Table of Contents

 

 

 

**UNITEDSTATES**

**SECURITIESAND EXCHANGE COMMISSION********Washington,D.C. 20549**

 

**FORM 10-Q**

 
| **(Mark one)**                                          |
|---------------------------------------------------------|
|                                                    | ** ** |
| **x**                                                   | **QUARTERLY  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF  1934** |
|                                                    |   |
| **For  the quarterly period ended March 31, 2009** |
|                                                    |   |
| **o**                                                   | **TRANSITION  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF  1934** |
|                                                    |   |
| **Commission  file number 000-53181**                   |

 

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**SOLERANATIONAL BANCORP, INC.**

(Exact name of registrant as specified inits charter)

 

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| **Delaware**                       | ** ** | **02-0774841**                     |
|------------------------------------|------------|------------------------------------|
| (State or other  jurisdiction      |       | (IRS Employer  Identification No.) |
| of incorporation or  organization) |       |                               |

 

**319 S.Sheridan Blvd.**

**Lakewood,CO 80226**

**303-209-8600**(Address and telephone number of principalexecutive offices and principal place of business)

 

Indicate by check mark whether the registrant (1) hasfiled all reports required to be filed by Section 13 or 15(d) of theSecurities Exchange Act of 1934 during the preceding 12 months (or for such shorterperiod that the registrant was required to file such reports), and (2) hasbeen subject to such filing requirements for the past 90 days.   Yes x  No o

 

Indicate by check mark whether the registrant has submittedelectronically and posted on its corporate Web site, if any, every InteractiveData File required to be submitted and posted pursuant to Rule 405 ofRegulation S-T during the preceding 12 months (or for such shorter period thatthe registrant was required to submit and post such files).   Yes  ̈  No o

 

Indicate by check mark whether the registrant isa large accelerated filer, an accelerated filer, a non-accelerated filer, or asmaller reporting company.

 

| Large accelerated  filer   ̈ |   | Accelerated  filer   ̈    |
|--------------------------------------------|--------|-----------------------------------------|
|                                       |   |                                    |
| Non-accelerated  filer   ̈   |   | Smaller reporting  company  x |

 

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

 

Indicate the number of shares outstanding ofeach of the issuer’s classes of common stock, as of the last practicabledate:  As of May 11, 2009, 2,553,671shares of the registrant’s common stock, $0.01 par value, were issued andoutstanding.

 

 

 

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**FORM 10-Q**

**SOLERANATIONAL BANCORP, INC.**

 

**INDEX**

 
| ** **                                                                                                       | ** ** | **PAGE** |
|------------------------------------------------------------------------------------------------------------------|------------|----------|
|                                                                                                             |       |     |
| **INTRODUCTORY  NOTE**                                                                                           |       | 3        |
|                                                                                                             |       |     |
| **PART I —  FINANCIAL INFORMATION**                                                                    |       | 5        |
|                                                                                                             |       |     |
| **ITEM 1. FINANCIAL  STATEMENTS (Unaudited)**                                                                    |       | 5        |
|                                                                                                             |       |     |
| **Balance  Sheets as of March 31, 2009 and December 31, 2008**                                         |       | 5        |
|                                                                                                             |       |     |
| **Statements  of Operations for the Three Months Ended March 31, 2009 and 2008**                            |       | 6        |
|                                                                                                             |       |     |
| **Statements  of Changes in Stockholders’ Equity for the Three Months Ended March 31,  2009 and 2008** |       | 7        |
|                                                                                                             |       |     |
| **Statements  of Cash Flows for the Three Months Ended March 31, 2009 and 2008**                            |       | 8        |
|                                                                                                             |       |     |
| **Statements  of Cash Flows for the Three Months Ended March 31, 2009 and 2008,  (continued)**              |       | 9        |
|                                                                                                             |       |     |
| **UNAUDITED  CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**                                              |       | 10       |
|                                                                                                             |       |     |
| **ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF  OPERATIONS**         |       | 18       |
|                                                                                                             |       |     |
| **ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**                                          |       | 28       |
|                                                                                                             |       |     |
| **ITEM 4(T).  CONTROLS AND PROCEDURES**                                                                          |       | 28       |
|                                                                                                             |       |     |
| **PART II — OTHER  INFORMATION**                                                                       |       | 29       |
|                                                                                                             |       |     |
| **ITEM 1. LEGAL  PROCEEDINGS**                                                                                   |       | 29       |
|                                                                                                             |       |     |
| **ITEM 1A. RISK FACTORS**                                                                                        |       | 29       |
|                                                                                                             |       |     |
| **ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS**                                         |       | 29       |
|                                                                                                             |       |     |
| **ITEM 3.  DEFAULTS UPON SENIOR SECURITIES**                                                                     |       | 29       |
|                                                                                                             |       |     |
| **ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**                                                 |       | 29       |
|                                                                                                             |       |     |
| **ITEM 5. OTHER  INFORMATION**                                                                                   |       | 29       |
|                                                                                                             |       |     |
| **ITEM 6. EXHIBITS**                                                                                             |       | 29       |
|                                                                                                             |       |     |
| **SIGNATURES**                                                                                                   |       | 30       |
|                                                                                                             |       |     |
| **EXHIBIT INDEX**                                                                                                |       | 31       |

 

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# **INTRODUCTORYNOTE**

#  

ThisQuarterly Report on Form 10-Q contains “forward-looking statements” withinthe meaning of the Private Securities Litigation Reform Act of 1995 aboutSolera National Bancorp, Inc. (the “Company”) and our subsidiary, SoleraNational Bank (the “Bank,” collectively with the Company, sometimes referred toas “we,” “us” and “our”) that are subject to risks and uncertainties. Forward-looking statements include information concerning future financialperformance, business strategy, projected plans and objectives.  Statementspreceded by, followed by or that otherwise include the words “anticipates,” “believes,”“estimates,” “expects,” “intends,” “plans,” “may increase,” “may fluctuate” andsimilar expressions of future or conditional verbs such as “will,” “should,” “would,”and “could” are generally forward-looking in nature and not historicalfacts.  Actual results may differ materially from those projected,implied, anticipated or expected in the forward-looking statements.  Readers of this quarterly report should notrely solely on the forward-looking statements and should consider alluncertainties and risks throughout this report. The statements arerepresentative only as of the date they are made, and Solera National Bancorp, Inc.undertakes no obligation to update any forward-looking statement.

 

Theseforward-looking statements, implicitly and explicitly, include the assumptionsunderlying the statements and other information with respect to the Company’sbeliefs, plans, objectives, goals, expectations, anticipations, estimates,financial condition, results of operations, future performance and business,including management’s expectations and estimates with respect to revenues,expenses, return on equity, return on assets, efficiency ratio, asset qualityand other financial data and capital and performance ratios.

 

Althoughthe Company believes that the expectations reflected in the forward-lookingstatements are reasonable, these statements involve risks and uncertaintiesthat are subject to change based on various important factors, some of whichare beyond the control of the Company. The following factors, among others,could cause the Company’s results or financial performance to differ materiallyfrom its goals, plans, objectives, intentions, expectations and otherforward-looking statements:

 

·      theCompany has a very limited operating history upon which to base an estimate ofits future financial performance;

 

·      theCompany expects to incur losses during its initial years of operations;

 

·      SoleraNational Bank’s failure to implement its business strategies may adverselyaffect the Company’s financial performance;

 

·      thedepartures of key personnel or directors may impair Solera National Bank’soperations;

 

·      SoleraNational Bank’s legal lending limits may impair its ability to attractborrowers;

 

·      aneconomic downturn, especially one affecting Solera National Bank’s primaryservice areas, may have an adverse effect on its financial performance;

 

·      theCompany could be negatively affected by changes in interest rates;

 

·      theCompany is subject to extensive regulatory oversight, which could restrain ourgrowth and profitability;

 

·      theCompany may not be able to raise additional capital on terms favorable to it;

 

·      theliquidity of the Company common stock will be affected by its limited tradingmarket;

 

·      monetarypolicy and other economic factors could adversely affect the Company’sprofitability;

 

·      theCompany’s certificate of incorporation and bylaws, and the employmentagreements of our Executive Officers, contain provisions that could make atakeover more difficult;

 

·      managementof Solera National Bank may be unable to adequately measure and limit creditrisk associated with Solera National Bank’s loan portfolio, which would affectthe Company’s profitability;

 

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·      governmentregulation may have an adverse effect on the Company’s profitability andgrowth;

 

·      the Federal Deposit Insurance Corporation, (“FDIC”),has increased deposit insurance premiums to rebuild and maintain the federaldeposit insurance fund, which could have a material affect on earnings;

 

·      the Company cannot predict the effect of therecently enacted federal rescue plan;

 

·      theeffects of competition from other commercial banks, thrifts, mortgage bankingfirms, consumer finance companies, credit unions, securities brokerage firms,insurance companies, money market and other mutual funds, and other financialinstitutions operating in our market area and elsewhere, including institutionsoperating regionally, nationally, and internationally, together with suchcompetitors offering banking products and services by mail, telephone,computer, and the Internet; and

 

·      management’sability to manage these and other risks.

 

Fora discussion of these and other risks and uncertainties that could cause actualresults to differ from those contained in the forward-looking statements, see “RiskFactors” in Item 1A of the Company’s 2008 Annual Report filed on Form 10-Kwith the SEC, which is available on the SEC’s website at www.sec.gov.  Allforward-looking statements are qualified in their entirety by this cautionarystatement, and the Company undertakes no obligation to revise or update thisQuarterly Report on Form 10-Q to reflect events or circumstances after thedate hereof.  New factors emerge fromtime to time, and it is not possible for us to predict which factors, if any,will arise.  In addition, the Companycannot assess the impact of each factor on the Company’s business or the extentto which any factor, or combination of factors, may cause actual results todiffer materially from those contained in any forward-looking statements.

 

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# **PART I— FINANCIAL INFORMATION**

 

# **ITEM 1. FINANCIAL STATEMENTS**

 

**SoleraNational Bancorp, Inc.**

 

**Balance Sheets as of March 31,2009 and December 31, 2008**

**(Unaudited)**

 
| ** **                                                                                                                                              | ** ** | **March 31,** | ** **      | **December 31,** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------|-----------------|-----------------------|------------|
| ** **                                                                                                                                              | ** ** | **2009**           | ** **      | **2008**              | ** ** |
| **ASSETS**                                                                                                                                              |       |               |            |                  |       |
| Cash and due from banks                                                                                                                                 |       | $                  | 1,576,637       |                  | $          | 1,436,241 |   |
| Federal funds sold                                                                                                                                      |       | —             |            | 965,000               |       |
| Total cash and cash equivalents                                                                                                                         |       | 1,576,637          |            | 2,401,241             |       |
|                                                                                                                                                    |       |               |            |                  |       |
| Investment securities, available-for-sale                                                                                                               |       | 52,484,096         |            | 41,557,461            |       |
|                                                                                                                                                    |       |               |            |                  |       |
| Gross loans                                                                                                                                             |       | 31,065,581         |            | 21,412,957            |       |
| Net deferred (fees)/expenses                                                                                                                            |       | (118,276           | )               | (56,747               | )          |
| Allowance for loan losses                                                                                                                               |       | (385,500           | )               | (268,000              | )          |
| Net loans                                                                                                                                               |       | 30,561,805         |            | 21,088,210            |       |
|                                                                                                                                                    |       |               |            |                  |       |
| Federal Home Loan Bank (FHLB) and Federal Reserve Bank stocks                                                                                           |       | 1,069,350          |            | 1,079,550             |       |
| Premises and equipment, net                                                                                                                             |       | 977,510            |            | 1,011,579             |       |
| Interest receivable                                                                                                                                     |       | 467,687            |            | 382,761               |       |
| Other assets                                                                                                                                            |       | 244,496            |            | 222,038               |       |
| **Total assets**                                                                                                                                        |       | $                  | 87,381,581      |                  | $          | 67,742,840 |   |
|                                                                                                                                                    |       |               |            |                  |       |
| **LIABILITIES AND STOCKHOLDERS’ EQUITY**                                                                                                           |       |               |            |                  |       |
| Deposits                                                                                                                                                |       |               |            |                  |       |
| Noninterest-bearing demand                                                                                                                              |       | $                  |  5,170,823 |                  | $          |  3,910,236 |   |
| Interest-bearing demand                                                                                                                                 |       | 4,372,237          |            | 2,603,923             |       |
| Savings and money market                                                                                                                                |       | 8,675,520          |            | 6,873,260             |       |
| Time deposits                                                                                                                                           |       | 37,269,529         |            | 24,274,807            |       |
| Total deposits                                                                                                                                          |       | 55,488,109         |            | 37,662,226            |       |
|                                                                                                                                                    |       |               |            |                  |       |
| Federal funds purchased and securities sold under agreements to  repurchase                                                                             |       | 1,181,634          |            | 398,162               |       |
| Accrued interest payable                                                                                                                                |       | 109,130            |            | 80,274                |       |
| Accounts payable and other liabilities                                                                                                                  |       | 1,798,803          |            | 393,498               |       |
| Federal Home Loan Bank advances                                                                                                                         |       | 10,000,000         |            | 10,000,000            |       |
| Deferred rent liability                                                                                                                                 |       | 67,819             |            | 60,505                |       |
| Capital lease liability                                                                                                                                 |       | 147,082            |            | 156,388               |       |
| **Total liabilities**                                                                                                                                   |       | $                  | 68,792,577      |                  | $          | 48,751,053 |   |
|                                                                                                                                                    |       |               |            |                  |       |
| COMMITMENTS AND CONTINGENCIES (see Note 10)                                                                                                             |       |               |            |                  |       |
|                                                                                                                                                    |       |               |            |                  |       |
| STOCKHOLDERS’ EQUITY                                                                                                                               |       |               |            |                  |       |
| Common stock, $0.01 par value; 5,000,000 shares authorized; 2,553,671  shares issued and outstanding at March 31, 2009 and December 31,  2008 |       | $                  | 25,536          |                  | $          | 25,536 |   |
| Additional paid-in capital                                                                                                                              |       | 25,607,069         |            | 25,558,098            |       |
| Accumulated deficit                                                                                                                                     |       | (7,222,163         | )               | (6,739,883            | )          |
| Accumulated other comprehensive income                                                                                                                  |       | 178,562            |            | 148,036               |       |
| **Total stockholders’ equity**                                                                                                                     |       | $                  | 18,589,004      |                  | $          | 18,991,787 |   |
|                                                                                                                                                    |       |               |            |                  |       |
| **Total liabilities and stockholders’ equity**                                                                                                     |       | $                  | 87,381,581      |                  | $          | 67,742,840 |   |

 

SeeNotes to Financial Statements.

 

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**SoleraNational Bancorp, Inc.**

 

# **Statementsof Operations for the Three Months Ended March 31, 2009 and 2008**

**(Unaudited)**

 
| ** **                                                                  | ** ** | **For the Three Months  Ended March 31,** | ** ** |
|-----------------------------------------------------------------------------|------------|------------------------------------------------|------------|
| ** **                                                                  | ** ** | **2009**                                       | ** ** | **2008** | ** ** |
| Interest income:                                                            |       |                                           |       |   |   |
| Interest and fees on loans                                                  |       | $                                              | 313,751    |   | $ | 87,162 |   |
| Interest on federal funds sold                                              |       | 987                                            |       | 37,175 |   |
| Interest on investment securities                                           |       | 598,219                                        |       | 230,802 |   |
| Other interest income                                                       |       | —                                         |       | 5,912 |   |
| Dividends on FHLB and Federal Reserve Bank stocks                           |       | 10,093                                         |       | 7,875 |   |
| Total interest income                                                       |       | 923,050                                        |       | 368,926 |   |
| Interest expense:                                                           |       |                                           |       |   |   |
| Deposits                                                                    |       | 294,076                                        |       | 87,949 |   |
| Federal Home Loan Bank advances                                             |       | 92,154                                         |       | — |   |
| Federal funds purchased and securities sold under agreements to  repurchase |       | 3,191                                          |       | — |   |
| Other borrowings                                                            |       | 3,571                                          |       | 4,396 |   |
| Total interest expense                                                      |       | 392,992                                        |       | 92,345 |   |
|                                                                        |       |                                           |       |   |   |
| Net interest income                                                         |       | 530,058                                        |       | 276,581 |   |
|                                                                        |       |                                           |       |   |   |
| Provision for loan loss                                                     |       | 117,500                                        |       | 37,066 |   |
| Net interest income after provision for loan loss                           |       | 412,558                                        |       | 239,515 |   |
|                                                                        |       |                                           |       |   |   |
| Noninterest income:                                                         |       |                                           |       |   |   |
| Service charges and fees                                                    |       | 68,902                                         |       | 5,610 |   |
| Sublease income                                                             |       | 4,108                                          |       | 3,750 |   |
| Gain on sale of securities                                                  |       | 76,935                                         |       | 39,620 |   |
| Total noninterest income                                                    |       | 149,945                                        |       | 48,980 |   |
| Noninterest expense:                                                        |       |                                           |       |   |   |
| Salaries and employee benefits                                              |       | 611,602                                        |       | 504,069 |   |
| Occupancy                                                                   |       | 136,019                                        |       | 117,767 |   |
| Professional fees                                                           |       | 116,426                                        |       | 72,035 |   |
| Other general and administrative                                            |       | 180,736                                        |       | 167,214 |   |
| Total noninterest expense                                                   |       | 1,044,783                                      |       | 861,085 |   |
|                                                                        |       |                                           |       |   |   |
| Income taxes                                                                |       | —                                         |       | — |   |
|                                                                        |       |                                           |       |   |   |
| Net loss                                                                    |       | $                                              | (482,280   | ) | $ | (572,590 | ) |
|                                                                        |       |                                           |       |   |   |
| Basic earnings (loss) per share                                             |       | (0.19                                          | )          | (0.22 | ) |
|                                                                        |       |                                           |       |   |   |
| Diluted earnings (loss) per share                                           |       | (0.19                                          | )          | (0.22 | ) |
|                                                                        |       |                                           |       |   |   |
| Weighted-average common shares                                              |       |                                           |       |   |   |
| Basic                                                                       |       | 2,553,671                                      |       | 2,553,671 |   |
| Diluted                                                                     |       | 2,553,671                                      |       | 2,553,671 |   |

 

SeeNotes to Financial Statements.

 

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**SoleraNational Bancorp, Inc.**

 

**Statements of Changes inStockholders’ Equity for the Three Months Ended March 31, 2009 and 2008**

**(Unaudited)**

 
| ** **                                                                  | ** ** | ** **      | ** ** | ** ** | ** ** | ** **     | ** ** | ** **      | ** ** | **Accumulated**   | ** **     | ** ** | ** ** |
|-----------------------------------------------------------------------------|------------|-----------------|------------|------------|------------|----------------|------------|-----------------|------------|-------------------|----------------|------------|------------|
| ** **                                                                  | ** ** | ** **      | ** ** | ** ** | ** ** | **Additional** | ** ** | ** **      | ** ** | **Other**         | ** **     | ** ** | ** ** |
| ** **                                                                  | ** ** | **Shares**      | ** ** | **Common** | ** ** | **Paid-in**    | ** ** | **Accumulated** | ** ** | **Comprehensive** | ** **     | ** ** | ** ** |
| ** **                                                                  | ** ** | **Outstanding** | ** ** | **Stock**  | ** ** | **Capital**    | ** ** | **Deficit**     | ** ** | **Income**        | ** **     | **Total**  | ** ** |
|                                                                        |       |            |       |       |       |           |       |            |       |              |           |       |       |
| **Balance at December 31, 2007**                                       | ** ** | **2,553,671**   | ** ** | **$**      | **25,536** | ** **     | **$**      | **25,347,342**  | ** ** | **$**             | **(4,525,955** | **)**      | **$**      | **2,412** | ** ** | **$** | **20,849,335** | ** ** |
| Stock-based compensation                                                    |       | —          |       | —     |       | 62,396         |       | —          |       | —            |           | 62,396     |       |
| Comprehensive income (loss):                                                |       | —          |       | —     |       | —         |       | —          |       | —            |           | —     |       |
| Net loss                                                                    |       | —          |       | —     |       | —         |       | (572,590        | )          | —            |           | (572,590   | )          |
| Net change in unrealized gains on investment securities  available-for-sale |       | —          |       | —     |       | —         |       | —          |       | 161,069           |           | 161,069    |       |
| Less:  reclassification  adjustment for net gains included in income   |       | —          |       | —     |       | —         |       | —          |       | (39,620           | )              | (39,620    | )          |
| Total comprehensive income (loss)                                           |       |            |       |       |       |           |       |            |       |              |           | (451,141   | )          |
| **Balance at March 31, 2008**                                          | ** ** | **2,553,671**   | ** ** | **$**      | **25,536** | ** **     | **$**      | **25,409,738**  | ** ** | **$**             | **(5,098,545** | **)**      | **$**      | **123,861** | ** ** | **$** | **20,460,590** | ** ** |
|                                                                        |       |            |       |       |       |           |       |            |       |              |           |       |       |
| **Balance at December 31, 2008**                                       | ** ** | **2,553,671**   | ** ** | **$**      | **25,536** | ** **     | **$**      | **25,558,098**  | ** ** | **$**             | **(6,739,883** | **)**      | **$**      | **148,036** | ** ** | **$** | **18,991,787** | ** ** |
| Stock-based compensation                                                    |       | —          |       | —     |       | 48,971         |       | —          |       | —            |           | 48,971     |       |
| Comprehensive income (loss):                                                |       |            |       |       |       |           |       |            |       |              |           |       |       |
| Net loss                                                                    |       | —          |       | —     |       | —         |       | (482,280        | )          | —            |           | (482,280   | )          |
| Net change in unrealized gains on investment securities  available-for-sale |       | —          |       | —     |       | —         |       | —          |       | 107,461           |           | 107,461    |       |
| Less:  reclassification  adjustment for net gains included in income   |       | —          |       | —     |       | —         |       | —          |       | (76,935           | )              | (76,935    | )          |
| Total comprehensive income (loss)                                           |       |            |       |       |       |           |       |            |       |              |           | (451,754   | )          |
| **Balance at March 31, 2009**                                          | ** ** | **2,553,671**   | ** ** | **$**      | **25,536** | ** **     | **$**      | **25,607,069**  | ** ** | **$**             | **(7,222,163** | **)**      | **$**      | **178,562** | ** ** | **$** | **18,589,004** | ** ** |

 

SeeNotes to Financial Statements.

 

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** **

**SoleraNational Bancorp, Inc.**

 

# **Statementsof Cash Flows for the Three Months Ended March 31, 2009 and 2008**

**(Unaudited)**

 
| ** **                                                                                   | ** ** | **For the Three Months  Ended March 31,** | ** **  |
|----------------------------------------------------------------------------------------------|------------|--------------------------------------------------------------------|-------------|
| ** **                                                                                   | ** ** | **2009**                                                           | ** **  | **2008** | ** ** |
| CASH FLOWS FROM OPERATING ACTIVITIES                                                         |       |                                                               |        |   |   |
| Net (loss)                                                                                   |       | $                                                                  | (482,280    | ) | $ | (572,590 | ) |
| Adjustments to reconcile net (loss) to net cash provided by (used in)  operating activities: |       |                                                               |        |   |   |
| Depreciation and amortization                                                                |       | 36,932                                                             |        | 26,724 |   |
| Provision for loan losses                                                                    |       | 117,500                                                            |        | 37,066 |   |
| Net amortization of deferred loan fees/expenses                                              |       | 62,751                                                             |        | (62 | ) |
| Net amortization of premiums on investment securities                                        |       | 20,208                                                             |        | 9,808 |   |
| Gain on sale of investment securities                                                        |       | (76,935                                                            | )           | (39,620 | ) |
| Federal Home Loan Bank stock dividend                                                        |       | (3,200                                                             | )           | — |   |
| Recognition of stock-based compensation on stock options                                     |       | 48,971                                                             |        | 62,396 |   |
| Changes in operating assets and liabilities:                                                 |       |                                                               |        |   |   |
| Interest receivable                                                                          |       | (84,926                                                            | )           | (70,755 | ) |
| Other assets                                                                                 |       | (22,458                                                            | )           | 168,350 |   |
| Accrued interest payable                                                                     |       | 28,856                                                             |        | 14,596 |   |
| Accounts payable and other liabilities                                                       |       | 395,807                                                            |        | (32,061 | ) |
| Deferred rent liability                                                                      |       | 7,314                                                              |        | 10,011 |   |
| **Net cash provided by (used in) operating  activities**                                     |       | $                                                                  | 48,540      |   | $ | (386,137 | ) |
|                                                                                         |       |                                                               |        |   |   |
| CASH FLOWS FROM INVESTING ACTIVITIES                                                         |       |                                                               |        |   |   |
| Purchase of investment securities, available-for-sale                                        |       | $                                                                  | (20,631,082 | ) | $ | (12,042,723 | ) |
| Proceeds from sales of investment securities, available-for-sale                             |       | 6,861,722                                                          |        | 2,488,676 |   |
| Proceeds from maturities/calls/pay downs of investment securities,  available-for-sale       |       | 3,939,476                                                          |        | 1,965,538 |   |
| Originated loans, net of pay downs                                                           |       | (9,653,846                                                         | )           | (3,908,528 | ) |
| Purchase of premises and equipment                                                           |       | (2,863                                                             | )           | (6,098 | ) |
| Proceeds from redemption of Federal Reserve Bank stock                                       |       | 13,400                                                             |        | — |   |
| Purchase of interest-bearing deposits with banks                                             |       | —                                                             |        | (691,442 | ) |
| **Net cash used in investing activities**                                                    |       | $                                                                  | (19,473,193 | ) | $ | (12,194,577 | ) |
|                                                                                         |       |                                                               |        |   |   |
| CASH FLOWS FROM FINANCING ACTIVITIES                                                         |       |                                                               |        |   |   |
| Net increase in deposits                                                                     |       | $                                                                  | 17,825,883  |   | $ |  10,720,013 |   |
| Net increase in federal funds purchased and securities sold under  agreements to repurchase  |       | 783,472                                                            |        | — |   |
| Principal payments on capital lease                                                          |       | (9,306                                                             | )           | (8,482 | ) |
| Proceeds from subscriptions receivable                                                       |       | —                                                             |        | 1,600,000 |   |
| **Net cash provided by financing activities**                                                |       | $                                                                  | 18,600,049  |   | $ | 12,311,531 |   |
|                                                                                         |       |                                                               |        |   |   |
| **Net decrease in cash and cash equivalents**                                                |       | $                                                                  | (824,604    | ) | $ | (269,183 | ) |
|                                                                                         |       |                                                               |        |   |   |
| CASH AND CASH EQUIVALENTS                                                                    |       |                                                               |        |   |   |
| Beginning of period                                                                          |       | 2,401,241                                                          |        | 5,306,126 |   |
| End of period                                                                                |       | $                                                                  | 1,576,637   |   | $ | 5,036,943 |   |

 

SeeNotes to Financial Statements.

 

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**SoleraNational Bancorp, Inc.**

 

# **Statementsof Cash Flows for the Three Months Ended March 31, 2009 and 2008,(continued)**

**(Unaudited)**

 
| ** **                                                               | ** ** | **For the Three Months  Ended March 31,** | ** ** |
|--------------------------------------------------------------------------|------------|--------------------------------------------------------------------|------------|
| ** **                                                               | ** ** | **2009**                                                           | ** ** | **2008** | ** ** |
|                                                                     |       |                                                               |       |   |   |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION                         |       |                                                               |       |   |   |
| Cash paid during the period for:                                         |       |                                                               |       |   |   |
| Interest                                                                 |       | $                                                                  | 364,136    |   | $ | 77,750 |   |
| Non-cash investing transactions:                                         |       |                                                               |       |   |   |
| Unrealized gain on investment securities available-for-sale              |       | $                                                                  | 30,526     |   | $ | 121,449 |   |
| Available-for-sale investment securities purchased, but not yet  settled |       | $                                                                  | 1,009,498  |   | $ | — |   |

 

SeeNotes to Financial Statements.

 

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**SOLERANATIONAL BANCORP, INC.**

 

# **UNAUDITED CONDENSED NOTES TOCONSOLIDATED FINANCIAL STATEMENTS**

#  

**NOTE 1 — SUMMARY OF ORGANIZATION**

 

SoleraNational Bancorp, Inc. (the “Company”), is a Delaware corporation that wasincorporated in 2006 to organize and serve as the holding company for SoleraNational Bank (the “Bank”), a national bank that opened for business on September 10,2007.  Solera National Bank is afull-service community, commercial bank headquartered in Lakewood, Coloradoserving the Denver metropolitan area.

 

**NOTE 2 — BASIS OF PRESENTATION**

 

Theaccompanying unaudited condensed consolidated financial statements contain alladjustments (consisting only of normal recurring adjustments) which, in theopinion of management, are necessary to present fairly the financial positionof the Company as of March 31, 2009, and the results of its operations forthe three months ended March 31, 2009 and 2008.  Cash flows are presented for the three monthsended March 31, 2009 and 2008.  Certain reclassifications have beenmade to the consolidated financial statements and related notes of priorperiods to conform to the current presentation. These reclassifications had noimpact on stockholders’ equity or net loss for the periods. Additionally,certain information and footnote disclosures normally included in financialstatements have been condensed or omitted pursuant to rules andregulations of the U.S. Securities and Exchange Commission.  The Companybelieves that the disclosures in the unaudited condensed consolidated financialstatements are adequate to make the information presented not misleading. However, these unaudited condensed consolidated financial statements should beread in conjunction with the consolidated financial statements and footnotesthereto included in the Company’s Annual Report on Form 10-K as of and forthe year ended December 31, 2008.

 

TheCompany received approval as a bank in organization in the first quarter of2007, conducted an initial closing of its common stock offering and commencedbanking operations during the third quarter of 2007.  Successfulcompletion of the Company’s development program and, ultimately, the attainmentof profitable operations are dependent on future events, including thesuccessful execution of the Company’s business plan and achieving a level ofrevenue adequate to support the Company’s cost structure.

 

**CriticalAccounting Policies**

 

Income taxes:  Deferredtaxes are provided on a liability method whereby deferred tax assets arerecognized for deductible temporary differences and operating losscarryforwards, and deferred tax liabilities are recognized for taxabletemporary differences.  Temporarydifferences are the differences between the reported amounts of assets andliabilities and their tax basis. Deferred tax assets are reduced by a valuation allowance when, in theopinion of management, it is more likely than not that some portion or all ofthe deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects ofchanges in tax laws and rates on the date of the enactment.

 

Securities available-for-sale: Securities available-for-sale are reported at fair value utilizing Level2 inputs (see Note 11).  For thesesecurities, the Company obtains fair value measurements from independentpricing services.  The fair valuemeasurements consider observable data that may include dealer quotes, marketspreads, cash flows, the U.S. Treasury yield curve, live trading levels, tradeexecution data, market consensus prepayment speeds, credit information and thebonds’ terms and conditions, among other things.

 

Securities are also evaluated for impairmentutilizing criteria such as the magnitude and duration of the decline and theintent and ability of the Company to retain the security for a period of timesufficient to allow for recovery of the value. If a decline in value below amortized cost is determined to beother-than-temporary, which does not necessarily indicate that the decline ispermanent, but indicates that the prospects for a near-term recovery of valueis not favorable, the value of the security is reduced and a charge to earningsis recognized.

 

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Stock-based compensation:  The Company accounts forstock-based compensation to employees as outlined in FASB Statement No. 123(R),*Share-Based Payment*, (SFAS 123R).  The cost ofemployee services received in exchange for an award of equity instruments isbased on the grant-date fair value of the award.

 

Provision for loan losses: The allowance for loan losses represents the Company’s recognition ofthe risks of extending credit and its evaluation of the loan portfolio. Theallowance for loan losses is maintained at a level considered adequate toprovide for probable loan losses based on management’s assessment of variousfactors affecting the loan portfolio, including a review of problem loans,business conditions, historical loss experience, evaluation of the quality ofthe underlying collateral, and holding and disposal costs. The allowance forloan losses is increased by provisions charged to expense and reduced by loanscharged off, net of recoveries.  Loanlosses are charged against the allowance for loan losses when managementbelieves the loan balance is uncollectible.

 

The Company hasestablished a formal process for determining an adequate allowance for loanlosses.  The allowance for loan lossescalculation process has two components. The first component represents the allowance for loan losses forimpaired loans computed in accordance with FASB Statement No. 114, *Accounting by Creditors for Impairment of a Loan*(SFAS 114 Component), as amended by FASB Statement No. 118, *Accounting by Creditors for Impairment of a Loan —Income Recognition and Disclosures - an amendment of FASB Statement No. 114*.  To determine the SFAS 114 Component, collateraldependent impaired loans are evaluated using internal analyses as well asthird-party information, such as appraisals. If an impaired loan is unsecured, it is evaluated using a discountedcash flow of the payments expected over the life of the loan using the loan’seffective interest rate and giving consideration to currently existing factorsthat would impact the amount or timing of the cash flows.  The second component is the allowance forloan losses calculated under FASB Statement No. 5, *Accounting for Contingencies* (SFAS 5Component), and represents the estimated probable losses inherent within theportfolio due to uncertainties in economic conditions, delays in obtaininginformation about a borrower’s financial condition, delinquent loans that havenot been determined to be impaired, results of internal and external loanreviews, and other factors.  Thiscomponent of the allowance for loan losses is calculated by assigning aprobable loss range, to each identified risk factor.  The recorded allowance for loan losses is theaggregate of the SFAS 114 Component and SFAS 5 Component.

 

**RecentlyIssued Accounting Pronouncements**

 

In April 2009, theFASB issued FSP FAS 115-2 and FAS 124-2, *Recognitionand Presentation of Other-Than-Temporary Impairments* (FSP FAS115-2/124-2). FSP FAS 115-2/124-2 requires entities toseparate an other-than-temporary impairment of a debt security into twocomponents when there are credit related losses associated with the impaireddebt security for which management asserts that it does not have the intent tosell the security, and it is more likely than not that it will not be requiredto sell the security before recovery of its cost basis. The amount of theother-than-temporary impairment related to a credit loss is recognized inearnings, and the amount of the other-than-temporary impairment related toother factors is recorded in other comprehensive loss. FSP FAS115-2/124-2 is effective for periods ending after June 15,2009, with early adoption permitted for periods ending after March 15,2009. The Company has elected to adopt FSP FAS 115-2/124-2effective for the quarter ending June 30, 2009. The Company is currentlyevaluating the impact that the adoption of this Statement will have on itsfinancial position and results of operations.

 

In April 2009, the FASB issued FSP FAS157-4, *Determining Fair Value When Volume and Levelof Activity for the Asset or Liability Have Significantly Decreased andIdentifying Transactions that are Not Orderly* (FSP FAS 157-4).Under FSP FAS 157-4, if an entity determines that there has been asignificant decrease in the volume and level of activity for the asset or theliability in relation to the normal market activity for the asset or liability(or similar assets or liabilities), then transactions or quoted prices may notaccurately reflect fair value. In addition, if there is evidence that the transactionfor the asset or liability is not orderly, the entity shall place little, ifany weight on that transaction price as an indicator of fair value. FSP FAS 157-4is effective for periods ending after June 15, 2009, with early adoptionpermitted for periods ending after March 15, 2009. The Company has electedto adopt FSP FAS 157 effective for the quarter ending June 30, 2009. TheCompany is currently evaluating the impact that the adoption of this Statementwill have on its financial position and results of operations.

 

In April 2009, the FASB issued FSP FAS107-1 and APB 28-1, *Interim Disclosures aboutFair Value of Financial Instruments* (FSP FAS 107-1 and APB 28-1).FSP FAS 107-1 and APB 28-1 require disclosures about fair value 

 

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of financial instruments in interim and annualfinancial statements. FSP FAS 107-1 and APB 28-1 are effective forperiods ending after June 15, 2009, with early adoption permitted forperiods ending after March 15, 2009. The Company has elected to adopt FSPFAS 107-1 and APB 28-1 effective for the quarter ending June 30,2009. The adoption will not have an impact on the Company’s financial positionand results of operations.

 

**NOTE 3 — INVESTMENTS**

 

The amortized costs and estimated fair values ofinvestment securities as of March 31, 2009 and December 31, 2008 areas follows:

 
| ** **                              | ** ** | **March 31, 2009**         | ** ** |
|-----------------------------------------|------------|---------------------------------|------------|
| ** **                              | ** ** | ** **                      | ** ** | **Gross** | ** ** | **Gross** | ** ** | ** ** | ** ** |
| ** **                              | ** ** | **Amortized**                   | ** ** | **Unrealized** | ** ** | **Unrealized** | ** ** | **Estimated** | ** ** |
| ** **                              | ** ** | **Cost**                        | ** ** | **Gains** | ** ** | **Losses** | ** ** | **Fair Value** | ** ** |
| **Securities available-for-sale:**      |       |                            |       |   |   |   |   |   |   |
| U.S. government agencies                |       | $                               | 4,705,050  |   | $ | 77,958 |   | $ | — |   | $ | 4,783,008 |   |
| Corporate                               |       | 3,992,412                       |       | 3,046 |   | (178,490 | ) | 3,816,968 |   |
| State and municipal                     |       | 15,549,842                      |       | 61,906 |   | (243,600 | ) | 15,368,148 |   |
| Mortgage-backed securities              |       | 28,058,230                      |       | 485,313 |   | (27,571 | ) | 28,515,972 |   |
| **Total securities available-for-sale** |       | $                               | 52,305,534 |   | $ | 628,223 |   | $ | (449,661 | ) | $ | 52,484,096 |   |
|                                    |       |                            |       |   |   |   |   |   |   |
| ** **                              | ** ** | **December 31, 2008** | ** ** |
| ** **                              | ** ** | ** **                      | ** ** | **Gross** | ** ** | **Gross** | ** ** | ** ** | ** ** |
| ** **                              | ** ** | **Amortized**                   | ** ** | **Unrealized** | ** ** | **Unrealized** | ** ** | **Estimated** | ** ** |
| ** **                              | ** ** | **Cost**                        | ** ** | **Gains** | ** ** | **Losses** | ** ** | **Fair Value** | ** ** |
| **Securities available-for-sale:**      |       |                            |       |   |   |   |   |   |   |
| U.S. government agencies                |       | $                               | 5,700,100  |   | $ | 46,500 |   | $ | (866 | ) | $ | 5,745,734 |   |
| Corporate                               |       | 1,516,323                       |       | 3,475 |   | (16,236 | ) | 1,503,562 |   |
| State and municipal                     |       | 3,043,274                       |       | 2,109 |   | (115,545 | ) | 2,929,838 |   |
| Mortgage-backed securities              |       | 31,149,728                      |       | 345,360 |   | (116,761 | ) | 31,378,327 |   |
| **Total securities available-for-sale** |       | $                               | 41,409,425 |   | $ | 397,444 |   | $ | (249,408 | ) | $ | 41,557,461 |   |

 

Management evaluates investment securities forother-than-temporary impairment taking into consideration the extent and lengthof time the fair value has been less than cost, the financial condition of the issuerand whether the Company has the intent and ability to retain the investment fora period of time sufficient to allow for any anticipated recovery in estimatedfair value.  All individual securitiesthat have been in a continuous unrealized loss position for 12 months or longerat March 31, 2009, have fluctuated in value since their purchase dates asa result of changes in market interest rates and not as a result of theunderlying issuer’s ability to repay. Management has reviewed the credit rating for all securities in acontinuous unrealized loss position for 12 months or longer and determined thatall securities are highly rated. Additionally, the Company has the ability and intent to hold thesesecurities until their fair value recovers to their cost, which may be untilmaturity. Accordingly, as of March 31, 2009, no declines in value aredeemed to be other than temporary.

 

The Company recorded a net unrealized gain in theinvestment portfolio of $179,000 at March 31, 2009.  This was an improvement over the $148,000unrealized gain at December 31, 2008.

 

The Company sold thirteen securities during the firstquarter 2009 for a net realized gain of $77,000 and the Company sold sixsecurities during the first quarter 2008 for a realized gain of $40,000.

 

Securities with carrying values of $10.3 million at March 31,2009 and $15.4 million at December 31, 2008, were pledged as collateral tosecure borrowings from the FHLB, public deposits and for other purposes asrequired or permitted by law.

 

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**NOTE 4 — LOANS**

 

Loans consisted of the following:

 
| ** **                         | ** **                            | **March 31, 2009** | ** ** | **December 31, 2008** | ** ** |
|------------------------------------|---------------------------------------|------------------------------|------------|---------------------------------|------------|
| Real estate – commercial      |                                  | $                            | 13,613,557 |                            | $          | 7,478,806 |   |
| Real estate – residential     |                                  | 5,224,006                    |       | 5,043,352                       |       |
| Construction and land  development |                                  | 6,220,904                    |       | 3,848,555                       |       |
| Commercial and industrial          |                                  | 5,043,029                    |       | 4,083,633                       |       |
| Consumer                           |                                  | 964,085                      |       | 958,611                         |       |
| Gross loans                        |                                  | 31,065,581                   |       | 21,412,957                      |       |
| Less:                              | Allowance for loan losses             |                         | (385,500   | )                               | (268,000   | ) |
|                               | Deferred loan (fees) /  expenses, net |                         | (118,276   | )                               | (56,747    | ) |
| Loans, net                         |                                  | $                            | 30,561,805 |                            | $          | 21,088,210 |   |

 

During the first three months of2009 and all of 2008, no loans were impaired, transferred to foreclosedproperties or past due more than 90 days.

 

Inthe ordinary course of business, and only if consistent with permissibleexceptions to Section 402 of the Sarbanes- Oxley Act of 2002, the Bank maymake loans to directors, executive officers, principal stockholders (holders ofmore than five percent of the outstanding common shares) and the businesseswith which they are associated.  In theCompany’s opinion, all loans and loan commitments to such parties are made onsubstantially the same terms, including interest rates and collateral, as thoseprevailing at the time for comparable transactions with other persons.

 

There were approximately $2.6 million in loansreceivable from related parties at March 31, 2009 and December 31,2008.

 

**NOTE 5 — ALLOWANCE FOR LOAN LOSSES**

 

Activityin the allowance for loan losses for the first three months of 2009 and 2008 issummarized as follows:

 
| ** **                                 | ** ** | **Quarter Ended**       | ** ** |
|--------------------------------------------|------------|-------------------------|------------|
| ** **                                 | ** ** | **March 31, 2009** | ** ** | **March 31, 2008** | ** ** |
|                                       |       |                    |       |   |   |
| Balance, beginning of period               |       | $                       | 268,000    |   | $ | 47,396 |   |
| Loans charged off                          |       | —                  |       | — |   |
| Recoveries on loans previously charged off |       | —                  |       | — |   |
| Provision for loan losses                  |       | 117,500                 |       | 37,066 |   |
| Balance, end of period                     |       | $                       | 385,500    |   | $ | 84,462 |   |

 

**NOTE 6 — DEPOSITS**

 

Deposits are summarized as follows:

 
| ** **                                     | ** ** | **March 31, 2009** | ** ** | **December 31, 2008** | ** ** |
|------------------------------------------------|------------|-------------------------|------------|----------------------------|------------|
| ** **                                     | ** ** | **Amount**              | ** ** | **% of   Total**           | ** ** | **Amount** | ** ** | **% of   Total** | ** ** |
| Noninterest-bearing demand                     |       | $                       | 5,170,823  |                       | 9          | % | $ | 3,910,236 |   | 10 | % |
| Interest-bearing demand                        |       | 4,372,237               |       | 8                          |       | 2,603,923 |   | 7 |   |
| Money market accounts                          |       | 4,745,634               |       | 9                          |       | 6,488,427 |   | 17 |   |
| Savings accounts                               |       | 3,929,886               |       | 7                          |       | 384,833 |   | 1 |   |
| Certificates of deposit, less than $100,000    |       | 14,958,168              |       | 27                         |       | 6,521,937 |   | 18 |   |
| Certificates of deposit, greater than $100,000 |       | 22,311,361              |       | 40                         |       | 17,752,870 |   | 47 |   |
| Total deposits                                 |       | $                       | 55,488,109 |                       | 100        | % | $ | 37,662,226 |   | 100 | % |

 

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In the ordinary course ofbusiness, certain officers, directors, stockholders, and employees of the Bankhave deposits with the Bank.  In the Bank’sopinion, all deposit relationships with such parties are made on substantiallythe same terms including interest rates and maturities, as those prevailing atthe time for comparable transactions with other persons.  The balance of related party deposits at March 31,2009 and December 31, 2008 was approximately $1.8 million and $2.7million, respectively.

 

**NOTE 7 — STOCK-BASED COMPENSATION**

 

The Company’s 2007 Stock Incentive Plan (the “Plan”)was approved by the Company’s Board of Directors (the “Board”) with an effectivedate of September 10, 2007 and was approved by the Company’s stockholdersat the annual meeting held on June 17, 2008.  Under the terms of the Plan, officers and keyemployees may be granted both nonqualified and incentive stock options anddirectors and other consultants, who are not also officers or employees, mayonly be granted nonqualified stock options. The Board reserved 510,734 sharesof common stock for issuance under the Plan.  The Plan provides foroptions to purchase shares of common stock at a price not less than 100% of thefair market value of the stock on the date of grant.  Stock options expire no later than ten yearsfrom the date of the grant and generally vest over four years.  The Plan provides for accelerated vesting ifthere is a change of control, as defined in the Plan.  The Company recognized stock-basedcompensation cost of approximately $49,000 and $62,000 during the three monthsended March 31, 2009 and 2008, respectively.  No tax benefit related to stock-basedcompensation will be recognized until the Company is profitable.

 

The Company accounts for its stock-based compensationunder the provisions of SFAS 123R.  Thefair value of each option grant is estimated on the date of grant using theBlack-Scholes-Merton option pricing model. The Company granted 13,000 options during the first quarter 2009 asincentive compensation to two Bank officers. No options were granted during the first quarter of 2008.

 

During the three months ended March 31, 2009, nooptions were forfeited; however, 16,499 vested options expiredunexercised.  No options were exercisedduring the three months ended March 31, 2009.  During this same period, the Companyrecognized expense for approximately 23,000 options, representing a pro-rataamount of the options earned during the first quarter 2009 that are expected tovest.  As of March 31, 2009, therewas approximately $627,000 of total unrecognized compensation cost related tothe outstanding stock options that will be recognized over a weighted-averageperiod of 2.6 years.

 

The following is a summary of the Company’soutstanding stock options at March 31, 2009:

 
| ** **                           | ** ** | **Options** | ** ** | **Weighted-  Average  Grant Date  Fair Value** | ** ** |
|--------------------------------------|------------|-------------|------------|------------------------------------------------|------------|
| Outstanding at  January 1, 2009 |       | 360,255     |       | $                                              | 2.71       |   |
| Granted                              |       | 13,000      |       | 1.43                                           |       |
| Exercised                            |       | —      |       | —                                         |       |
| Forfeited                            |       | —      |       | —                                         |       |
| Expired                              |       | (16,499     | )          | 2.75                                           |       |
| Outstanding at March 31, 2009   |       | 356,756     |       | $                                              | 2.66       |   |

 

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**NOTE 8 — NONINTEREST EXPENSE**

 

The following table details the items comprising other general andadministrative expenses:

 
| ** **                        | ** ** | **Three Months Ended  March 31,** | ** ** |
|-----------------------------------|------------|----------------------------------------|------------|
| ** **                        | ** ** | **2009**                               | ** ** | **2008** | ** ** |
| Marketing and promotions          |       | $                                      | 20,569     |   | $ | 67,159 |   |
| Data processing                   |       | 66,290                                 |       | 46,909 |   |
| Regulatory and reporting fees     |       | 34,324                                 |       | 13,756 |   |
| Printing, stationery and supplies |       | 6,866                                  |       | 9,436 |   |
| Telephone/communication           |       | 10,849                                 |       | 7,183 |   |
| Travel and entertainment          |       | 6,675                                  |       | 4,642 |   |
| Postage and shipping              |       | 6,154                                  |       | 1,952 |   |
| Training and education            |       | 2,261                                  |       | 2,485 |   |
| Insurance                         |       | 4,803                                  |       | 4,745 |   |
| Dues and memberships              |       | 10,262                                 |       | 5,050 |   |
| Miscellaneous                     |       | 11,683                                 |       | 3,897 |   |
| Total                             |       | $                                      | 180,736    |   | $ | 167,214 |   |

 

**NOTE 9 — INCOME TAXES**

 

Deferredtaxes are a result of differences between income tax accounting and generallyaccepted accounting principles with respect to income and expenserecognition.  The following is a summaryof the components of the net deferred tax asset account recognized in theaccompanying consolidated statements of financial condition:

 
| ** **                                           | ** ** | **March 31, 2009** | ** ** | **December 31, 2008** | ** ** |
|------------------------------------------------------|------------|-------------------------|------------|----------------------------|------------|
| Deferred tax assets:                                 |       |                    |       |                       |       |
| Start-up and organizational expenses                 |       | $                       | 1,185,571  |                       | $          | 1,207,526 |   |
| Net operating loss carryforward                      |       | 1,236,532               |       | 1,096,123                  |       |
| Allowance for loan losses                            |       | 119,622                 |       | 76,082                     |       |
| Non-qualified stock options                          |       | 19,117                  |       | 16,045                     |       |
| Other                                                |       | 46,928                  |       | 40,651                     |       |
| Total deferred tax assets                            |       | 2,607,770               |       | 2,436,427                  |       |
| Deferred tax liabilities:                            |       |                    |       |                       |       |
| Net unrealized gain on securities available-for-sale |       | (66,168                 | )          | (54,856                    | )          |
| Federal Home Loan Bank stock dividend                |       | (5,447                  | )          | (4,261                     | )          |
| Tax over book depreciation                           |       | (24,657                 | )          | (23,814                    | )          |
| Total deferred tax liabilities                       |       | (96,272                 | )          | (82,931                    | )          |
|                                                 |       |                    |       |                       |       |
| Net deferred tax assets                              |       | 2,511,498               |       | 2,353,496                  |       |
|                                                 |       |                    |       |                       |       |
| Valuation allowance                                  |       | (2,511,498              | )          | (2,353,496                 | )          |
|                                                 |       |                    |       |                       |       |
| Net deferred taxes                                   |       | $                       | —     |                       | $          | — |   |

 

TheCompany has provided a 100% valuation allowance for its net deferred tax assetdue to uncertainty of realization during the carryforward period.  As of March 31, 2009, the Company hasnet operating loss carryforwards of approximately $3.3 million for federalincome tax purposes.  Federal netoperating loss carryforwards, to the extent not used, will expire beginning in2027.

 

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The income tax provision differs from the amount ofincome tax determined by applying the U.S. federal income tax rate of 35% topretax income from continuing operations for the three months ended March 31,2009 and the twelve months ended December 31, 2008 due to the following:

 
| ** **                                | ** ** | **March 31, 2009** | ** ** | **December 31, 2008** | ** ** |
|-------------------------------------------|------------|-------------------------|------------|----------------------------|------------|
| Computed “expected” tax benefit |       | $                       | (168,798   | )                          | $          | (774,874 | ) |
| Change in income taxes resulting from:    |       |                    |       |                       |       |
| Change in valuation allowance             |       | 158,002                 |       | 698,020                    |       |
| Other                                     |       | 10,796                  |       | 76,854                     |       |
| Income tax provision                      |       | $                       | —     |                       | $          | — |   |

 

**NOTE 10 —****COMMITMENTSAND CONTINGENCIES**

 

The Company is a party to credit related financial instruments withoff-balance-sheet risk in the normal course of business to meet the financingneeds of its customers.  These financialinstruments include commitments to extend credit and letters of credit.  Such commitments involve, to varying degrees,elements of credit and interest rate risk in excess of the amount recognized inthe consolidated balance sheet.  TheCompany’s exposure to credit loss is represented by the contractual amount ofthese commitments.  The Company followsthe same credit policies in making commitments as it does for on-balance-sheetinstruments.

 

At March 31,2009 and December 31, 2008 the following financial instruments wereoutstanding whose contract amounts represent credit risk:

 
| ** **                                                             | ** ** | **March 31, 2009** | ** ** | **December 31, 2008** | ** ** |
|------------------------------------------------------------------------|------------|-------------------------|------------|----------------------------|------------|
| Financial instruments whose contractual amounts represent credit risk: |       |                    |       |                       |       |
| Commitments to extend credit                                           |       | $                       | 9,585,718  |                       | $          | 6,715,658 |   |
| Letters of credit                                                      |       | —                  |       | —                     |       |
| Total commitments                                                      |       | $                       | 9,585,718  |                       | $          | 6,715,658 |   |

 

Commitments to extend credit are agreements to lend to a customer aslong as there is no violation of any condition established in thecontract.  Commitments generally havefixed expiration dates or other termination clauses and may require payment ofa fee.  Since many of the commitments areexpected to expire without being drawn upon, the commitments do not necessarilyrepresent future cash requirements.  TheCompany evaluates each customer’s creditworthiness on a case-by-casebasis.  The amount of collateral obtainedis based on management’s credit evaluation. Collateral held varies, but may include accounts receivable, inventory,property, plant and equipment and income producing commercial properties.

 

Letters of credit are conditional commitments issued by the Company toguarantee the performance of a customer to a third party.  The credit risk involved in issuing lettersof credit is essentially the same as that involved in extending loan facilitiesto customers.

 

**NOTE 11****—****FAIR VALUE MEASUREMENTS(SFAS 157 DISCLOSURE)**

 

TheCompany determines the fair market values of its financial instruments based onthe fair value hierarchy established in SFAS No. 157, *Fair ValueMeasurements* (SFAS 157), which requires an entity to maximize theuse of observable inputs and minimize the use of unobservable inputs whenmeasuring fair value.  The standarddescribes three levels of inputs, as follows, that may be used to measure fairvalue.

 

Level1 —      inputsare unadjusted quoted prices in active markets for identical assets orliabilities that the Company has the ability to access at the measurement date.

 

Level2 —      inputsare other than quoted prices included in Level 1 that are observable for theasset or liability either directly or indirectly, such as quoted prices forsimilar assets or liabilities; quoted prices in markets that are not active; ormodel-based valuation techniques for which all significant assumptions areobservable in the market.

 

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Level3 —      valuationis generated from model-based techniques that use at least one significantassumption not observable in the market. These unobservable assumptions reflect estimates of assumptions thatmarket participants would use in pricing the asset or liability.  Valuation techniques include use of optionpricing models, discounted cash flow models and similar techniques.

 

TheCompany carries its available-for-sale securities at fair value.  Fair value measurement is obtained from independent pricingservices which utilize observable data that may include dealer quotes, marketspreads, cash flows, the U.S. Treasury yield curve, live trading levels, tradeexecution data, market consensus prepayment speeds, credit information and thebonds’ terms and conditions, among other things.  Asof March 31, 2009 and December 31, 2008, all of the Company’savailable-for-sale securities were valued using Level 2 inputs.

 

**NOTE 12****—****SUBSEQUENT EVENTS**

 

# Effective April 28, 2009, the Company enteredinto a separation agreement with an employee who also served as a director forboth the Company and the Bank.  TheCompany will incur a one-time charge of $53,333 associated with this separationagreement during the second quarter of 2009.

 

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# **ITEM 2. MANAGEMENT’S DISCUSSION ANDANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**

#  

Thefollowing discussion and analysis presents the Company’s consolidated financialcondition as of March 31, 2009 and results of operations for the threemonths ended March 31, 2009.  Thediscussion should be read in conjunction with the financial statements and thenotes related thereto which appear elsewhere in this Quarterly Report on Form 10-Q.

 

**EXECUTIVE OVERVIEW**

 

We are a Delaware corporation that wasincorporated on January 12, 2006 to organize and serve as the holdingcompany for Solera National Bank, a national bank that opened for business on September 10,2007.  Solera National Bank is afull-service commercial bank headquartered in Lakewood, Colorado serving theDenver metropolitan area.  Our mainbanking office is located at 319 S. Sheridan Blvd., Lakewood, Colorado80226.  Our telephone number is (303)209-8600.

 

We offer a broad range of commercial andconsumer banking services to small and medium-sized businesses, licensedprofessionals and individuals who are particularly responsive to thepersonalized service that Solera National Bank provides to its customers.  We believe that local ownership and controlallows the Bank to serve customers more efficiently and effectively.  Solera National Bank competes on the basis ofproviding a unique and personalized banking experience combined with a fullrange of services, customized and tailored to fit the individual needs of itsclients.  Solera National Bank serves theentire market area and, in addition, has a special niche focus on the localHispanic population due to the significant growth of this demographic.

 

****Recent Economic Events****

 

The global and U.S. economies continue to experience significantly reduced business activity during the first quarter of 2009.  Real Gross Domestic Product (GDP) — the output of goods and services produced by labor and property located in the United States — decreased at an annual rate of 6.1% in the first quarter of 2009, according to advance estimates released by the Bureau of Economic Analysis.  In the fourth quarter of 2008, real GDP decreased at an annual rate of 6.3%.  Our lending operations are entirely in the State of Colorado which has not been immune to the weakened economy.  Unemployment reached 7.2% by the end of the first quarter. Most predictions are for increasing unemployment throughout 2009. According to a recent Manpower survey, Denver metropolitan area employers planning to hire in 2009 declined to 15% from 32% in the fourth quarter of 2008.

 

Dramatic declines in thehousing market during the past year, with falling home prices and increasingforeclosures and unemployment, have resulted in significant write-downs ofasset values by financial institutions. These write-downs, initially ofmortgage-backed securities but spreading to other areas of the credit market,have caused many financial institutions to seek additional capital, to mergewith larger and stronger institutions or, in some cases, to fail.  Many banks, such as ours, that were notunderwriting subprime residential real estate loans have not experienced thesignificant losses in their loan and investment portfolios or liquidityconcerns that larger institutions have experienced.

 

To combat the severerecession, the federal government and the Federal Reserve have been extremelyactive in setting monetary policy.  TheFederal Reserve has lowered both the federal funds benchmark rate and thediscount rate by 400 basis points in 2008, and at the end of the first quarterof 2009, the federal funds target rate was approximately 0% and the discountrate was 0.50%.

 

We are not aware of any known trends, events or uncertaintiesparticular to our Company that will have or are reasonably likely to have amaterial adverse effect on the following:

 

***InvestmentSecurities***:  We do not hold mortgage-backed securitiesbacked by subprime mortgages in our investment portfolio or collateralized debtobligations backed directly or indirectly by such mortgage-backed securities orother low-quality loans.  Nor do we owncorporate bonds and other debt instruments whose values have been impacted bythe deterioration of the financial markets. We do not hold any preferred or common stock of Fannie Mae or FreddieMac.

 

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***Loans— Credit Quality***:  We have not engaged in the origination ofsubprime mortgage loans or in subprime lending. We have not engaged in real estate development lending except inaccordance with our rigorous underwriting standards involving substantialcollateral protection.  To date, we havenot experienced any deterioration in credit quality.  As of March 31, 2009 we have no past dueloans and no nonaccrual loans.

 

***Liquidity***: We have not experienced any liquidity shortfalls and we have determinedthat we possess adequate sources of liquidity for all of our reasonablyforeseeable needs.  We recognize thatliquidity is of heightened concern to all banks given the recent economicevents.  However, we are not aware of anyregulatory or investor concerns regarding our capital, asset quality or fundingsources.

 

****Comparative Results ofOperations for the Three Months Ended March 31, 2009 and 2008****

 

Thefollowing discussion focuses on the Company’s financial condition and resultsof operations for the three months ended March 31, 2009 compared to thefinancial condition and results of operations for the three months ended March 31,2008.  The Company’s principal operationsfor each of these periods consisted of the operations of Solera National Bank,which opened for business September 10, 2007.

 

As of March 31, 2009, the Company had totalassets of $87.4 million, an increase of $19.6 million, or 29%, from December 31,2008.  Net loans increased $9.5 million,or 45%, from $21.1 million at December 31, 2008 to $30.6 million at March 31,2009.  Similarly, the Company’s totaldeposits grew $17.8 million, or 47%, from $37.7 million at December 31,2008 to $55.5 million as of March 31, 2009.   This growth was achieved as a result of oursuccessful business development program.

 

**Thefollowing table presents, for the periods indicated, average assets,liabilities and stockholders’ equity, as well as the net interest income fromaverage interest-earning assets and the resultant annualized yields expressedin percentages.**

 

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****Table 1****

 
| ** **                                                                  | ** ** | **Three Months Ended  March 31, 2009** | ** ** | **Three Months Ended  March 31, 2008** | ** ** |
|-----------------------------------------------------------------------------|------------|---------------------------------------------|------------|---------------------------------------------|------------|
| ** **                                                                  | ** ** | **Average   Balance**                       | ** ** | **Interest**                                | ** ** | **Yield   /  Cost** | ** ** | **Average   Balance** | ** ** | **Interest** | ** ** | **Yield   /  Cost** | ** ** |
| **Assets:**                                                                 |       |                                        |       |                                        |       |   |   |   |   |   |   |   |   |
| Interest-earning assets:                                                    |       |                                        |       |                                        |       |   |   |   |   |   |   |   |   |
| Gross loans, net of unearned fees                                           |       | $                                           | 24,599,433 |                                        | $          | 313,751 |   | 5.17 | % | $ | 5,336,136 |   | $ | 87,162 |   | 6.57 | % |
| Investment securities**                                                     |       | 46,191,653                                  |       | 598,219                                     |       | 5.25 | % | 18,084,544 |   | 230,802 |   | 5.13 | % |
| FHLB and Federal Reserve Bank Stocks                                        |       | 1,073,482                                   |       | 10,093                                      |       | 3.81 | % | 525,000 |   | 7,875 |   | 6.03 | % |
| Federal funds sold                                                          |       | 1,423,900                                   |       | 987                                         |       | 0.28 | % | 4,351,538 |   | 37,175 |   | 3.44 | % |
| Interest-bearing deposits in banks                                          |       | —                                      |       | —                                      |       | — | % | 438,653 |   | 5,912 |   | 5.42 | % |
| Total interest-earning assets                                               |       | 73,288,468                                  |       | $                                           | 923,050    |   | 5.11 | % | 28,735,871 |   | $ | 368,926 |   | 5.16 | % |
| Noninterest-earning assets                                                  |       | 2,100,520                                   |       |                                        |       |   |   | 1,907,162 |   |   |   |   |   |
| Total assets                                                                |       | $                                           | 75,388,988 |                                        |       |   |   |   | $ | 30,643,033 |   |   |   |   |   |
|                                                                        |       |                                        |       |                                        |       |   |   |   |   |   |   |   |   |
| **Liabilities and Stockholders’ Equity:**                              |       |                                        |       |                                        |       |   |   |   |   |   |   |   |   |
| Interest-bearing liabilities:                                               |       |                                        |       |                                        |       |   |   |   |   |   |   |   |   |
| Money market and savings deposits                                           |       | $                                           | 6,928,227  |                                        | $          | 39,094 |   | 2.29 | % | $ | 4,228,868 |   | $ | 31,852 |   | 3.03 | % |
| Interest-bearing checking                                                   |       | 3,328,612                                   |       | 12,263                                      |       | 1.49 | % | 402,068 |   | 385 |   | 0.39 | % |
| Time deposits                                                               |       | 31,970,878                                  |       | 242,719                                     |       | 3.08 | % | 4,581,073 |   | 55,712 |   | 4.89 | % |
| Federal funds purchased and securities sold under agreements to  repurchase |       | 913,272                                     |       | 3,191                                       |       | 1.42 | % | — |   | — |   | — | % |
| Federal Home Loan Bank advances                                             |       | 10,000,000                                  |       | 92,154                                      |       | 3.74 | % | — |   | — |   | — | % |
| Other borrowings                                                            |       | 152,819                                     |       | 3,571                                       |       | 9.48 | % | 188,156 |   | 4,396 |   | 9.40 | % |
| Total interest-bearing liabilities                                          |       | 53,293,808                                  |       | $                                           | 392,992    |   | 2.99 | % | 9,400,165 |   | $ | 92,345 |   | 3.95 | % |
| Noninterest-bearing checking accounts                                       |       | 2,768,040                                   |       |                                        |       |   |   | 246,454 |   |   |   |   |   |
| Noninterest-bearing liabilities                                             |       | 363,097                                     |       |                                        |       |   |   | 226,956 |   |   |   |   |   |
| Stockholders’ equity                                                   |       | 18,964,053                                  |       |                                        |       |   |   | 20,769,458 |   |   |   |   |   |
| Total liabilities and stockholders’ equity                             |       | $                                           | 75,388,998 |                                        |       |   |   |   | $ | 30,643,033 |   |   |   |   |   |
|                                                                        |       |                                        |       |                                        |       |   |   |   |   |   |   |   |   |
| Net interest income                                                         |       |                                        |       | $                                           | 530,058    |   |   |   |   |   | $ | 276,581 |   |   |   |
|                                                                        |       |                                        |       |                                        |       |   |   |   |   |   |   |   |   |
| Net interest spread                                                         |       |                                        |       | 2.12                                        | %          |   |   |   |   | 1.21 | % |   |   |
|                                                                        |       |                                        |       |                                        |       |   |   |   |   |   |   |   |   |
| Net interest margin                                                         |       |                                        |       | 2.93                                        | %          |   |   |   |   | 3.87 | % |   |   |

 

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****  Yields on investment securities have not beenadjusted to a tax-equivalent basis.**

 

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**Thefollowing table presents the dollar amount of changes in interest and feeincome and interest expense for the major categories of interest-earning assetsand interest-bearing liabilities.  Theinformation details the changes attributable to a change in volume (i.e. changein average balance multiplied by the prior-period average rate) and changesattributable to a change in rate (i.e. change in average rate multiplied by thecurrent-period average balance).**

 

****Table 2****

 
| ** **                                                                  | ** ** | **Three Months Ended March 31, 2009 Compared to Three   Months Ended March 31, 2008** | ** ** |
|-----------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------------------------|------------|
| ** **                                                                  | ** ** | **Net Change**                                                                                  | ** ** | **Rate** | ** ** | **Volume** | ** ** |
| **Interest income:**                                                        |       |                                                                                            |       |   |   |   |   |
| Gross loans, net of unearned fees                                           |       | $                                                                                               | 226,589    |   | $ | (85,444 | ) | $ | 312,033 |   |
| Investment securities                                                       |       | 367,417                                                                                         |       | 13,697 |   | 353,720 |   |
| FHLB and Federal Reserve Bank stocks                                        |       | 2,218                                                                                           |       | (5,925 | ) | 8,143 |   |
| Federal funds sold                                                          |       | (36,188                                                                                         | )          | (11,169 | ) | (25,019 | ) |
| Interest-bearing deposits in banks                                          |       | (5,912                                                                                          | )          | — |   | (5,912 | ) |
| Total interest income                                                       |       | $                                                                                               | 554,124    |   | $ | (88,841 | ) | $ | 642,965 |   |
|                                                                        |       |                                                                                            |       |   |   |   |   |
| **Interest expense:**                                                       |       |                                                                                            |       |   |   |   |   |
| Money market and savings deposits                                           |       | $                                                                                               | 7,242      |   | $ | (12,763 | ) | $ | 20,005 |   |
| Interest-bearing checking                                                   |       | 11,878                                                                                          |       | 9,178 |   | 2,700 |   |
| Time deposits                                                               |       | 187,007                                                                                         |       | (144,063 | ) | 331,070 |   |
| Federal funds purchased and securities sold under agreements to  repurchase |       | 3,191                                                                                           |       | — |   | 3,191 |   |
| Federal Home Loan Bank advances                                             |       | 92,154                                                                                          |       | — |   | 92,154 |   |
| Other borrowings                                                            |       | (825                                                                                            | )          | 30 |   | (855 | ) |
| Total interest expense                                                      |       | $                                                                                               | 300,647    |   | $ | (147,618 | ) | $ | 448,265 |   |
|                                                                        |       |                                                                                            |       |   |   |   |   |
| **Net interest income**                                                     |       | $                                                                                               | 253,477    |   | $ | 58,777 |   | $ | 194,700 |   |

 

****NetInterest Income and Net Interest Margin****

 

Net interest income is the difference between interestand fee income, principally from loan and investment security portfolios, andinterest expense, principally on customer deposits and borrowings.  Net interest income is our principal source ofearnings.  Changes in net interest incomeresult from changes in volume, spread and margin. Volume refers to the averagedollar level of interest-earning assets and interest-bearing liabilities.  Spread refers to the difference between theaverage yield on interest-earning assets and the average cost ofinterest-bearing liabilities. Margin refers to net interest income divided byaverage interest-earning assets, and is influenced by the level and relativemix of interest-earning assets and interest-bearing liabilities.

 

The Federal Reserve Boardinfluences the general market rates of short-term interest, including thedeposit and loan rates offered by the Bank. The Bank’s loan portfolio issignificantly affected by changes in the prime interest rate.  The prime interest rate, which is the rateoffered on loans to borrowers with strong credit, was 7.25% on January 1,2008.  During the first quarter of 2008,the prime interest rate fell 200 basis points to end the quarter at 5.25%.  During 2008, it fell another 200 basis pointsto end the 2008 year at 3.25%.  The primeinterest rate remained at 3.25% for the first quarter of 2009.

 

The federal funds rate,which is the cost of immediately available, overnight funds, has moved in asimilar manner.  It averaged 3.17% duringthe first quarter of 2008 compared to 0.19% during the first quarter of 2009.

 

The impact of these decreases in interest rates can be seen in theCompany’s decreasing net interest margin, which declined 94 basis points, or24%, from the first quarter 2008 to the first quarter 2009.  As evident in Table 2, the reason for thisdecline is due to the declining rate environment; however, the impact has beenmitigated by the fact 

 

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that the Company’s volumes have drastically increased.   Since a substantial portion of the Bank’sloan portfolio is tied to the prime interest rate, the average yield on loanshas decreased from 6.57% at March 31, 2008 to 5.17% at March 31,2009.  However, the Bank’s average yieldon total interest-earning assets has only fallen 5 basis points, from 5.16%during the first quarter of 2008 to 5.11% during the first quarter of 2009, dueprimarily to a change in the asset mix from lower-yielding assets (federalfunds sold) to higher-yielding assets (loans and investments).  The Company’s balance sheet is currentlyasset sensitive, meaning that earning assets generally reprice more quicklythan interest-bearing liabilities. Therefore, the Company could experiencecompression in its net interest margin during periods of declining short-terminterest rates.

 

Total interest income was$923,000 for the first quarter of 2009, consisting primarily of interest oninvestment securities of $598,000 and interest and fees on loans of$314,000.  This compared to totalinterest income of $369,000 during the first quarter of 2008, consistingprimarily of interest on investment securities of $231,000, interest and feeson loans of $87,000 and interest on federal funds sold of $37,000.  Average loans, net of unearned fees,increased $19.3 million, from $5.3 million at March 31, 2008 to $24.6million at March 31, 2009.  Averageinvestment securities increased $28.1 million from $18.1 million at March 31,2008 to $46.2 million at March 31, 2009. As more of the Company’s resources were deployed in loans and investmentsecurities, average federal funds sold decreased $2.9 million from $4.4 millionat March 31, 2008 to $1.4 million at March 31, 2009.

 

Total interest expensewas $393,000 in the first quarter of 2009, an increase of $301,000 from $92,000during the first quarter of 2008. $206,000 of this increase was due to higher average deposits whichincreased $33.0 million from $9.2 million at March 31, 2008 to $42.2million at March 31, 2009.  Anadditional $92,000 of this increase was due to interest expense on $10.0million of Federal Home Loan Bank advances. Overall, the interest rate on total interest-bearing liabilitiesdecreased from 3.95% at March 31, 2008 to 2.99% at March 31, 2009;primarily due to the falling interest rate environment.

 

Net interest income was$530,000 in the first quarter of 2009, an increase of $253,000, or 92%, from$277,000 during the first quarter of 2008. This increase was primarily the result of increased volumes.  Our annualized net interest margin was 2.93%for the three months ended March 31, 2009 compared to 3.87% for the threemonths ended March 31, 2008.  Thenet interest margin compression was due to lower interest rates whichnegatively impacted the Bank given its asset sensitive balance sheet.

 

****Provisionfor Loan Losses****

 

We determine a provision for loan losses that weconsider sufficient to maintain an allowance to absorb probable losses inherentin our portfolio as of the balance sheet date. For additional informationconcerning this determination, see the section of this discussion and analysiscaptioned **“Allowancefor Loan Losses.”**

 

During the first threemonths of 2009, our provision for loan losses was $118,000 relating to thegrowth of our loan portfolio and the estimated probable losses inherent withinthe portfolio due to uncertainties in economic conditions.  There were no loans specifically reserved forunder the SFAS 114 Component of the loan loss reserve.  Furthermore, there were no charge-offs ornon-performing loans during this period.

 

****NoninterestIncome****

 

The noninterest incomefor the quarter ended March 31, 2009 was $150,000, an increase of $101,000from $49,000 at March 31, 2008.  TheCompany sold thirteen securities for a net gain of $77,000 during the firstquarter of 2009, compared to a net gain of $40,000 during the first quarter of2008 for the sale of securities.  Servicecharges on deposits increased $63,000 from $6,000 during the first quarter of2008 to $69,000 during the first quarter of 2009, due to the significantincrease in customer relationships. Sublease income remained constant, at $4,000, during the first quarterof 2008 and 2009, for offices within the Bank’s main office building that areleased to third parties.

 

****NoninterestExpense****

 

Our total noninterest expense was $1.0 million for the quarter ended March 31,2009, a 21%, or $184,000, increase from $861,000 at March 31, 2008.  This consisted of an increase in salaries andemployee benefits of $108,000, or 21%, related to the 21 full-time equivalentemployees as of March 31, 2009 compared to 16 full-time equivalentemployees as of March 31, 2008. Occupancy expense increased $18,000, or 15%, quarter-over-quarterprimarily 

 

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due to the re-occupancy of the Bank’s professional offices resulting inincreased rent expense.  Professionalfees increased $44,000, or 62%, quarter-over-quarter, primarily due toincreased fees for our external audit.

 

Other general andadministrative expenses increased $14,000, or 8%, quarter-over-quarter.  This increase was primarily the result of a$21,000 increase in regulatory and reporting fees primarily due to increases inFederal Deposit Insurance Corporation (FDIC) fees due to significant increasesin average deposit volumes, as well as increases in FDIC rates; a $19,000, or41%, increase in data processing fees due to increased customer volumes; $5,000increase in dues and memberships as members of the Bank’s management teamjoined more nonprofit organizations in an effort to increase communityawareness of the Bank’s products and services; $4,000 increase in postage andshipping primarily due to increased armored courier expenses as the result ofincreased branch activity; and $4,000 increase in telephone and communicationexpense primarily due to the re-occupancy of the Bank’s professional officeswhich required additional information technology and telephone lines; and an$8,000 increase in miscellaneous other expenses.  These increases were partially offset by a$47,000 decrease in marketing and promotions as the Company reduced some of itsmarketing expenditures.

 

****IncomeTaxes****

 

No federal or state taxexpense has been recorded for the quarters ended March 31, 2009 and 2008,based upon net operating losses.  Sinceit is uncertain that the Company will become profitable, the deferred taxbenefit accumulated to date has a full valuation allowance so that the netdeferred tax benefit at March 31, 2009 is $0.

 

****Financial Condition****

 

Customer deposits, Federal Home Loan Bank advances,and proceeds from the initial public offering completed in 2007 were primarilyinvested in loans and investment securities, resulting in total assets as of March 31,2009 of $87.4 million.

 

As of March 31,2009, stockholders’ equity was $18.6 million, as a result of the initial publicoffering, partially offset by the inception-to-date losses from start-upactivities and current operations.

 

****FederalHome Loan Bank (FHLB) and Federal Reserve Bank Stocks****

 

**At March 31,2009, the Bank had a total of $1.1 million invested in FHLB and Federal ReserveBank stocks carried at cost consisting of $448,000 in Federal Reserve Bankstock and $621,000 in FHLB stock.  Theseinvestments allow Solera National Bank to conduct business with these entities.  As of March 31, 2009, the FederalReserve Bank stock is yielding an average of 6.0% and the FHLB stock isyielding an average rate of 2.1%.**

 

****InvestmentSecurities****

 

Our investment portfolio serves as a source ofinterest income and, secondarily, as a source of liquidity and a managementtool for our interest rate sensitivity. We manage our investment portfolio according to a written investmentpolicy established by our Board of Directors.

 

At March 31, 2009,Solera National Bank’s securities consisted of available-for-sale securities of$52.5 million.  The following tableprovides additional detail on the Company’s investment securities as of March 31,2009 and December 31, 2008:

 
| ** **                              | ** ** | **March 31, 2009**    | ** ** | **December 31, 2008**     | ** ** |
|-----------------------------------------|------------|----------------------------|------------|--------------------------------|------------|
| ** **                              | ** ** | **Estimated Fair   Value** | ** ** | **Weighted   Average   Yield** | ** ** | **Estimated Fair   Value** | ** ** | **Weighted   Average   Yield** | ** ** |
| **Securities available-for-sale**       |       |                       |       |                           |       |   |   |   |   |
| U.S. government agencies                |       | $                          | 4,783,008  |                           | 4.93       | % | $ | 5,745,734 |   | 5.38 | % |
| Corporate                               |       | 3,816,968                  |       | 5.90                           |       | 1,503,562 |   | 5.99 |   |
| State and municipal                     |       | 15,368,148                 |       | 5.61                           |       | 2,929,838 |   | 5.59 |   |
| Mortgage-backed securities              |       | 28,515,972                 |       | 5.05                           |       | 31,378,327 |   | 5.20 |   |
| **Total securities available-for-sale** |       | $                          | 52,484,096 |                           | 5.26       | % | $ | 41,557,461 |   | 5.28 | % |

 

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****Loan Portfolio****

 

Our primary focus is income from interest on loans.The following table presents the composition of our loan portfolio by categoryas of the dates indicated:

 
| ** **                        | ** **                            | **March 31, 2009** | ** ** | **December 31, 2008** | ** ** |
|-----------------------------------|---------------------------------------|-------------------------|------------|----------------------------|------------|
| ** **                        | ** **                            | **Amount**              | ** ** | **% of   Total**           | ** ** | **Amount** | ** ** | **% of   Total** | ** ** |
| Real estate — commercial     |                                  | $                       | 13,613,557 |                       | 44         | % | $ | 7,478,806 |   | 35 | % |
| Real estate — residential    |                                  | 5,224,006               |       | 17                         |       | 5,043,352 |   | 24 |   |
| Construction and land development |                                  | 6,220,904               |       | 20                         |       | 3,848,555 |   | 18 |   |
| Commercial and industrial         |                                  | 5,043,029               |       | 16                         |       | 4,083,633 |   | 19 |   |
| Consumer                          |                                  | 964,085                 |       | 3                          |       | 958,611 |   | 4 |   |
| Gross loans                       |                                  | 31,065,581              |       | 100                        | %          | 21,412,957 |   | 100 | % |
| Less:                             | Allowance  for loan losses            |                    | (385,500   | )                          |       |   | (268,000 | ) |   |   |
|                              | Deferred  loan (fees) / expenses, net |                    | (118,276   | )                          |       |   | (56,747 | ) |   |   |
| Loans,  net                       |                                  | $                       | 30,561,805 |                       |       |   | $ | 21,088,210 |   |   |   |

 

As of March 31,2009, net loans were $30.6 million, a $9.5 million, or 45%, increase from $21.1million at December 31, 2008.  Netloans as a percentage of total assets were 35% as of March 31, 2009,compared to 31% at December 31, 2008.

 

The real estate —commercial loan portfolio consists primarily of lines of credit or term loansto businesses that are secured by real estate. At March 31, 2009, there were $13.6 million commercial real estateloans in the loan portfolio, an increase of 82%, or $6.1 million, from $7.5 millionat December 31, 2008.

 

The real estate —residential loan portfolio consists of residential second mortgage loans, homeequity loans and lines of credit and home improvement loans.  At March 31,2009, $5.2 million was outstanding for residential real estate loans, anincrease of 4% from $5.0 million outstanding at December 31, 2008.

 

The construction and landdevelopment loan portfolio is comprised of construction loans forowner-occupied construction and development loans for property being constructedand sold to third parties.  At March 31,2009, construction and land development loans totaled $6.2 million, an increaseof $2.4 million, or 62%, from $3.8 million at December 31, 2008.

 

The commercial andindustrial loan portfolio consists of loans to businesses primarily for workingcapital lines of credit.  At March 31, 2009, commercial andindustrial loans totaled $5.0 million, a $959,000, or 23%, increase from $4.1million at December 31, 2008.

 

The consumer and otherloan portfolio consists of personal lines of credit, loans to acquire personalassets such as automobiles and boats and overdraft protection balances for ourdeposit customers.  As of March 31,2009, there were $964,000 consumer and other loans in the loan portfolio, anincrease of $5,000 from December 31, 2008.

 

Loan concentrations areconsidered to exist when there are amounts loaned to a multiple number ofborrowers engaged in similar activities that would cause them to be similarlyimpacted by economic or other conditions. The Bank’s loan portfolio generallyconsists of loans to borrowers within Colorado. Although the Bank seeks to avoid concentrations of loans to a singleindustry or based upon a single class of collateral, the Bank’s loan portfolioconsists primarily of real estate loans secured by real estate located inColorado, making the value of the portfolio more susceptible to declines inreal estate values and other changes in economic conditions in Colorado.  Although the Colorado economy hasoutperformed the majority of other metropolitan areas nationally, it began toshow some signs of weakness during the fourth quarter of 2008.  Management is diligently monitoring theimpact these economic trends may have on our Colorado loan portfolio.  At this time, management believes theallowance for loan losses has adequately captured the overall weaknesses in theColorado economy.  Additionally, sincethe Bank’s loan portfolio is in the initial stages, it contains only 86 fundedloans, with the three largest loans comprising approximately 20% of theportfolio’s gross value.  However,management expects this concentration to diminish 

 

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over time as the Bank’sloan portfolio continues to grow.  Nosingle borrower can be approved for a loan over the Bank’s current legallending limit of approximately $2.1 million. This regulatory requirement helps to ensure the Bank’s exposure to oneindividual customer is limited.

 

Management may renewloans at maturity when requested by a customer whose financial strength appearsto support such a renewal or when such a renewal appears to be in the bestinterest of Solera National Bank. Solera National Bank requires payment ofaccrued interest in such instances and may adjust the rate of interest, requirea principal reduction, or modify other terms of the loan at the time ofrenewal.

 

Loan terms vary according to loan type. The followingtable shows the contractual maturity distribution of loans as of March 31,2009 and December 31, 2008:

 
| **** ****                    | **** **** | ****As of March 31, 2009****   | ** **     |
|-----------------------------------|----------------|-------------------------------------|----------------|
| **** ****                    | **** **** | ** **                          | **** **** | ****Over 1 Year************through 5 Years**** | ** ** | ****Over 5 Years**** | ** ** | ** ** | ** ** |
| **** ****                    | **** **** | ****One Year************or Less**** | **** **** | ****Fixed************Rate**** | **** **** | ****Floating or   Adjustable   Rate**** | **** **** | ****Fixed************Rate**** | **** **** | ****Floating or   Adjustable   Rate**** | **** **** | ****Total**** | **** **** |
| Real estate — commercial     |           | $                                   | 616,771        |   | $ | 5,319,951 |   | $ | 1,030,000 |   | $ | 6,646,835 |   | $ | — |   | $ | 13,613,557 |   |
| Real estate — residential    |           | 1,550                               |           | 92,667 |   | — |   | — |   | 5,129,789 |   | 5,224,006 |   |
| Construction and land development |           | 3,669,976                           |           | 1,025,000 |   | 1,525,928 |   | — |   | — |   | 6,220,904 |   |
| Commercial and industrial         |           | 1,979,170                           |           | 1,151,757 |   | 753,172 |   | 1,158,930 |   | — |   | 5,043,029 |   |
| Consumer                          |           | 220,125                             |           | 715,298 |   | — |   | 28,662 |   | — |   | 964,085 |   |
| Gross loans                       |           | $                                   | 6,487,592      |   | $ | 8,304,673 |   | $ | 3,309,100 |   | $ | 7,834,427 |   | $ | 5,129,789 |   | $ | 31,065,581 |   |

**** ****
| **** ****                    | **** **** | ****As of December 31, 2008**** | ** **     |
|-----------------------------------|----------------|--------------------------------------|----------------|
| **** ****                    | **** **** | ** **                           | **** **** | ****Over 1 Year************through 5 Years**** | ** ** | ****Over 5 Years**** | ** ** | ** ** | ** ** |
| **** ****                    | **** **** | ****One Year************or Less****  | **** **** | ****Fixed************Rate**** | **** **** | ****Floating or   Adjustable   Rate**** | **** **** | ****Fixed************Rate**** | **** **** | ****Floating or   Adjustable   Rate**** | **** **** | ****Total**** | **** **** |
| Real estate — commercial     |           | $                                    | 30,000         |   | $ | 5,182,139 |   | $ | 991,531 |   | $ | 1,275,136 |   | $ | — |   | $ | 7,478,806 |   |
| Real estate — residential    |           | 1,550                                |           | 415,995 |   | — |   | — |   | 4,625,807 |   | 5,043,352 |   |
| Construction and land development |           | 3,103,333                            |           | — |   | 745,222 |   | — |   | — |   | 3,848,555 |   |
| Commercial and industrial         |           | 2,267,209                            |           | 993,550 |   | 575,207 |   | 247,667 |   | — |   | 4,083,633 |   |
| Consumer                          |           | 242,389                              |           | 716,222 |   | — |   | — |   | — |   | 958,611 |   |
| Gross loans                       |           | $                                    | 5,644,481      |   | $ | 7,307,906 |   | $ | 2,311,960 |   | $ | 1,522,803 |   | $ | 4,625,807 |   | $ | 21,412,957 |   |

 

*****Nonperforming Loans, Leases andAssets*****

 

Nonperforming assetsconsist of loans and leases on nonaccrual status, loans 90 days or more pastdue and still accruing interest, loans that have been restructured resulting ina reduction or deferral of interest or principal, OREO, and other repossessedassets. As of March 31, 2009, there were no nonperforming assets.

 

An internally classifiedloan list is maintained that helps management assess the overall quality of theloan portfolio and the adequacy of the allowance for loan losses. Loansclassified as “substandard” are those loans with clear and defined weaknesses,such as highly leveraged positions, unfavorable financial ratios, uncertainrepayment resources or poor financial condition, which may jeopardizerecoverability of the loan. Loans classified as “doubtful” are those loans thathave characteristics similar to substandard loans, but also have an increasedrisk that loss may occur or at least a portion of the loan may require acharge-off if liquidated at present. Although loans classified as substandarddo not duplicate loans classified as doubtful, both substandard and doubtful loansmay include some loans that are past due at least 90 days, are on nonaccrualstatus or have been restructured. Loans classified as “loss” are those loansthat are in the process of being charged-off. Solera National Bank had no loansclassified in any of these categories at March 31, 2009.

 

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****Allowancefor Loan Losses****

 

Implicit in Solera National Bank’s lending activitiesis the fact that loan losses will be experienced and that the risk of loss willvary with the type of loan being made and the creditworthiness of the borrowerover the term of the loan. To reflect the currently perceived risk of lossassociated with the loan portfolio, additions are made to the allowance forloan losses in the form of direct charges against income to ensure that theallowance is available to absorb possible loan losses. The factors thatinfluence the amount include, among others, the remaining collateral and/orfinancial condition of the borrowers, historical loan loss, changes in the sizeand composition of the loan portfolio, and general economic conditions.

 

The amount of theallowance equals the cumulative total of the provisions made from time to time,reduced by loan charge-offs and increased by recoveries of loans previouslycharged-off.  Until management hasadequate historical data upon which to base the estimate of the allowance forloan losses, information regarding the ability of the borrower to repay theloan, current economic conditions and other pertinent factors will beconsidered.  The allowance was $386,000,or 1.24% of outstanding principal as of March 31, 2009 compared to$268,000, or 1.25% of outstanding principal as of December 31, 2008.

 

Credit and loan decisionsare made by management and the Board of Directors in conformity with loanpolicies established by the Board of Directors. Solera National Bank’s practiceis to charge-off any loan or portion of a loan when the loan is determined bymanagement to be uncollectible due to the borrower’s failure to meet repaymentterms, the borrower’s deteriorating or deteriorated financial condition, thedepreciation of the underlying collateral, the loan’s classification as a lossby regulatory examiners, or other reasons. During the three months ended March 31,2009 and 2008, there were no charge-offs.

 

*****Off-Balance-Sheet Arrangements*****

 

In the ordinary course ofbusiness, the Company enters into various off-balance-sheet commitments andother arrangements to extend credit that are not reflected in the consolidatedbalance sheets of the Company.  Thebusiness purpose of these off-balance-sheet commitments is the routineextension of credit.  The total amountsof off-balance-sheet financial instruments with credit risk were as follows:

 
| ** **                   | ** ** | **March 31, 2009** | ** ** | **December 31, 2008** | ** ** |
|------------------------------|------------|-------------------------|------------|----------------------------|------------|
| Commitments to extend credit |       | $                       | 9,585,718  |                       | $          | 6,715,658 |   |
| Letters of credit            |       | —                  |       | —                     |       |
| Total commitments            |       | $                       | 9,585,718  |                       | $          | 6,715,658 |   |

 

Commitments to extend credit are agreements to lend to a customer aslong as there is no violation of any condition established in thecontract.  Commitments generally havefixed expiration dates or other termination clauses and may require payment ofa fee.  Commitments also includerevolving lines of credit arrangements and unused commitments for commercialand real estate secured loans.  Sincemany of the commitments are expected to expire without being drawn upon, thecommitments do not necessarily represent future cash requirements.

 

Lettersof credit are conditional commitments issued by the Company to guarantee theperformance of a customer to a third party. The credit risk involved in issuing letters of credit is essentially thesame as that involved in extending loan facilities to customers and, therefore,the Company applies the same rigorous underwriting standards to letters ofcredit.

 

TheCompany faces the risk of deteriorating credit quality of borrowers to whom acommitment to extend credit has been made; however, no significant creditlosses are expected from these commitments and arrangements.

 

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****Borrowings****

 

As of March 31, 2009, the Bank had $10.0 millionin borrowings from the Federal Home Loan Bank of Topeka (FHLB) with varyingmaturity dates between April 2009 and June 2010 and aweighted-average fixed interest rate of 3.74%.  On April 16, 2009, $1.3 million of the fixed-rate advance maturedand was subsequently rolled into an overnight line-of-credit with theFHLB.  The current interest rate on thisvariable-rate line-of-credit is approximately 200 basis points less than thefixed-rate advance it replaced.

 

The Bank has also established unsecured Federal Fundslines-of-credit totaling $11.3 million with Bankers Bank of the West, FirstTennessee Bank N.A., the Independent Bankers Bank, and Wells Fargo.  Additionally, the Bank has access to asecured Federal Funds line with Bankers Bank of the West.  As of March 31, 2009, the Company had$345,000. outstanding on these lines.

 

****LoanCommitments****

 

At March 31, 2009,the Company had $9.6 million in outstanding loan origination commitments.  Management believes Solera National Bank hassufficient funds available to meet current origination and other lendingcommitments.

 

****CapitalResources and Capital Adequacy Requirements****

 

The risk-based capitalregulations established and administered by the banking regulatory agencies areapplicable to Solera National Bank. Risk-based capital guidelines are designedto make regulatory capital requirements more sensitive to differences in riskprofiles among banks, to account for off-balance-sheet exposure, and tominimize disincentives for holding liquid assets. Under the regulations, assetsand off-balance-sheet items are assigned to broad risk categories, each withappropriate weights. The resulting capital ratios represent capital as apercentage of total risk-weighted assets and off-balance-sheet items. Under theprompt corrective action regulations, to be adequately capitalized a bank mustmaintain minimum ratios of total capital to risk-weighted assets of 8.0%, Tier1 capital to risk-weighted assets of 4.0%, and Tier 1 capital to total averageassets of 4.0%. Failure to meet these capital requirements can initiate certainmandatory, and possibly additional discretionary, actions by regulators that,if undertaken, could have a direct material effect on Solera National Bank’sfinancial statements.

 

As of March 31, 2009, Solera National Bank was categorized aswell-capitalized. A well-capitalized institution must maintain a minimum ratioof total capital to risk-weighted assets of at least 10.0%, a minimum ratio ofTier 1 capital to risk-weighted assets of at least 6.0%, and a minimum ratio ofTier 1 capital to total average assets of at least 5.0% and must not be subjectto any written order, agreement, or directive requiring it to meet or maintaina specific capital level.

 

Thefollowing table summarizes the ratios of the Bank and the regulatory minimumcapital requirements at March 31, 2009:

 
| ** **                               | **** **** | ****Actual**** | **** **** | ****For Capital Adequacy   Purposes**** | ** ** | ****To Be Well-Capitalized   Under Prompt Corrective   Action Problems**** | ** ** |
|------------------------------------------|----------------|----------------|----------------|-----------------------------------------|------------|----------------------------------------------------------------------------|------------|
| ****As of March 31, 2009****        | ** **     | **Amount**     | ** **     | **%**                                   | ** ** | **Amount**                                                                 | ** ** | **%** | ** ** | **Amount** | ** ** | **%** | ** ** |
| **($ in thousands)**                | ** **     | ** **     | ** **     | ** **                              | ** ** | ** **                                                                 | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Total capital (to risk-weighted assets)  |           | $              | 14,856         |                                    | 30.2       | %                                                                          | $          | 3,931 |   | >8.0 | % | $ | 4,914 |   | >10.0 | % |
| Tier 1 capital (to risk-weighted assets) |           | $              | 14,470         |                                    | 29.4       | %                                                                          | $          | 1,966 |   | >4.0 | % | $ | 2,949 |   | >6.0 | % |
| Tier 1 capital (to average assets)       |           | $              | 14,470         |                                    | 19.2       | %                                                                          | $          | 3,012 |   | >4.0 | % | $ | 3,765 |   | >5.0 | % |

 

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****Liquidity****

 

The primary source ofliquidity for the Company will be dividends paid by Solera National Bank.  Solera National Bank is currently restrictedfrom paying dividends without regulatory approval that will not be granteduntil the accumulated deficit has been eliminated.

 

Solera National Bank’sliquidity is monitored by its staff, the Asset Liability Committee and theBoard of Directors, who review historical funding requirements, currentliquidity position, sources and stability of funding, marketability of assets,options for attracting additional funds, and anticipated future funding needs,including the level of unfunded commitments.

 

Solera National Bank’sprimary sources of funds are retail and commercial deposits, loan andsecurities repayments, other short-term borrowings, and other funds provided byoperations. While scheduled loan repayments and maturing investments arerelatively predictable, deposit flows and early loan prepayments are moreinfluenced by interest rates, general economic conditions, and competition.Solera National Bank will maintain investments in liquid assets based uponmanagement’s assessment of (1) the need for funds, (2) expecteddeposit flows, (3) yields available on short-term liquid assets, and (4) objectivesof the asset/liability management program.

 

As loan demand increases,greater pressure will be exerted on Solera National Bank’s liquidity. However,it is management’s intention to maintain a conservative loan to deposit ratioin the range of 80 - 90% over time. Given this goal, Solera National Bank willnot aggressively pursue lending opportunities if sufficient funding sources (**e.g.**,deposits, Federal Funds, etc.) are not available, nor will Solera National Bankseek to attract transient volatile, non-local deposits with above marketinterest rates. As of March 31, 2009, the loan to deposit ratio was 56% aslight decrease from 57% at December 31, 2008.

 

Solera National Bank hadcash and cash equivalents of $1.6 million, or 1.8% of total Bank assets, at March 31,2009.  Management feels Solera NationalBank should have adequate liquidity to meet anticipated future funding needs.

 

# **ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURESABOUT MARKET RISK**

#  

As a smaller reportingcompany, the Company is not required to provide the information required bythis Item.

 

# **ITEM 4(T). CONTROLS AND PROCEDURES**

#  

**Disclosure Controls andProcedures**

 

Management is responsible for maintaining effectivedisclosure controls and procedures.  As of the end of the period coveredby this Quarterly Report on Form 10-Q, management evaluated theeffectiveness and operation of the Company’s disclosure controls and procedures(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)). Based on that evaluation, both the Company’s Principal Executive Officer andPrincipal Accounting and Chief Financial Officer have concluded that theCompany’s disclosure controls and procedures are effective to ensure that theinformation required to be disclosed by the Company in reports that are filedor submitted under the Exchange Act are recorded, processed, summarized andreported to management within the time periods specified in the Securities andExchange Commission’s rules and forms and that such information isaccumulated and communicated to management as appropriate to allow timelydecisions regarding disclosure.

 

**Changes in Internal Control over FinancialReporting**

 

There have been no changes in internal controls overfinancial reporting during the Company’s last fiscal quarter that havematerially affected, or are reasonably likely to materially affect, the Company’sinternal controls over financial reporting.

 

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# **PART II— OTHER INFORMATION**

#  

# **ITEM 1. LEGAL PROCEEDINGS**

#  

Notapplicable.

 

# **ITEM1A.  RISK FACTORS**

#  

As a smaller reportingcompany, the Company is not required to provide the information required bythis Item.

 

# **ITEM 2. UNREGISTERED SALES OF EQUITYSECURITIES AND USE OF PROCEEDS**

#  

Notapplicable.

 

# **ITEM 3. DEFAULTS UPON SENIORSECURITIES**

#  

Notapplicable.

 

# **ITEM 4. SUBMISSION OF MATTERS TO AVOTE OF SECURITY HOLDERS**

#  

Notapplicable.

 

# **ITEM 5. OTHER INFORMATION**

#  

Notapplicable.

 

# **ITEM 6. EXHIBITS**

#  

| 31.1 |   | Certification  of the Principal Executive Officer pursuant to Rule 13a-14(a) of  the Securities Exchange Act.*                      |
|------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------|
| 31.2 |   | Certification  of the Principal Accounting and Chief Financial Officer pursuant to Rule 13a-14(a) of  the Securities Exchange Act.* |
| 32.1 |   | Certification  pursuant to Rule 13a-14(b) of the Securities Exchange Act and 18  U.S.C. §1350.*                                |

 

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*Filed herewith.

 

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**SOLERA NATIONAL BANCORP, INC.**

 

**SIGNATURES**

 

Pursuantto the requirements of the Securities Exchange Act of 1934, the registrant hasduly caused this report to be signed on its behalf by the undersigned, thereuntoduly authorized.

 
| * *                 | *SOLERA NATIONAL BANCORP, INC.*                     |
|--------------------------|-----------------------------------------------------|
| *** ***             | *(Registrant)*                                      |
| *** ***             | *** ***                                        |
| Date:  May 12, 2009 | /s/  Douglas Crichfield                             |
|                     | Douglas  Crichfield                                 |
|                     | President  and Chief Executive Officer              |
|                     | (Principal  Executive Officer)                      |
|                     |                                                |
|                     |                                                |
|                     | /s/  Robert J. Fenton                               |
|                     | Robert  J. Fenton                                   |
|                     | Vice  President, Secretary & Treasurer     |
|                     | (Principal  Accounting and Chief Financial Officer) |

 

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# **EXHIBITINDEX**

 
| **Exhibit  Number** | ** ** | **Description  of Exhibit**                                                                                  |
|---------------------|------------|--------------------------------------------------------------------------------------------------------------|
|                |       |                                                                                                         |
| 31.1                |       | Certification  pursuant to Rule 13a-14(a) of the Securities Exchange Act                           |
|                |       |                                                                                                         |
| 31.2                |       | Certification  pursuant to Rule 13a-14(a) of the Securities Exchange Act                           |
|                |       |                                                                                                         |
| 32.1                |       | Certification  pursuant to Rule 13a-14(b) of the Securities Exchange Act and 18  U.S.C. §1350 |

 

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