**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, 2008**

 

| ** ̈** | **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 ofregistrant as specified in its charter)

 

| **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 ofprincipal executive 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 suchshorter period 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 ̈

 

Indicate by check mark whether the registrant is a large acceleratedfiler, an accelerated filer, a non-accelerated filer, or a smaller reportingcompany. See definitions of “large accelerated filer,” “accelerated filer,” and“smaller reporting company” in Rule 12b-2 of the Exchange Act. (Checkone):

 

| Large  accelerated filer o                     |   | Accelerated  filer o         |
|------------------------------------------------|--------|-----------------------------------|
|                                           |   |                              |
| Non-accelerated  filer o                       |   | Smaller  reporting company x |
| (Do  not check if a smaller reporting company) |   |                              |

 

Indicate by check mark whether theregistrant is a shell company (as defined in Rule 12b-2 of the ExchangeAct).

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 14, 2008, 2,553,671shares of the registrant’s common stock, $0.01 par value, were issued andoutstanding.

 

 

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**FORM 10-Q**

**SOLERA NATIONAL BANCORP, INC.**

 

**INDEX**

 
|                                                                                                 | **PAGE**   |
|------------------------------------------------------------------------------------------------------|------------|
|                                                                                                 | ** ** |
| INTRODUCTORY NOTE                                                                                    | 3          |
| PART I — FINANCIAL INFORMATION                                                             | 5          |
| ITEM 1. FINANCIAL STATEMENTS                                                                         | 5          |
| Balance  Sheets as of March 31, 2008 and December 31, 2007                                 | 5          |
| Statements of Operations for the Three Months Ended  March 31, 2008 and 2007                    | 6          |
| Statements  of Changes in Stockholders’ Equity for the Three Months Ended March 31,  2008  | 7          |
| Statements of Cash Flows for the Three Months Ended  March 31, 2008 and 2007                    | 8          |
| Unaudited  Condensed Notes to Consolidated Financial Statements                                      | 9          |
| ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF  OPERATIONS | 16         |
| ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                  | 22         |
| ITEM 4(T). CONTROLS  AND PROCEDURES                                                                  | 22         |
| PART II  — OTHER INFORMATION                                                               | 23         |
| ITEM 1. LEGAL PROCEEDINGS                                                                            | 23         |
| ITEM  1A. RISK FACTORS                                                                               | 23         |
| ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS                                 | 23         |
| ITEM 3.  DEFAULTS UPON SENIOR SECURITIES                                                             | 23         |
| ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                         | 23         |
| ITEM 5. OTHER INFORMATION                                                                            | 23         |
| ITEM  6. EXHIBITS                                                                                    | 23         |
| SIGNATURES                                                                                           | 24         |
| EXHIBIT  INDEX                                                                                       | 25         |

#  

2

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# **INTRODUCTORYNOTE**

#  

This Quarterly Report on Form 10-Q contains“forward-looking statements” within the meaning of the Private SecuritiesLitigation Reform Act of 1995 about Solera National Bancorp, Inc. (the “Company”)and our subsidiary, Solera National Bank (the “Bank”) that are subject to risksand uncertainties.  Forward-looking statements include informationconcerning future financial performance, business strategy, projected plans andobjectives.  Statements preceded by, followed by or that otherwise includethe words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,”“may increase,” “may fluctuate” and similar expressions of future orconditional verbs such as “will,” “should,” “would,” and “could” are generallyforward-looking in nature and not historical facts.  Actual results maydiffer materially from those projected, implied, anticipated or expected in theforward-looking statements.  Readers ofthis quarterly report should not rely solely on the forward-looking statementsand should consider all uncertainties and risks throughout this report. Thestatements are representative only as of the date they are made, and SoleraNational Bancorp, Inc. (sometimes referred to herein as on a consolidatedbasis as the Company, we, us, or similar phrasing) undertakes no obligation toupdate any forward-looking statement.

 

These forward-looking statements, implicitly andexplicitly, include the assumptions underlying the statements and otherinformation with respect to the Company’s beliefs, plans, objectives, goals, expectations,anticipations, estimates, financial condition, results of operations, futureperformance and business, including management’s expectations and estimateswith respect to revenues, expenses, return on equity, return on assets,efficiency ratio, asset quality and other financial data and capital andperformance ratios.

 

Although the Company believes that theexpectations reflected in the forward-looking statements are reasonable, thesestatements involve risks and uncertainties that are subject to change based onvarious important factors, some of which are beyond the control of the Company.The following factors, among others, could cause the Company’s results orfinancial performance to differ materially from its goals, plans, objectives,intentions, expectations and other forward-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 will face intense competition from a variety of competitors;

 

·                  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 does not intend to pay dividends in the foreseeable future;

 

·                  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’s profitability;

 

3

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·                  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;

 

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

 

·                  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.

 

For a discussion of these and other risks anduncertainties that could cause actual results to differ from those contained inthe forward-looking statements, see “Risk Factors” in the Company’s 2007 AnnualReport filed on Form 10-KSB with the SEC, which is available on the SEC’swebsite at www.sec.gov.  All forward-looking statements are qualified intheir entirety by this cautionary statement, and the Company undertakes noobligation to revise or update this Quarterly Report on Form 10-Q toreflect events or circumstances after the date hereof.  New factors emerge from time to time, and itis not possible for us to predict which factors, if any, will arise.  In addition, the Company cannot assess the impactof each factor on the Company’s business or the extent to which any factor, orcombination of factors, may cause actual results to differ materially fromthose contained in any forward-looking statements.

#  

4

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# **PART I— FINANCIAL INFORMATION**

#  

# **ITEM 1. FINANCIAL STATEMENTS**

#  

**Solera National Bancorp, Inc.**

 

**Balance Sheets as of March 31, 2008 and December 31,2007**

**(Unaudited)**

 
| ** **                                                                                                                                              | ** ** | **March 31,** | ** ** | **December 31,** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------|------------|-----------------------|------------|
| ** **                                                                                                                                              | ** ** | **2008**           | ** ** | **2007**              | ** ** |
| **ASSETS**                                                                                                                                              |       |               |       |                  |       |
| Cash and due  from banks                                                                                                                                |       | $                  | 756,943    |                  | $          | 336,126 |   |
| Federal  funds sold                                                                                                                                     |       | 4,280,000          |       | 4,970,000             |       |
| Total cash and cash equivalents                                                                                                                         |       | 5,036,943          |       | 5,306,126             |       |
| Investment  securities, available-for-sale                                                                                                              |       | 21,600,551         |       | 13,860,781            |       |
| Interest-bearing  deposits with banks                                                                                                                   |       | 691,442            |       | —                |       |
| Loans                                                                                                                                                   |       | 7,723,432          |       | 3,814,842             |       |
| Allowance  for loan losses                                                                                                                              |       | (84,462            | )          | (47,396               | )          |
| Net loans                                                                                                                                               |       | 7,638,970          |       | 3,767,446             |       |
| Investment  in Federal Reserve stock                                                                                                                    |       | 525,000            |       | 525,000               |       |
| Premises and  equipment, net                                                                                                                            |       | 926,055            |       | 946,681               |       |
| Interest  receivable                                                                                                                                    |       | 171,012            |       | 100,257               |       |
| Subscriptions  receivable                                                                                                                               |       | —             |       | 1,600,000             |       |
| Other assets                                                                                                                                            |       | 113,556            |       | 281,906               |       |
| **Total  assets**                                                                                                                                       |       | $                  | 36,703,529 |                  | $          | 26,388,197 |   |
|                                                                                                                                                    |       |               |       |                  |       |
| **LIABILITIES  AND STOCKHOLDERS’ EQUITY**                                                                                                          |       |               |       |                  |       |
| Deposits                                                                                                                                                |       |               |       |                  |       |
| Noninterest-bearing demand                                                                                                                              |       | $                  | 328,222    |                  | $          | 147,407 |   |
| Interest-bearing demand                                                                                                                                 |       | 434,118            |       | 315,373               |       |
| Savings and money market                                                                                                                                |       | 9,378,918          |       | 1,284,212             |       |
| Time deposits                                                                                                                                           |       | 5,578,135          |       | 3,252,388             |       |
| Total deposits                                                                                                                                          |       | 15,719,393         |       | 4,999,380             |       |
|                                                                                                                                                    |       |               |       |                  |       |
| Accrued  interest payable                                                                                                                               |       | 31,369             |       | 16,773                |       |
| Accounts  payable and other liabilities                                                                                                                 |       | 192,841            |       | 221,772               |       |
| Deferred  rent liability                                                                                                                                |       | 40,265             |       | 30,254                |       |
| Capital  lease liability                                                                                                                                |       | 183,046            |       | 191,528               |       |
| Liability  for abandoned lease                                                                                                                          |       | 76,025             |       | 79,155                |       |
|                                                                                                                                                    |       |               |       |                  |       |
| **Total  liabilities**                                                                                                                                  |       | $                  | 16,242,939 |                  | $          | 5,538,862 |   |
| ** **                                                                                                                                              | ** ** | ** **         | ** ** | ** **            | ** ** |
| COMMITMENTS  AND CONTINGENCIES (see Note 11)                                                                                                            |       |               |       |                  |       |
|                                                                                                                                                    |       |               |       |                  |       |
| STOCKHOLDERS’  EQUITY                                                                                                                              |       |               |       |                  |       |
| Common stock, $0.01 par value; 5,000,000  shares authorized; 2,553,671 shares issued and outstanding at March 31,  2008 and December 31, 2007 |       | $                  | 25,536     |                  | $          | 25,536 |   |
| Additional  paid-in capital                                                                                                                             |       | 25,409,738         |       | 25,347,342            |       |
| Accumulated  deficit                                                                                                                                    |       | (5,098,545         | )          | (4,525,955            | )          |
| Accumulated  other comprehensive income                                                                                                                 |       | 123,861            |       | 2,412                 |       |
| **Total  stockholders’ equity**                                                                                                                    |       | $                  | 20,460,590 |                  | $          | 20,849,335 |   |
| ** **                                                                                                                                              | ** ** | ** **         | ** ** | ** **            | ** ** |
| **Total  liabilities and stockholders’ equity**                                                                                                    |       | $                  | 36,703,529 |                  | $          | 26,388,197 |   |

 

See Notes to Financial Statements.

 

5

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**Solera National Bancorp, Inc.**

 

# **Statements of Operations for theThree Months Ended March 31, 2008 and 2007**

**(Unaudited)**

 
| ** **                                         | ** ** | **For the Three Months Ended March 31,** | ** ** |
|----------------------------------------------------|------------|------------------------------------------------------------------------|------------|
| ** **                                         | ** ** | **2008**                                                               | ** ** | **2007** | ** ** |
|                                               |       |                                                                   |       |   |   |
| Interest  income:                                  |       |                                                                   |       |   |   |
| Interest and fees on loans                         |       | $                                                                      | 87,162     |   | $ | — |   |
| Interest on federal funds sold                     |       | 37,175                                                                 |       | — |   |
| Interest on investment securities                  |       | 230,802                                                                |       | — |   |
| Other interest income                              |       | 5,912                                                                  |       | — |   |
| Dividends on Federal Reserve stock                 |       | 7,875                                                                  |       | — |   |
| Total interest income                              |       | 368,926                                                                |       | — |   |
| Interest  expense:                                 |       |                                                                   |       |   |   |
| Deposits                                           |       | 87,949                                                                 |       | — |   |
| Note payable                                       |       | —                                                                 |       | 31,685 |   |
| Other borrowings                                   |       | 4,396                                                                  |       | — |   |
| Total interest expense                             |       | 92,345                                                                 |       | 31,685 |   |
| Net interest income                                |       | 276,581                                                                |       | (31,685 | ) |
|                                               |       |                                                                   |       |   |   |
| Provision  for loan loss                           |       | 37,066                                                                 |       | — |   |
| Net interest income after provision for loan  loss |       | 239,515                                                                |       | (31,685 | ) |
|                                               |       |                                                                   |       |   |   |
| Noninterest  income:                               |       |                                                                   |       |   |   |
| Service charges and fees                           |       | 5,610                                                                  |       | — |   |
| Sublease income                                    |       | 3,750                                                                  |       | — |   |
| Gain on sale of securities                         |       | 39,620                                                                 |       | — |   |
| Total noninterest income                           |       | 48,980                                                                 |       | — |   |
| Noninterest  expenses:                             |       |                                                                   |       |   |   |
| Salaries and employee benefits                     |       | 504,069                                                                |       | — |   |
| Occupancy                                          |       | 117,767                                                                |       | 54,486 |   |
| Professional fees                                  |       | 72,035                                                                 |       | 39,098 |   |
| Consulting fees                                    |       | —                                                                 |       | 36,625 |   |
| Management fees                                    |       | —                                                                 |       | 201,916 |   |
| Other general and administrative                   |       | 167,214                                                                |       | 74,583 |   |
| Total noninterest expenses                         |       | 861,085                                                                |       | 406,708 |   |
| ** **                                         | ** ** | ** **                                                             | ** ** | ** ** | ** ** |
| Income taxes                                       |       | —                                                                 |       | — |   |
| ** **                                         | ** ** | ** **                                                             | ** ** | ** ** | ** ** |
| Net loss                                           |       | $                                                                      | (572,590   | ) | $ | (438,393 | ) |
|                                               |       |                                                                   |       |   |   |
| Basic  earnings per share                          |       | (0.22                                                                  | )          | NA |   |
|                                               |       |                                                                   |       |   |   |
| Diluted  earnings per share                        |       | (0.22                                                                  | )          | NA |   |
|                                               |       |                                                                   |       |   |   |
| Weighted-average  common shares                    |       |                                                                   |       |   |   |
| Basic                                              |       | 2,553,671                                                              |       | NA |   |
| Diluted                                            |       | 2,553,671                                                              |       | NA |   |

 

See Notes to Financial Statements.

 

6

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**Solera National Bancorp, Inc.**

 

**Statements of Changes in Stockholders’ Equityfor the Three Months Ended March 31, 2008****(Unaudited)**

 
| ** **                                                                  | ** ** | ** **              | ** ** | ** **        | ** ** | **Additional**        | ** ** | ** **               | ** ** | **Accumulated Other**     | ** **     | ** ** | ** ** |
|-----------------------------------------------------------------------------|------------|-------------------------|------------|-------------------|------------|-----------------------|------------|--------------------------|------------|---------------------------|----------------|------------|------------|
| ** **                                                                  | ** ** | **Shares  Outstanding** | ** ** | **Common  Stock** | ** ** | **Paid-in   Capital** | ** ** | **Accumulated  Deficit** | ** ** | **Comprehensive  Income** | ** **     | **Total**  | ** ** |
|                                                                        |       |                    |       |              |       |                  |       |                     |       |                      |           |       |       |
| **Balance at December 31, 2007**                                       | ** ** | **2,553,671**           | ** ** | **$**             | **25,536** | ** **            | **$**      | **25,347,342**           | ** ** | **$**                     | **(4,525,955** | **)**      | **$**      | **2,412** | ** ** | **$** | **20,849,335** | ** ** |
| Stock-based compensation                                                    |       | —                  |       | —            |       | 62,396                |       | —                   |       | —                    |           | 62,396     |       |
| Comprehensive income (loss)                                                 |       | —                  |       | —            |       | —                |       | —                   |       | —                    |           | —     |       |
| Net loss                                                                    |       | —                  |       | —            |       | —                |       | (572,590                 | )          | —                    |           | (572,590   | )          |
| Net change in unrealized gains on  investment securities available-for-sale |       | —                  |       | —            |       | —                |       | —                   |       | 121,449                   |           | 121,449    |       |
| Total comprehensive income (loss)                                           |       | —                  |       | —            |       | —                |       | (572,590                 | )          | 121,449                   |           | (451,141   | )          |
| **Balance at March 31, 2008**                                          | ** ** | **2,553,671**           | ** ** | **$**             | **25,536** | ** **            | **$**      | **25,409,738**           | ** ** | **$**                     | **(5,098,545** | **)**      | **$**      | **123,861** | ** ** | **$** | **20,460,590** | ** ** |

 

See Notes to Financial Statements.

 

7

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**Solera National Bancorp, Inc.**

 

# **Statements of Cash Flows for theThree Months Ended March 31, 2008 and 2007**

**(Unaudited)**

** **
| ** **                                                                             | ** ** | **For the Three  Months Ended March 31,** | ** **  |
|----------------------------------------------------------------------------------------|------------|--------------------------------------------------------------------|-------------|
| ** **                                                                             | ** ** | **2008**                                                           | ** **  | **2007** | ** ** |
| CASH FLOWS FROM OPERATING ACTIVITIES                                                   |       |                                                               |        |   |   |
| Net (loss)                                                                             |       | $                                                                  | (572,590    | ) | $ | (438,393 | ) |
| Adjustments to reconcile net loss to net  cash used in operating activities:           |       |                                                               |        |   |   |
| Depreciation and amortization                                                          |       | 26,724                                                             |        | 17,141 |   |
| Provision for loan losses                                                              |       | 37,066                                                             |        | — |   |
| Net amortization of deferred loan  fees/expenses                                       |       | (62                                                                | )           | — |   |
| Net amortization of premiums on investment  securities                                 |       | 9,808                                                              |        | — |   |
| Gain on sale of investment securities                                                  |       | (39,620                                                            | )           | — |   |
| Recognition of stock-based compensation on  stock options                              |       | 62,396                                                             |        | — |   |
| Changes in operating assets and  liabilities:                                          |       |                                                               |        |   |   |
| Interest receivable                                                                    |       | (70,755                                                            | )           | — |   |
| Other assets                                                                           |       | 168,350                                                            |        | (405 | ) |
| Deferred offering costs                                                                |       | —                                                             |        | (32,272 | ) |
| Accrued interest payable                                                               |       | 14,596                                                             |        | (4,179 | ) |
| Accounts payable and other liabilities                                                 |       | (40,543                                                            | )           | 192,120 |   |
| Deferred rent liability                                                                |       | 10,011                                                             |        | 1,881 |   |
| **Net cash used in operating activities**                                              |       | $                                                                  | (394,619    | ) | $ | (264,107 | ) |
|                                                                                   |       |                                                               |        |   |   |
| CASH FLOWS FROM INVESTING ACTIVITIES                                                   |       |                                                               |        |   |   |
| Purchase of investment securities,  available-for-sale                                 |       | $                                                                  | (12,042,723 | ) | $ | — |   |
| Proceeds from sales of investment  securities, available-for-sale                      |       | 2,488,676                                                          |        | — |   |
| Proceeds from maturities/calls/pay downs of  investment securities, available-for-sale |       | 1,965,538                                                          |        | — |   |
| Issuance of loans, net of paydowns                                                     |       | (3,908,528                                                         | )           | — |   |
| Purchase of premises and equipment                                                     |       | (6,098                                                             | )           | (332,225 | ) |
| Purchase of interest-bearing deposits with  banks                                      |       | (691,442                                                           | )           | — |   |
| **Net cash used in investing activities**                                              |       | $                                                                  | (12,194,577 | ) | $ | (332,225 | ) |
|                                                                                   |       |                                                               |        |   |   |
| CASH FLOWS FROM FINANCING ACTIVITIES                                                   |       |                                                               |        |   |   |
| Net change in deposits                                                                 |       | $                                                                  | 10,720,013  |   | $ | — |   |
| Proceeds from note payable                                                             |       | —                                                             |        | 606,097 |   |
| Proceeds from subscriptions receivable                                                 |       | 1,600,000                                                          |        | — |   |
| **Net cash provided by financing activities**                                          |       | $                                                                  | 12,320,013  |   | $ | 606,097 |   |
|                                                                                   |       |                                                               |        |   |   |
| **Net (decrease)/increase in cash and cash  equivalents**                              |       | $                                                                  | (269,183    | ) | $ | 9,765 |   |
|                                                                                   |       |                                                               |        |   |   |
| CASH AND CASH EQUIVALENTS                                                              |       |                                                               |        |   |   |
| Beginning of period                                                                    |       | 5,306,126                                                          |        | 6,978 |   |
| End of period                                                                          |       | $                                                                  | 5,036,943   |   | $ | 16,743 |   |
|                                                                                   |       |                                                               |        |   |   |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW  INFORMATION                                      |       |                                                               |        |   |   |
| Cash paid for interest                                                  |       | $                                                                  | 77,750      |   | $ | — |   |
| Assets acquired under capital leases                                                   |       | $                                                                  | —      |   | $ | 176,940 |   |

 

See Notes to Financial Statements.

 

8

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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, 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.

 

**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 position ofthe Company as of March 31, 2008, and the results of its operations forthe three months ended March 31, 2008 and 2007.  Cash flows are presented for the three monthsended March 31, 2008 and 2007.  Certain reclassifications have beenmade to the condensed consolidated financial statements and related notes ofprior periods to conform to the current presentation. These reclassificationshad no impact on Stockholders’ equity or net loss for the periods.Additionally, certain information and footnote disclosures normally included infinancial statements 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-KSB as of andfor the year ended December 31, 2007.

 

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.

 

TheCompany is subject to various risks and uncertainties frequently encountered bycompanies in the early stages.  Such risks and uncertainties include, butare not limited to, its limited operating history, competition, dependence onkey personnel and management of rapid growth.  To address these risks, theCompany must, among other things, develop and retain its customer base,implement and successfully execute its business and marketing strategy,continue to develop and upgrade its technology, provide superior customerservice and attract, retain and motivate qualified personnel.  There canbe no guarantee that the Company will be successful in addressing these or othersuch risks.

 

TheCompany’s cash and cash equivalents at March 31, 2008 and December 31,2007 totaled $5.0 million and $5.3 million, respectively.  Managementbelieves cash currently on hand will provide adequate funding through March 31,2009.  There can be no assurance that the Company will achieve or sustainprofitability or positive cash flow from its operations.

 

**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 bases. Deferred tax assets are reduced by 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.  For these securities, theCompany obtains fair value measurements from independent pricing services.  The fair value 

 

9

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measurements consider observable data that mayinclude dealer quotes, market spreads, cash flows, the U.S. Treasury yieldcurve, live trading levels, trade execution data, market consensus prepaymentspeeds, credit information and the bonds’ terms and conditions, among otherthings.

 

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 various factorsaffecting the loan portfolio, including a review of problem loans, businessconditions, historical loss experience, evaluation of the quality of theunderlying collateral, and holding and disposal costs. The allowance for loanlosses 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,collateral dependent impaired loans are evaluated using internal analyses aswell as third-party information, such as appraisals.  If an impaired loan is unsecured, it isevaluated using a discounted cash flow of the payments expected over the lifeof the loan using the loan’s effective interest rate and giving considerationto currently existing factors that would impact the amount or timing of thecash flows.  The second component is theallowance for loan 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, trends in speculative construction realestate lending, results of internal and external loan reviews, and otherfactors.  This component of the allowancefor loan losses is calculated by assigning a certain risk weighting, within apredetermined range, to each identified risk factor.  The recorded allowance for loan losses is theaggregate of the SFAS 114 Component and SFAS 5 Component.

 

**NOTE 3 — INVESTMENTS**

The amortized costs and fair values of investmentsecurities as of March 31, 2008 are as follows:

 
| ** **                              | ** ** | ** **    | ** ** | **Gross**      | ** ** | **Gross**      | ** ** | ** **     | ** ** |
|-----------------------------------------|------------|---------------|------------|----------------|------------|----------------|------------|----------------|------------|
| ** **                              | ** ** | **Amortized** | ** ** | **Unrealized** | ** ** | **Unrealized** | ** ** | **Estimated**  | ** ** |
| ** **                              | ** ** | **Cost**      | ** ** | **Gains**      | ** ** | **Losses**     | ** ** | **Fair Value** | ** ** |
| **Securities available-for-sale:**      |       |          |       |           |       |           |       |           |       |
| U.S. government agencies                |       | $             | 3,996,055  |           | $          | 15,112         |       | $              | (4,576     | ) | $ | 4,006,591 |   |
| State and municipal                     |       | 1,118,702     |       | 11,387         |       | (17,756        | )          | 1,112,333      |       |
| Mortgage-backed securities              |       | 16,361,933    |       | 138,509        |       | (18,815        | )          | 16,481,627     |       |
| **Total securities available-for-sale** |       | $             | 21,476,690 |           | $          | 165,008        |       | $              | (41,147    | ) | $ | 21,600,551 |   |

 

Since all of the Bank’s investment securities werepurchased during either the fourth quarter of 2007 or the first quarter of2008, no securities have been in a continuous loss position for over twelvemonths.  As of March 31, 2008,eleven securities were in a loss position with a combined estimated fair valueof $3,831,639, representing approximately 18% of the portfolio’s totalestimated fair value.

 

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 theissuer and whether the Company has the intent and ability to retain theinvestment for a period of time sufficient to allow for any anticipatedrecovery in fair value.  As of March 31,2008, no declines in value are deemed to be other than temporary.

 

10

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The Company’s net unrealized gain on investmentsecurities increased by $122,000 during the first quarter 2008, from a netunrealized gain of $2,000 as of December 31, 2007 to a net unrealized gainof $124,000 as of March 31, 2008. The increase is related partially to the increased portfolio value, asmanagement has continued to build the Company’s investment portfolio.  The portfolio increased by approximately $7.6million, or 55%, from an amortized cost of $13.9 million at December 31,2007 to an amortized cost of $21.5 million at March 31, 2008.  The other contributing factor to the increasein the portfolio’s unrealized gain was the 200 basis point decrease in interestrates implemented by the Federal Reserve during the first quarter of 2008 andthe impact that decrease had on the long-end of the treasury yield curve.

 

The Company sold six securities during the firstquarter 2008 for a realized gain of $39,620.

 

Securities with carrying values of $3.5 million at March 31,2008 and $495,000 at December 31, 2007, were pledged as collateral tosecure public deposits.

 

**NOTE 4 — INTEREST-BEARING DEPOSITS WITH BANKS**

 

During the first quarter 2008, the Company investedapproximately $700,000 in FDIC-insured certificates of deposit that earn aweighted-average yield of 4.13% and mature between June and September 2008.

 

**NOTE 5 — LOANS**

 

Loans consist of the following:

 
| ** **                        | ** **                            | **March 31, 2008** | ** ** | **December 31, 2007** | ** ** |
|-----------------------------------|---------------------------------------|-------------------------|------------|----------------------------|------------|
| Real estate – commercial     |                                  | $                       | 5,077,430  |                       | $          | 3,003,274 |   |
| Construction and land development |                                  | 2,121,459               |       | 399,732                    |       |
| Commercial and industrial         |                                  | 318,300                 |       | 188,684                    |       |
| Real estate – residential    |                                  | 187,158                 |       | 190,557                    |       |
| Consumer                          |                                  | 24,772                  |       | 29,407                     |       |
| Gross loans                       |                                  | 7,729,119               |       | 3,811,654                  |       |
| Less:                             | Allowance for loan losses             |                    | (84,462    | )                          | (47,396    | ) |
|                              | Deferred loan fees and  expenses, net |                    | (5,687     | )                          | 3,188      |   |
| Loans, net                        |                                  | $                       | 7,638,970  |                       | $          | 3,767,446 |   |

 

During the first quarter 2008, noloans were impaired, transferred to foreclosed properties or past due.

 

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.

 

The following table details loans receivable from relatedparties as of March 31, 2008:

 
| ** **                      | ** ** | **2008** | ** ** |
|---------------------------------|------------|----------|------------|
|                            |       |     |       |
| Balance at January 1, 2008 |       | $        | —     |   |
| New loans                       |       | 338,000  |       |
| Payments                        |       | —   |       |
| Balance at March 31, 2008  |       | $        | 338,000    |   |

 

There were no loans receivable from related partiesat December 31, 2007.

 

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**NOTE 6 — ALLOWANCE FOR LOAN LOSSES**

 

Activityin the allowance is summarized as follows:

 
| ** **                                  | ** ** | **2008** | ** ** | **2007** | ** ** |
|---------------------------------------------|------------|----------|------------|----------|------------|
| Allowance at  January 1,               |       | $        | 47,396     |     | $          | — |   |
| Loans charged off                           |       | —   |       | —   |       |
| Recoveries on loans  previously charged off |       | —   |       | —   |       |
| Provision for loan losses                   |       | 37,066   |       | —   |       |
| Allowance at  March 31,                |       | $        | 84,462     |     | $          | — |   |

 

**NOTE 7 — DEPOSITS**

 

Deposits are summarized as follows:

 
| ** **                                      | ** ** | **March 31, 2008** | ** ** | **December 31, 2007** | ** ** |
|-------------------------------------------------|------------|-------------------------|------------|----------------------------|------------|
| Noninterest-bearing demand                      |       | $                       | 328,222    |                       | 2          | % | $ | 147,407 |   | 3 | % |
| Interest-bearing demand                         |       | 434,118                 |       | 3                          |       | 315,373 |   | 6 |   |
| Money market accounts                           |       | 9,349,492               |       | 59                         |       | 1,271,665 |   | 26 |   |
| Savings accounts                                |       | 29,426                  |       | —                     |       | 12,547 |   | — |   |
| Certificates of deposits, less than $100,000    |       | 1,080,824               |       | 7                          |       | 352,388 |   | 7 |   |
| Certificates of deposits, greater than $100,000 |       | 4,497,311               |       | 29                         |       | 2,900,000 |   | 58 |   |
| Total deposits                                  |       | $                       | 15,719,393 |                       | 100        | % | $ | 4,999,380 |   | 100 | % |

 

In the course of ordinarybusiness, 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 31,2008 and December 31, 2007 was approximately $2.2 million and $2.1million, respectively.

 

**NOTE 8 — STOCK-BASED COMPENSATION**

 

The Company’s 2007 Stock Incentive Plan (the “Plan”)was approved by the Company’s Board of Directors (the “Board”) with aneffective date of September 10, 2007. Under the terms of the Plan, officers and key employees may be grantedboth nonqualified and incentive stock options and directors and otherconsultants, who are not also officers or employees, may only be grantednonqualified stock options. The Board reserved 510,734 shares of common stockfor issuance under the Plan.  The Plan provides for options to purchaseshares of common stock at a price not less than 100% of the fair market valueof the stock on the date of grant.  Stockoptions expire no later than ten years from the date of the grant and generallyvest over four years.  The Plan providesfor accelerated vesting if there is a change of control, as defined in thePlan.  The Company recognized stock-basedcompensation cost of approximately $62,000 during the first quarter 2008, and$0 during the first quarter 2007.  No taxbenefit related to stock-based compensation will be recognized until theCompany 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. No options were granted during the first quarter 2008.

 

No options were exercised, vested or forfeited duringthe first quarter ended March 31, 2008. However, during the first quarter 2008, the Company recognized expensefor 24,866 options, representing a pro-rata amount of the options that willvest at the end of year one.  As of March 31,2008, there was approximately $867,000 of total unrecognized compensation costrelated to the outstanding stock options that will be recognized over aweighted-average period of 3.47 years.

 

12

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The following is a summary of the Company’s non-vestedoptions at March 31, 2008:

 
| ** **                         | ** ** | **Shares** | ** ** | **Weighted-  Average  Grant Date  Fair Value** | ** ** |
|------------------------------------|------------|------------|------------|------------------------------------------------|------------|
| Non-vested at January 1, 2008 |       | 397,846    |       | $                                              | 2.74       |   |
| Granted                            |       | —     |       | —                                         |       |
| Vested                             |       | —     |       | —                                         |       |
| Forfeited                          |       | —     |       | —                                         |       |
| Non-vested at March 31, 2008  |       | 397,846    |       | $                                              | 2.74       |   |

 

**NOTE 9 — NONINTEREST EXPENSE**

 

The following table details the items comprisingOther general and administrative expenses:

 
| ** **                         | ** ** | **3 months ended March 31,** | ** ** |
|------------------------------------|------------|-----------------------------------|------------|
| ** **                         | ** ** | **2008**                          | ** ** | **2007** | ** ** |
| Marketing and promotions           |       | $                                 | 67,159     |   | $ | 7,629 |   |
| Data processing                    |       | 46,909                            |       | — |   |
| Regulatory and reporting  fees     |       | 13,756                            |       | — |   |
| Printing, stationery and  supplies |       | 9,436                             |       | 19,900 |   |
| Telephone/communication            |       | 7,183                             |       | 3,258 |   |
| Dues and memberships               |       | 5,050                             |       | — |   |
| Insurance                          |       | 4,745                             |       | 1,444 |   |
| Travel and entertainment           |       | 4,642                             |       | 9,468 |   |
| Training and education             |       | 2,485                             |       | — |   |
| Postage and shipping               |       | 1,952                             |       | 1,318 |   |
| Temporary staffing                 |       | —                            |       | 30,692 |   |
| Miscellaneous                      |       | 3,897                             |       | 874 |   |
| Total                              |       | $                                 | 167,214    |   | $ | 74,583 |   |

 

**NOTE 10 — 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 statements of financial condition:

 
| ** **                           | ** ** | **March 31, 2008** | ** ** | **December 31, 2007** | ** ** |
|--------------------------------------|------------|-------------------------|------------|----------------------------|------------|
| Deferred tax assets:                 |       |                    |       |                       |       |
| Start-up and organizational expenses |       | $                       | 1,274,993  |                       | $          | 1,295,346 |   |
| Net operating loss carryforward      |       | 495,332                 |       | 283,720                    |       |
| Allowance for loan losses            |       | 6,011                   |       | 7,235                      |       |
| Other                                |       | 76,200                  |       | 71,070                     |       |
| Total deferred tax assets            |       | 1,852,536               |       | 1,657,371                  |       |
| Deferred liabilities:                |       |                    |       |                       |       |
| Tax over book depreciation           |       | (5,436                  | )          | (1,895                     | )          |
| Total deferred tax liabilities       |       | (5,436                  | )          | (1,895                     | )          |
|                                 |       |                    |       |                       |       |
| Net deferred tax assets              |       | 1,847,100               |       | 1,655,476                  |       |
|                                 |       |                    |       |                       |       |
| Valuation allowance                  |       | (1,847,100              | )          | (1,655,476                 | )          |
|                                 |       |                    |       |                       |       |
| Net deferred taxes                   |       | $                       | —     |                       | $          | — |   |

 

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TheCompany has provided a 100% valuation allowance for its net deferred tax assetdue to uncertainty of realization during the carryforward period.  The Company has net operating losscarryforwards of approximately $1.3 million for federal income tax purposes.  Federal net operating loss carry forwards, tothe extent not used, will expire beginning in 2027.

 

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 31,2008 and the twelve months ended December 31, 2007 due to the following:

 
| ** **                                | ** ** | **March 31, 2008** | ** ** | **December 31, 2007** | ** ** |
|-------------------------------------------|------------|-------------------------|------------|----------------------------|------------|
| Computed “expected” tax benefit |       | $                       | (200,407   | )                          | $          | (851,948 | ) |
| Change in income taxes resulting from:    |       |                    |       |                       |       |
| Change in valuation allowance             |       | 191,624                 |       | 881,024                    |       |
| Other                                     |       | 8,783                   |       | (29,076                    | )          |
| Income tax provision                      |       | $                       | —     |                       | $          | — |   |

 

**NOTE 11 —****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, 2008 and December 31, 2007 the followingfinancial instruments were outstanding whose contract amounts represent creditrisk:

 
| ** **                                                               | ** ** | **March 31,  2008** | ** ** | **December 31,  2007** | ** ** |
|--------------------------------------------------------------------------|------------|--------------------------|------------|-----------------------------|------------|
| Financial instruments  whose contractual amounts  represent credit risk: |       |                     |       |                        |       |
| Commitments to extend credit                                             |       | $                        | 3,129,023  |                        | $          | 2,522,059 |   |
| Letters of credit                                                        |       | 9,000                    |       | 9,000                       |       |
| Total commitments*                                                       |       | $                        | 3,138,023  |                        | $          | 2,531,059 |   |

 

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*Total commitments of $3.1 million were outstanding atMarch 31, 2008 and consisted of $3.0 million at variable rates and $130,000at fixed rates.  Total commitments of$2.5 million were outstanding at December 31, 2007, respectively andconsisted of $2.4 million at variable rates and $88,000 at fixed rates.

 

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.  Letters of credit are used to guaranteeperformance primarily on development and construction projects.  The credit risk involved in issuing lettersof credit is essentially the same as that involved in extending loan facilitiesto customers.  Those commitments areprimarily issued on behalf of local businesses.

 

**NOTE 12****—****FAIR VALUE MEASUREMENTS(SFAS 157 DISCLOSURE)**

 

EffectiveJanuary 1, 2008, the Company determines the fair market values of itsfinancial instruments based on the fair value hierarchy established in SFAS No. 157,*Fair Value Measurements* (SFAS 157),which requires an entity 

 

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tomaximize the use of observable inputs and minimize the use of unobservableinputs when measuring fair value.  Thestandard describes three levels of inputs, as follows, that may be used tomeasure fair value.

 
| Level  1–  |   | inputs  are unadjusted quoted prices in active markets for identical assets or  liabilities that the Company has the ability to access at the measurement  date.                                                                                                                                                                                                                        |
|-----------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|            |   |                                                                                                                                                                                                                                                                                                                                                                                    |
| Level  2 – |   | inputs  are other than quoted prices included in Level 1 that are observable for the  asset or liability either directly or indirectly, such as quoted prices for  similar assets or liabilities; quoted prices in markets that are not active;  or model-based valuation techniques for which all significant assumptions are  observable in the market.                               |
|            |   |                                                                                                                                                                                                                                                                                                                                                                                    |
| Level  3–  |   | valuation  is generated from model-based techniques that use at least one significant  assumption not observable in the market. These unobservable assumptions  reflect estimates of assumptions that market participants would use in  pricing the asset or liability. Valuation techniques include use of option  pricing 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, 2008, all of the Company’s available-for-sale securities,$21.6 million, were valued using Level 2 inputs.

 

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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, 2008 and results of operations for the threemonths ended March 31, 2008 and 2007, respectively.  The discussion should be read in conjunctionwith the financial statements and the notes related thereto which appearelsewhere 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.

 

As of March 31,2008, the Company had, on a consolidated basis, total assets of $36.7 million,net loans of $7.6 million, total deposits of $15.7 million, and stockholders’equity of $20.5 million.  In 2007, theCompany completed an initial public offering of its common stock, issuing2,553,671 shares at a price of $10.00 per share.  The gross proceeds received from the offeringwere $25.5 million.

 

****Results of Operations forthe Three Months Ended March 31, 2008****

 

Thefollowing discussion focuses on the Company’s financial condition and resultsof operations for the three months ended March 31, 2008.  The Company’s principal operations for thethree months ended March 31, 2008 consisted of the operations of SoleraNational Bank, which opened for business September 10, 2007.  The following discussion is limited and doesnot include a discussion of the comparison to prior financial results for theperiod ended March 31, 2007, since the Bank was not open for businessduring the first quarter of 2007.  Assuch, a discussion of the comparison to prior financial results is notmeaningful to an understanding of our current business and, therefore, has beenomitted from this Report.

 

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

 

Net interest income is the difference between interestincome, principally from loan and investment securities portfolios, andinterest expense, principally on customer deposits and borrowings.  Net interest income is our principal sourceof earnings.  Changes in net interestincome result from changes in volume, spread and margin. Volume refers to theaverage dollar level of interest-earning assets and interest-bearingliabilities.  Spread refers to thedifference between the average yield on interest-earning assets and the averagecost of interest-bearing liabilities. Margin refers to net interest incomedivided by average interest-earning assets, and is influenced by the level andrelative mix of interest-earning assets and interest-bearing liabilities.

 

Net interest income was $277,000 in the first quarter of 2008. Ourannualized net interest margin was 3.8% for the three months ended March 31,2008.

 

Total interest income was$369,000 for the first quarter of 2008. Average net loans were $5.3 million, and other average interest earningassets were $23.4 million, consisting primarily of average available-for-salesecurities of $18.6 million, average federal funds sold of $4.4 million andaverage certificates of deposits with banks of $439,000.

 

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Total interest expensewas $92,000 in the first quarter of 2008. This consisted primarily of interest expense on certificates of depositover $100,000 of $50,000 and interest expense on money market accounts of $32,000.

 

****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.”**

 

In the first quarter of2008, our provision for loan losses was $37,000.  There were no charge-offs or non-performingloans during the first quarter of 2008.

 

****NoninterestIncome****

 

The noninterest incomefor the quarter ended March 31, 2008 was $49,000, consisting primarily ofgains on the sale of investment securities of $40,000.  Additionally, the Company earned $5,000 indeposit service charges and $4,000 in sublease income for an office within theBank’s main office building that is leased to a third party.

 

****NoninterestExpense****

 

Our total noninterest expense was $861,000 in the first quarter of2008, consisting primarily of salaries and benefits of $504,000.  The Company employed 16 full-time equivalentemployees as of March 31, 2008.

 

Occupancy expenses totaled $118,000 for the first quarter of 2008,attributable primarily to lease expense for the bank’s main office building.

 

Professional fees of$72,000 for the first quarter of 2008 consisted of $44,000 for the Company’s2007 year-end external audit, $17,000 in legal costs associated with Company’s10-KSB filing and $11,000 in consulting fees paid for information technologyconsulting and accounting and tax consulting.

 

Marketing and promotionalexpenses totaled $67,000 for the first quarter of 2008, as the Bank continuedto raise awareness in the community of the products and services we offer.

 

Data processing fees of$47,000 for the first quarter of 2008 were primarily attributable to the costsincurred to run the Bank’s main banking software.

 

The Company incurred$14,000 in regulatory and reporting fees, primarily attributable to bankassessment fees paid to the Office of the Comptroller of the Currency, theFederal Reserve Bank, and the Federal Deposit Insurance Corporation as well asfees associated with filing reports with the Securities and ExchangeCommission.

 

Other expenses of $39,000for the first quarter of 2008 included $9,000 for printing, stationery andsupplies, $7,000 for telephone and communication lines, $5,000 for due andmemberships, $5,000 for insurance, $5,000 for travel and entertainment, $2,000for training and education, $2,000 for postage and shipping, and $4,000 forother miscellaneous expenses.

 

****IncomeTaxes****

 

No federal or state taxexpense has been recorded for the quarter ended March 31, 2008, based uponnet operating losses.  Since it isuncertain that the Company will become profitable, the deferred tax benefitaccumulated to date has a full valuation allowance so that the net deferred taxbenefit at March 31, 2008 is $0.

 

****Financial Condition****

 

Total assets as of March 31, 2008 were $36.7million, primarily the result of investing the net proceeds from the initialpublic offering completed in the fourth quarter of 2007 and customer deposits,in loans, investment securities and federal funds sold.

 

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As of March 31,2008, stockholders’ equity was $20.5 million, as a result of the initial publicoffering, partially offset by the inception-to-date losses from start-upactivities and current operations.

 

****Short-TermInvestments and Interest-bearing Deposits in Other Financial Institutions****

 

At March 31, 2008,Solera National Bank had $4.3 million in federal funds sold and $691,000 ininterest-bearing deposits with other financial institutions.  These short-term investments andinterest-bearing deposits allow Solera National Bank to meet liquidityrequirements and provide temporary holdings until the funds can be otherwisedeployed or invested.

 

****InvestmentSecurities****

 

Our investment portfolioserves as a source of interest income and, secondarily, as a source ofliquidity and a management tool for our interest rate sensitivity.  We manage our investment portfolio accordingto a written investment policy established by our Board of Directors.

 

At March 31, 2008,Solera National Bank’s securities consisted of available-for-sale securities of$21.6 million, and Federal Reserve Bank Stock, having an amortized cost of$525,000, and a weighted average yield of 6%. The following table provides additional detail on the Company’sinvestment securities as of March 31, 2008 and December 31, 2007:

 
| ** **                              | ** ** | **March 31, 2008**   | ** ** | **December 31, 2007** | ** ** |
|-----------------------------------------|------------|--------------------------------|------------|---------------------------------|------------|
| ** **                              | ** ** | **Estimated Fair  Value** | ** ** | **Weighted  Average  Yield**    | ** ** | **Estimated Fair  Value** | ** ** | **Weighted   Average   Yield** | ** ** |
| **Securities available-for-sale**       |       |                           |       |                            |       |   |   |   |   |
| U.S. government agencies                |       | $                              | 4,006,591  |                            | 4.92       | % | $ | 3,508,333 |   | 5.09 | % |
| State and municipal                     |       | 1,112,333                      |       | 5.43                            |       | 1,117,262 |   | 5.43 |   |
| Mortgage-backed securities              |       | 16,481,627                     |       | 5.30                            |       | 9,235,186 |   | 5.34 |   |
| **Total securities available-for-sale** |       | $                              | 21,600,551 |                            | 5.23       | % | $ | 13,860,781 |   | 5.29 | % |

 

****LoanPortfolio****

 

Our primary source of income is interest on loans. Thefollowing table presents the composition of our loan portfolio by category asof the dates indicated:

 
| ** **                        | ** **                            | **March 31, 2008** | ** ** | **December 31, 2007** | ** ** |
|-----------------------------------|---------------------------------------|------------------------------|------------|---------------------------------|------------|
| ** **                        | ** **                            | **Amount**                   | ** ** | **% of   Total**      | ** ** | **Amount** | ** ** | **% of   Total** | ** ** |
| Real estate – commercial     |                                  | $                            | 5,077,430  |                            | 66         | % | $ | 3,003,274 |   | 79 | % |
| Construction and land development |                                  | 2,121,459                    |       | 28                              |       | 399,732 |   | 10 |   |
| Commercial and industrial         |                                  | 318,300                      |       | 4                               |       | 188,684 |   | 5 |   |
| Real estate – residential    |                                  | 187,158                      |       | 2                               |       | 190,557 |   | 5 |   |
| Consumer                          |                                  | 24,772                       |       | —                          |       | 29,407 |   | 1 |   |
| Gross loans                       |                                  | 7,729,119                    |       | 100                             | %          | 3,811,654 |   | 100 | % |
| Less:                             | Allowance for loan losses             |                         | (84,462    | )                               |       |   | (47,396 | ) |   |   |
|                              | Deferred loan fees and  expenses, net |                         | (5,687     | )                               |       |   | 3,188 |   |   |   |
| Loans, net                        |                                  | $                            | 7,638,970  |                            |       |   | $ | 3,767,446 |   |   |   |

 

As of March 31,2008, net loans were $7.6 million, a 103%, or $3.9 million increase from $3.8million at December 31, 2007.  Netloans as a percentage of total assets were 21% as of March 31, 2008,compared to 14% at December 31, 2007.

 

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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, 2008, there were $5.0 million real estate commercialloans in the loan portfolio, an increase of 69%, or $2.1 million from $3.0million at December 31, 2007.

 

The construction and landdevelopment loan portfolio is comprised of construction loans forowner-occupied construction and development loans for property beingconstructed and sold to third parties. At March 31, 2008, construction and land development loans totaled$2.1 million, an increase of $1.7 million from $400,000 from December 31,2007.

 

The commercial andindustrial loan portfolio consists of loans to businesses for working lines ofcredit.  At March 31, 2008, commercial and industrial loans totaled$318,000, a 69%, or $130,000, increase from $189,000 at December 31, 2007.

 

The real estate –residential loan portfolio consists of residential second mortgage loans, homeequity loans and lines of credit and home improvement loans.  There wasminimal change in this loan category between March 31, 2008 and December 31,2007, with $187,000 of principal outstanding at March 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 31,2008, there were $25,000 consumer and other loans in the loan portfolio, adecrease of 16%, or $5,000, from December 31, 2007.

 

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.  Also, since the Bank’s loan portfolio is inthe initial stages, it contains only 19 funded loans, with the three largestloans comprising approximately 53% of the portfolio’s gross value.  However, management expects thisconcentration to diminish over time as the Bank’s loan portfolio continues togrow.  No single borrower can be approvedfor a loan over the Bank’s current legal lending limit of approximately $2.5million.  This regulatory requirementhelps to ensure the Bank’s exposure to one individual 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 31,2008:

 
| **** ****                    | **** **** | ****As of March 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     |           | $                                                   | —         |   | $ | 3,138,519 |   | $ | 938,911 |   | $ | 1,000,000 |   | $ | — |   | $ | 5,077,430 |   |
| Construction and land development |           | 854,810                                             |           | — |   | 1,266,649 |   | — |   | — |   | 2,121,459 |   |
| Commercial and industrial         |           | 314,560                                             |           | 3,243 |   | — |   | 497 |   | — |   | 318,300 |   |
| Real estate – residential    |           | —                                              |           | — |   | — |   | 47,666 |   | 139,492 |   | 187,158 |   |
| Consumer                          |           | 4,215                                               |           | 20,557 |   | — |   | — |   | — |   | 24,772 |   |
| Gross loans                       |           | $                                                   | 1,173,585      |   | $ | 3,162,319 |   | $ | 2,205,560 |   | $ | 1,048,163 |   | $ | 139,492 |   | $ | 7,729,119 |   |

 

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*****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, 2008, there were no nonperforming assets.

 

A potential problem loanis defined as a loan where information about possible credit problems of theborrower is known, causing management to have serious doubts as to the abilityof the borrower to comply with the present loan payment terms and which mayresult in the inclusion of such loan in one of the nonperforming assetcategories. An internally classified loan list is maintained that helpsmanagement assess the overall quality of the loan portfolio and the adequacy ofthe allowance for loan losses. Loans classified as “special mention” are thosethat contain a weakness that, if left unattended, could develop into a problemaffecting the ultimate collectibility of the loan. Loans classified as “substandard”are those loans with clear and defined weaknesses, such as highly leveragedpositions, unfavorable financial ratios, uncertain repayment resources or poorfinancial condition, which may jeopardize recoverability of the loan. Loansclassified as “doubtful” are those loans that have characteristics similar tosubstandard loans, but also have an increased risk that loss may occur or atleast a portion of the loan may require a charge-off if liquidated at present.Although loans classified as substandard do not duplicate loans classified asdoubtful, both substandard and doubtful loans may include some loans that arepast due at least 90 days, are on nonaccrual status or have been restructured.Loans classified as “loss” are those loans that are in the process of beingcharged-off. Solera National Bank had no loans classified in these categoriesat March 31, 2008.

 

****Allowancefor Loan Losses****

 

Implicit in SoleraNational Bank’s lending activities is the fact that loan losses will beexperienced and that the risk of loss will vary with the type of loan beingmade and the creditworthiness of the borrower over the term of the loan. Toreflect the currently perceived risk of loss associated with the loanportfolio, additions are made to the allowance for loan losses in the form ofdirect charges against income to ensure that the allowance is available toabsorb possible loan losses. The factors that influence the amount include,among others, the remaining collateral and/or financial condition of theborrowers, historical loan loss, changes in the size and composition of theloan 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 $84,462,or 1.09% of outstanding principal as of March 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 first quarter of 2008,there were no charge-offs.

 

****Non-earningAssets****

 

Premises, leaseholdimprovements and equipment totaled $926,055 at March 31, 2008. There areno definitive agreements regarding acquisition or disposition of owned orleased facilities and, for the near-term future, there are no significantchanges anticipated in the total occupancy expense.

 

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

 

Neither the Company norSolera National Bank has any material off-balance sheet arrangements.

 

20

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****Borrowings****

 

The Bank is a member of the Federal Home Loan Bank ofTopeka (FHLB) and has the ability to borrow funds under varying programsoffered by the FHLB.  The Bank has alsoestablished an unsecured Fed Funds line-of-credit with Bankers Bank of the Westand First Tennessee.  As of March 31,2008, the Company or the Bank had $0 borrowings.

 

****LoanCommitments****

 

At March 31, 2008,the Company had $3.1 million in outstanding loan origination commitments,including one standby letter of credit for $9,000.  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 assetsof 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, 2008, 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 assets of at least 5.0% and must not be subject to anywritten order, agreement, or directive requiring it to meet or maintain aspecific capital level.

 

Thefollowing table summarizes the ratios of the Bank and the regulatory minimumcapital requirements at March 31, 2008:

 
| ****As of March 31, 2008**** | **** **** | ****Actual**** | **** **** | ****For Capital Adequacy  Purposes**** | ** ** | ****To Be Well Capitalized  Under Prompt Corrective  Action Problems**** | ** ** |
|--------------------------------------------------|----------------|----------------|----------------|--------------------------------------------------|------------|--------------------------------------------------------------------------------------------------------|------------|
| **($ in thousands)**                   | ** **     | **Amount**     | ** **     | **%**                                            | ** ** | **Amount**                                                                                             | ** ** | **%** | ** ** | **Amount** | ** ** | **%** | ** ** |
| Total Capital (to risk-weighted assets)          |           | $              | 16,381         |                                             | 113.5      | %                                                                                                      | $          | 1,155 |   | >8.0 | % | $ | 1,444 |   | >10.0 | % |
| Tier 1 capital (to risk-weighted assets)         |           | $              | 16,297         |                                             | 112.9      | %                                                                                                      | $          | 578 |   | >4.0 | % | $ | 866 |   | >6.0 | % |
| Tier 1 capital (to average assets)               |           | $              | 16,297         |                                             | 53.3       | %                                                                                                      | $          | 1,123 |   | >4.0 | % | $ | 230 |   | >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 will 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 will be 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, 2008, the loan to deposit ratio was 49%.

 

Solera National Bank hadcash and cash equivalents of $5.0 million, or 14% of total Bank assets, at March 31,2008. Management feels Solera National Bank should have more than adequateliquidity 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 Financial Officer have concluded that the Company’s disclosurecontrols and procedures are effective to ensure that the information requiredto be disclosed by the Company in reports that are filed or submitted under theExchange Act are recorded, processed, summarized and reported to Managementwithin the time periods specified in the Securities and Exchange Commission’s rules andforms and that such information is accumulated and communicated to managementas appropriate to allow timely decisions 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.

 

22

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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 Principal Executive Officer pursuant to Rule 13a-14(a) of the  Securities Exchange Act.*                      |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                      |
| 31.2   |   | Certification  of 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.*                            |

 

----

*Filed herewith.

 

23

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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,thereunto duly authorized.

 
| * *                 | *SOLERA NATIONAL BANCORP, INC.*                     |
|--------------------------|-----------------------------------------------------|
| *** ***             | *(Registrant)*                                      |
| *** ***             | *** ***                                        |
| Date:  May 14, 2008 | /s/  Paul M. Ferguson                               |
|                     | Paul  M. Ferguson                                   |
|                     | President                                           |
|                     | (Principal  Executive Officer)                      |
|                     |                                                |
|                     |                                                |
|                     | /s/  Robert J. Fenton                               |
|                     | Robert  J. Fenton                                   |
|                     | Vice  President, Secretary & Treasurer     |
|                     | (Principal  Accounting and Chief Financial Officer) |

 

24

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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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