*Table
            of Contents*





**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: June 30, 2007**




**OR**




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


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





**000-50914**


(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 o




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 o         
Accelerated filer
x Non-accelerated
      filer o





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


Yes
o         
      No x




The
      number of shares of Common Stock outstanding as of July 31, 2007:
      6,426,275




-1-


*Table
        of Contents*




**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
              13Item
                  3
              Quantitative
                  and Qualitative Disclosures About Market
                  Risk
              30Item
                  4
              Controls
                  and Procedures
              32**PART
                  II - OTHER INFORMATION**Item
                  1
              Legal
                  Proceedings
              33Item
                  1A
              Risk
                  Factors
              33Item
                  2
              Unregistered
                  Sales of Equity Securities and Use of
                  Proceeds
              33Item
                  3
              Defaults
                  Upon Senior Securities
              33Item
                  4
              Submission
                  of Matters to a Vote of Security
                  Holders
              33Item
                  5
              Other
                  Information
              33Item
                  6
              Exhibits
              33Signatures
              
              34Index
                  to Exhibits
              35


-2-
 *Table
          of Contents*




**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-
 *Table
          of Contents*




**PART
      I - FINANCIAL INFORMATION**




**ITEM
      1 - FINANCIAL STATEMENTS**




**BRIDGE
                  CAPITAL HOLDINGS AND SUBSIDIARY****Interim
                  Consolidated Balance
                  Sheets**(dollars
                  in thousands)




**(unaudited)****June
                  30,**
              
              **December
                  31,****2007**
              
              **2006****ASSETS**Cash
                  and due from banks
              
              $
              21,274
              
              $
              24,360Federal
                  funds sold
              
              
              39,790
              
              
              93,845Total
                  cash and equivalents
              
              
              61,064
              
              
              118,205Investment
                  securities available for sale
              
              
              73,362
              
              
              43,933Loans,
                  net of allowance for credit losses of $7,590 atJune
                  30, 2007 and $7,329 at December 31, 2006
              
              
              597,056
              
              
              531,956Premises
                  and equipment, net
              
              
              4,966
              
              
              3,479Accrued
                  interest receivable
              
              
              4,608
              
              
              4,292Other
                  assets
              
              
              22,741
              
              
              20,114Total
                  assets
              
              $
              763,797
              
              $
              721,979**LIABILITIES
                  AND SHAREHOLDERS' EQUITY**Deposits:Demand
                  noninterest-bearing
              
              $
              218,651
              
              $
              198,639Demand
                  interest-bearing
              
              
              4,563
              
              
              3,901Savings
              
              
              372,470
              
              
              333,838Time
              
              
              85,442
              
              
              108,609Total
                  deposits
              
              
              681,126
              
              
              644,987Junior
                  subordinated debt securities
              
              
              17,527
              
              
              17,527Other
                  borrowings
              
              
              —
              
              
              —Accrued
                  interest payable
              
              
              276
              
              
              318Other
                  liabilities
              
              
              9,882
              
              
              10,053Total
                  liabilities
              
              
              708,811
              
              
              672,885Commitments
                  and contingencies
              
              
              —
              
              
              —**SHAREHOLDERS'
                  EQUITY**Preferred
                  stock, no par value; 10,000,000 shares authorized;none
                  issued
              
              
              —
              
              
              —Common
                  stock, no par value; 30,000,000 shares authorized;6,425,525
                  shares issued and outstanding at June 30, 2007;6,349,824
                  shares issued and outstanding at December 31, 2006.
              
              
              36,466
              
              
              35,427Retained
                  earnings
              
              
              19,970
              
              
              14,543Accumulated
                  other comprehensive (loss)
              
              
              (1,450
              )
              
              (876
              )Total
                  shareholders' equity
              
              
              54,986
              
              
              49,094Total
                  liabilities and shareholders' equity
              
              $
              763,797
              
              $
              721,979


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


-4-
 *Table
          of Contents*




**BRIDGE
                  CAPITAL HOLDINGS AND SUBSIDIARY****Interim
                  Consolidated Statements of Operations
                  (unaudited)**(dollars
                  in thousands)




**Three
                  months ended**
              
              **Six
                  months ended****June
                  30,**
              
              **June
                  30,****2007**
              
              **2006**
              
              **2007**
              
              **2006****INTEREST
                  INCOME:**Loans
              
              $
              15,433
              
              $
              11,682
              
              $
              29,617
              
              $
              21,934Federal
                  funds sold
              
              
              753
              
              
              692
              
              
              1,277
              
              
              1,270Investment
                  securities available for sale
              
              
              750
              
              
              105
              
              
              1,420
              
              
              203Total
                  interest income
              
              
              16,936
              
              
              12,479
              
              
              32,314
              
              
              23,407**INTEREST
                  EXPENSE:**Deposits:Interest-bearing
                  demand
              
              
              10
              
              
              7
              
              
              23
              
              
              14Money
                  market and savings
              
              
              3,628
              
              
              1,913
              
              
              6,625
              
              
              3,340Certificates
                  of deposit
              
              
              1,112
              
              
              1,020
              
              
              2,268
              
              
              1,685Other
              
              
              260
              
              
              281
              
              
              520
              
              
              568Total
                  interest expense
              
              
              5,010
              
              
              3,221
              
              
              9,436
              
              
              5,607Net
                  interest income
              
              
              11,926
              
              
              9,258
              
              
              22,878
              
              
              17,800Provision
                  for credit losses
              
              
              1,000
              
              
              450
              
              
              1,200
              
              
              672Net
                  interest income after provisionfor
                  credit losses
              
              
              10,926
              
              
              8,808
              
              
              21,678
              
              
              17,128**NON-INTEREST
                  INCOME:**Service
                  charges on deposit accounts
              
              
              181
              
              
              127
              
              
              332
              
              
              239Gain
                  on sale of SBA loans
              
              
              1,890
              
              
              388
              
              
              2,622
              
              
              839Other
                  non interest income
              
              
              542
              
              
              563
              
              
              953
              
              
              1,083Total
                  non-interest income
              
              
              2,613
              
              
              1,078
              
              
              3,907
              
              
              2,161**OPERATING
                  EXPENSES:**Salaries
                  and benefits
              
              
              5,265
              
              
              4,160
              
              
              10,267
              
              
              8,079Premises
                  and fixed assets
              
              
              1,026
              
              
              700
              
              
              1,975
              
              
              1,314Other
              
              
              2,131
              
              
              1,770
              
              
              4,034
              
              
              3,575Total
                  operating expenses
              
              
              8,422
              
              
              6,630
              
              
              16,276
              
              
              12,968Income
                  before income taxes
              
              
              5,117
              
              
              3,256
              
              
              9,309
              
              
              6,321Income
                  taxes
              
              
              2,134
              
              
              1,237
              
              
              3,882
              
              
              2,371Net
                  income
              
              $
              2,983
              
              $
              2,019
              
              $
              5,427
              
              $
              3,950Basic
                  earnings per share
              
              $
              0.47
              
              $
              0.32
              
              $
              0.85
              
              $
              0.63Diluted
                  earnings per share
              
              $
              0.43
              
              $
              0.29
              
              $
              0.78
              
              $
              0.58Average
                  common shares outstanding
              
              
              6,381,493
              
              
              6,260,576
              
              
              6,356,192
              
              
              6,251,518Average
                  common and equivalentshares
                  outstanding
              
              
              6,933,273
              
              
              6,798,840
              
              
              6,908,338
              
              
              6,782,783


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


-5-
 *Table
          of Contents*




**BRIDGE
                  CAPITAL HOLDINGS AND SUBSIDIARY****Interim
                  Consolidated Statements of Cash Flows
                  (unaudited)**(dollars
                  in thousands)




**Six
                  months ended June 30,****2007**
              
              **2006**CASH
                  FLOWS FROM OPERATING ACTIVITIES:Net
                  income
              
              $
              5,427
              
              $
              3,950Adjustments
                  to reconcile net income to net cashprovided
                  by operating activities:Provision
                  for credit losses
              
              
              1,200
              
              
              672Depreciation
                  and amortization
              
              
              468
              
              
              419Stock
                  based compensation
              
              
              559
              
              
              321Loans
                  originated for sale
              
              
              (44,080
              )
              
              (29,033
              )Proceeds
                  from loan sales
              
              
              56,519
              
              
              27,301Decrease
                  in accrued interest receivableand
                  other assets
              
              
              (2,490
              )
              
              (1,323
              )Decrease
                  in accrued interest payableand
                  other liabilities
              
              
              (1,162
              )
              
              (691
              )Net
                  cash provided by (used in) operating activities
              
              
              16,441
              
              
              1,616CASH
                  FLOWS FROM INVESTING ACTIVITIES:Purchase
                  of securities available for sale
              
              
              (38,361
              )
              
              (5,080
              )Proceeds
                  from maturity of securities available for sale
              
              
              9,000
              
              
              6,525Net
                  increase in loans
              
              
              (78,739
              )
              
              (35,501
              )Purchase
                  of fixed assets
              
              
              (2,100
              )
              
              (1,129
              )Net
                  cash used in investing activities
              
              
              (110,200
              )
              
              (35,185
              )CASH
                  FLOW FROM FINANCING ACTIVITIES:Net
                  increase in deposits
              
              
              36,138
              
              
              105,634(Decrease)
                  in other borrowings
              
              
              —
              
              
              (4,473
              )Common
                  stock issued
              
              
              480
              
              
              294Net
                  cash provided by financing activities
              
              
              36,618
              
              
              101,455NET
                  INCREASE (DECREASE) IN CASH AND EQUIVALENTS:
              
              
              (57,141
              )
              
              67,886Cash
                  and equivalents at beginning of period
              
              
              118,205
              
              
              69,540Cash
                  and equivalents at end of period
              
              $
              61,064
              
              $
              137,426OTHER
                  CASH FLOW INFORMATION:Cash
                  paid for interest
              
              $
              9,540
              
              $
              2,149Cash
                  paid for income taxes
              
              $
              4,800
              
              $
              1,720


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


-6-
 *Table
          of Contents*




**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 June 30, 2007 and for the three and six months
      ended June 30, 2007 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 and six months ended June 30, 2007, are not necessarily indicative
      of
      full year results.





The
      comparative balance sheet information as of December 31, 2006 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
      $282,000 ($257,000 net of tax) and $559,000 ($510,000 net of tax) of stock-based
      compensation expense during the three and six months ended June 30, 2007 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 June 30, 2007.  As of June 30, 2007, $3.3 million of total
      unrecognized compensation cost related to stock options and restricted stock
      units are expected to be recognized over a weighted-average period of 5 years.





The
      impact of implementing SFAS No. 123R reduced basic earnings per share by $0.04
      and $0.08 and diluted earnings per share by $0.03 and $0.05 for the three and
      six months ended June 30, 2007, respectively.




-7-
 *Table
          of Contents*
  **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 (loss) totaling $(1.5) million, net of tax, as of June 30, 2007 and
      $(876,000), net of tax, as of December 31, 2006.




Three
                  months ended
              
              Six
                  months ended(dollars
                  in thousands)
              
              June
                  30,
              
              June
                  30,2007
              
              2006
              
              2007
              
              2006Net
                  income
              
              $
              2,983
              
              $
              2,019
              
              $
              5,427
              
              $
              3,950Other
                  comprehensive earnings-Net
                  unrealized gains (losses) onsecurities
                  available for sale
              
              
              (106
              )
              
              5
              
              
              (45
              )
              
              22Net
                  unrealized gains (losses) onFAS
                  158 adjustment - supplementalexecutive
                  retirement plan
              
              
              11
              
              
              —
              
              
              21
              
              
              —Net
                  unrealized gains (losses) oncash
                  flow hedges
              
              
              (872
              )
              
              —
              
              
              (550
              )
              
              —Total
                  comprehensive income
              
              $
              2,016
              
              $
              2,024
              
              $
              4,853
              
              $
              3,972


**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-
 *Table
          of Contents*




Three
                  months ended
              
              Six
                  months ended(dollars
                  in thousands)
              
              June
                  30,
              
              June
                  30,2007
              
              2006
              
              2007
              
              2006Net
                  income
              
              $
              2,983
              
              $
              2,019
              
              $
              5,427
              
              $
              3,950Weighted
                  average shares used incomputing:Basic
                  common shares
              
              
              6,381,493
              
              
              6,260,576
              
              
              6,356,192
              
              
              6,251,518Diluted
                  potential common sharesrelated
                  to stock based awards,using
                  the treasury stock method
              
              
              551,780
              
              
              538,264
              
              
              552,146
              
              
              531,265Total
                  average common equivalent shares
              
              
              6,933,273
              
              
              6,798,840
              
              
              6,908,338
              
              
              6,782,783Basic
                  earnings per share
              
              $
              0.47
              
              $
              0.32
              
              $
              0.85
              
              $
              0.63Diluted
                  earnings per share
              
              $
              0.43
              
              $
              0.29
              
              $
              0.78
              
              $
              0.58




**3.**
            **Securities**




The
      amortized cost and approximate fair values of securities at June 30, 2007 and
      December 31, 2006 are as follows:




(dollars
                  in thousands)
              
              As
                  of June 30, 2007Gross
                  Unrealized
              
              FairCost
              
              Gains
              
              Losses
              
              ValueU.S.
                  government treasury notes
              
              $
              200
              
              $
              —
              
              $
              —
              
              $
              200U.S.
                  government agency notes
              
              
              73,321
              
              
              1
              
              
              (160
              )
              
              73,162Total
                  securities available for sale
              
              
              73,521
              
              
              1
              
              
              (160
              )
              
              73,362Total
                  investment securities
              
              $
              73,521
              
              $
              1
              
              $
              (160
              )
              $
              73,362
  As
                  of December 31, 2006Gross
                  Unrealized
              
              FairCost
              
              Gains
              
              Losses
              
              ValueU.S.
                  government treasury notes
              
              $
              200
              
              $
              —
              
              $
              —
              
              $
              200U.S.
                  government agency notes
              
              
              43,815
              
              
              24
              
              
              (106
              )
              
              43,733Total
                  securities available for sale
              
              
              44,015
              
              
              24
              
              
              (106
              )
              
              43,933Total
                  investment securities
              
              $
              44,015
              
              $
              24
              
              $
              (106
              )
              $
              43,933




-9-
 *Table
          of Contents*




The
      scheduled maturities of securities available for sale at June 30, 2007 and
      December 31, 2006 were as follows:




(dollars
                  in thousands)
              
              June
                  30, 2007Amortized
              
              FairCost
              
              ValueDue
                  in one year or less
              
              $
              27,031
              
              $
              26,989Due
                  after one year through five years
              
              
              46,490
              
              
              46,373Due
                  after five years through ten years
              
              
              —
              
              
              —Due
                  after ten years
              
              
              —
              
              
              —Total
                  securities available for sale
              
              
              73,521
              
              
              73,362Total
                  investment securities
              
              $
              73,521
              
              $
              73,362
  December
                  31, 2006Amortized
              
              FairCost
              
              ValueDue
                  in one year or less
              
              $
              17,042
              
              $
              16,993Due
                  after one year through five years
              
              
              26,973
              
              
              26,940Due
                  after five years through ten years
              
              
              —
              
              
              —Due
                  after ten years
              
              
              —
              
              
              —Total
                  securities available for sale
              
              
              44,015
              
              
              43,933Total
                  investment securities
              
              $
              44,015
              
              $
              43,933




As
      of
      June 30, 2007, investment securities with carrying values of approximately
      $200,000 were pledged as collateral. As of June 30, 2007, $118,000 in unrealized
      losses was attributable to securities maturing in greater than 12 months. The
      unrealized losses on investments in U.S. Government agency securities which
      have
      been in an unrealized loss position for one year or longer as of June 30, 2007
      (a total of 5 securities), were caused by market interest rate increases
      subsequent to the purchase of the securities. Because the Bank has the ability
      to hold these investments until a recovery in fair value, which may be maturity,
      these investments are not considered to be other-than-temporarily impaired
      as of
      June 30, 2007.




**4.**
            **Loans**




The
      balances in the various loan categories are as follows as of June 30, 2007
      and
      December 31, 2006:




June
                  30,
              
              December
                  31,(dollars
                  in thousands)
              
              2007
              
              2006Commercial
              
              $
              258,978
              
              $
              197,174SBA
              
              
              56,176
              
              
              59,888Real
                  estate construction
              
              
              104,652
              
              
              103,710Real
                  estate other
              
              
              134,299
              
              
              115,313Factoring
                  and asset based lending
              
              
              42,683
              
              
              56,924Other
              
              
              9,341
              
              
              7,771Loans,
                  gross
              
              
              606,129
              
              
              540,780Unearned
                  fee income
              
              
              (1,483
              )
              
              (1,495
              )Total
                  loan portfolio
              
              
              604,646
              
              
              539,285Less
                  allowance for credit losses
              
              
              (7,590
              )
              
              (7,329
              )Loans,
                  net
              
              $
              597,056
              
              $
              531,956






-10-
 *Table
          of Contents*




**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 June 30, 2007 and December 31, 2006 are comprised of the
      following:




(dollars
                  in thousands)
              
              June
                  30, 2007Accumulated
              
              Net
                  BookCost
              
              Depreciation
              
              ValueLeasehold
                  improvements
              
              $
              4,461
              
              $
              (1,252
              )
              $
              3,209Furniture
                  and fixtures
              
              
              949
              
              
              (581
              )
              
              368Capitalized
                  software
              
              
              2,066
              
              
              (1,355
              )
              
              711Equipment
              
              
              1,677
              
              
              (1,058
              )
              
              619Construction
                  in process
              
              
              59
              
              
              —
              
              
              59Totals
              
              $
              9,212
              
              $
              (4,246
              )
              $
              4,966
  December
                  31, 2006Accumulated
              
              Net
                  bookCost
              
              Depreciation
              
              ValueLeasehold
                  improvements
              
              $
              2,673
              
              $
              (1,010
              )
              $
              1,663Furniture
                  and fixtures
              
              
              741
              
              
              (524
              )
              
              217Capitalized
                  software
              
              
              1,691
              
              
              (1,160
              )
              
              531Equipment
              
              
              1,264
              
              
              (939
              )
              
              325Construction
                  in process
              
              
              743
              
              
              —
              
              
              743Totals
              
              $
              7,112
              
              $
              (3,633
              )
              $
              3,479





**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-
 *Table
          of Contents*





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 June 30, 2007 and December 31, 2006.





As
      of
      June 30, 2007, the Company had a total borrowing capacity with the Federal
      Home
      Loan Bank of San Francisco of approximately $134.0 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 $27.0
      million. At June 30, 2007, 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 and six month periods ended
      June
      30, 2007 and 2006 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
              
              Six
                  months endedJune
                  30,
              
              June
                  30,2007
              
              2006
              
              2007
              
              2006Expected
                  life
              
              
              60
                  months
              
              
              60
                  months
              
              
              60
                  months
              
              
              60
                  monthsStock
                  volatility
              
              
              28.43
              %
              
              32.90
              %
              
              28.43
              %
              
              32.90
              %Risk
                  free interest rate
              
              
              4.80
              %
              
              4.92
              %
              
              4.76
              %
              
              4.57
              %Dividend
                  yield
              
              
              0.00
              %
              
              0.00
              %
              
              0.00
              %
              
              0.00
              %Fair
                  value per share
              
              $
              9.40
              
              $
              7.38
              
              $
              9.40
              
              $
              7.16






-12-
 *Table
          of Contents*




**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
      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 June 30, 2007 and
      December 31, 2006, 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.




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.




-13-
 *Table
          of Contents*




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 and six months ended June 30, 2007 and 2006.




(dollars
                  in thousands, except per share data)Three
                  months ended
              
              Six
                  months endedJune
                  30,
              
              June
                  30,**Statement
                  of Operations Data:**
              
              2007
              
              2006
              
              2007
              
              2006Interest
                  income
              
              $
              16,936
              
              $
              12,479
              
              $
              32,314
              
              $
              23,407Interest
                  expense
              
              
              5,010
              
              
              3,221
              
              
              9,436
              
              
              5,607Net
                  interest income
              
              
              11,926
              
              
              9,258
              
              
              22,878
              
              
              17,800Provision
                  for credit losses
              
              
              1,000
              
              
              450
              
              
              1,200
              
              
              672Net
                  interest income after provisionfor
                  credit losses
              
              
              10,926
              
              
              8,808
              
              
              21,678
              
              
              17,128Other
                  income
              
              
              2,613
              
              
              1,078
              
              
              3,907
              
              
              2,161Other
                  expenses
              
              
              8,422
              
              
              6,630
              
              
              16,276
              
              
              12,968Income
                  before income taxes
              
              
              5,117
              
              
              3,256
              
              
              9,309
              
              
              6,321Income
                  taxes
              
              
              2,134
              
              
              1,237
              
              
              3,882
              
              
              2,371Net
                  income
              
              $
              2,983
              
              $
              2,019
              
              $
              5,427
              
              $
              3,950**Per
                  Share Data:**Basic
                  earnings per share
              
              $
              0.47
              
              $
              0.32
              
              $
              0.85
              
              $
              0.63Diluted
                  earnings per share
              
              
              0.43
              
              
              0.29
              
              
              0.78
              
              
              0.58Shareholders'
                  equity per share
              
              
              8.61
              
              
              7.06
              
              
              8.61
              
              
              7.06Cash
                  dividend per common share
              
              
              —
              
              
              —
              
              
              —
              
              
              —**Balance
                  Sheet Data:**Balance
                  sheet totals:Assets
              
              $
              763,797
              
              $
              641,578Loans,
                  net
              
              
              597,056
              
              
              469,228Deposits
              
              
              681,126
              
              
              573,792Shareholders'
                  equity
              
              
              54,986
              
              
              44,301Average
                  balance sheet amounts:Assets
              
              $
              759,905
              
              $
              568,858
              
              $
              724,208
              
              $
              554,372Loans,
                  net
              
              
              583,529
              
              
              451,436
              
              
              559,696
              
              
              437,882Deposits
              
              
              678,773
              
              
              500,431
              
              
              644,593
              
              
              485,306Shareholders'
                  equity
              
              
              54,171
              
              
              43,176
              
              
              52,487
              
              
              42,064**Selected
                  Ratios:**Return
                  on average assets
              
              
              1.57
              %
              
              1.42
              %
              
              1.51
              %
              
              1.44
              %Return
                  on average equity
              
              
              22.09
              %
              
              18.76
              %
              
              20.85
              %
              
              18.94
              %Efficiency
                  ratio
              
              
              57.93
              %
              
              64.14
              %
              
              60.77
              %
              
              64.97
              %Risk
                  based capital ratio
              
              
              11.56
              %
              
              12.36
              %Net
                  chargeoffs to average gross loans
              
              
              0.16
              %
              
              0.00
              %
              
              0.17
              %
              
              0.00
              %Allowance
                  for loan losses to total loans
              
              
              1.25
              %
              
              1.39
              %Average
                  equity to average assets
              
              
              7.13
              %
              
              7.59
              %
              
              7.25
              %
              
              7.59
              %




-14-
 *Table
          of Contents*




**Summary
      of Financial Results - Quarter ended June 30, 2007**





The
      Company reported net income of $3.0 million ($0.47 basic and $0.43 diluted
      earnings per share) for the quarter ended June 30, 2007 as compared to $2.0
      million ($0.32 basic and $0.29 diluted earnings per share) for the quarter
      ended
      June 30, 2006. The increase in net income resulted primarily from increases
      in
      net interest income and non-interest income offset, in part, by increases in
      operating expenses and provision for loan losses.





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




Three
                  months endedJune
                  30,
              
              Increase(dollars
                  in thousands)
              
              2007
              
              2006
              
              (Decrease)Interest
                  income
              
              $
              16,936
              
              $
              12,479
              
              $
              4,457Interest
                  expense
              
              
              5,010
              
              
              3,221
              
              
              1,789Net
                  interest income
              
              
              11,926
              
              
              9,258
              
              
              2,668Provision
                  for credit losses
              
              
              1,000
              
              
              450
              
              
              550Net
                  interest income after provisionfor
                  credit losses
              
              
              10,926
              
              
              8,808
              
              
              2,118Other
                  income
              
              
              2,613
              
              
              1,078
              
              
              1,535Other
                  expenses
              
              
              8,422
              
              
              6,630
              
              
              1,792Income
                  before income taxes
              
              
              5,117
              
              
              3,256
              
              
              1,861Income
                  taxes
              
              
              2,134
              
              
              1,237
              
              
              897Net
                  income
              
              $
              2,983
              
              $
              2,019
              
              $
              964


**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 June 30, 2007 was $11.9 million, which
      was
      comprised of $16.9 million in interest income and $5.0 million in interest
      expense. Net interest income for the quarter ended June 30, 2006 was $9.3
      million, which was comprised of $12.5 million in interest income and $3.2
      million in interest expense. Net interest income for the quarter ended June
      30,
      2007 represented an increase of $2.7 million or 28.8% over the same period
      one
      year earlier. The average balance sheet and the general interest rate
      environment drive net interest income.





The
      Company’s net interest margin (net interest income divided by average earning
      assets) for the quarter ended June 30, 2007 was 6.75% declining slightly from
      7.05% in the same period one year earlier as a result of growth in the volume
      of
      average interest bearing liabilities and decreased balance sheet leverage.





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 June 30, 2007 and 2006.




-15-
 *Table
          of Contents*




Three
                  months ended June 30,(dollars
                  in thousands)
              
              2007
              
              2006Yields
              
              Interest
              
              
              
              Yields
              
              InterestAverage
              
              or
              
              Income/
              
              Average
              
              or
              
              Income/Balance
              
              Rates
              
              Expense
              
              Balance
              
              Rates
              
              ExpenseASSETSInterest
                  earning assets (2):Loans
                  (1)
              
              $
              592,461
              
              
              10.4
              %
              $
              15,433
              
              $
              459,081
              
              
              10.2
              %
              $
              11,681Federal
                  funds sold
              
              
              57,851
              
              
              5.2
              %
              
              753
              
              
              56,129
              
              
              5.0
              %
              
              693Investment
                  securities
              
              
              58,615
              
              
              5.1
              %
              
              750
              
              
              11,446
              
              
              3.7
              %
              
              105Total
                  interest earning assets
              
              
              708,927
              
              
              9.6
              %
              
              16,936
              
              
              526,656
              
              
              9.5
              %
              
              12,479Noninterest-earning
                  assets:Cash
                  and due from banks
              
              
              29,985
              
              
              
              
              
              
              
              
              26,473All
                  other assets (3)
              
              
              20,993
              
              
              
              
              
              
              
              
              15,730TOTAL
              
              $
              759,905
              
              
              
              
              
              
              
              $
              568,859LIABILITIES
                  ANDSHAREHOLDERS'
                  EQUITYInterest
                  bearing liabilities:Deposits:Demand
              
              $
              5,408
              
              
              0.7
              %
              $
              10
              
              $
              3,511
              
              
              0.9
              %
              $
              8Savings
              
              
              376,293
              
              
              3.9
              %
              
              3,629
              
              
              233,173
              
              
              3.3
              %
              
              1,913Time
              
              
              91,712
              
              
              4.9
              %
              
              1,111
              
              
              97,294
              
              
              4.2
              %
              
              1,020Other
              
              
              17,527
              
              
              6.0
              %
              
              260
              
              
              18,956
              
              
              5.9
              %
              
              280Total
                  interest bearing liabilities
              
              
              490,940
              
              
              4.1
              %
              
              5,010
              
              
              352,934
              
              
              3.7
              %
              
              3,221Noninterest-bearing
                  liabilities:Demand
                  deposits
              
              
              205,360
              
              
              
              
              
              
              
              
              166,454Accrued
                  expenses andother
                  liabilities
              
              
              9,434
              
              
              
              
              
              
              
              
              6,295Shareholders'
                  equity
              
              
              54,171
              
              
              
              
              
              
              
              
              43,176TOTAL
              
              $
              759,905
              
              
              
              
              
              
              
              $
              568,859Net
                  interest income and margin
              
              
              
              
              
              6.8
              %
              $
              11,926
              
              
              
              
              
              7.1
              %
              $
              9,258





(1)
            Loan
                fee amortization of $1.5 million and $920,000, 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 $7.5 million and $6.3 million,
                respectively.




-16-
 *Table
          of Contents*




The
      following table shows the effect of the interest differential of volume and
      rate
      changes for the quarters ended June 30, 2007 and 2006. 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 June 30,2007
                  vs. 2006Increase
                  (decrease)due
                  to change inAverage
              
              Average
              
              TotalVolume
              
              Rate
              
              ChangeInterest
                  income:Loans
              
              $
              3,474
              
              $
              278
              
              $
              3,752Federal
                  funds sold
              
              
              22
              
              
              38
              
              
              60Investment
                  securities
              
              
              604
              
              
              41
              
              
              645Total
                  interest income
              
              
              4,100
              
              
              357
              
              
              4,457Interest
                  expense:Demand
              
              
              4
              
              
              (2
              )
              
              2Savings
              
              
              1,380
              
              
              336
              
              
              1,716Time
              
              
              (68
              )
              
              159
              
              
              91Other
              
              
              (21
              )
              
              1
              
              
              (20
              )Total
                  interest expense
              
              
              1,295
              
              
              494
              
              
              1,789Change
                  in net interest income
              
              $
              2,805
              
              $
              (137
              )
              $
              2,668


**Interest
      Income**





Interest
      income of $16.9 million in the quarter ended June 30, 2007 represented an
      increase of $4.5 million, or 35.7%, over $12.5 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
      earning assets for the quarter ended June 30, 2007 were $708.9 million and
      represented growth of $181.7 million or 34.5% over $527.2 million for the same
      period in 2006.





Average
      gross loans were $592.5 million for three months ended June 30, 2007, an
      increase of $133.4 million or 29.1% over $459.1 million for the same period
      one
      year earlier. Average loans comprised 83.6% of average earning assets in the
      three months ended June 30, 2007 compared to 87.2% in the second quarter of
      2006. During the quarter ended June 30, 2007, the ratio of average gross loans
      to average deposits (one measure of leverage) was 87.3%, compared to 91.7%
      in
      the comparable period of 2006.





Interest
      income also benefited from increases in short-term interest rates. The average
      yield on earning assets was 9.6% for the quarter ended June 30, 2007 and 9.5%
      for the quarter ended June 30, 2006. 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 increase in
      yield was primarily due to increases in the prime rate during 2006. The
      Company’s prime rate averaged 8.25% in the three months ended June 30, 2007, up
      from 7.89% in the same period one year earlier.





Other
      earning assets, consisting of investment securities and federal funds sold,
      averaged $116.5 million for the quarter ended June 30, 2007, an increase of
      $48.9 million or 72.4% from $67.6 million for the three months ended June 30,
      2006.




**Interest
      Expense**




Interest
      expense was $5.0 million for the quarter ended June 30, 2007, which represented
      an increase of $1.8 million or 55.5% over $3.2 million for the comparable period
      of 2006. The increase in interest expense reflects growth in average
      interest-bearing liabilities and higher interest rates paid on liabilities
      in
      2007 compared to 2006. Average interest-bearing liabilities were $490.9 million
      for the three months ended June 30, 2007, an increase of $138.0 million, or
      39.1%, over $352.9 million for the same period one year earlier.




-17-
 *Table
          of Contents*


Growth
      in
      average interest bearing liabilities was primarily due to growth in average
      interest bearing deposits. Average interest bearing deposits were $473.4 million
      for the quarter ended June 30, 2007, which represented 69.8% of total average
      deposits and was an increase of $139.4 million, or 41.8%, over $334.0 million
      representing 66.7% of total average deposits in the second quarter of 2006.





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 $17.5 million in the three months ended June 30, 2007 compared to
      $19.0
      million for the same period one year earlier, which represented a decrease
      of
      $1.5 million or 7.9%.




The
      impact of increases in short-term market interest rates together with the
      factors noted above resulted in an increase in the average rate paid on
      interest-bearing liabilities to 4.1% in the quarter ended June 30, 2007 compared
      to 3.7% in the second quarter of 2006.




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.




**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 $1.0 million to the allowance for credit
      losses for the three months ended June 30, 2007, as compared to $450,000 for
      the
      same period in 2006. There were loan charge-offs of $943,000 and no recoveries
      during the three months ended June 30, 2007 as compared to no loans charged
      off
      and $1,000 in recoveries during the three month period ended June 30, 2006.
      The
      loans charged-off during the second quarter of 2007 consisted primarily of
      two
      loans to one commercial borrower that had previously been reported as impaired.
      At June 30, 2007, the allowance for credit losses was $7.6 million, representing
      1.3% of total loans, as compared to $6.6 million, representing 1.4% of total
      loans, at June 30, 2006.




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




Three
                  months ended(dollars
                  in thousands)
              
              June
                  30,2007
              
              2006Balance,
                  beginning of period
              
              $
              7,533
              
              $
              6,169Provision
                  for credit losses
              
              
              1,000
              
              
              450Charge-offs
              
              
              (943
              )
              
              —Recoveries
              
              
              —
              
              
              1Balance,
                  end of period
              
              $
              7,590
              
              $
              6,620


The
      accrual of interest on loans would be discontinued and any accrued and unpaid
      interest is reversed when, in the opinion of management, there is significant
      doubt as to the collectibility of interest or principal or when the payment
      of
      principal or interest is ninety days past due, unless the amount is well-secured
      and in the process of collection. There were no non-accrual loans at June 30,
      2007 and two non-accrual loans totaling $437,000 at December 31, 2006. At
      December 31, 2006, the non-accrual total consisted of commercial loans that
      were
      secured by business assets and real property with values in excess of the loans’
carrying values.




In
      addition, at June 30, 2007 and December 31, 2006, there were no restructured
      loans or loans past due 90 days or more as to principal or interest and still
      accruing interest.




-18-
 *Table
          of Contents*




At
      June
      30, 2007 there was one commercial property valued at $425,000 that was owned
      by
      the Company and acquired through the foreclosure process. At December 31, 2006
      there were no properties owned by the Company that were acquired through the
      foreclosure process.





The
      following summarizes nonperforming assets at June 30, 2007 and December 31,
      2006.


June
                  30,
              
              December
                  31,(dollars
                  in thousands)
              
              2007
              
              2006Loans
                  accounted for on a non-accrual basis
              
              $
              —
              
              $
              437Loans
                  restructured and in compliance with modified terms
              
              
              —
              
              
              —Other
                  loans with principal or interest contracturally past due90
                  days or more
              
              
              —
              
              
              —Total
                  nonperforming loans
              
              
              —
              
              
              437Other
                  real estate owned
              
              
              425
              
              
              —Total
                  nonperforming assets
              
              $
              425
              
              $
              437


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 June 30, 2007 and December 31,
      2006:




(dollars
                  in thousands)
              
              June
                  30, 2007
              
              December
                  31, 2006Amount
              
              Percent
              
              Amount
              
              PercentCommercial
                  and other
              
              $
              1,569
              
              
              20.7
              %
              $
              1,831
              
              
              25.0
              %SBA
              
              
              1,229
              
              
              16.2
              %
              
              1,803
              
              
              24.6
              %Real
                  estate construction
              
              
              794
              
              
              10.5
              %
              
              1,082
              
              
              14.8
              %Real
                  estate other
              
              
              1,977
              
              
              26.0
              %
              
              1,152
              
              
              15.7
              %Factoring/ABL
              
              
              1,949
              
              
              25.7
              %
              
              1,415
              
              
              19.3
              %Other
              
              
              72
              
              
              0.9
              %
              
              46
              
              
              0.6
              %$
              7,590
              
              
              100.0
              %
              $
              7,329
              
              
              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 loan portfolio, which includes approximately $239.0
      million in real estate and construction loans, representing approximately 39.4%
      of the 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 OREO and the level of the
      allowance for loan losses, which could adversely affect the Company's future
      growth and profitability.





**Non-interest
      Income**





The
      following table sets forth the components of other income and the percentage
      distribution of such income for the three months ended June 30, 2007 and
      2006:




-19-
 *Table
          of Contents*




Three
                  months ended June 30,(dollars
                  in thousands)
              
              2007
              
              2006Amount
              
              Percent
              
              Amount
              
              PercentGain
                  on sale of SBA loans
              
              $
              1,825
              
              
              69.8
              %
              $
              388
              
              
              36.0
              %Foreign
                  exchange upcharge
              
              
              195
              
              
              7.5
              %
              
              68
              
              
              6.3
              %Depositor
                  service charges
              
              
              181
              
              
              6.9
              %
              
              127
              
              
              11.8
              %SBA
                  loan servicing income
              
              
              171
              
              
              6.5
              %
              
              166
              
              
              15.4
              %Increase
                  in value of life insurance
              
              
              86
              
              
              3.3
              %
              
              92
              
              
              8.5
              %Other
                  operating income
              
              
              155
              
              
              5.9
              %
              
              237
              
              
              22.0
              %$
              2,613
              
              
              100.0
              %
              $
              1,078
              
              
              100.0
              %


Non-interest
      income totaled $2.6 million in the second quarter of 2007, an increase of $1.5
      million or 142.3% from $1.1 million in 2006. Non-interest income consists
      primarily of gains recognized on sales of SBA loans, SBA loan servicing income,
      and packaging fees and service charge income on deposit accounts. The increase
      in non-interest income for the second quarter of 2007 was primarily a result
      of
      increased gains recognized on SBA loan sales and SBA loan servicing income
      offset, in part, by a decrease in other operating income.





Revenue
      from sales of SBA loans is dependant on consistent origination and funding
      of
      new loan volumes, the timing of which may be impacted, from time to time, by
      (1)
      increased competition from other lenders; (2) the relative attractiveness of
      SBA
      borrowing to other financing options; (3) 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 $1.8 million in the quarter
      ended June 30, 2007 which represented an increase of $1.4 million or 370.4%
      compared to $388,000 the same period one year earlier. The increase was
      attributed to a higher volume of loans sold during the quarter. During the
      second quarter of 2007 the Company’s SBA group funded $25.0 million in new loans
      and sold $31.2 million which compared to $17.4 million funded and $12.8 million
      sold in the same period one year earlier. The SBA loans sold during the second
      quarter of 2007 included $11.3 million of un-guaranteed loans.





**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 June 30, 2007 and
      2006.




Three
                  months ended June 30,(dollars
                  in thousands)
              
              2007
              
              2006Amount
              
              Percent
              
              Amount
              
              PercentSalaries
                  and benefits
              
              $
              5,265
              
              
              3.0
              %
              $
              4,160
              
              
              3.2
              %Occupancy
              
              
              791
              
              
              0.4
              %
              
              526
              
              
              0.4
              %Data
                  processing
              
              
              494
              
              
              0.3
              %
              
              355
              
              
              0.3
              %Marketing/Advertising
              
              
              391
              
              
              0.2
              %
              
              259
              
              
              0.2
              %Deposit
                  services
              
              
              226
              
              
              0.1
              %
              
              362
              
              
              0.3
              %Legal
                  and professional
              
              
              396
              
              
              0.2
              %
              
              213
              
              
              0.2
              %Furniture
                  and equipment
              
              
              235
              
              
              0.1
              %
              
              174
              
              
              0.1
              %Other
              
              
              624
              
              
              0.4
              %
              
              581
              
              
              0.4
              %$
              8,422
              
              
              4.8
              %
              $
              6,630
              
              
              5.1
              %


Operating
      expenses were $8.4 million for the three months ended June 30, 2007, an increase
      of $1.8 million or 27.0% from $6.6 million at June 30, 2006. As a percentage
      of
      average earning assets, other expenses for the three months ended June 30,
      2007
      and 2006 were 4.8% and 5.1%, respectively, on an annualized basis. In 2007,
      operating expenses were comprised primarily of salaries and benefits of $5.3
      million, which compared to $4.2 million in 2006. The increase in salaries and
      benefits was primarily due to the additional headcount related to expansion
      of
      the business. At June 30, 2007, the Company employed 161 FTE compared to 123
      FTE
      on the same




-20-
 *Table
          of Contents*


date
      one
      year earlier. In addition, salaries and benefits included a charge of $282,000
      and $182,000 to recognize compensation related to stock option grants as a
      result of the implementation of FAS No. 123R in the second quarter of 2007
      and
      2006, respectively. Occupancy and data processing expense for the second quarter
      of 2007 was $1.3 million compared to $881,000 for the same period one year
      earlier. The increase was primarily due to expansion of the business. The
      decrease in deposit services expense of $136,000 or 37.6% was due to a decline
      in real estate related title and escrow deposit accounts.




**Summary
      of Financial Results - Six months ended June 30, 2007**





The
      Company reported net income of $5.4 million ($0.85 basic and $0.78 diluted
      earnings per share) for the six months ended June 30, 2007 as compared to $4.0
      million ($0.63 basic and $0.58 diluted earnings per share) for the six months
      ended June 30, 2006. The increase in net income resulted primarily from
      increases in net interest income and non-interest income offset, in part, by
      an
      increase in operating expenses.





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




Six
                  months endedJune
                  30,
              
              Increase(dollars
                  in thousands)
              
              2007
              
              2006
              
              (Decrease)Interest
                  income
              
              $
              32,314
              
              $
              23,407
              
              $
              8,907Interest
                  expense
              
              
              9,436
              
              
              5,607
              
              
              3,829Net
                  interest income
              
              
              22,878
              
              
              17,800
              
              
              5,078Provision
                  for credit losses
              
              
              1,200
              
              
              672
              
              
              528Net
                  interest income after provisionfor
                  credit losses
              
              
              21,678
              
              
              17,128
              
              
              4,550Other
                  income
              
              
              3,907
              
              
              2,161
              
              
              1,746Other
                  expenses
              
              
              16,276
              
              
              12,968
              
              
              3,308Income
                  before income taxes
              
              
              9,309
              
              
              6,321
              
              
              2,988Income
                  taxes
              
              
              3,882
              
              
              2,371
              
              
              1,511Net
                  income
              
              $
              5,427
              
              $
              3,950
              
              $
              1,477




**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 six months, the rates earned on such assets
      and
      the rates paid on interest bearing liabilities.





Net
      interest income for the six months ended June 30, 2007 was $22.9 million, which
      was comprised of $32.3 million in interest income and $9.4 million in interest
      expense. Net interest income for the six months ended June 30, 2006 was $17.8
      million, which was comprised of $23.4 million in interest income and $5.6
      million in interest expense. Net interest income for the six months ended June
      30, 2007 represented an increase of $5.1 million or 28.5% over the same period
      one year earlier. The average balance sheet and the general interest rate
      environment drive net interest income.





The
      Company’s net interest margin (net interest income divided by average earning
      assets) for the six months ended June 30, 2007 was 6.85% declining slightly
      from
      7.02% in the same period one year earlier as a result of growth in the volume
      of
      average interest bearing liabilities and decreased balance sheet leverage.





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 six months ended June 30, 2007 and 2006.




-21-
 *Table
          of Contents*




Six
                  months ended June 30,(dollars
                  in thousands)
              
              2007
              
              2006Yields
              
              Interest
              
              
              
              Yields
              
              InterestAverage
              
              or
              
              Income/
              
              Average
              
              or
              
              Income/Balance
              
              Rates
              
              Expense
              
              Balance
              
              Rates
              
              ExpenseASSETSInterest
                  earning assets (2):Loans
                  (1)
              
              $
              568,542
              
              
              10.5
              %
              $
              29,617
              
              $
              444,021
              
              
              10.0
              %
              $
              21,934Federal
                  funds sold
              
              
              49,241
              
              
              5.2
              %
              
              1,277
              
              
              54,349
              
              
              4.7
              %
              
              1,270Investment
                  securities
              
              
              55,883
              
              
              5.1
              %
              
              1,420
              
              
              12,733
              
              
              3.2
              %
              
              203Total
                  interest earning assets
              
              
              673,666
              
              
              9.7
              %
              
              32,314
              
              
              511,103
              
              
              9.2
              %
              
              23,407Noninterest-earning
                  assets:Cash
                  and due from banks
              
              
              30,426
              
              
              
              
              
              
              
              
              28,301All
                  other assets (3)
              
              
              20,116
              
              
              
              
              
              
              
              
              15,419TOTAL
              
              $
              724,208
              
              
              
              
              
              
              
              $
              554,823LIABILITIES
                  ANDSHAREHOLDERS'
                  EQUITYInterest
                  bearing liabilities:Deposits:Demand
              
              $
              5,462
              
              
              0.8
              %
              $
              23
              
              $
              3,441
              
              
              0.9
              %
              $
              15Savings
              
              
              346,552
              
              
              3.9
              %
              
              6,625
              
              
              223,036
              
              
              3.0
              %
              
              3,340Time
              
              
              94,855
              
              
              4.8
              %
              
              2,268
              
              
              85,215
              
              
              4.0
              %
              
              1,685Other
              
              
              17,527
              
              
              6.0
              %
              
              520
              
              
              20,711
              
              
              5.5
              %
              
              567Total
                  interest bearing liabilities
              
              
              464,396
              
              
              4.1
              %
              
              9,436
              
              
              332,403
              
              
              3.4
              %
              
              5,607Noninterest-bearing
                  liabilities:Demand
                  deposits
              
              
              197,723
              
              
              
              
              
              
              
              
              173,614Accrued
                  expenses andother
                  liabilities
              
              
              9,602
              
              
              
              
              
              
              
              
              6,742Shareholders'
                  equity
              
              
              52,487
              
              
              
              
              
              
              
              
              42,064TOTAL
              
              $
              724,208
              
              
              
              
              
              
              
              $
              554,823Net
                  interest income and margin
              
              
              
              
              
              6.9
              %
              $
              22,878
              
              
              
              
              
              7.0
              %
              $
              17,800





(1)
            Loan
                fee amortization of $2.8 million and $1.8 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 $7.4 million and $6.1 million,
                respectively.




-22-
 *Table
          of Contents*


The
      following table shows the effect of the interest differential of volume and
      rate
      changes for the quarters ended June 30, 2007 and 2006. 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)
              
              Six
                  months ended June 30,2007
                  vs. 2006Increase
                  (decrease)due
                  to change inAverage
              
              Average
              
              TotalVolume
              
              Rate
              
              ChangeInterest
                  income:Loans
              
              $
              6,487
              
              
              1,196
              
              $
              7,683Federal
                  funds sold
              
              
              (132
              )
              
              139
              
              
              7Investment
                  securities
              
              
              1,096
              
              
              121
              
              
              1,217Other
              
              
              —
              
              
              —
              
              
              —Total
                  interest income
              
              
              7,451
              
              
              1,456
              
              
              8,907Interest
                  expense:Demand
              
              
              9
              
              
              (1
              )
              
              8Savings
              
              
              2,361
              
              
              924
              
              
              3,285Time
              
              
              230
              
              
              353
              
              
              583Other
              
              
              (94
              )
              
              47
              
              
              (47
              )Total
                  interest expense
              
              
              2,506
              
              
              1,323
              
              
              3,829Change
                  in net interest income
              
              $
              4,945
              
              $
              133
              
              $
              5,078


**Interest
      Income**





Interest
      income of $32.3 million in the six months ended June 30, 2007 represented an
      increase of $8.9 million, or 38.1%, over $23.4 million in the same period one
      year earlier. The increase in interest income was primarily due to growth in
      average earning assets, particularly growth in average loan balances. Average
      earning assets for the six months ended June 30, 2007 were $673.7 million and
      represented growth of $162.6 million or 31.8% over $511.1 million for the same
      period in 2006.





Average
      gross loans were $568.5 million for six months ended June 30, 2007, an increase
      of $124.5 million or 28.0% over $440.0 million for the same period one year
      earlier. Average loans comprised 84.4% of average earning assets in the six
      months ended June 30, 2007 compared to 86.9% in the second quarter of 2006.
      During the six months ended June 30, 2007, the ratio of average gross loans
      to
      average deposits (one measure of leverage) was 88.2%, compared to 91.5% in
      the
      comparable period of 2006.





Interest
      income also benefited from increases in short-term interest rates. The average
      yield on earning assets was 9.7% for the six months ended June 30, 2007 and
      9.2%
      for the six months ended June 30, 2006. 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 increase in
      yield was primarily due to increases in the prime rate during 2006. The
      Company’s prime rate averaged 8.25% in the six months ended June 30, 2007, up
      from 7.66% in the same period one year earlier.





Other
      earning assets, consisting of investment securities and federal funds sold,
      averaged $105.1 million for the six months ended June 30, 2007, an increase
      of
      $38.0 million or 56.7% from $67.1 million for the six months ended June 30,
      2006.




**Interest
      Expense**




Interest
      expense was $9.4 million for the six months ended June 30, 2007, which
      represented an increase of $3.8 million or 68.3% over $5.6 million for the
      comparable period of 2006. The increase in interest expense reflects growth
      in
      average interest-bearing liabilities and higher interest rates paid on
      liabilities in 2007 compared to 2006. Average interest-bearing liabilities
      were
      $464.4 million for the six months ended June 30, 2007, an increase of $132.0
      million, or 39.7%, over $332.4 million for the same period one year earlier.




-23-
 *Table
          of Contents*




Growth
      in
      average interest bearing liabilities was primarily due to growth in average
      interest bearing deposits. Average interest bearing deposits were $446.9 million
      for the six months ended June 30, 2007, which represented 69.3% of total average
      deposits and was an increase of $135.2 million, or 43.4%, over $311.7 million
      representing 64.2% of total average deposits in the first six months of 2006.





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 $17.5 million in the six months ended June 30, 2007 compared to $20.7
      million for the same period one year earlier, which represented a decrease
      of
      $3.2 million or 15.4%.




The
      impact of increases in short-term market interest rates together with the
      factors noted above resulted in an increase in the average rate paid on
      interest-bearing liabilities to 4.1% in the six months ended June 30, 2007
      compared to 3.4% in the first six months of 2006.




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.




**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 col-lateral, loan performance and inherent risks in the
      loan
      portfolio. The allowance is reduced by charge-offs and increased by provisi-ons
      for credit losses charged to operating expense and recoveries of previously
      charged-off loans. The Company provided $1.2 million to the allowance for credit
      losses for the six months ended June 30, 2007, as compared to $672,000 for
      the
      same period in 2006. There were loan charged-offs of $943,000 and $4,000 in
      recoveries during the six months ended June 30, 2007 as compared to no loans
      charged off and $12,000 in recoveries during the six month period ended June
      30,
      2006. The loans charged-off during the first six months of 2007 consisted
      primarily of two loans to one commercial borrower that had previously been
      reported as impaired. At June 30, 2007, the allowance for credit losses was
      $7.6
      million, representing 1.3% of total loans, as compared to $6.6 million,
      representing 1.4% of total loans, at June 30, 2006.





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




Six
                  months ended(dollars
                  in thousands)
              
              June
                  30,2007
              
              2006Balance,
                  beginning of period
              
              $
              7,329
              
              $
              5,936Provision
                  for credit losses
              
              
              1,200
              
              
              672Charge-offs
              
              
              (943
              )
              
              —Recoveries
              
              
              4
              
              
              12Balance,
                  end of period
              
              $
              7,590
              
              $
              6,620




See
      “Summary of Financial Results - Quarter ended June 30, 2007 - Provision for
      Credit Losses” for a discussion of nonperforming assets.





**Non-interest
      Income**





The
      following table sets forth the components of other income and the percentage
      distribution of such income for the six months ended June 30, 2007 and
      2006:




-24-
 *Table
          of Contents*




Six
                  months ended June 30,(dollars
                  in thousands)
              
              2007
              
              2006Amount
              
              Percent
              
              Amount
              
              PercentGain
                  on sale of SBA loans
              
              $
              2,499
              
              
              64.0
              %
              $
              839
              
              
              38.8
              %SBA
                  loan servicing income
              
              
              341
              
              
              8.7
              %
              
              283
              
              
              13.1
              %Depositor
                  service charges
              
              
              332
              
              
              8.5
              %
              
              239
              
              
              11.1
              %Increase
                  in value of life insurance
              
              
              211
              
              
              5.4
              %
              
              178
              
              
              8.2
              %Foreign
                  exchange upcharge
              
              
              272
              
              
              7.0
              %
              
              89
              
              
              4.1
              %Other
                  operating income
              
              
              252
              
              
              6.4
              %
              
              533
              
              
              24.7
              %$
              3,907
              
              
              100.0
              %
              $
              2,161
              
              
              100.0
              %


Non-interest
      income totaled $3.9 million in the first six months of 2007, an increase of
      $1.7
      million or 80.8% from $2.2 million in 2006. Non-interest income consists
      primarily of gains recognized on sales of SBA loans, SBA loan servicing income,
      and packaging fees and service charge income on deposit accounts. The increase
      in non-interest income for the first six months of 2007 was primarily a result
      of increased gains recognized on SBA loan sales and SBA loan servicing income
      offset, in part, by a decrease in other operating income.





Revenue
      from sales of SBA loans is dependant on consistent origination and funding
      of
      new loan volumes, the timing of which may be impacted, from time to time, by
      (1)
      increased competition from other lenders; (2) the relative attractiveness of
      SBA
      borrowing to other financing options; (3) 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 $2.5 million in the six
      months ended June 30, 2007 which represented an increase of $1.7 million or
      197.9% compared to $839,000 the same period one year earlier. The increase
      was
      attributed to a higher volume of loans sold during the six months. During the
      first six months of 2007 the Company’s SBA group funded $44.1 million in new
      loans and sold $56.5 million which compared to $29.0 million funded and $27.3
      million sold in the same period one year earlier. The SBA loans sold during
      the
      first six months of 2007 included $11.3 million of un-guaranteed
      loans.




**Non-interest
      Expense**





The
      components of other expense as a percentage of average assets are set forth
      in
      the following table for the six months ended June 30, 2007 and
      2006.




Six
                  months ended June 30,(dollars
                  in thousands)
              
              2007
              
              2006Amount
              
              Percent
              
              Amount
              
              PercentSalaries
                  and benefits
              
              $
              10,267
              
              
              3.1
              %
              $
              8,079
              
              
              3.2
              %Occupancy
              
              
              1,539
              
              
              0.5
              %
              
              972
              
              
              0.4
              %Data
                  processing
              
              
              980
              
              
              0.3
              %
              
              717
              
              
              0.3
              %Marketing/Advertising
              
              
              716
              
              
              0.2
              %
              
              530
              
              
              0.2
              %Legal
                  and professional
              
              
              614
              
              
              0.2
              %
              
              421
              
              
              0.2
              %Deposit
                  services
              
              
              484
              
              
              0.1
              %
              
              874
              
              
              0.3
              %Furniture
                  and equipment
              
              
              436
              
              
              0.1
              %
              
              342
              
              
              0.1
              %Other
              
              
              1,240
              
              
              0.4
              %
              
              1,033
              
              
              0.4
              %$
              16,276
              
              
              4.9
              %
              $
              12,968
              
              
              5.1
              %


Operating
      expenses were $16.3 million for the six months ended June 30, 2007, an increase
      of $3.3 million or 25.5% from $13.0 million for the six months ended June 30,
      2006. As a percentage of average earning assets, other expenses for the six
      months ended June 30, 2007 and 2006 were 4.9% and 5.1%, respectively, on an
      annualized basis. In 2007, operating expenses were comprised primarily of
      salaries and benefits of $10.3 million, which compared to $8.1 million in 2006.
      The increase in salaries and benefits was primarily due to the additional
      headcount related to expansion of the business. At June 30, 2007, the Company
      employed 161 FTE compared to




-25-
 *Table
          of Contents*


123
      FTE
      on the same date one year earlier. In addition, salaries and benefits included
      a
      charge of $559,000 and $322,000 to recognize compensation related to stock
      option grants as a result of the implementation of FAS No. 123R in 2007 and
      2006, respectively. Occupancy and data processing expense for the first six
      months of 2007 was $2.5 million representing an increase of $830,000, or 49.1%,
      compared to $1.7 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 $390,000 or 80.6% was due to a decline in real estate related title
      and escrow deposit accounts.




**Balance
      Sheet**




Total
      assets of the Company at June 30, 2007 were $763.8 million, an increase of
      $41.8
      million, or 5.8%, as compared to $722.0 million at December 31, 2006. 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 June 30, 2007 and December 31,
      2006.




(dollars
                  in thousands)
              
              June
                  30,
              
              December
                  31,2007
              
              2006Commercial
              
              $
              258,978
              
              $
              197,174SBA
              
              
              56,176
              
              
              59,888Real
                  estate construction
              
              
              104,652
              
              
              103,710Real
                  estate other
              
              
              134,299
              
              
              115,313Factoring
                  and asset based lending
              
              
              42,683
              
              
              56,924Other
              
              
              9,341
              
              
              7,771Total
                  gross loans
              
              
              606,129
              
              
              540,780Unearned
                  fee income
              
              
              (1,483
              )
              
              (1,495
              )Total
                  gross loans
              
              
              604,646
              
              
              539,285Less
                  allowance for credit losses
              
              
              (7,590
              )
              
              (7,329
              )Total
                  loans, net
              
              $
              597,056
              
              $
              531,956Commercial
              
              
              42.7
              %
              
              36.5
              %SBA
              
              
              9.3
              %
              
              11.1
              %Real
                  estate construction
              
              
              17.3
              %
              
              19.2
              %Real
                  estate other
              
              
              22.2
              %
              
              21.3
              %Factoring
                  and asset based lending
              
              
              7.0
              %
              
              10.5
              %Other
              
              
              1.5
              %
              
              1.4
              %Total
                  gross loans
              
              
              100.0
              %
              
              100.0
              %


Net
      loan
      balances increased to $597.1 million at June 30, 2007, which represented an
      increase of $65.1 million, or 12.2%, as compared to $532.0 million at December
      31, 2006. The increase in loans was primarily in commercial and real estate
      other without a concentration in any one specific category of loans. The
      increase was a result of general marketing efforts.





The
      Company’s commercial loan portfolio represents loans to small and middle-market
      businesses in the Santa Clara County region. Commercial loans were $259.0
      million at June 30, 2007, which represented an increase of $61.8 million, or
      31.3%, over $197.2 million at December 31, 2006. At June 30, 2007, commercial
      loans comprised 42.7% of total loans outstanding compared to 36.5% at December
      31, 2006.





In
      March
      of 2002, the Company established an SBA lending group in Santa Clara County
      with
      a loan production office in Sacramento County. In October 2004, the Company
      established a loan production office in San Diego County. 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




-26-
 *Table
          of Contents*


Development
      Corporation, makes an additional loan to the borrower and takes a deed of trust
      subject to the Company’s position. At June 30, 2007, SBA loans comprised $56.2
      million, or 9.3%, of total loans, a decrease of $3.7 million, or 6.2%, from
      $59.9 million at December 31, 2006. 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 June
      30,
      2007 and December 31, 2006, 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 $1.0 million, or 0.9%,
      to
      $104.7 million at June 30, 2007 over $103.7 million at December 31, 2006.
      Construction loan balances at June 30, 2007 and December 31, 2006 comprised
      17.3% and 19.2%, respectively, of total loans.





Other
      real estate loans increased $19.0 million or 16.5% to $134.3 million at June
      30,
      2007 over $115.3 million at December 31, 2006. 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 22.2% of
      total
      loans at June 30, 2007 compared to 21.3% at December 31, 2006.





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 June 30, 2007,
      factoring/asset- based loans totaled $42.7 million or 7.0% of total loans,
      a
      slight decrease as compared to $56.9 million or 10.5% of total loans at December
      31, 2006.





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 June 30, 2007, other loans totaled $9.3 million as
      compared to $7.8 million at December 31, 2006.





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 June 30, 2007 and December 31, 2006.




(dollars
                  in thousands)
              
              June
                  30,
              
              December
                  31,2007
              
              2006Amount
              
              Percent
              
              Amount
              
              PercentNoninterest-bearing
                  demand
              
              $
              218,651
              
              
              32.10
              %
              $
              198,639
              
              
              30.80
              %Interest-bearing
                  demand
              
              
              4,563
              
              
              0.67
              %
              
              3,901
              
              
              0.60
              %Money
                  market and savings
              
              
              372,470
              
              
              54.69
              %
              
              333,838
              
              
              51.76
              %Certificates
                  of deposit:Less
                  than $100
              
              
              27,468
              
              
              4.03
              %
              
              28,918
              
              
              4.48
              %$100
                  and more
              
              
              57,974
              
              
              8.51
              %
              
              79,691
              
              
              12.36
              %Total
                  deposits
              
              $
              681,126
              
              
              100.00
              %
              $
              644,987
              
              
              100.00
              %


Deposits
      increased $36.1 million or 5.6% from $645.0 million at December 31, 2006 to
      $681.1 million at June 30, 2007. 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 June 30, 2007 included
      $28.8 million, or 4.2%, in title and escrow company account balances compared
      to
      $27.3 million, or 4.2%, at December 31, 2006. Excluding title and escrow company
      account balances, deposits increased $34.6 million or 5.6% compared to December
      31, 2006.




**Leverage**




Total
      gross loan balances at June 30, 2007 were $606.1 million. The resulting loan
      to
      deposit ratio was 89.0%.




-27-
 *Table
          of Contents*




Other
      earning assets at June 30, 2007 were primarily comprised of investment
      securities and federal funds sold of $113.2 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% 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% 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% 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% or more of total assets or trading
      activity of $1 billion or more. The federal banking agencies may apply the
      market risk regulations on a case-by-case basis to institutions not meeting
      the
      eligibility criteria if necessary for safety and soundness reasons.




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,




-28-
 *Table
          of Contents*




the
      agencies focus in the examination on an institution’s ability to monitor and
      manage its market risk, and will provide management with a clearer and more
      focused indication of supervisory concerns in this area.




Under
      certain circumstances, the Comptroller may determine that the capital ratios
      for
      a national bank 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 guide-lines of the Comptroller concerning the maintenance of
      an
      adequate allowance for loan and lease losses. The
      Company’s Tier 1 capital at June 30, 2007 was $73.4 million, which was comprised
      of $36.5 million of capital stock and surplus, $19.9 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 June 30, 2007 and December
      31, 2006 as well as the minimum capital ratios required to be deemed “well
      capitalized” under the regulatory framework.




As
                  of June 30,
              
              As
                  of December 31,(dollars
                  in thousands)
              
              2007
              
              2006Amount
              
              Ratio
              
              Amount
              
              Ratio**Company
                  Capital Ratios**Tier
                  1 Capital
              
              $
              73,359
              
              
              10.48
              %
              $
              66,533
              
              
              10.52
              %(to
                  Risk Weighted Assets)Tier
                  1 capital minimum requirement
              
              $
              28,003
              
              
              4.00
              %
              $
              25,293
              
              
              4.00
              %Total
                  Capital
              
              $
              80,949
              
              
              11.56
              %
              $
              74,229
              
              
              11.74
              %(to
                  Risk Weighted Assets)Total
                  capital minimum requirement
              
              $
              56,006
              
              
              8.00
              %
              $
              50,587
              
              
              8.00
              %Company
                  LeverageTier
                  1 Capital
              
              $
              73,359
              
              
              10.13
              %
              $
              66,533
              
              
              10.97
              %(to
                  Average Assets)Tier
                  1 capital minimum requirement
              
              $
              28,968
              
              
              4.00
              %
              $
              24,260
              
              
              4.00
              %**Bank
                  Capital Ratios**Tier
                  1 Capital
              
              $
              70,404
              
              
              10.06
              %
              $
              64,145
              
              
              10.15
              %(to
                  Risk Weighted Assets)Tier
                  1 capital minimum requirement
              
              $
              27,981
              
              
              4.00
              %
              $
              25,272
              
              
              4.00
              %Total
                  Capital
              
              $
              77,994
              
              
              11.15
              %
              $
              71,474
              
              
              11.31
              %(to
                  Risk Weighted Assets)Total
                  capital minimum requirement
              
              $
              55,962
              
              
              8.00
              %
              $
              50,544
              
              
              7.99
              %Bank
                  LeverageTier
                  1 Capital
              
              $
              70,404
              
              
              9.73
              %
              $
              64,145
              
              
              10.59
              %(to
                  Average Assets)Tier
                  1 capital minimum requirement
              
              $
              28,944
              
              
              4.00
              %
              $
              24,240
              
              
              4.00
              %


The
      Company and the Bank were considered well capitalized at June 30,
      2007.




-29-
 *Table
          of Contents*




**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 June
      30,
      2007 and December 31, 2006, liquid assets as a percentage of deposits were
      19.7%
      and 25.1%, 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 $27.0 million in Federal funds
      lines of credit available with correspondent banks to meet liquidity needs
      and
      additionally has approximately $134.0 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 June 30, 2007, the interest rate sensitivity gap (i.e. interest
      rate sensitive assets less interest rate sensitive liabilities), the cumulative
      interest rate sensitivity gap, the interest rate sensitivity gap ratio (i.e.
      interest rate sensitive assets divided by interest rate sensitive liabilities)
      and the cumulative interest rate sensitivity gap ratio.




(dollars
                  in thousands)
              
              As
                  of June 30, 2007After
                  three
              
              After
                  six
              
              After
                  oneWithin
              
              months
                  but
              
              months
                  but
              
              year
                  but
              
              Afterthree
              
              within
                  six
              
              within
                  one
              
              within
              
              fivemonths
              
              months
              
              year
              
              five
                  years
              
              years
              
              TotalFederal
                  funds sold
              
              $
              39,790
              
              $
              —
              
              $
              —
              
              $
              —
              
              $
              —
              
              $
              39,790U.S.
                  Treasury securities
              
              
              —
              
              
              100
              
              
              —
              
              
              100
              
              
              —
              
              
              200Agency
                  securities
              
              
              7,979
              
              
              3,994
              
              
              14,916
              
              
              46,273
              
              
              —
              
              
              73,162Loans
              
              
              497,954
              
              
              12,575
              
              
              11,348
              
              
              52,218
              
              
              32,035
              
              
              606,130Total
                  earning assets
              
              $
              545,723
              
              $
              16,669
              
              $
              26,264
              
              $
              98,591
              
              $
              32,035
              
              $
              719,282Interest
                  checking, moneymarket
                  and savings
              
              
              377,033
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              377,033Certificates
                  of deposit:Less
                  than $100,000
              
              
              4,571
              
              
              2,689
              
              
              10,109
              
              
              10,099
              
              
              —
              
              
              27,468$100,000
                  or more
              
              
              17,766
              
              
              10,030
              
              
              18,836
              
              
              11,342
              
              
              —
              
              
              57,974Total
                  interest-bearing liabilities
              
              $
              399,370
              
              $
              12,719
              
              $
              28,945
              
              $
              21,441
              
              $
              —
              
              $
              462,475Interest
                  rate gap
              
              $
              146,353
              
              $
              3,950
              
              $
              (2,681
              )
              $
              77,150
              
              $
              32,035
              
              $
              256,807Cumulative
                  interest rate gap
              
              $
              146,353
              
              $
              150,303
              
              $
              147,622
              
              $
              224,772
              
              $
              256,807Interest
                  rate gap ratio
              
              
              0.27
              
              
              0.24
              
              
              (0.10
              )
              
              0.78
              
              
              1.00Cumulative
                  interest rategap
                  ratio
              
              
              0.27
              
              
              0.27
              
              
              0.25
              
              
              0.33
              
              
              0.36


Based
      on
      the contractual terms of its assets and liabilities, the Company’s balance sheet
      as June 30, 2007 was asset sensitive in terms of its short-term exposure to
      interest rates. That is, at June 30, 2007 the volume of assets that might
      reprice within the next year exceeded the volume of liabilities that might
      reprice. This position provides a hedge against rising interest rates, but
      has a
      detrimental effect during times of rate decreases. Net interest income is
      negatively impacted by a decline in interest rates and positively impacted
      by an
      increase in interest rates. To partially mitigate the adverse impact of
      declining rates, 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.





The
      following table shows maturity and interest rate sensitivity of the loan
      portfolio at June 30, 2007 and December




-30-
 *Table
          of Contents*




31,
      2006.
      At June 30, 2007, approximately 78.1% 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 June 30, 2007Due
                  after oneDue
                  one year
              
              year
                  through
              
              Due
                  afterAmount
              
              or
                  less
              
              five
                  years
              
              five
                  yearsCommercial
                  and other
              
              $
              258,978
              
              $
              126,221
              
              $
              104,816
              
              $
              27,941SBA
              
              
              56,176
              
              
              15,303
              
              
              3,136
              
              
              37,737Real
                  estate construction
              
              
              104,652
              
              
              97,248
              
              
              7,404
              
              
              —Real
                  estate-other
              
              
              134,299
              
              
              56,149
              
              
              28,838
              
              
              49,312Factoring
                  / Asset-Based Lending
              
              
              42,683
              
              
              42,354
              
              
              329
              
              
              —Other
              
              
              9,341
              
              
              8,288
              
              
              1,054
              
              
              —Total
                  loans
              
              $
              606,129
              
              $
              345,563
              
              $
              145,577
              
              $
              114,990
  As
                  of December 31, 2006Due
                  after oneDue
                  one year
              
              year
                  through
              
              Due
                  afterAmount
              
              or
                  less
              
              five
                  years
              
              five
                  yearsCommercial
                  and other
              
              $
              197,174
              
              $
              102,870
              
              $
              82,154
              
              $
              12,150SBA
              
              
              59,888
              
              
              8,857
              
              
              186
              
              
              50,845Real
                  estate construction
              
              
              103,710
              
              
              102,005
              
              
              1,705
              
              
              —Real
                  estate-other
              
              
              115,313
              
              
              44,802
              
              
              25,633
              
              
              44,878Factoring
                  / Asset-Based Lending
              
              
              56,924
              
              
              56,924
              
              
              —
              
              
              —Other
              
              
              7,771
              
              
              4,656
              
              
              3,115
              
              
              —Total
                  loans
              
              $
              540,780
              
              $
              320,114
              
              $
              112,793
              
              $
              107,873


**Off-Balance
      Sheet Arrangements and Aggregate Contractual Obligations**




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





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


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


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


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




In
      the
      ordinary course of business, we have issued certain guarantees which qualify
      as
      off-balance sheet arrangements, as of June 30, 2007 those guarantees include
      the
      following:





·
            Standby
                Letters of Credit in the amount of $14.7
                million.




-31-
 *Table
          of Contents*




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




(dollars
                  in thousands)
              
              As
                  of June 30, 2007Payments
                  due by periodLess
                  than
              
              1
                  -
                  3
              
              3
                  -
                  5
              
              More
                  thanTotal
              
              1
                  year
              
              years
              
              years
              
              5
                  yearsLong-term
                  contracts
              
              $
              3,551
              
              $
              1,062
              
              $
              1,981
              
              $
              508
              
              $
              —Operating
                  leases
              
              
              15,612
              
              
              1,470
              
              
              3,268
              
              
              3,853
              
              
              7,021Total
              
              $
              19,163
              
              $
              2,532
              
              $
              5,249
              
              $
              4,361
              
              $
              7,021


**ITEM
      4 - CONTROLS AND PROCEDURES**




**Disclosure
      Controls and Procedures**





As
      required by SEC rules, the Company’s management evaluated the effectiveness, as
      of June 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 June 30, 2007.





**Internal
      Control over Financial Reporting**





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





Pertain
      to the maintenance of records that in reasonable detail accurately and fairly
      reflect the transactions and dispositions of assets of the company; provide
      reasonable assurance that transactions are recorded as necessary to permit
      preparation of financial statements in accordance with generally accepted
      accounting principles, and that receipts and expenditures of the company are
      being made only in accordance with authorizations of management and directors
      of
      the company; and provide reasonable assurance regarding prevention or timely
      detection of unauthorized acquisition, use 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 second
      quarter of 2007 that has materially affected, or is reasonably likely to
      materially affect, the Company’s internal control over financial
      reporting.




-32-
 *Table
          of Contents*




**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, 2006.




**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 35 of this Quarterly Report on Form 10-Q.




-33-
 *Table
          of Contents*




**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: 
      August 2, 2007


By: /s/
      Daniel P. Myers


Daniel
      P.
      Myers


President
      and Chief Executive Officer


(Principal
      Executive Officer)








Dated: 
      August 2, 2007


By: /s/
      Thomas A. Sa


Thomas
      A.
      Sa


Executive
      Vice President


Chief
      Administrative Officer and Chief Financial Officer


(Principal
      Financial and Accounting Officer)




-34-
 *Table
          of Contents*




**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






-35-