing:Basic
                common shares
            
            
            6,434,900
            
            
            6,330,610Diluted
                potential common shares related to stock options and restricted stock,
                using the treasury stock method
            
            
            519,114
            
            
            551,825Total
                average common shares and equivalents
            
            
            6,954,014
            
            
            6,882,435Basic
                earnings per share
            
            $
            0.24
            
            $
            0.38Diluted
                earnings per share
            
            $
            0.22
            
            $
            0.35




**3.**  **Securities**




The
      amortized cost and approximate fair values of securities at March 31, 2008
      and
      December 31, 2007 are as follows:





(dollars
                in thousands)
            
            As
                of March 31, 2008Gross
                Unrealized
            
            FairCost
            
            Gains
            
            Losses
            
            ValueU.S.
                government treasury notes
            
            $
            201
            
            $
            2
            
            $
            -
            
            $
            203U.S.
                government agency notes
            
            
            44,503
            
            
            1,424
            
            
            -
            
            
            45,927Total
                securities available for sale
            
            
            44,704
            
            
            1,426
            
            
            -
            
            
            46,130Total
                investment securities
            
            $
            44,704
            
            $
            1,426
            
            $
            -
            
            $
            46,130





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




9




The
      scheduled maturities of securities available for sale at March 31, 2008 and
      December 31, 2007 were as follows:




(dollars
                in thousands)
            
            March
                31, 2008Amortized
            
            FairCost
            
            ValueDue
                in one year or less
            
            $
            20,132
            
            $
            20,392Due
                after one year through five years
            
            
            24,572
            
            
            25,738Due
                after five years through ten years
            
            
            -
            
            
            -Due
                after ten years
            
            
            -
            
            
            -Total
                securities available for sale
            
            
            44,704
            
            
            46,130Total
                investment securities
            
            $
            44,704
            
            $
            46,130





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





As
      of
      March 31, 2008, investment securities with carrying values of approximately
      $200,000 were pledged as collateral. As of March 31, 2008, there were no
      unrealized losses attributable to securities maturing in greater than 12 months.




**4.**  **Loans**




The
      balances in the various loan categories are as follows as of March 31, 2008
      and
      December 31, 2007:




March
                31,
            
            December
                31,(dollars
                in thousands)
            
            2008
            
            2007Commercial
            
            $
            271,390
            
            $
            272,660SBA
            
            
            61,472
            
            
            56,945Real
                estate construction
            
            
            85,522
            
            
            85,378Real
                estate other
            
            
            188,917
            
            
            171,042Factoring
                and asset based lending
            
            
            53,108
            
            
            57,662Other
            
            
            10,898
            
            
            9,042Loans,
                gross
            
            
            671,307
            
            
            652,729Unearned
                fee income
            
            
            (1,664
            )
            
            (1,856
            )Total
                loan portfolio
            
            
            669,643
            
            
            650,873Less
                allowance for credit losses
            
            
            (10,978
            )
            
            (8,608
            )Loans,
                net
            
            $
            658,665
            
            $
            642,265




10




**5.** **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, generally three to fifteen years, or the estimated
      useful lives of the assets, generally three to five years.




Premises
      and equipment at March 31, 2008 and December 31, 2007 are comprised of the
      following:







(dollars
                in thousands)
            
            March
                31, 2008Cost
            
            Accumulated
              Depreciation
            
            NetBook
              ValueLeasehold
                improvements
            
            $
            4,945
            
            $
            (1,717
            )
            $
            3,228Furniture
                and fixtures
            
            
            1,035
            
            
            (660
            )
            
            375Capitalized
                software
            
            
            2,569
            
            
            (1,680
            )
            
            889Equipment
            
            
            1,854
            
            
            (1,301
            )
            
            553Construction
                in process
            
            
            -
            
            
            -
            
            
            -Totals
            
            $
            10,403
            
            $
            (5,358
            )
            $
            5,045




December
                31, 2007Cost
            
            
            Accumulated
                Depreciation
            
            
            Net
                book
              ValueLeasehold
                improvements
            
            $
            4,855
            
            $
            (1,548
            )
            $
            3,307Furniture
                and fixtures
            
            
            1,027
            
            
            (627
            )
            
            400Capitalized
                software
            
            
            2,285
            
            
            (1,567
            )
            
            718Equipment
            
            
            1,798
            
            
            (1,218
            )
            
            580Construction
                in process
            
            
            -
            
            
            -
            
            
            -Totals
            
            $
            9,965
            
            $
            (4,960
            )
            $
            5,005





**6.
      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.


11





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**




There
      were no other borrowings at March 31, 2008 and $10.0 million in other borrowings
      at December 31, 2007.




As
      of
      March 31, 2008, the Company had a total borrowing capacity with the Federal
      Home
      Loan Bank of San Francisco of approximately $68.0 million of which $10.0 million
      was pledged to secure a letter of credit.





The
      Bank
      also has unsecured borrowing lines with correspondent banks totaling $35.0
      million. At March 31, 2008, there were no balances outstanding on these
      lines.





**7.**  **Stock-Based
      Compensation**





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 the three month periods ended March 31,
      2008 and 2007 and the resulting estimates of weighted-average fair value per
      share of stock-based awards granted during those periods are as follows:


Three months ended March 31,2008
              
              2007Expected
                  life
              
              
              75
                  months
              
              
              60
                  monthsStock
                  volatility
              
              
              22.00
              %
              
              28.43
              %Risk
                  free interest rate
              
              
              3.06
              %
              
              4.70
              %Dividend
                  yield
              
              
              0.00
              %
              
              0.00
              %Fair
                  value per share
              
              $
              6.44
              
              $
              9.40




**8.**  **Fair
      Values of Assets and Liabilities**




In
      accordance with SFAS No. 157, the Company groups its financial assets and
      financial liabilities measured at fair value in three levels, based on the
      markets in which the assets and liabilities are traded and the reliability
      of
      the assumptions used to determine fair value. These levels are:




Level
      1 – Valuations for assts and liabilities traded in active exchange markets,
      such as the New York Stock Exchange. Level 1 also includes U.S. Treasury, other
      U.S. government and agency mortgage-backed securities that are traded by dealers
      or brokers in active markets. Valuations are obtained from readily available
      pricing sources for market transactions involving identical assets or
      liabilities.




Level
      2 –
Valuations for assets and liabilities traded in less active dealer or broker
      markets. Valuations are obtained from third party pricing services for identical
      or comparable assets or liabilities.




Level
      3 –
Valuations for assets and liabilities that are derived from other valuation
      methodologies, including option pricing models, discounted cash flow models
      and
      similar techniques, and not based on market exchange, dealer, or broker traded
      transactions. Level 3 valuations incorporate certain assumptions and projections
      in determining the fair value assigned to such assets or
      liabilities.


12





The
      balances of assets and liabilities measured at fair value on a recurring basis
      are as follows:





(dollars
                in thousands)
            
            As
                of March 31, 2008Total
            
            Level
                1
            
            Level
                2
            
            Level
                3Securities
                available for sale
            
            $
            46,130
            
            $
            46,130
            
            $
            -
            
            $
            -Cash
                flow hedge
            
            
            6,539
            
            
            -
            
            
            6,539
            
            
            -Warrant
                portfolio
            
            
            502
            
            
            -
            
            
            -
            
            
            502Total
            
            $
            53,171
            
            $
            46,130
            
            $
            6,539
            
            $
            502




The
      changes in Level 3 assets and liabilities measured at fair value on a recurring
      basis were not material for the quarter ended March 31, 2008.





The
      Company may be required, from time to time, to measure certain other financial
      assets at fair value on a non-recurring basis in accordance with GAAP. These
      adjustments to fair value usually result from application of
      lower-of-cost-or-market accounting or write-downs of individual assets. The
      assets measured at fair value on a non-recurring basis were not material for
      the
      quarter ended March 31, 2008.


13


**ITEM
      2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
      OF OPERATIONS**





In
      addition to the historical information, this quarterly 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 quarterly 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 interest rate environment
      reduces margin; (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 of terrorist threats
      or acts, or apprehension about possible future occurrences of acts of this
      type;
      and (10) the involvement of the United States in war or other hostilities.
      Therefore, the information in this quarterly report should be carefully
      considered when evaluating the business prospects of the Company.





**Critical
      Accounting Policies**





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




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




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




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





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.




The
      Company has the ability and the intent to sell all or a portion of certain
      SBA
      loans in the loan portfolio and, as such, carries the saleable portion of these
      loans at the lower of aggregate cost or fair value. At March 31, 2008 and
      December 31, 2007, the fair value of SBA loans exceeded aggregate cost and
      therefore, SBA loans were carried at aggregate cost.




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


14




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.





Supplemental
      Employee Retirement Plan: The Company has entered into supplemental employee
      retirement agreements with certain executive and senior officers. The
      measurement of the liability under these agreements includes estimates involving
      life expectancy, length of time before retirement, and expected benefit levels.
      Should these estimates prove materially wrong, we could incur additional or
      reduced expense to provide the benefits.





**Selected
      Financial Data**





The
      following table reflects selected financial data and ratios as of and for the
      quarters ended March 31, 2008 and 2007.





(dollars
                in thousands, except per share data)
            
            Three
                months ended
              March
                31,2008
            
            2007**Statement
                of Operations Data:**Interest
                income
            
            $
            16,021
            
            $
            15,378Interest
                expense
            
            
            3,988
            
            
            4,426Net
                interest income
            
            
            12,033
            
            
            10,952Provision
                for credit losses
            
            
            2,370
            
            
            200Net
                  interest income after provision for credit losses
            
            
            9,663
            
            
            10,752Other
                income
            
            
            1,671
            
            
            1,294Other
                expenses
            
            
            8,736
            
            
            7,854Income
                before income taxes
            
            
            2,598
            
            
            4,192Income
                taxes
            
            
            1,076
            
            
            1,748Net
                income
            
            $
            1,522
            
            $
            2,444**Per
                Share Data:**Basic
                earnings per share
            
            $
            0.24
            
            $
            0.38Diluted
                earnings per share
            
            
            0.22
            
            
            0.35Shareholders'
                equity per share
            
            
            10.58
            
            
            8.21Cash
                dividend per common share
            
            
            -
            
            
            -**Balance
                Sheet Data:**Balance
                sheet totals:Assets
            
            $
            785,006
            
            $
            731,122Loans,
                net
            
            
            658,665
            
            
            566,021Deposits
            
            
            689,242
            
            
            653,398Shareholders'
                equity
            
            
            68,871
            
            
            52,459Average
                balance sheet amounts:Assets
            
            $
            778,320
            
            $
            688,115Loans,
                net
            
            
            649,492
            
            
            535,598Deposits
            
            
            676,083
            
            
            610,033Shareholders'
                equity
            
            
            67,468
            
            
            50,785**Selected
                Ratios:**Return
                on average assets
            
            
            0.79
            %
            
            1.44
            %Return
                on average equity
            
            
            9.07
            %
            
            19.52
            %Efficiency
                ratio
            
            
            63.75
            %
            
            64.14
            %Risk
                based capital ratio
            
            
            11.72
            %
            
            11.69
            %Net
                chargeoffs to average gross loans
            
            
            0.00
            %
            
            0.00
            %Allowance
                for loan losses to total loans
            
            
            1.64
            %
            
            1.31
            %Average
                equity to average assets
            
            
            8.67
            %
            
            7.38
            %




15




**Summary
      of Financial Results – Quarter ended March 31, 2008**





The
      Company reported net income of $1.5 million ($0.24 basic and $0.22 diluted
      earnings per share) for the quarter ended March 31, 2008 as compared to $2.4
      million ($0.38 basic and $0.35 diluted earnings per share) for the quarter
      ended
      March 31, 2007. The decrease in net income resulted primarily from increases
      in
      the provision for credit losses and operating expenses offset, in part, by
      increases in net interest income and non-interest income.





The
      table
      below highlights the changes in the nature and sources of income and expense.







Three
                months ended
              March
                31,(dollars
                in thousands)
            
            2008
            
            2007
            
            Increase
              (Decrease)Interest
                income
            
            $
            16,021
            
            $
            15,378
            
            $
            643Interest
                expense
            
            
            3,988
            
            
            4,426
            
            
            (438
            )Net
                interest income
            
            
            12,033
            
            
            10,952
            
            
            1,081Provision
                for credit losses
            
            
            2,370
            
            
            200
            
            
            2,170Net
                interest income after provision for credit losses
            
            
            9,663
            
            
            10,752
            
            
            (1,089
            )Other
                income
            
            
            1,671
            
            
            1,294
            
            
            377Other
                expenses
            
            
            8,736
            
            
            7,854
            
            
            882Income
                before income taxes
            
            
            2,598
            
            
            4,192
            
            
            (1,594
            )Income
                taxes
            
            
            1,076
            
            
            1,748
            
            
            (672
            )Net
                income
            
            $
            1,522
            
            $
            2,444
            
            $
            (922
            )





**Net
      Interest Income and Margin**





Net
      interest income, the difference between interest earned on loans and investments
      and interest paid on deposits is the principal component of the Company's
      earnings. Net interest income is affected by changes in the nature and volume
      of
      earning assets held during the quarter, the rates earned on such assets and
      the
      rates paid on interest bearing liabilities.





Net
      interest income for the quarter ended March 31, 2008 was $12.0 million, which
      was comprised of $16.0 million in interest income and $4.0 million in interest
      expense. Net interest income for the quarter ended March 31, 2007 was $11.0
      million, which was comprised of $15.4 million in interest income and $4.4
      million in interest expense. Net interest income for the quarter ended March
      31,
      2008 represented an increase of $1.0 million or 9.9% over the same period one
      year earlier.





The
      composition of the average balance sheet impacts growth in net interest income.
      For the quarter ended March 31, 2008 average earning assets of $734.2 million
      represented an increase of $96.2 million, or 15.1%, compared to $638.0 million
      for the same period in 2007. The Company’s loan-to-deposit ratio, a measure of
      leverage, averaged 97.63% during the quarter ended March 31, 2008, which
      represented an increase compared to an average of 89.23% for the same quarter
      of
      2007 as a result of faster loan growth relative to deposit funding.





Changes
      in short-term interest rates also impact growth in net interest income as 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 6.23% in the quarter ended March 31, 2008 compared to 8.25% in the
      same
      period one year earlier.


16





The
      Company’s net interest margin (net interest income divided by average earning
      assets) for the quarter ended March 31, 2008 was 6.59% compared to 6.96% in
      the
      same period one year earlier primarily as a result of the decrease in short
      term
      interest rates offset, in part, by an increase in loan related fees and income
      from interest rate swaps. During the quarter ended March 31, 2008, the Company
      recognized $400,000 as a success fee resulting from the completion of a capital
      raising event of a loan client. In addition, the net settlement from interest
      rate swaps contributed $340,000 to support net interest income in the quarter
      ended March 31, 2008 compared to a loss of $98,000 for the quarter ended March
      31, 2007.





The
      following table details the average balances, interest income and expense and
      the effective yields/rates for earning assets and interest-bearing liabilities
      for the quarters ended March 31, 2008 and 2007.


Three
                  months ended March 31,(dollars
                  in thousands)
              
              2008
              
              2007Average
                Balance
              
              Yields
                or
                Rates
              
              Interest
                Income/
                Expense
              
              Average
                Balance
              
              Yields
                or
                Rates
              
              Interest
                Income/
                ExpenseASSETSInterest
                  earning assets (2):Loans
                  (1)
              
              $
              660,083
              
              
              9.3
              %
              $
              15,227
              
              $
              544,357
              
              
              10.5
              %
              $
              14,184Federal
                  funds sold
              
              
              24,181
              
              
              2.9
              %
              
              177
              
              
              40,536
              
              
              5.2
              %
              
              524Investment
                  securities
              
              
              49,908
              
              
              5.0
              %
              
              617
              
              
              53,122
              
              
              5.1
              %
              
              670Total
                  interest earning assets
              
              
              734,172
              
              
              8.8
              %
              
              16,021
              
              
              638,015
              
              
              9.7
              %
              
              15,378Noninterest-earning
                  assets:Cash
                  and due from banks
              
              
              18,496
              
              
              
              
              
              
              
              
              30,872All
                  other assets (3)
              
              
              25,652
              
              
              
              
              
              
              
              
              19,228TOTAL
              
              $
              778,320
              
              
              
              
              
              
              
              $
              688,115LIABILITIES
                      AND SHAREHOLDERS' EQUITYInterest
                  bearing liabilities:Deposits:Demand
              
              $
              4,954
              
              
              0.3
              %
              $
              4
              
              $
              5,517
              
              
              0.9
              %
              $
              13Savings
              
              
              367,923
              
              
              2.8
              %
              
              2,581
              
              
              316,481
              
              
              3.8
              %
              
              2,997Time
              
              
              98,019
              
              
              4.5
              %
              
              1,088
              
              
              98,033
              
              
              4.7
              %
              
              1,156Other
              
              
              23,341
              
              
              5.4
              %
              
              315
              
              
              17,527
              
              
              6.0
              %
              
              260Total
                  interest bearing liabilities
              
              
              494,237
              
              
              3.2
              %
              
              3,988
              
              
              437,558
              
              
              4.1
              %
              
              4,426Noninterest-bearing
                  liabilities:Demand
                  deposits
              
              
              205,187
              
              
              
              
              
              
              
              
              190,002Accrued
                      expenses and other liabilities
              
              
              11,428
              
              
              
              
              
              
              
              
              9,770Shareholders'
                  equity
              
              
              67,468
              
              
              
              
              
              
              
              
              50,785TOTAL
              
              $
              778,320
              
              
              
              
              
              
              
              $
              688,115Net
                  interest income and margin
              
              
              
              
              
              6.6
              %
              $
              12,033
              
              
              
              
              
              7.0
              %
              $
              10,952




(1)
            Loan
                fee amortization of $1.7 million and $1.3 million, respectively,
                is
                included in interest income. Nonperforming loans have been included
                in
                average loan balances.


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


(3)
            Net
                of average allowance for credit losses of $8.9 million and $7.3 million,
                respectively.


17





The
      following table shows the effect of the interest differential of volume and
      rate
      changes for the quarters ended March 31, 2008 and 2007. The change in interest
      due to both rate and volume has been allocated in proportion to the relationship
      of absolute dollar amounts of change in each.





(dollars
                in thousands)
            
            Three months ended March 31,
              2008 vs. 2007Increase (decrease)
              due to change inAverage
            
            Average
            
            TotalVolume
            
            Rate
            
            ChangeInterest
                income:Loans
            
            $
            2,670
            
            $
            (1,627
            )
            $
            1,043Federal
                funds sold
            
            
            (120
            )
            
            (227
            )
            
            (347
            )Investment
                securities
            
            
            (40
            )
            
            (13
            )
            
            (53
            )Total
                interest income
            
            
            2,510
            
            
            (1,867
            )
            
            643Interest
                expense:Demand
            
            
            (0
            )
            
            (9
            )
            
            (9
            )Savings
            
            
            361
            
            
            (777
            )
            
            (416
            )Time
            
            
            (0
            )
            
            (68
            )
            
            (68
            )Other
            
            
            78
            
            
            (23
            )
            
            55Total
                interest expense
            
            
            439
            
            
            (877
            )
            
            (438
            )Change
                in net interest income
            
            $
            2,071
            
            $
            (989
            )
            $
            1,081





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





**Interest
      Income**





Interest
      income of $16.0 million in the quarter ended March 31, 2008 represented an
      increase of $640,000, or 4.2%, over $15.4 million in the same quarter one year
      earlier. The increase in interest income was primarily due to growth in average
      earning assets, particularly growth in average loan balances.





Average
      gross loans were $660.1 million for three months ended March 31, 2008, an
      increase of $115.7 million or 21.3% over $544.4 million for the same period
      one
      year earlier. Average loans comprised 89.9% of average earning assets in the
      three months ended March 31, 2008 compared to 85.3% in the first quarter of
      2007.





The
      average yield on earning assets was 8.8% for the quarter ended March 31, 2008
      and 9.8% for the quarter ended March 31, 2007. As noted above, the majority
      of
      the Company’s earning assets, including a majority of loans, are priced to
      adjust with movements in short-term interest rates, particularly the prime
      rate,
      and the decrease in yield was primarily due to decreases in the prime rate
      during 2007 offset, in part, by an increase in loan related fees and income
      from
      interest rate swaps.





Other
      earning assets, consisting of investment securities and federal funds sold,
      averaged $74.1 million for the quarter ended March 31, 2008, a decrease of
      $19.6
      million or 20.9% from $93.7 million for the three months ended March 31, 2007.




**Interest
      Expense**




Interest
      expense was $4.0 million for the quarter ended March 31, 2008, which represented
      a decrease of $440,000 or 9.9% over $4.4 million for the comparable period
      of
      2007. The decrease in interest expense reflects growth in average
      interest-bearing liabilities offset by lower interest rates paid on liabilities
      in 2008 compared to 2007. Average interest-bearing liabilities were $494.2
      million for the three months ended March 31, 2008, an increase of $56.7 million,
      or 13.0%, over $437.5 million for the same period one year earlier.




18




Growth
      in
      average interest bearing liabilities was primarily due to growth in average
      interest bearing deposits. Average interest bearing deposits were $470.9 million
      for the quarter ended March 31, 2008, which represented 69.7% of total average
      deposits and was an increase of $50.9 million, or 12.1%, over $420.0 million
      representing 68.9% of total average deposits in the first quarter of 2007.





Other
      (non-deposit) interest bearing liabilities are primarily comprised of junior
      subordinated debt securities issued by the Company. The junior subordinated
      debt
      is intended to supplement capital requirements of the Company at a rate of
      interest that is fixed for five years. Other interest bearing liabilities
      averaged $23.3 million and $17.5 million in the three months ended March 31,
      2008 and 2007, respectively.




The
      average rate paid on interest-bearing liabilities of 3.3% in the quarter ended
      March 31, 2008 compared to 4.0% in the first quarter of 2007.





**Credit
      Risk and Provision for Credit Losses**





The
      Company maintains an allowance for credit losses which is based, in part, on
      the
      Company's and industry loss experience, the impact of economic conditions within
      the Company'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. The Company provided $2.4 million to the allowance for credit
      losses for the three months ended March 31, 2008, as compared to $200,000 for
      the same period in 2007. There were no loan charge-offs or recoveries during
      the
      three months ended March 31, 2008 as compared to no loans charged off and $4,000
      in recoveries during the three month period ended March 31, 2007. At March
      31,
      2008, the allowance for credit losses was $11.0 million, representing 1.6%
      of
      total loans, as compared to $7.5 million, representing 1.3% of total loans,
      at
      March 31, 2007.





The
      following schedule provides an analysis of the allowance for credit
      losses:




(dollars
                in thousands)
            
            Three months ended
              March 31,2008
            
            2007Balance,
                beginning of period
            
            $
            8,608
            
            $
            7,329Provision
                for credit losses
            
            
            2,370
            
            
            200Charge-offs
            
            
            -
            
            
            -Recoveries
            
            
            -
            
            
            4Balance,
                end of period
            
            $
            10,978
            
            $
            7,533





At
      March
      31, 2008 nonperforming assets totaled $15.9 million, or 2.03% of total assets,
      compared to $5.3 million, or 0.69% of total assets, on December 31, 2007. The
      nonperforming assets at March 31, 2008 consisted of seven lending relationships
      totaling $15.6 million that were on non-accrual status and determined to be
      impaired based upon the criteria set forth in SFAS No. 114, and two commercial
      properties valued at $348,000 that were categorized as “other real estate
      owned”.





Included
      in the non-performing loans were two lending relationships totaling $11.2
      million at March 31, 2008 that were collateralized by undeveloped land. The
      largest of the relationships, representing $7.5 million, represents two loans
      secured by lots for luxury single family construction in Monterey County. The
      second relationship is a land development loan for $3.7 million in Fresno
      County. These loans had an indicated potential loss exposure of approximately
      $1.4 million and an impairment reserve was included in the allowance for loan
      losses.





Also
      included in the non-performing loans was a construction loan totaling $2.6
      million as of March 31, 2008. The loan is secured by three completed luxury
      homes in the hills of the East Bay region of the San Francisco Bay area. This
      loan had an indicated potential loss exposure of approximately $540,000 and
      an
      impairment reserve was included in the allowance for loan losses. The two other
      significant non-performing loans were SBA loans totaling $1.5 million at March
      31, 2008. These loans had an indicated potential loss exposure of approximately
      $73,000 and an impairment reserve was included in the allowance for loan
      losses.




19




The
      Company had one loan totaling $1.1 million at March 31, 2008 that was performing
      but determined to be impaired based upon the criteria set forth in SFAS No.
      114.
      This loan was adequately collateralized by commercial real estate. As such,
      no
      specific reserve was required for this loan.





The
      following summarizes nonperforming assets at March 31, 2008 and December 31,
      2007.





(dollars in thousands)
            
            March 31,
              2008
            
            December 31,
              2007Loans
                accounted for on a non-accrual basis
            
            $
            15,578
            
            $
            4,914Loans
                restructured and in compliance with modified terms
            
            
            -
            
            
            -Other
                loans with principal or interest contracturally past due 90 days
                or
                more
            
            
            -
            
            
            -Nonperforming
                loans
            
            
            15,578
            
            
            4,914Other
                real estate owned
            
            
            348
            
            
            425Nonperforming
                assets
            
            $
            15,926
            
            $
            5,339





Based
      on
      an evaluation of the individual credits, historical credit loss experience
      by
      loan type, and economic conditions, management has allocated the allowance
      for
      loan losses as follows for the periods ending March 31, 2008 and December 31,
      2007:





(dollars
                in thousands)
            
            March 31, 2008
            
            December 31, 2007Amount
            
            Percent
            
            Amount
            
            PercentCommercial
                and other
            
            $
            3,506
            
            
            31.9
            %
            $
            3,124
            
            
            36.3
            %SBA
            
            
            1,286
            
            
            11.7
            %
            
            1,053
            
            
            12.2
            %Real
                estate construction
            
            
            1,046
            
            
            9.5
            %
            
            783
            
            
            9.1
            %Real
                estate other
            
            
            4,126
            
            
            37.6
            %
            
            2,356
            
            
            27.4
            %Factoring/ABL
            
            
            960
            
            
            8.7
            %
            
            1,239
            
            
            14.4
            %Other
            
            
            54
            
            
            0.5
            %
            
            53
            
            
            0.6
            %$
            10,978
            
            
            100.0
            %
            $
            8,608
            
            
            100.0
            %





Management
      is of the opinion that the allowance for credit losses is maintained at a level
      adequate for known and unidentified losses inherent in the loan portfolio.
      However, the Company's construction and land development loan portfolios,
      representing approximately 22.0% of the total loan portfolio, could be adversely
      affected if California economic conditions and the real estate market in the
      Company'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 and the level of the allowance
      for loan losses, which could adversely affect the Company's future growth and
      profitability.




20




**Non-interest
      Income**





The
      following table sets forth the components of other income and the percentage
      distribution of such income for the three months ended March 31, 2008 and
      2007:





Three months ended March 31,(dollars
                in thousands)
            
            2008
            
            2007Amount
            
            Percent
            
            Amount
            
            PercentGain
                on sale of SBA loans
            
            $
            283
            
            
            16.9
            %
            $
            731
            
            
            56.5
            %SBA
                loan servicing income
            
            
            118
            
            
            7.1
            %
            
            111
            
            
            8.6
            %Depositor
                service charges
            
            
            229
            
            
            13.7
            %
            
            152
            
            
            11.7
            %Increase
                in value of life insurance
            
            
            109
            
            
            6.5
            %
            
            125
            
            
            9.7
            %Foreign
                exchange upcharge
            
            
            378
            
            
            22.6
            %
            
            78
            
            
            6.0
            %Other
                operating income
            
            
            554
            
            
            33.2
            %
            
            97
            
            
            7.5
            %$
            1,671
            
            
            100.0
            %
            $
            1,294
            
            
            100.0
            %





Non-interest
      income totaled $1.7 million in the first quarter of 2008, an increase of
      $377,000 or 29.1% from $1.3 million in the first quarter of 2007. Non-interest
      income consists primarily of gains recognized on sales of SBA loans, foreign
      exchange income, SBA loan servicing income, and packaging fees and service
      charge income on deposit accounts. The increase in non- interest income is
      primarily the result of increased international fee income. For the quarter
      ended March 31, 2008 international fee income was $378,000 compared to $78,000
      for the quarter ended March 31, 2007. Additionally, included in non-interest
      income for the quarter ended March 31, 2008 was a hedge accounting adjustment
      of
      $279,000 pertaining to the Company’s interest rate swap and $82,000 from the
      sale of commercial real estate loans. The increase in non-interest income for
      the first quarter of 2008 was offset, in part, by a lower volume of SBA loan
      sales.





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) adjustments to programs by the SBA;
      (4) changes in activities of secondary market participants and; (5) other
      factors. Gains recognized on sales of SBA loans were $283,000 in the quarter
      ended March 31, 2008 which represented a decrease of $448,000 or 61.3% compared
      to $731,000 the same period one year earlier. The increase was attributed to
      a
      higher volume of loans sold during the quarter. During the first quarter of
      2008
      the Company’s SBA group funded $12.0 million in new loans and sold $8.6 million
      which compared to $19.1 million funded and $23.5 million sold in the same period
      one year earlier.





**Non-interest
      Expense**





The
      components of other expense as a percentage of average earnings assets are
      set
      forth in the following table for the three months ended March 31, 2008 and
      2007.




Three months ended March 31,(dollars
                in thousands)
            
            2008
            
            2007Amount
            
            Percent
            
            Amount
            
            PercentSalaries
                and benefits
            
            $
            5,650
            
            
            3.1
            %
            $
            5,001
            
            
            3.2
            %Occupancy
            
            
            876
            
            
            0.5
            %
            
            747
            
            
            0.5
            %Data
                processing
            
            
            582
            
            
            0.3
            %
            
            486
            
            
            0.3
            %Marketing/Advertising
            
            
            319
            
            
            0.2
            %
            
            325
            
            
            0.2
            %Deposit
                services
            
            
            178
            
            
            0.1
            %
            
            257
            
            
            0.2
            %Legal
                and professional
            
            
            (34
            )
            
            0.0
            %
            
            218
            
            
            0.1
            %Furniture
                and equipment
            
            
            229
            
            
            0.1
            %
            
            201
            
            
            0.1
            %Other
            
            
            936
            
            
            0.5
            %
            
            619
            
            
            0.4
            %$
            8,736
            
            
            4.8
            %
            $
            7,854
            
            
            5.0
            %




21




Operating
      expenses were $8.7 million for the three months ended March 31, 2008, an
      increase of $880,000 or 11.2% from $7.9 million at March 31, 2007. As a
      percentage of average earning assets, other expenses for the three months ended
      March 31, 2008 and 2007 were 4.8% and 5.0%, respectively, on an annualized
      basis. In 2008, operating expenses were comprised primarily of salaries and
      benefits of $5.7 million, which compared to $5.0 million in 2007. The increase
      in salaries and benefits was primarily due to the additional headcount related
      to expansion of the business. At March 31, 2008, the Company employed 172 FTE
      compared to 142 FTE on the same date one year earlier. In addition, salaries
      and
      benefits included a charge of $366,000 and $276,000 to recognize compensation
      related to stock option grants as a result of the implementation of FAS No.
      123R
      in the first quarter of 2008 and 2007, respectively. Occupancy and data
      processing expense for the first quarter of 2008 was $1.5 million compared
      to
      $1.2 million for the same period one year earlier. The increase was primarily
      due to expansion of the business. The decrease in deposit services expense
      of
      $80,000 or 30.7% was due to a decline in real estate related title and escrow
      deposit accounts. The decrease in legal and professional expense of $252,000,
      or
      115.6%, was primarily due to a recovery of loan related legal
      expense.




**Balance
      Sheet**




Total
      assets of the Company at March 31, 2008 were $785.0 million, an increase of
      $10.2 million, or 1.3%, as compared to $774.8 million at December 31, 2007.
      Growth in total assets was principally due to an increase in loan balances.





The
      following table shows the Company’s loans by type and their percentage
      distribution for the periods ended March 31, 2008 and December 31,
      2007.





(dollars
                in thousands)
            
            March 31,
              2008
            
            December 31,
              2007Commercial
            
            $
            271,390
            
            $
            272,660SBA
            
            
            61,472
            
            
            56,945Real
                estate construction
            
            
            85,522
            
            
            85,378Real
                estate other
            
            
            188,917
            
            
            171,042Factoring
                and asset based lending
            
            
            53,108
            
            
            57,662Other
            
            
            10,898
            
            
            9,042Total
                gross loans
            
            
            671,307
            
            
            652,729Unearned
                fee income
            
            
            (1,664
            )
            
            (1,856
            )Total
                gross loans
            
            
            669,643
            
            
            650,873Less
                allowance for credit losses
            
            
            (10,978
            )
            
            (8,308
            )Total
                loans, net
            
            $
            658,665
            
            $
            642,565Commercial
            
            
            40.4
            %
            
            41.8
            %SBA
            
            
            9.2
            %
            
            8.7
            %Real
                estate construction
            
            
            12.7
            %
            
            13.1
            %Real
                estate other
            
            
            28.1
            %
            
            26.2
            %Factoring
                and asset based lending
            
            
            7.9
            %
            
            8.8
            %Other
            
            
            1.6
            %
            
            1.4
            %Total
                gross loans
            
            
            100.0
            %
            
            100.0
            %





Net
      loan
      balances increased to $658.7 million at March 31, 2008, which represented an
      increase of $16.1 million, or 2.5%, as compared to $642.6 million at December
      31, 2007. The increase in loans was primarily in real estate other without
      a
      concentration in any one specific category of loans.





The
      Company’s commercial loan portfolio represents loans to small and middle-market
      businesses in the Santa Clara County region. Commercial loans were $271.4
      million at March 31, 2008, which represented a slight decrease of $1.3 million,
      or 0.5%, compared to $272.7 million at December 31, 2007. At March 31, 2008,
      commercial loans comprised 40.4% of total loans outstanding compared to 41.8%
      at
      December 31, 2007.




22




The
      Company, 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 75% to 85% of the total loan. In addition, the loan
      could be collateralized by a deed of trust on real estate. Under the 504
      program, the Company lends directly to the borrower and takes a first deed
      of
      trust to the subject property. In addition the SBA, through a Certified
      Development Corporation, makes an additional loan to the borrower and takes
      a
      deed of trust subject to the Company’s position. At March 31, 2008, SBA loans
      comprised $61.5 million, or 9.2%, of total loans, an increase of $4.5 million,
      or 7.9%, from $56.9 million at December 31, 2007. The Company has the ability
      and 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 March 31, 2008 and December 31, 2007, the fair value of SBA loans exceeded
      aggregate cost and therefore, SBA loans were carried at aggregate
      cost.





The
      Company’s construction loan portfolio primarily consists of loans to finance
      individual single-family residential homes, approximately half of which are
      owner-occupied projects. Construction loans increased $144,000, or 0.2%, to
      $85.5 million at March 31, 2008 over $85.4 million at December 31, 2007.
      Construction loan balances at March 31, 2008 and December 31, 2007 comprised
      122.7% and 13.1%, respectively, of total loans.





Other
      real estate loans increased $17.9 million or 10.5% to $188.9 million at March
      31, 2008 over $171.0 million at December 31, 2007. The increase in other real
      estate loans was approximately equally split between home equity lines of credit
      and other real estate term loans. Other real estate loans represented 28.1%
      of
      total loans at March 31, 2008 compared to 26.2% at December 31,
      2007.





Factoring
      and asset-based lending represents purchased accounts receivable (factoring)
      and
      a structured accounts receivable lending program where the Company receives
      client specific payment for client invoices. Under the factoring program, the
      Company purchases accounts receivable invoices from its clients and then
      receives payment directly from the party obligated for the receivable. In most
      cases the Company purchases the receivables subject to recourse from the
      Company’s factoring client. The asset-based lending program requires a security
      interest in all of a client’s accounts receivable. At March 31, 2008,
      factoring/asset- based loans totaled $53.1 million or 7.9% of total loans,
      a
      slight decrease as compared to $57.7 million or 8.8% of total loans at December
      31, 2007.





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 March 31, 2008, other loans totaled $10.9 million as
      compared to $9.0 million at December 31, 2007.





Deposits
      represent the Company’s principal source of funds. Most of the Company’s
      deposits are obtained from professionals, small- to medium sized businesses
      and
      individuals within the Company’s market area. The Company’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 March 31, 2008 and December 31, 2007.





(dollars
                in thousands)
            
            March 31,
              2008
            
            December 31,
              2007Amount
            
            Percent
            
            Amount
            
            PercentNoninterest-bearing
                demand
            
            $
            200,567
            
            
            29.10
            %
            $
            198,641
            
            
            29.59
            %Interest-bearing
                demand
            
            
            4,587
            
            
            0.67
            %
            
            5,350
            
            
            0.80
            %Money
                market and savings
            
            
            386,369
            
            
            56.06
            %
            
            372,923
            
            
            55.55
            %Certificates
                of deposit:Less
                than $100
            
            
            29,649
            
            
            4.30
            %
            
            22,896
            
            
            3.41
            %$100
                and more
            
            
            68,070
            
            
            9.88
            %
            
            71,546
            
            
            10.66
            %Total
                deposits
            
            $
            689,242
            
            
            100.00
            %
            $
            671,356
            
            
            100.00
            %





Deposits
      increased $17.9 million or 2.7% from $671.4 million at December 31, 2007 to
      $689.2 million at March 31, 2008. The increase in deposits was primarily in
      money market and savings accounts. The increase was a result of marketing
      efforts to attract such deposits in order to meet the Bank’s liquidity needs and
      to accommodate projected loan funding. Deposit totals at March 31, 2008 included
      $15.7 million, or 2.3%, in title and escrow company account balances compared
      to
      $10.7 million, or 1.6%, at December 31, 2007. Excluding title and escrow company
      account balances, deposits increased $36.8 million or 6.0% compared to December
      31, 2007.




23




**Leverage**





Total
      gross loan balances at March 31, 2008 were $671.3 million. The resulting loan
      to
      deposit ratio was 97.4%. Other earning assets at March 31, 2008 were primarily
      comprised of investment securities and federal funds sold of $63.7 million.
      To
      date, the Company has deployed earning assets primarily in federal funds sold
      to
      address the potential volatility of the title company deposit balances and
      to
      accommodate projected loan funding, and in short term fixed rate investments
      to
      mitigate interest rate risk associated with the Company’s asset-sensitive
      balance sheet.





**Capital
      Resources**




The
      Company and the Bank are subject to the capital guidelines and regulations
      governing capital adequacy for bank holding companies and national banks.
      Additional capital requirements may be imposed on banks based on market risk.
      The FDIC requires a leverage ratio of 8.00% for new banks during the first
      three
      years of operation.




After
      the
      first three years of operations, the Comptroller requires a minimum leverage
      ratio of 3.00% for national banks that have received the highest composite
      regulatory rating (a regulatory measurement of capital, assets, management,
      earnings and liquidity) and that are not anticipating or experiencing any
      significant growth. All other institutions are required to maintain a leverage
      ratio of at least 100 to 200 basis points above the 3.00% minimum.




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




The
      risk-based capital ratio focuses principally on broad categories of credit
      risk,
      and might 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 Company’s risk-based
      capital ratio. The Comptroller has stated that banks generally are expected
      to
      operate above the minimum risk-based capital ratio. Banks contemplating
      significant expansion plans, as well as those institutions with high or
      inordinate levels of risk, should hold capital consistent with the level and
      nature of the risks to which they are exposed.




Further,
      the banking agencies have adopted modifications to the risk-based capital
      regulations to include standards for interest rate risk exposures. Interest
      rate
      risk is the exposure of a bank’s current and future earnings and equity capital
      arising from movements in interest rates. While interest rate risk is inherent
      in a bank’s role as financial intermediary, it introduces volatility to bank
      earnings and to the economic value of the Company. 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 effective January 1, 1998 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.




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




24




Under
      certain circumstances, the Comptroller may determine that the capital ratios
      for
      a national bank shall be maintained at levels, which are higher than the minimum
      levels required by the guidelines. A national bank which does not achieve and
      maintain adequate capital levels as required 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 Company is required
      to meet certain guidelines of the Comptroller concerning the maintenance of
      an
      adequate allowance for loan and lease losses.




The
      Company’s Tier 1 capital at March 31, 2008 was $81.9 million, which was
      comprised of $38.0 million of capital stock and surplus, $26.9 million in
      retained earnings and trust preferred securities up to the allowable limit
      of
      $17.0 million.





The
      following table shows the Company’s capital ratios at March 31, 2008 and
      December 31, 2007 as well as the minimum capital ratios required to be deemed
      “well capitalized” under the regulatory framework.





(dollars
                in thousands)
            
            As of  March 31,
              2008
            
            As of December 31,
              2007Amount
            
            Ratio
            
            Amount
            
            Ratio**Company
                Capital Ratios**Tier
                1 Capital
            
            $
            81,893
            
            
            10.47
            %
            $
            80,024
            
            
            10.54
            %(to
                Risk Weighted Assets)Tier
                1 capital minimum requirement
            
            $
            31,285
            
            
            4.00
            %
            $
            30,376
            
            
            4.00
            %Total
                Capital
            
            $
            91,670
            
            
            11.72
            %
            $
            88,632
            
            
            11.67
            %(to
                Risk Weighted Assets)Total
                capital minimum requirement
            
            $
            62,570
            
            
            8.00
            %
            $
            60,752
            
            
            8.00
            %Company
                LeverageTier
                1 Capital
            
            $
            81,893
            
            
            10.52
            %
            $
            80,024
            
            
            10.66
            %(to
                Average Assets)Tier
                1 capital minimum requirement
            
            $
            31,133
            
            
            4.00
            %
            $
            30,022
            
            
            4.00
            %**Bank
                Capital Ratios**Tier
                1 Capital
            
            $
            79,367
            
            
            10.16
            %
            $
            77,096
            
            
            10.17
            %(to
                Risk Weighted Assets)Tier
                1 capital minimum requirement
            
            $
            31,234
            
            
            4.00
            %
            $
            30,328
            
            
            4.00
            %Total
                Capital
            
            $
            89,128
            
            
            11.41
            %
            $
            85,704
            
            
            11.30
            %(to
                Risk Weighted Assets)Total
                capital minimum requirement
            
            $
            62,468
            
            
            8.00
            %
            $
            60,655
            
            
            8.00
            %Bank
                LeverageTier
                1 Capital
            
            $
            79,367
            
            
            10.21
            %
            $
            77,096
            
            
            10.27
            %(to
                Average Assets)Tier
                1 capital minimum requirement
            
            $
            31,091
            
            
            4.00
            %
            $
            30,018
            
            
            4.00
            %





The
      Company and the Bank were considered well capitalized at March 31, 2008.




25


**ITEM
      3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
      RISK**




**Liquidity/Interest
      Rate Sensitivity**




The
      Company manages its liquidity to provide adequate funds at an acceptable cost
      to
      support borrowing requirements and deposit flows of its customers. At March
      31,
      2008 and December 31, 2007, liquid assets as a percentage of deposits were
      12.9%
      and 14.4%, respectively. In addition to cash and due from banks, liquid assets
      include interest-bearing deposits in other banks, Federal funds sold and
      securities available for sale. The Company has $35.0 million in Federal funds
      lines of credit available with correspondent banks to meet liquidity needs
      and
      additionally has approximately $68.0 million in borrowing capacity at the
      Federal Home Loan Bank of San Francisco. The Company’s balance sheet position is
      asset-sensitive (based upon the significant amount of variable rate loans and
      the repricing characteristics of its deposit accounts). This balance sheet
      position generally provides a hedge against rising interest rates, but has
      a
      detrimental effect during times of interest rate decreases. Net interest income
      is generally negatively impacted in the short term by a decline in interest
      rates. Conversely, an increase in interest rates should have a short-term
      positive impact on net interest income.





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 March 31, 2008, 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 sensitive assets divided by interest rate sensitive liabilities)
      and the cumulative interest rate sensitivity gap ratio.





(dollars
                in thousands)
            
            As
                of March 31, 2008Within
              three
              months
            
            After three
              months but
              within six
              months
            
            After six
              months but
              within one
              year
            
            After one
              year but
              within
              five years
            
            After
              five
              years
            
            TotalFederal
                funds sold
            
            $
            16,880
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            16,880Interest
                bearing deposits in other banks
            
            
            -
            
            
            693
            
            
            -
            
            
            -
            
            
            -
            
            
            693U.S.
                Treasury securities
            
            
            -
            
            
            101
            
            
            102
            
            
            -
            
            
            -
            
            
            203Agency
                securities
            
            
            5,007
            
            
            3,026
            
            
            12,156
            
            
            25,738
            
            
            -
            
            
            45,927Loans
            
            
            413,679
            
            
            42,635
            
            
            45,803
            
            
            108,152
            
            
            61,038
            
            
            671,307Total
                earning assets
            
            $
            435,566
            
            $
            46,455
            
            $
            58,061
            
            $
            133,890
            
            $
            61,038
            
            $
            735,010Interest
                checking, money market and savings
            
            
            390,956
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            390,956Certificates
                of deposit:Less
                than $100,000
            
            
            3,068
            
            
            4,403
            
            
            17,535
            
            
            4,643
            
            
            -
            
            
            29,649$100,000
                or more
            
            
            20,323
            
            
            14,107
            
            
            29,049
            
            
            4,591
            
            
            -
            
            
            68,070Other
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            17,527
            
            
            17,527Total
                interest-bearing liabilities
            
            $
            414,347
            
            $
            18,510
            
            $
            46,584
            
            $
            9,234
            
            $
            17,527
            
            $
            506,202Interest
                rate gap
            
            $
            21,219
            
            $
            27,945
            
            $
            11,477
            
            $
            124,656
            
            $
            43,511
            
            $
            228,808Cumulative
                interest rate gap
            
            $
            21,219
            
            $
            49,164
            
            $
            60,641
            
            $
            185,297
            
            $
            228,808Interest
                rate gap ratio
            
            
            0.05
            
            
            0.60
            
            
            0.20
            
            
            0.93
            
            
            0.71Cumulative
                interest rate gap ratio
            
            
            0.05
            
            
            0.10
            
            
            0.11
            
            
            0.27
            
            
            0.31





Based
      on
      the contractual terms of its assets and liabilities, the Company’s balance sheet
      at March 31, 2008 was asset sensitive in terms of its short-term exposure to
      interest rates. That is, at March 31, 2008 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, a significant portion of variable rate loans made by the
      Company have been written with a minimum “floor” rate. In addition, the Company
      has invested in short-term fixed rate securities and entered into interest
      rate
      swaps to hedge the variable cash flows associated with $100.0 million of
      existing variable-rate assets.




26




The
      following table shows maturity and interest rate sensitivity of the loan
      portfolio at March 31, 2008 and December 31, 2007. At March 31, 2008,
      approximately 70.0% of the loan portfolio is priced with floating interest
      rates
      which limit the exposure to interest rate risk on long-term loans.





(dollars
                in thousands)
            
            As
                of March 31, 2008Due after oneDue one year
            
            year through
            
            Due afterAmount
            
            or less
            
            five years
            
            five yearsCommercial
                and other
            
            $
            271,390
            
            $
            144,641
            
            $
            98,911
            
            $
            27,838SBA
            
            
            61,472
            
            
            12,930
            
            
            3,657
            
            
            44,885Real
                estate construction
            
            
            85,522
            
            
            70,307
            
            
            15,215
            
            
            -Real
                estate-other
            
            
            188,917
            
            
            74,842
            
            
            38,958
            
            
            75,117Factoring
                / Asset-Based Lending
            
            
            53,108
            
            
            51,656
            
            
            1,452
            
            
            -Other
            
            
            10,898
            
            
            10,150
            
            
            748
            
            
            -Total
                loans
            
            $
            671,307
            
            $
            364,526
            
            $
            158,941
            
            $
            147,840





As of December 31, 2007Due after oneDue one year
            
            year through
            
            Due afterAmount
            
            or less
            
            five years
            
            five yearsCommercial
                and other
            
            $
            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
                / 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





**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 March 31, 2008 those guarantees include
      the following:





·
            Standby
                Letters of Credit in the amount of $13.2
                million.




27




The
      table
      below summarizes the Company’s off-balance sheet contractual
      obligations:





(dollars
                in thousands)
            
            As of March 31, 2008Payments due by periodLess than
            
            1 - 3
            
            3 - 5
            
            More thanTotal
            
            1 year
            
            years
            
            years
            
            5 yearsLong-term
                contracts
            
            $
            2,929
            
            $
            1,065
            
            $
            1,661
            
            $
            203
            
            $
            -Operating
                leases
            
            
            14,597
            
            
            1,832
            
            
            3,654
            
            
            3,371
            
            
            5,740Total
            
            $
            17,526
            
            $
            2,897
            
            $
            5,315
            
            $
            3,574
            
            $
            5,740




**ITEM
      4 – CONTROLS AND PROCEDURES**





**Disclosure
      Controls and Procedures**





As
      required by SEC rules, the Company’s management evaluated the effectiveness, as
      of September 30, 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 March 31, 2008.





**Internal
      Control over Financial Reporting**





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





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





Because
      of its inherent limitations, internal control over financial reporting may
      not
      prevent or detect misstatements. Projections of any evaluation of effectiveness
      to future periods are subject to the risk that controls may become inadequate
      because of changes in conditions, or that the degree of compliance with the
      policies or procedures may deteriorate. No change occurred during the first
      quarter of 2008 that has materially affected, or is reasonably likely to
      materially affect, the Company’s internal control over financial reporting.





28





**PART
      II – OTHER INFORMATION**




**ITEM
      1 – LEGAL PROCEEDINGS**





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




**ITEM
      1A – RISK FACTORS**




There
      were no material changes in the risk factors that were disclosed in Item 1A,
      under the caption “Risk Factors” in Part I of our Annual Report on Form 10-K for
      our fiscal year ended December 31, 2007.




**ITEM
      2 – UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
      PROCEEDS**




Not
      applicable




**ITEM
      3 – DEFAULTS UPON SENIOR SECURITIES**




Not
      applicable




**ITEM
      4 – SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**




Not
      applicable




**ITEM
      5 – OTHER INFORMATION**




Not
      applicable




**ITEM
      6 – EXHIBITS**




**(a)
      Exhibits**




See
      Index
      to Exhibits at page 31 of this Quarterly Report on Form 10-Q.




29




**SIGNATURES**




Pursuant
      to the requirements 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**Dated:
                May 12, 2008
            By:
            /s/
                Daniel P. MyersDaniel
                P. MyersPresident
                and Chief Executive Officer(Principal
                Executive Officer)Dated:
                May 12, 2008
            By:
            /s/ Thomas A. SaThomas
                A. SaExecutive
                Vice PresidentChief
                Administrative Officer and Chief Financial Officer(Principal
                Financial and Accounting Officer)





30


**INDEX
      TO EXHIBITS**




**Exhibit****Number**
            
            **Description
                of Exhibit**(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





31