belvedere_10q-063008.htm

10-Q 1 belvedere_10q-063008.htm QUARTERLY REPORT belvedere_10q-063008.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended June 30, 2008

or

o	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from __________ to __________

Commission File Number: 333-141453

BELVEDERE SOCAL

(Exact name of registrant as specified in its charter)

California	20-8356735
(State of incorporation)	(I.R.S. Employer Identification No.)

One Maritime Plaza, Suite 825 San Francisco, CA	94111
(Address of principal executive offices)	(Zip Code)

(415) 434 - 1236

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x

No o

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

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

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

Yes o

No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

As of August 8, 2008, there were 3,331,271 shares of common stock, no par value, outstanding.

BELVEDERE SoCAL

TABLE OF CONTENTS

		Page

PART I – FINANCIAL INFORMATION

ITEM 1.	FINANCIAL STATEMENTS	F-1

ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	3

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	15

ITEM 4T.	CONTROLS AND PROCEDURES	15

PART II – OTHER INFORMATION

ITEM 1.	LEGAL PROCEEDINGS	16

ITEM 1A.	RISK FACTORS	16

ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	16

ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	16

ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	16

ITEM 5.	OTHER INFORMATION	16

ITEM 6.	EXHIBITS	16

	SIGNATURES	17

	CERTIFICATIONS

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

BELVEDERE SoCAL AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

	June 30, 2008			December 31, 2007

Cash and due from banks	$	10,154,514		$	4,401,632
Federal Funds sold		34,080,000			9,130,000
Total cash and cash equivalents		44,234,514			13,531,632

Interest-bearing deposits in other financial institutions		614,000			100,000
Investment securities available for sale		31,957,642			8,786,293

Loans, net of allowance for loan losses of $5,384,728 at June 30, 2008 and $4,077,213 at December 31, 2007		302,966,691			210,257,162
Premises and equipment, net		5,218,899			461,760
Goodwill		57,291,432			29,459,783
Other intangible assets, net		2,844,610			2,368,172
Federal Home Loan Bank stock, at cost		1,078,400			916,300
Other real estate owned		1,536,905			-
Accrued interest and other assets		11,178,849			4,198,740
Total assets	$	458,921,942		$	270,079,842


Deposits
Noninterest bearing demand	$	111,385,625		$	73,358,729
NOW, savings and money market accounts		84,800,613			49,514,411
Time deposits under $100,000		79,112,536			45,460,646
Time deposits over $100,000		67,441,060			25,715,811
Total deposits		342,739,834			194,049,597

Federal Home Loan Bank advances		12,600,000			18,000,000
Notes payable		8,000,000			-
Junior subordinated debentures		15,464,000			-
Accrued interest and other liabilities		4,526,440			3,044,416
Total liabilities		383,330,274			215,094,013

Commitments and Contingencies (Note 3)

Shareholders’ equity:
Preferred Stock - non-cumulative, perpetual, no par value; authorized 20,000,000 shares; 868,299 and 806,666 shares issued and outstanding at June 30, 2008 and December 31, 2007, respectively		21,307,475			19,766,650
Common Stock - no par value; authorized 20,000,000 shares; 3,330,738 and 2,011,343 shares issued and outstanding at June 30, 2008 and December 31, 2007, respectively		57,917,066			35,749,587
Accumulated deficit		(3,337,564	)		(540,408	)
Accumulated other comprehensive (loss) income, net of taxes		(295,309	)		10,000
Total shareholders’ equity		75,591,668			54,985,829
Total liabilities and shareholders' equity	$	458,921,942		$	270,079,842

See notes to unaudited consolidated financial statements

F-1

BELVEDERE SoCAL AND SUBSIDIARIES

AND ITS PREDECESSOR BUSINESS PROFESSIONAL BUSINESS BANK

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

	Three-month period ended June 30,						Six-month period ended June 30,
	Belvedere SoCal and Subsidiaries			Professional Business Bank			Belvedere SoCal and Subsidiaries			Professional Business Bank
	2008			2007			2008			2007

Interest income:
Interest and fees on loans	$	5,431,718		$	3,583,107		$	10,816,269		$	6,772,985
Interest on investment securities		370,949			91,970			685,662			339,300
Other interest income		133,542			250,287			273,647			440,221
Total interest income		5,936,209			3,925,364			11,775,578			7,552,506

Interest expense:
Deposits		1,662,062			1,226,122			3,043,746			2,333,663
Junior subordinated debentures		442,442			0			644,334			0
Other borrowings		175,324			29,467			441,149			75,675
Total interest expense		2,279,828			1,255,589			4,129,229			2,409,338

Net interest income before provision for loan losses		3,656,381			2,669,775			7,646,349			5,143,168

Provision for loan losses		1,103,235			380,000			2,060,530			537,000
Net interest income after provision for loan losses		2,553,146			2,289,775			5,585,819			4,606,168

Non-interest income
Service charges and fees		277,141			59,394			546,817			191,374
Other income		86,082			43,704			143,281			45,073
Total non-interest income		363,223			103,098			690,098			236,447

Non-interest expense
Salaries and employee benefits		2,152,490			1,547,897			4,621,273			2,850,982
Occupancy and equipment		389,972			172,582			715,075			319,956
Professional fees		515,543			242,054			1,101,640			625,981
Data processing		389,971			162,125			657,630			296,980
Marketing and business promotion		64,432			31,966			113,295			64,344
Office and administrative expenses		251,033			222,900			492,960			385,343
Other expenses		402,618			216,029			829,010			331,670
Total non-interest expense		4,166,059			2,595,553			8,530,883			4,875,256

Loss before income taxes		(1,249,690	)		(202,680	)		(2,254,966	)		(32,641	)

Provision for income tax (benefit) expense		(554,758	)		(20,577	)		(998,635	)		120,737

Net loss	$	(694,932	)	$	(182,103	)	$	(1,256,331	)	$	(153,378	)

Net loss per share - basic and diluted	$	(0.44	)	$	(0.09	)	$	(0.90	)	$	(0.08	)

Weighted average shares:
Basic and diluted		3,330,263			1,970,070			3,104,569			1,992,131

See notes to unaudited consolidated financial statements

F-2

BELVEDERE SoCAL AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED)

FOR THE PERIOD FROM JANUARY 17, 2007 (INCEPTION) TO JUNE 30, 2008

	Preferred Stock				Common Stock											Accumulated Other
	Number of Shares		Amount		Number of Shares		Amount			Comprehensive Loss			Accumulated Deficit			Comprehensive (Loss) Income

Common stock issued						1,125,539	$	11,500,000

Series A non-cumulative perpetual preferred stock
issued, net of issuance cots		800,000	$	19,600,000

Common stock issued for acquisition of Professional Business Bank, net of issuance costs						885,804		24,249,587

Comprehensive loss:
Net loss										$	(373,758	)	$	(373,758	)
Unrealized gain on available-for-sale securities, net of tax											10,000					$	10,000
Total comprehensive loss										$	(363,758	)

Series A preferred stock dividend declared		6,666		166,650										(166,650	)

Balance December 31, 2007		806,666		19,766,650		2,011,343		35,749,587						(540,408)			10,000

Warrants exercised						5,963		60

Stock-based compensation								167,470

Common stock issued						1,313,432		22,000,000

Cash payments for fractional shares								(51	)

Comprehensive loss:
Net loss											(1,256,331	)		(1,256,331	)

Change in unrealized gain (loss) on available-for-sale securities, net of tax											(305,309)						(305,309)
Total comprehensive loss										$	(1,925,398	)

Series A preferred stock dividends declared		61,633		1,540,825										(1,540,825	)

Balance June 30, 2008		868,299	$	21,307,475		3,330,738	$	57,917,066					$	(3,337,564	)	$	(295,309	)

See notes to unaudited consolidated financial statements

F-3

BELVEDERE SoCAL AND SUBSIDIARIES

AND ITS PREDECESSOR BUSINESS PROFESSIONAL BUSINESS BANK

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

SIX-MONTH PERIODS ENDED JUNE 30, 2008 AND 2007

	Belvedere SoCal and Subsidiaries			Professional Business Bank
	2008			2007
Operating activities:
Net loss	$	(1,256,331	)	$	(153,378)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization expense		356,972			68,348
Provision for loan losses		2,060,530			537,000
Stock-based compensation		167,470			129,693
Net decrease (increase) in accrued interest and other assets		2,073,421			(422,121	)
Net (decrease) increase in accrued interest and other liabilities		(7,502,560)			1,674
Net cash (used in) provided by operating activities		(4,885,099	)		161,216

Investing activities:
Proceeds from maturities and principal paydowns of available-for-sale investment securities		18,368,178			1,543,570
Proceeds from issuance of junior subordinated debentures		464,000			-
Net decrease in interest-bearing deposits in other financial institutions		2,094,000			4,799,000
Increase in loans, net		(16,858,787	)		(36,100,305	)
Purchases of premises and equipment		(45,454	)		(157,524	)
Purchase of FHLB stock		(162,100	)		(76,300	)
Cash received in connection with the acquisition of Spectrum Bank, net of cash paid		127,811			-
Net cash provided by (used in) investing activities		3,523,648			(29,991,559	)


Financing activities:
Net increase in deposits		6,679,724			22,583,602
Net (decrease) increase in Federal Home Loan Bank advances		(5,400,000)			4,000,000
Proceeds from note payable		8,000,000			-
Investment in Belvedere Statutory Trust I		(464,000	)		-
Proceeds from exercise of stock options		-			12,321
Proceeds from sale of stock		22,000,000			-
Cash payments for fractional shares		(51	)		-
Proceeds from exercise of warrants		60			-
Net cash provided by financing activities		31,279,733			26,595,923

Increase (decrease) in cash and cash equivalents		30,702,882			(3,234,420)

Cash and cash equivalents, beginning of period		13,531,632			9,683,852

Cash and cash equivalents, end of period	$	44,234,514		$	6,449,432

Noncash financing activities
Loans transferred to other real estate owned	$	1,536,905		$	-
Preferred stock dividends declared	$	1,540,825		$	-

Supplemental cash flow information
Interest paid	$	4,262,894		$	1,153,388
Taxes paid	$	2,400		$	268,000

See notes to unaudited consolidated financial statements

F-4

BELVEDERE SoCAL AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

1.	Nature of Business and Basis of Presentation

Belvedere SoCal ("SoCal"), a bank holding company incorporated in 2007 in the state of California, was formed by its majority shareholder, Belvedere Capital Fund II L.P. (the “Fund”), a Delaware limited partnership formed in 2002. SoCal was formed specifically to acquire Professional Business Bank (“PBB"), which occurred on November 23, 2007, and to be the platform for acquiring other banks in southern California. SoCal closed the acquisition of Spectrum Bank (“Spectrum”) on January 31, 2008, further expanding its market presence. Collectively, PBB and Spectrum are referred to as the “Subsidiary Banks.” SoCal issued an additional 1,313,432 shares of common stock to the Fund for proceeds of $22 million to fund the Spectrum acquisition. After sale of the shares, the Fund now owns approximately 73% of SoCal's common stock on a fully diluted basis.

Prior to November 23, 2007 SoCal had no significant operations. The consolidated balance sheet at June 30, 2008 and the results of operations for the three-month and six-month periods ended June 30, 2008 include the operations of Spectrum subsequent to January 31, 2008. The results of operations for the three-month and six-month periods ended June 30, 2007 are for Professional Business Bank only. Securities and Exchange Commission rules require the presentation of certain prior period comparative financial statements of the acquired business when the acquiring company succeeds to substantially all of the business and the registrant’s own operations prior to the acquisition appear insignificant relative to the business acquired.

The June 30, 2008 unaudited consolidated financial statements include the accounts of SoCal and the Subsidiary Banks. SoCal has one other wholly-owned subsidiary, Belvedere SoCal Statutory Trust I (the “Trust”), which was formed in 2008, to issue trust preferred securities. FIN 46R does not allow the consolidation of the Trust into SoCal's consolidated financial statements. As a result, the accompanying consolidated balance sheets include the investment in the Trust of $464 thousand in other assets.

The financial statements reflect all adjustments which are, in the opinion of management, necessary for a fair presentation, in all material respects, of the financial position and operating results for the interim periods. The results of operations for the six-month period ended June 30, 2008 are not necessarily indicative of the results of operations that may be expected for any other interim period or for the year ending December 31, 2008. The year-end balance sheet data at December 31, 2007 was derived from the audited financial statements.

This information should be read in conjunction with the audited financial statements and notes thereto included in SoCal's Form 10-KSB for the fiscal year ended December 31, 2007.

2.	Recent Accounting Pronouncements

In December 2007, the FASB issued Statement of Financial Accounting Standards No. 141 (revised 2007), Business Combinations (“SFAS No. 141(R)”). SFAS No. 141(R), among other things, establishes principles and requirements for how the acquirer in a business combination (i) recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquired business, (ii) recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase, and (iii) determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SoCal is required to adopt SFAS No. 141(R) for all business combinations for which the acquisition date is on or after January 1, 2009. Earlier adoption is prohibited. This standard will change the accounting treatment for business combinations on a prospective basis.

Effective January 1, 2008, SoCal adopted SFAS No. 157, Fair Value Measurements, which among other things, requires enhanced disclosures about financial instruments carried at fair value. SFAS No. 157 establishes a hierarchical disclosure framework associated with the level of observable pricing scenarios utilized in measuring financial instruments at fair value. The degree of judgment utilized in measuring the fair value of financial instruments generally correlates to the level of the observable pricing scenario. Financial instruments with readily available active quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of observable pricing and a lesser degree of judgment utilized in measuring fair value. Conversely, financial instruments rarely traded or not quoted will generally have little or no observable pricing and a higher degree of judgment utilized in measuring fair value. Observable pricing scenarios are impacted by a number of factors, including the type of financial instrument, whether the financial instrument is new to the market and not yet established and the characteristics specific to the transaction.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities—Including an Amendment of FASB Statement No. 115, which permits entities to choose to measure financial instruments and certain warranty and insurance contracts at fair value. SFAS No. 159 applies to all reporting entities, including not-for-profit organizations, and contains financial statement presentation and disclosure requirements for assets and liabilities reported at fair value. SFAS No. 159 is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. SoCal adopted SFAS No. 159 on January 1, 2008. SoCal chose not to elect the option to measure eligible financial assets and liabilities at fair value.

F-5

3.	Commitments and Contingencies

In the normal course of business there are outstanding various commitments to extend credit which are not reflected in the financial statements, including loan commitments of approximately $66.4 million at June 30, 2008 and $62.5 million at December 31, 2007. Such loans relate primarily to real estate construction loans and revolving lines of credit and other commercial loans. However, all such commitments will not necessarily culminate in actual extensions of credit by SoCal as some of these are expected to expire without being fully drawn upon.

Standby letters of credit are conditional commitments issued to guarantee the performance or financial obligation of a client to a third party. These guarantees are issued primarily relating to purchases of inventory or as security for real estate rents by commercial clients and are typically short-term in nature. Credit risk is similar to that involved in extending loan commitments to clients and accordingly, evaluation and collateral requirements similar to those for loan commitments are used. The majority of all such commitments are collateralized. Standby letters of credit totaled $1.4 million and $769 thousand at June 30, 2008 and December 31, 2007, respectively. SoCal has a reserve for undisbursed commitments of $130 thousand and $141 thousand at June 30, 2008 and December 31, 2007, respectively.

In connection with the acquisition of Spectrum Bank, SoCal assumed the following : leases for two branches, which expire in 2008 and 2011, and an administrative office, which expires in 2010. These leases include provisions for periodic rent increases as well as payment by the lessee of certain operating expenses.

Total rent expense for the three- and six-month periods ended June 30, 2008 was approximately $42 thousand and $106 thousand, respectively.

The approximate future minimum annual payments for these leases are as follows:

Year Ending
December 31,

2008	$	225,810
2009		58,380
2010		53,940
2011		34,960

Total	$	373,090

4.	Comprehensive Income

Comprehensive income (loss) is reported in addition to net income (loss) for all periods presented. Comprehensive income (loss) is comprised of net income (loss) plus other comprehensive income (loss). Other comprehensive income (loss), net of taxes, was comprised of the unrealized losses on available-for-sale investment securities of ($305) thousand and ($149) thousand for the six-month periods ended June 30, 2008 and 2007 and ($314) thousand and ($66) thousand for the three-month periods ended June 30, 2008 and 2007. Comprehensive income (loss) was ($1.9) million and $1.1 million for the six-month periods ended June 30, 2008 and 2007 and ($1.0) million and $248 thousand for the three-month periods ended June 30, 2008 and 2007.

5.	Stock-Based Compensation

SoCal has adopted SFAS No. 123(R), Shared-Based Payment. This Statement requires entities to recognize the cost of employee services received in exchange for awards of stock options, or other equity instruments, based on the grant-date fair value of those awards. This cost is recognized over the period which an employee is required to provide services in exchange for the award, generally the vesting period. Stock-based compensation expense totaled $76 thousand and $65 thousand for the quarters ended June 30, 2008 and 2007, respectively. A tax benefit of $31 thousand and $8 thousand was recognized in connection with the stock-based compensation for the quarters ended June 30, 2008 and 2007, respectively. Stock-based compensation expense totaled $167 thousand and $130 thousand for the six-month periods ended June 30, 2008 and 2007, respectively. A tax benefit of $69 thousand and $17 thousand was recognized in connection with the stock-based compensation expense for the six-month periods ended June 30, 2008 and 2007, respectively. The expense for 2007 was recognized under the Professional Business Bank 2001 Incentive and Nonqualified Stock Option Plan.

SoCal has one stock-based compensation plan, the Belvedere SoCal 2007 Equity Incentive Plan (the "Plan"), which, among other things, permits the grant of stock options and stock purchase rights. The Plan is designed primarily to attract and retain personnel and provide additional incentives to employees, directors and consultants to promote the success of SoCal's business. The maximum aggregate number of shares that may be issued under the Plan is 1,500,000. The amount, frequency and terms of share-based awards are subject to all applicable terms and conditions of the Plan and such other terms and conditions as prescribed by a Committee of the Board of Directors. New shares are issued upon the exercise of options.

The Plan requires that the option or share price may not be less than the fair market value of the stock on the grant date, except for options granted in substitution for options outstanding under the Professional Business Bank Stock Option Plan, and that the stock be paid in full at the time the option is exercised. All options vest on a date determined by the Committee, but not later than ten years from the date of grant.

Management estimates the fair value of each option award as of the date of grant using a Black-Scholes-Merton option pricing model. Expected volatility is based on historical volatility of similar entities over a preceding period commensurate with the expected term of the option because the Company's common stock has been publicly traded for a shorter period than the expected term of the options. The expected term represents the period that the stock-based awards are expected to be outstanding. The risk free interest rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of grant. Expected dividend yield was not considered in the option pricing formula because SoCal has not paid cash dividends historically. In addition to these assumptions, management makes estimates regarding pre-vesting forfeitures that will impact total compensation expense recognized under the Plan.

F-6

Two types of options were granted in the first quarter of 2008: one grant of 175,402 options with performance conditions that vest based on certain qualifying events, or cliff vest at the 7th anniversary of the grant date if no qualifying event occurs, and the second grant of 175,409 options with a time-based condition that cliff vest at the 5th anniversary of the grant date. There were no stock options granted in the second quarter of 2008 or the first six months of 2007.

The following assumptions were utilized in the calculation of the fair value of options granted during the six-month period ended June 30, 2008:

Risk-free interest rate	3.21%
Expected life	6 years
Expected volatility	28%
Expected dividend yield	N/A
Weighted average grant date fair value	$5.10

A summary of stock option activity and related information for the six-month period ended June 30, 2008 follows:

	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding December 31, 2007		135,041		$	15.21
Options granted		350,811		$	15.00
Options forfeited		(19,955	)	$	15.00
Options exercised		-
Outstanding at June 30, 2008		465,897		$	15.06	8.5 years	$	-
Options exercisable, June 30, 2008		135,041		$	15.21	5.6 years	$	-

Options expected to vest after June 30, 2008		314,901		$	15.00	9.7 years	$	-

All options granted in 2008 allow for early exercise into shares of restricted common stock of SoCal under identical vesting terms as the original options. Such options are not shown as exercisable in the above table.

At June 30, 2008, there was $1.5 million in unrecognized compensation costs related to the outstanding options that will be recognized over a weighted average period of 5.4 years.

6.	Earnings Per Share

Basic earnings per share for each of the periods presented was computed by dividing net (loss) earnings adjusted for stock dividends paid or declared on non-cumulative perpetual preferred stock by the weighted average number of shares outstanding during each such period.

Basic and diluted earnings per share for the three-month periods ended June 30, 2008 and 2007 are computed as follows (dollars in thousands):

SoCal Three-month period ended June 30, 2008	Net Loss			Weighted Average Number of Shares Outstanding		Per Share Amount

Basic loss per share:
Net loss	$	(695	)
Preferred stock dividend		(785	)

Net loss available to common shareholders	$	(1,480	)		3,330,263	$	(0.44	)

Professional Business Bank Three-month period ended June 30, 2007	Net Loss			Weighted Average Number of Shares Outstanding		Per Share Amount

Net loss available to common shareholders	$	(182	)		1,970,070	$	(0.09)

F-7

Basic and diluted earnings per share for the six-month periods ended June 30, 2008 and 2007 are computed as follows (dollars in thousands):

SoCal Six-month period ended June 30, 2008	Net Loss			Weighted Average Number of Shares Outstanding		Per Share Amount

Basic loss per share:
Net loss	$	(1,256	)
Preferred stock dividend		(1,541	)

Net loss available to common shareholders	$	(2,797	)		3,104,569	$	(0.90	)

Professional Business Bank Six-month period ended June 30, 2007	Net Loss			Weighted Average Number of Shares Outstanding		Per Share Amount

Net loss available to common shareholders	$	(153	)		1,992,131	$	(0.08)

7.	Allowance for Loan Losses

The following table presents the changes in the allowance for loan losses as of the dates indicated (dollars in thousands):

	Three-month period ended June 30,						Six-month period ended June 30,
	2008			2007			2008			2007
Balance at beginning of period	$	6,254		$	2,026		$	4,077		$	1,869
Allowance acquired at acquisition of Spectrum		-			-			1,436			-
Additional provision		1,104			380			2,061			537
Charge-offs		(1,973	)		(2	)		(2,205	)		(2	)
Recoveries		-			-			16			-
Total	$	5,385		$	2,404		$	5,385		$	2,404

F-8

8.	Acquisition of Spectrum Bank

Effective January 31, 2008, SoCal acquired all of the common stock of Spectrum, a California state-chartered bank headquartered in Irvine, California with branch offices in Huntington Beach and Montebello, California. All the outstanding Spectrum shares were exchanged for $20.2 million in cash and $15 million in trust preferred securities. The acquisition was accounted for in accordance with SFAS No. 141, Business Combinations. Accordingly, the net assets were recorded at their estimated fair values, and the operating results were included in the financial statements from the date of acquisition. Goodwill totaled $27.8 million (none of which is deductible for tax purposes) and a core deposit intangible of $722 thousand was recorded and is being amortized over approximately seven years. Capitalized direct transaction costs were approximately $1 million including $740,000 paid to the Fund. The allocation of the purchase price to the assets and liabilities acquired will be finalized no later than fourth quarter 2008, as SoCal obtains more information regarding asset valuations, liabilities assumed and revisions of preliminary estimates of fair values made at the date of purchase. The purchase price has been allocated on a preliminary basis, using information currently available as presented below (dollars in thousands):

Assets acquired:
Cash and due from banks	$	4,283
Federal funds sold		17,080
Interest-bearing deposits in other financial institutions		2,608
Investment securities available for sale		41,475
Loans, net		79,452
Premises and equipment		4,947
Goodwill		27,832
Other intangible assets, net		722
Accrued interest and other assets		9,043

Total assets acquired		187,442

Liabilities assumed:
Total deposits		142,011
Accrued interest and other liabilities		9,196

Total liabilities assumed		151,207

Total consideration paid	$	36,235

9.	Junior Subordinated Debentures

In January 2008, SoCal issued $15.5 million of junior subordinated debentures to Belvedere SoCal Statutory Trust I, a Delaware business trust that was formed for the exclusive purpose of issuing trust preferred securities. The Trust purchased debentures with: (1) the proceeds of the sale of its common trust securities to SoCal for $464 thousand, and (2) certain shares of common stock in Spectrum Bank valued at $15 million that the Trust received from certain shareholders of Spectrum Bank in exchange for the Trust’s trust preferred securities. The subordinated debentures and trust preferred securities have generally identical terms, including that they mature in 2038, are redeemable at SoCal’s option at par, and require monthly distributions/interest payments at a rate of 10%. SoCal has unconditionally guaranteed certain distributions on, and certain payments on liquidation and redemption of, the trust preferred securities.

Interest expense recognized by SoCal for the three- and six-month periods ended June 30, 2008 related to the subordinated debentures was $442 thousand and $644 thousand, respectively.

10.	Note Payable

In March 2008, SoCal borrowed $8 million through a loan secured by the stock of the Subsidiary Banks. The loan bears interest at three-month LIBOR plus 3.1% (5.87% at June 30, 2008) with quarterly interest payments through September 2009, followed by principal and interest payments through the maturity date of March 2018. The promissory note and related loan agreements contain certain customary restrictions including a potential limitation on the ability of the Subsidiary Banks to pay dividends to SoCal for purposes other than to allow SoCal to service the loan. At June 30, 2008, SoCal was not in compliance with the debt service coverage covenant of the loan agreement. On July 25, 2008 the lender waived compliance with this covenant.

F-9

11.	Other Real Estate Owned

Other Real Estate Owned is real estate acquired through, or in lieu of, loan foreclosures that is expected to be sold and is recorded at its fair value less estimated costs to sell (fair value). The amount, if any, by which the recorded amount of the loan exceeds the fair value less estimated costs to sell are charged to the allowance for loan or lease losses, if necessary. After foreclosure, valuations are periodically performed by management with any subsequent write-downs recorded as a valuation allowance and charged against operating expenses. Operating expenses of such properties, net of related income, are included in other expenses and gains and losses on their disposition are included in other income and other expenses.

SoCal’s investment in other real estate owned, totaled $1.5 million at June 30, 2008. SoCal had no other real estate owned and no investment in real estate acquired in full or partial settlement of loan obligations at December 31, 2007.

12.	Pro forma financial information

The June 30, 2008 consolidated financial statements include the accounts of Spectrum since February 1, 2008. The following supplemental proforma information discloses selected financial information for the three- and six-month periods ended June 30, 2008 and 2007 as though the Spectrum merger had been completed as of the beginning of the period. The proforma information for the three- and six-month periods ended June 30, 2007 combines Professional Business Bank, as the predecessor business to SoCal, and Spectrum. The unaudited proforma income for the three- and six-month periods ended June 30, 2008 includes nonrecurring merger expenses incurred by Spectrum for cancellation of all outstanding options of Spectrum per the terms of the merger agreement, severance payments to Spectrum executives under change of control agreements and cash settlements of deferred compensation programs totaling $4.0 million, net of tax. Dollars are in thousands except per share data.

	Three-month period ended June 30,					Six-month period ended June 30,
	2008			2007		2008			2007

Revenue (net interest income plus non-interest income)	$	4,020		$	4,654	$	8,868		$	9,284

Net (loss) income	$	(1,480	)	$	100	$	(5,065	)	$	503

Basic (loss) earnings per share	$	(0.44	)	$	0.03	$	(0.84	)	$	0.15

Diluted (loss) earnings per share	$	(0.44	)	$	0.03	$	(0.84	)	$	0.15

13.	Fair Value Measurements

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements, which provides enhanced guidance for using fair value to measure assets and liabilities. The standard applies whenever other standards require or permit assets or liabilities to be measured at fair value. The standard does not expand the use of fair value in any new circumstances. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. SoCal adopted SFAS No. 157 as of January 1, 2008 and the adoption did not have a material impact on the consolidated financial statements or results of operations of SoCal. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels are defined as follows:

· Level 1	inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

· Level 2	inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

· Level 3	inputs to the valuation methodology are unobservable and significant to the fair value measurement.

Following is a description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy:

F-10

Assets

Securities

Where quoted prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. Level 1 inputs include securities that have quoted prices in active markets for identical assets. If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics, or discounted cash flow. Examples of such instruments, which would generally be classified within Level 2 of the valuation hierarchy, included certain collateralized mortgage and debt obligations and certain high-yield debt securities. In certain cases where there is limited activity or less transparency around inputs to the valuation, securities are classified within Level 3 of the valuation hierarchy. SoCal’s current portfolio does not have securities that are valued using Level 3 inputs as of June 30, 2008. When measuring fair value, the valuation techniques available under the market approach, income approach and/or cost approach are used. SoCal’s evaluations are based on market data and SoCal employs combinations of these approaches for its valuation methods depending on the asset class.

Impaired Loans

SFAS No. 157 applies to loans measured for impairment using the practical expedients permitted by SFAS No. 114, Accounting by Creditors for Impairment of a Loan, including impaired loans measured at an observable market price (if available), or at the fair value of the loan’s collateral (if the loan is collateral dependent). Fair value of the loan’s collateral, when the loan is dependent on collateral, is determined by appraisals or independent valuation which is then adjusted for the cost related to liquidation of the collateral. Fair value of loans that are not collateral dependent is calculated based on the present value of future cash flows. For impaired loans that are collateral dependent, either a Level 2 or Level 3 valuation methodology is used. The fair value of loans that are not collateral dependent is measured using a Level 3 methodology.

Other Real Estate Owned

Other real estate owned ("OREO") is measured at fair value less cost to sell which is a Level 2 valuation methodology based on quoted prices for similiar assets or a Level 3 valuation methodology when an income approach is used. SoCal believes that the fair value component in its valuation follows the provisions of SFAS No. 157. Fair value of OREO at June 30, 2008 was determined by independent appraised values less estimated costs to sell.

Assets Measured on a Recurring Basis

Assets measured at fair value on a recurring basis are summarized below (dollars in thousands):

Fair Value Measurements at June 30, 2008 Using

Quoted Prices in

Active Markets for

Significant Other

Significant

Identical Assets

Observable Inputs

Unobservable Inputs

(in 000’s)

June 30, 2008

(Level 1)

(Level 2)

(Level 3)

Assets:

Available-for-sale investment securities

31,958

—

31,958

—

Assets measured at fair value on a non-recurring basis are summarized below (dollars in thousands):

			Fair Value Measurements at June 30, 2008 Using
(in 000's)	June 30, 2008		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Impaired loans	$	1,475	$	—	$	133	$	1,342
OREO	$	1,537	$	—	$	1,537	$	—

Impaired loans with a carrying amount of $133 thousand were measured based on the fair value of collateral, a Level 2 valuation methodology. Impaired loans with a carrying amount of $1.3 million were measured based on management’s update to a previously received appraised value, a Level 3 valuation methodology. A valuation allowance of $166 thousand is included in the allowance for loan losses for the impaired loans.

OREO consists of one commercial property and two residential properties valued by independent appraisals, net of estimated selling costs.

14.	Subsequent Event

Effective July 3, 2008, SoCal completed the merger of the Subsidiary Banks. By combining the two banks, SoCal expects to improve operational efficiency, reduce regulatory compliance costs, and consolidate vendor relationships. The merger of Spectrum Bank into Professional Business Bank was accounted for as a transfer of assets and liabilities between entities under common control and, accordingly, the assets and liabilities of Spectrum were transferred at their carrying amounts, similar to a pooling of interests. However, the existing Spectrum branches and certain customer-related activities will continue to be conducted using the Spectrum brand.

F-11

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

Background

SoCal acquired Professional Business Bank on November 23, 2007 and Spectrum on January 31, 2008. Prior to November 23, 2007, SoCal had no significant operations. Accordingly, the discussion and results of operations and financial condition for the three- and six-month periods ended June 30, 2008 are for SoCal. The results of operations and financial condition for the three- and six-month periods ended June 30, 2007 are for Professional Business Bank only. Securities and Exchange Commission rules require the presentation of certain prior period comparative financial statements of the acquired business when the acquiring company succeeds to substantially all of the business and the registrant’s own operations prior to the acquisition appear insignificant relative to the business acquired.

Forward-Looking Information

The statements contained herein that are not historical facts are forward-looking statements based on management’s current expectations and beliefs concerning future developments and their potential effects on SoCal. These forward looking statements involve risks and uncertainties, including the risks and uncertainties described in our annual report on Form 10-KSB in the discussion under the caption, “Business - Factors That May Affect Future Operating Results,” which was filed with the Securities and Exchange Commission on March 31, 2008. There can be no assurance that future developments affecting SoCal will be the same as those anticipated by management, and actual results may differ from those projected in the forward-looking statements. Statements regarding policies and procedures are not intended, and should not be interpreted to mean, that such policies and procedures will not be amended, modified or repealed at any time in the future.

Critical Accounting Policies

This discussion and analysis is based upon SoCal’s financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires SoCal’s management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses and related disclosure of contingencies.

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

Allowance for Loan Losses. The allowance for loan losses represents management’s best estimate of losses inherent in the existing loan portfolio. The allowance for loan losses is increased by the provision for loan losses charged to expense and reduced by loans charged off, net of recoveries. The provision for loan losses is determined based on management’s assessment of several factors: reviews and evaluation of specific loans, changes in the nature and volume of the loan portfolio, current economic conditions and the related impact on specific borrowers and industry groups, historical loan loss experiences, the level of classified and nonperforming loans and the results of regulatory examinations. Refer to “Provision for Loan Losses” on page 9 for a full discussion of Socal’s methodology of assessing the adequacy of the allowance for loan losses.

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

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

Goodwill and Other Intangibles. Net assets of entities acquired in purchase transactions are recorded at fair value at the date of acquisition. The historical cost basis of individual assets and liabilities are adjusted to reflect their fair value. Identified intangibles are amortized on a straight-line basis over the period benefited. Goodwill is not amortized for book purposes, although it will be reviewed for potential impairment on an annual basis, or if events or circumstances indicate a potential impairment. The impairment test is performed in two phases. The first step of the goodwill impairment test compares the fair value of the reporting unit with its carrying amount, including goodwill. If the fair value of the reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired; however, if the carrying amount of the reporting unit exceeds its fair value, an additional procedure must be performed. That additional procedure compares the implied fair value of the reporting unit’s goodwill (as defined in SFAS No. 142, Goodwill and Other Intangible Assets) with the carrying amount of that goodwill. An impairment loss is recorded to the extent that the carrying amount of goodwill exceeds its implied fair value. Management will begin the annual process of impairment testing by engaging a third party to prepare an independent valuation of SoCal during the third quarter of 2008.

Other intangible assets subject to amortization are evaluated for impairment in accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. An impairment loss will be recognized if the carrying amount of the intangible asset is not recoverable and exceeds fair value. The carrying amount of the intangible is considered “not recoverable” if it exceeds the sum of the undiscounted cash flows expected to result from the use of the asset.

Fair Value. Effective January 1, 2008, SoCal adopted SFAS No. 157, Fair Value Measurements, which among other things, requires enhanced disclosures about financial instruments carried at fair value. SFAS No. 157 establishes a hierarchical disclosure framework associated with the level of observable pricing scenarios utilized in measuring financial instruments at fair value. The degree of judgment utilized in measuring the fair value of financial instruments generally correlates to the level of the observable pricing scenario. Financial instruments with readily available active quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of observable pricing and a lesser degree of judgment utilized in measuring fair value. Conversely, financial instruments rarely traded or not quoted will generally have little or no observable pricing and a higher degree of judgment utilized in measuring fair value. Observable pricing scenarios are impacted by a number of factors, including the type of financial instrument, whether the financial instrument is new to the market and not yet established and the characteristics specific to the transaction.

Overview

The following discussion reviews and analyzes the operating results of SoCal for the for the three- and six-month periods ended June 30, 2008 and Professional Business Bank for the three- and six-month periods ended June 30, 2007 and the financial condition of SoCal at June 30, 2008 and December 31, 2007. It should be read in conjunction with the financial statements and the other financial data presented elsewhere in this quarterly report.

SoCal recorded a net loss of $1.3 million, ($0.90) basic and diluted loss per share, for the six-month period ended June 30, 2008 as compared to Professional Business Bank’s $153 thousand loss, ($0.08) basic and diluted loss per share, for the six-month period ended June 30, 2007. The increased loss was primarily due to a $3.7 million increase in non-interest expenses and a $1.5 million increase in provision for loan losses, offset by a $2.5 million increase in net interest income, a $454 thousand increase in non-interest income and a $1.1 million decrease in income tax expense.

SoCal recorded a net loss of $695 thousand, ($0.44) basic and diluted loss per share, for the three-month period ended June 30, 2008 as compared to Professional Business Bank’s $182 thousand, ($0.09) basic and diluted loss per share, for the three-month period ended June 30, 2007. The increased loss was primarily due to a $1.6 million increase in non-interest expenses and a $723 thousand increase to the provision for loan losses, offset by a $1 million increase in net interest income and an increase in income tax benefit of $534 thousand.

Total assets increased from $270.1 million at December 31, 2007 to $458.9 million at June 30, 2008, an increase of $188.9 million, or 69.9%, of which $177.7 million, or 94.0% of the increase, related to the acquisition of Spectrum. Net loans grew from $210.3 million at December 31, 2007 to $303.0 million at June 30, 2008, an increase of $92.7 million, or 44.1%, of which $78.5 million, or 84.6% of the increase, related to the acquisition of Spectrum. Deposits grew from $194.0 million at December 31, 2007 to $342.7 million at June 30, 2008, an increase of $148.7 million, or 76.6%, of which $135.6 million, or 91.2% of the increase, related to the acquisition of Spectrum.

Set forth below are certain key financial performance ratios for the periods indicated:

	For the six-month period ended June 30,
	2008		2007

Return on Average Assets (1)		(0.59%)		(0.16%)
Return on Average Equity (1)		(3.38%)		(1.53%)

(1) Annualized

Net Interest Income

Interest income was $5.9 million and $11.8 million for the three- and six-month periods ended June 30, 2008 as compared to $3.9 million and $7.6 million for the three- and six-month periods ended June 30, 2007. Interest expense was $2.3 million and $4.1 million for the three- and six-month periods ended June 30, 2008 as compared to $1.3 million and $2.4 million for the three- and six-month periods ended June 30, 2007. Net interest income was $3.7 million and $7.6 million for the three- and six-month periods ended June 30, 2008 as compared to $2.7 million and $5.1 million for the three- and six-month periods ended June 30, 2007. The increase in interest income was primarily due to the $182.9 million and $167.0 million increase in average interest-earning assets for the three- and six-month periods ended June 30, 2008 as compared to the same periods in 2007. The increase in interest expense was due to a $149.5 million and $137.1 million increase in average interest-bearing liabilities. The decrease in net interest margin from 5.68% for the six-month period ended June 30, 2007 to 4.40% for the six-month period ended June 30, 2008 is primarily due to declines in market interest rates and Spectrum’s lower net interest margin as compared to that of Professional Business Bank.

The increase in average interest-earning assets and average interest-bearing liabilities as compared to the same period in the prior year is primarily the result of the acquisition of Spectrum. Average loans increased $142.2 million, or 93.6%, to $294.2 million at June 30, 2008 compared to $152.0 million at June 30, 2007, of which $68.8 million, or 48.4%, related to the acquisition of Spectrum. Average interest-bearing deposits increased $101.9 million, or 91.5%, to $213.2 million at June 30, 2008 compared to $111.4 million at June 30, 2007, of which $82.2 million, or 91.5%, relates to the acquisition of Spectrum.

The weighted average yield on interest-earning assets decreased as a result of a decline in market interest rates. The prime rate decreased seven times, totaling a reduction of 325 basis points, from June 2007 through June 2008. Variable rate loans, with rates primarily indexed to the prime rate, comprise approximately 79% of the loan portfolio. The decline in the prime rate impacted the loan portfolio immediately and to a greater extent than its impact on the interest-bearing liabilities generally due to a lag in deposit repricing as compared to loans.

The following table presents the weighted average yield on each specified category of interest-earning assets, the weighted average rate paid on each specified category of interest-bearing liabilities, and the resulting interest rate spread and net interest margin for the periods indicated. Loan fees, which are not material, are included in interest earned on loans (dollars in thousands).

	Three-month period ended June 30,
	Belvedere SoCal								Professional Business Bank
	2008								2007
						Average								Average
				Interest		Yield or						Interest		Yield or
	Average			Earned		Rate			Average			Earned		Rate
	Balance			or Paid		Paid			Balance			or Paid		Paid
Assets
Interest-Earning Assets:
Investment Securities-taxable	$	27,007		$	279		4.15	%	$	14,284		$	176		4.94	%
Investment Securities-nontaxable		9,049			91		4.04	%		-			-		-
Interest-Bearing Deposits in Other
Financial Institutions		1,350			16		4.77	%		3,064			40		5.24	%
Federal Funds Sold		23,374			118		2.03	%		9,671			126		5.23	%
Loans		311,628			5,432		7.01	%		162,523			3,583		8.84	%
Total Interest-Earning Assets		372,408			5,936		6.41	%		189,542			3,925		8.31	%

Noninterest-Earning Assets:
Cash and Due from Banks		9,508								4,966
Premises and Equipment		5,231								464
Goodwill		57,176								-
Other Intangibles		2,905								-
Accrued Interest and Other Assets		15,208								3,291
Allowance for Loan Losses		(6,447	)							(2,202	)
Total Assets	$	455,989							$	196,061


Liabilities and Shareholders' Equity
Interest-Bearing Liabilities:
Money Market, Savings and NOW	$	84,311			271		1.29	%	$	87,001			798		3.68	%
Time Deposits under $100,000		81,253			890		4.41	%		21,361			291		5.46	%
Time Deposits of $100,000 or More		69,985			502		2.88	%		10,877			137		5.05	%
Short Term borrowings		12,370			63		2.05	%		2,621			30		4.59	%
Note Payable		8,000			112		5.63	%		-			-		-
Subordinated Debentures		15,464			442		11.50	%		-			-		-
Total Interest-Bearing Liabilities		271,383			2,280		3.38	%		121,860			1,256		4.13	%

Noninterest-Bearing Liabilities:
Demand Deposits		103,737								52,996
Other Liabilities		4,670								1,100
Shareholders' Equity		76,199								20,105
Total Liabilities and Shareholders' Equity	$	455,989							$	196,061
Net Interest Income				$	3,656							$	2,669

Net Yield on Interest-
Earning Assets (Net Interest Margin)							3.95	%							5.65	%

Yields are computed on a tax equivalent basis resulting in an adjustment of $ 31 thousand to interest earned on municipal bonds for the three-month period ended June 30, 2008. There were no municipal bonds held during the three-month period ended June 30, 2007.

	Six-month period ended June 30,
	Belvedere SoCal 2008							Professional Business Bank 2007
						Average							Average
				Interest		Yield or					Interest		Yield or
	Average			Earned		Rate		Average			Earned		Rate
	Balance			or Paid		Paid		Balance			or Paid		Paid
Assets
Interest-Earning Assets:
Investment Securities-taxable	$	25,960		$	534		4.14%	$	14,498		$	339		4.72%
Investment Securities-nontaxable		7,507			152		4.07%		-			-		-
Interest-Bearing Deposits in Other Financial Institutions		1,326			32		4.85%		3,974			124		6.29%
Federal Funds Sold		20,680			242		2.35%		12,217			317		5.23%
Loans		294,203			10,815		7.39%		151,978			6,773		8.99%
Total Interest-Earning
Assets		349,676			11,775		6.77%		182,667			7,553		8.34%
Noninterest-Earning Assets:
Cash and Due from Banks		8,485							5,621
Premises and Equipment		4,452							436
Goodwill		52,452							-
Other Intangibles Assets, net		2,847							-
Accrued Interest and
Other Assets		15,130							3,192
Allowance for Loan Losses		(5,915	)						(2,094	)
Total Assets	$	427,127						$	189,822

Liabilities and Shareholders' Equity
Interest-Bearing Liabilities:
Money Market, Savings and NOW	$	78,796		547	1.40%	$	79,605		1,496	3.79%
Time Deposits under $100,000		72,077		1,383	3.86%		21,220		574	5.45%
Time Deposits of $100,000 or More		62,345		1,114	3.59%		10,542		263	5.03%
Short-Term Borrowings		21,024		304	2.91%		3,278		76	4.68%
Note Payable		4,667		137	5.90%		-		-	-
Subordinated Debentures		12,835		644	10.09%		-		-	-
Total Interest-Bearing Liabilities		251,744		4,129	3.18%		114,645		2,409	4.24%

Noninterest-Bearing Liabilities:
Demand Deposits		96,068					54,028
Other Liabilities		4,665					1,008
Shareholders' Equity		74,650					20,141
Total Liabilities and Shareholders' Equity	$	427,127				$	189,822
Net Interest Income			$	7,646				$	5,144

Net Yield on Interest-
Earning Assets (Net Interest Margin)					4.40%					5.68%

Yields are computed on a tax equivalent basis resulting in an adjustment of $52 thousand to interest earned on municipal bonds for the six-month period ended June 30, 2008. There were no municipal bonds held during the six-month period ended June 30, 2007.

Rate and Volume Analysis

The following tables show the increase or decrease in interest income, interest expense and net interest income resulting from the changes in rates and volumes for the periods indicated (dollars in thousands):

	Three-Month Period Ended June 30, 2008
	versus
	Three-Month Period Ended June 30, 2007
	Increase (Decrease) Due
	To Change in
	Volume			Rate			Total
Interest-Earning Assets:
Investment Securities-Taxable	$	156		$	(53	)	$	103
Investment Securities-Nontaxable		91			-			91
Interest-Bearing Deposits in Other Financial Institutions		(22	)		(2	)		(24	)
Federal Funds Sold		186			(194	)		( 8	)
Loans		3,261			(1,412	)		1,849
Total Interest Income		3,672			(1,661	)		2,011

Interest-Bearing Liabilities:
Money Market, Savings and NOW		(25	)		(502	)		(527	)
Time Deposits under $100,000		813			(214	)		599
Time Deposits of $100,000 or More		742			(377	)		365
Short Term Borrowings		111			(78	)		33
Subordinated Debentures		112			-			112
Note Payable		442			-			442
Total Interest Expense		2,195			(1,171	)		1,024
Net Interest Income	$	1,477		$	(490	)	$	987

	Six-Month Period Ended June 30, 2008
	versus
	Six-Month Period Ended June 30, 2007
	Increase (Decrease) Due
	To Change in
	Volume			Rate			Total
Interest-Earning Assets:
Investment Securities-Taxable	$	270		$	(75	)	$	195
Investment Securities-Nontaxable		152			-			152
Interest-Bearing Deposits in Other Financial Institutions		(83	)		(9	)		(92	)
Federal Funds Sold		218			(293	)		( 75	)
Loans		6,386			(2,344	)		4,042
Total Interest Income		6,943			(2,721	)		4,222

Interest-Bearing Liabilities:
Money Market, Savings and NOW		(15	)		(934	)		(949	)
Time Deposits under $100,000		1,382			(573	)		809
Time Deposits of $100,000 or More		1,147			(296	)		851
Short Term Borrowings		395			(167	)		228
Subordinated Debentures		644			-			644
Note Payable		137			-			137
Total Interest Expense		3,690			(1,970	)		1,720
Net Interest Income	$	3,253		$	(751	)	$	2,502

Provision for Loan Losses

SoCal made provisions for loan losses of $1.1 million and $2.1 million for the three- and six-month periods ending June 30, 2008 and Professional Business Bank made provisions of $380 thousand and $537 thousand for the three- and six-month periods ended June 30, 2007, respectively. The increase year over year reflects SoCal’s assessment of the overall adequacy of the allowance for loan losses considering the $1.8 million charge-off of one real estate construction loan along with an increase in nonperforming loans.

During the second quarter, additional provision was recorded to replenish the allowance for loan losses after a $1.8 million charge-off on one real estate construction participation loan. The loan was classified as impaired at March 31, 2008 with a $510 thousand specific reserve pending an updated appraisal from the lead bank. The appraisal received during the second quarter indicated additional reserves were required. Management recorded a charge-off of the $1.8 million impairment based on the appraised value, reducing the loan balance to $520 thousand at June 30, 2008. The loan remains on nonaccrual status.

Management believes that the allowance for loan losses is adequate. Quarterly detailed reviews are performed by management to identify the risks inherent in the loan portfolio, assess the overall quality of the loan portfolio and to determine the adequacy of the allowance for loan losses and the related provision for loan losses to be charged to expense. These systematic reviews follow the methodology set forth by the FDIC in its 2006 policy statement on the allowance for loan losses.

Management has adopted a methodology designed by a third-party to prepare the quarterly provision for loan loss calculations. The methodology estimates the expected loss rates based on a two-factor approach. The first factor is based on the actual payment default rate in the loan portfolio. For loan types that have not generated an actual payment default rate, a rate is applied based on industry experience for such loans by type and geographic location. The second factor is based on the rate of loss as determined by dividing the expected net charge-off of defaulted loans, with defaulted loans being defined as loans that have 30 days or greater payment delinquency plus nonaccrual and gross loans charged-off, by total loans in each group. This rate reflects industry experience as determined by state and loan type. Taken together, the two factors produce the expected loss rate.

The calculation is applied to both outstanding loan balances and expected contingent funding of commitments to fund as of the measurement date. Expected losses on loans identified as specifically impaired will be excluded from the above measurements, as the provision for such loans is based on the present value of expected future cash flows discounted at the historical effective interest rate stipulated in the loan agreement, or based on the fair value of collateral for collateral-dependent loans and is included as a separate component in calculating the required provision for loan losses.

SoCal has also elected to take external, subjective (so-called qualitative) factors into consideration when assessing the adequacy of the allowance for loan losses. These qualitative factors take into account and weight by risk, among other things, the growth and nature of the loan portfolio, concentration of credits, lending policies, economic trends, competition and legal and regulatory requirements. The total qualitative reserve requirement is determined by applying the risk weights of the qualitative factors to the total amount of loans outstanding and is included as the third component in the calculation.

The credit quality of our loans will be influenced by underlying trends in the economic cycle, particularly in Southern California, and other factors, which are beyond management’s control. Accordingly, no assurance can be given that we will not sustain loan losses that in any particular period will be sizable in relation to the allowance. Additionally, subsequent evaluation of the loan portfolio by us and by our regulators, in light of factors then prevailing, may require increases in the allowance through charges to the provision for loan losses.

Non-Interest Income

Non-interest income consists primarily of service charges on deposit accounts. Non-interest income for SoCal was $363 thousand and $690 thousand for the three- and six-month periods ended June 30, 2008. Non-interest income for Professional Business Bank was $103 thousand and $236 thousand for the three- and six-month periods ended June 30, 2007. Virtually all of the increase is attributable to the acquisition of Spectrum’s deposit base.

Non-Interest Expense

	Three-month period ended ended June 30,							Six-month period ended June 30,
	Belvedere SoCal 2008		Professional Business Bank 2007		Percent Change			Belvedere SoCal 2008		Professional Business Bank 2007		Percent Change

Salaries and employee benefits	$	2,152,490	$	1,547,897		39.1	%	$	4,621,273	$	2,850,982		62.1	%
Occupancy and equipment		389,973		172,582		126.0	%		715,075		319,956		123.5	%
Professional fees		515,543		242,054		113.0	%		1,101,640		625,981		76.0	%
Data processing		389,971		162,125		140.5	%		657,630		296,980		121.4	%
Marketing and business promotion		64,432		31,966		101.6	%		113,295		64,344		76.1	%
Office and administrative expenses		251,033		222,900		12.6	%		492,960		385,343		27.9	%
Other expenses		402,617		216,029		86.4	%		829,010		331,670		150.0	%
Total	$	4,166,059	$	2,595,553		60.5	%	$	8,530,883	$	4,875,256		75.0	%

Salary and employee benefits increased $605 thousand, or 39.1%, for the three-month period ended June 30, 2008 compared to the same period in 2007. Virtually all of the increase related to the addition of 33 full-time and two part-time Spectrum employees. The $1.8 million, or 62.1%, increase for the six-month period ended June 30, 2008 compared to the same period in 2007 was primarily related to the addition of Spectrum employees, comprising $1.1 million of the increase in costs. The remainder of the increase was the result of increased stock-based compensation costs, salary adjustments and other employee benefits.

Occupancy and equipment expenses increased $217 thousand, or 126.0%, and $395 thousand, or 123.5%, for the three- and six-month periods ended June 30, 2008. The increase was primarily due to the acquisition of Spectrum, which added three branch offices to the existing branches of Professional Business Bank.

Professional fees increased $273 thousand, or 113.0%, and $476 thousand, or 76.0%, for the three- and six-month periods ended June 30, 2008 due to professional fees incurred by Spectrum and legal, accounting and audit fees incurred by the holding company.

Data processing expenses increased $228 thousand, or 140.5%, and $361 thousand, or 121.4%, for the three- and six-month periods ended June 30, 2008 due to system conversion costs and the increased transaction volume subsequent to the acquisition of Spectrum.

Marketing and business promotion expenses increased $32 thousand, or 101.6%, and $49 thousand, or 76.1%, for the three- and six-month periods ended June 30, 2008 due to costs incurred by the holding company related to the processing and publication of public filings and marketing expenses of $24 thousand and $37 thousand for the three- and six-month periods ended June 30, 2008 incurred by Spectrum.

Office and administrative expenses increased $28 thousand, or 12.6%, for the three-month period ended June 30, 2008. The increase of $108 thousand, or 27.9%, for the six-month period ended June 30, 2008 was primarily due to $112 thousand in administrative costs incurred by Spectrum.

Other expenses increased $187 thousand, or 86.4%, and $497 thousand, or 150.0%, for the three- and six-month periods ended June 30, 2008 due to amortization of core deposit intangibles and expenses incurred by the holding company and Spectrum.

Income Tax (Benefit) Expense

The income tax benefit for the three- and six-month periods ended June 30, 2008, respectively, totaled $555 thousand, an effective rate of 44.3%, and $999 thousand, an effective tax rate of 44.4%. The income tax benefit for the three-month period ended June 30, 2007 totaled $21 thousand, an effective rate of 10.1%. The income tax provision for the six-month period ended June 30, 2007 totaled $121 thousand, an effective rate of 369.9%. The fluctuating effective rates (compared to a statutory rate of 41.2%) for the three- and six-month periods ended June 30, 2007 were due to nondeductible merger-related costs and stock compensation costs incurred by Professional Business Bank during these periods offset by interest income exclusions for certain loans in designated enterprise zones of California. No valuation allowance for deferred taxes is considered necessary based on the earnings history of the Subsidiary Banks.

The income tax rates used in determining the income tax provision or benefit were 34.000% for federal income tax purposes and 7.115% for state income taxes, net of federal income tax benefit. Generally, the current tax expense is the result of applying the current tax rate to taxable income. The deferred portion is intended to account for the fact that (losses) income on which taxes are recognized differs from financial statement pre-tax (loss) income because some items of income and expense are recognized in different years for income tax purposes than in the financial statements. These recognition anomalies cause “temporary differences”; eventually, all taxes are paid.

Regulatory Capital

At June 30, 2008, Tier 1 capital of Professional Business Bank and Spectrum Bank, which is comprised of shareholders’ equity as modified by certain regulatory adjustments, was $24.1 million and $11.8 million, respectively.

Under regulatory capital adequacy guidelines, capital adequacy is measured as a percentage of risk-adjusted assets in which risk percentages are applied to assets and certain off-balance-sheet items, such as unused loan commitments and standby letters of credit. The guidelines require that a portion of total capital be core, or Tier 1, capital consisting of common shareholders’ equity and non-cumulative perpetual preferred stock, less goodwill and certain deductions. Tier 2 capital consists of other elements, primarily some types of non-perpetual preferred stock, subordinated debt and mandatory convertible debt, plus the allowance for loan losses, subject to certain limitations. Under current regulatory guidelines, the $15 million in trust preferred securities outstanding currently qualify as Tier 1 capital up to 25% of core capital. The guidelines also evaluate the leverage ratio, which is Tier 1 capital divided by average tangible assets. Beginning with the quarter ended March 31, 2009, amendments to the risk-based capital guidelines will become effective and the amount of trust preferred securities that may be included in Tier 1 capital may not exceed 25% of the sum of all core capital elements, including restricted core capital elements, net of goodwill less any associated deferred tax liability.

The following table sets forth the regulatory standards for well-capitalized and adequately capitalized institutions and the capital ratios for SoCal, Professional Business Bank and Spectrum Bank as of the dates indicated (dollars in thousands):

June 30, 2008:	Actual				For Capital Adequacy Purposes			To Be Well Capitalized
SoCal	Amount		Ratio		Amount		Ratio	Amount		Ratio
Total Capital (to risk-weighted assets)		35,389		9.99%		28,327	>=+ 8%		N/A		N/A
Tier 1 Capital (to risk-weighted assets)		30,956		8.74%		14,164	>=+ 4%		N/A		N/A
Tier 1 Capital (to average assets)		30,956		7.86%		15,748	>=+ 4%		N/A		N/A

Professional Business Bank
Total Capital (to risk-weighted assets)		27,224		10.83%		20,200	>=+ 8%		25,250	>=+ 10%
Tier 1 Capital (to risk-weighted assets)		24,068		9.57%		10,100	>=+ 4%		15,150	>=+ 6%
Tier 1 Capital (to average assets)		24,068		9.76%		9,866	>=+ 4%		12,332	>=+ 5%

Spectrum Bank
Total Capital (to risk-weighted assets)		13,109		12.77%		8,210	>=+ 8%		10,262	>=+ 10%
Tier 1 Capital (to risk-weighted assets)		11,832		11.53%		4,105	>=+ 4%		6,157	>=+ 6%
Tier 1 Capital (to average assets)		11,832		8.05%		5,882	>=+ 4%		7,352	>=+ 5%

Deposits

Deposits grew from $194.0 million at December 31, 2007 to $342.7 million at June 30, 2008, an increase of $148.7 million, or 76.6%, of which $135.6 million, or 91.2% of the increase, related to the acquisition of Spectrum.

Total demand deposits represented 32.5% of total deposits at June 30, 2008 compared to 37.8% at December 31, 2007. Total interest-bearing checking, money market and savings accounts as a group totaled 24.7% of total deposits at June 30, 2008 compared to 25.5% at December 31, 2007. Total certificates of deposit represented 42.8% to total deposits at June 30, 2008 compared to 36.7% at December 31, 2007.

At June 30, 2008 and December 31, 2007, the deposit portfolio consisted of $36.2 million and $20.0 million in brokered deposits, respectively, which are defined to include not only deposits received through deposit brokers, but also deposits bearing interest in excess of 75 basis points over market rates.

The following table sets forth the scheduled maturities of time deposits in denominations of $100,000 or greater at June 30, 2008 (dollars in thousands):

Three Months or less	$	26,739
Over Three Months to One Year		29,353
Over One Year to Three Years		6,149
Over Three Years		5,200
Total	$	67,441

Liquidity and Borrowings

Liquidity management for banks requires that funds always be available to pay anticipated deposit withdrawals and maturing financial obligations promptly and fully in accordance with their terms. The balance of the funds required is generally provided by payments on loans, the acquisition of additional deposit liabilities and liquidation of assets.

Liquidity may be enhanced, if necessary, through short-term borrowings. As of June 30, 2008, SoCal had short-term borrowing facilities available totaling approximately $92.5 million. This consisted of $22.5 million in unsecured federal funds lines of credit with correspondent banks and approximately $70 million in a secured line of credit with the Federal Home Loan Bank.

SoCal has from time to time borrowed funds on a short-term basis from the Federal Home Loan Bank and other financial institutions. Outstanding borrowings totaled $12.6 million and $18.0 million at June 30, 2008 and December 31, 2007, respectively. The interest rate was 2.08% and 3.80% on these outstanding borrowings at June 30, 2008 and December 31, 2007, respectively. The average amounts outstanding totaled $17.5 million and $7.8 million and the weighted average interest rates were 3.09% and 4.90% for the six-month period ended June 30, 2008 and the year ended December 31, 2007, respectively. The maximum outstanding at any month-end during the six-month period ended June 30, 2008 and the year ended December 31, 2007 was $39.0 million and $18.0 million, respectively.

In March 2008, SoCal borrowed $8.0 million through a loan secured by the stock of the Subsidiary Banks. The loan bears interest at three-month LIBOR plus 3.1% (5.87% at June 30, 2008) with quarterly interest payments through September 2009, followed by principal and interest payments through the maturity date of March 2018. The promissory note and related loan agreements contain certain customary restrictions, including a potential limitation on the ability of the Subsidiary Banks to pay dividends to SoCal for purposes other than to allow SoCal to service the loan. At June 30, 2008, SoCal was not in compliance with the debt service coverage covenant of the loan agreement. On July 25, 2008 the lender waived compliance with this covenant.

In January 2008, SoCal issued $15.5 in junior subordinated debentures to Belvedere SoCal Statutory Trust I, a Delaware business trust that was formed for the exclusive purpose of issuing trust preferred securities. The Trust purchased debentures with: (1) the proceeds of the sale of its common trust securities to SoCal for $464 thousand, and (2) certain shares of common stock in Spectrum Bank valued at $15 million that the Trust received from certain shareholders of Spectrum Bank in exchange for the Trust’s trust preferred securities. The junior subordinated debentures and trust preferred securities have generally identical terms, including that they mature in January 2038 and require monthly interest payments at 10%. The trust preferred securities and corresponding junior subordinated deferrable interest debentures contain provisions limiting our ability to declare and pay dividends on SoCal’s common stock in certain events.

Loan Portfolio

SoCal’s lending strategy is to attract small to mid-sized business borrowers by offering a variety of commercial and real estate loan products and a full range of other banking services coupled with highly personalized service. We offer commercial loans, lines of credit, certain consumer and installment loans, commercial and residential construction loans, as well as specialized products such as SBA and CalCAP loans.

The following table sets forth the components of total net loans outstanding in each category at the date indicated (dollars in thousands):

	June 30, 2008					December 31, 2007
	Amount			Percent of		Amount			Percent of
	Outstanding			Total		Outstanding			Total
Loans
Commercial	$	81,831			26.5%	$	56,791			26.5%
Real Estate - Construction		40,024			13.0%		37,566			17.5%
Real Estate - Other		179,116			58.0%		113,123			52.7%
Consumer		7,743			2.5%		7,127			3.3%
Total Loans		308,714			100.0%		214,607			100.0%
Net Deferred Loan Fees		(362	)				(273	)
Allowance for Loan Losses		(5,385	)				(4,077	)
Net Loans	$	302,967				$	210,257

Commitments
Letters of Credit	$	1,398				$	769
Undisbursed Loans and
Commitments to Grant Loans		66,449					62,459
Total Commitments	$	67,847				$	63,228

Nonperforming Assets

Nonaccrual loans are those loans for which SoCal has discontinued accrual of interest because reasonable doubt exists as to the full and timely collection of either principal or interest. Loans past due 90 days will generally continue to accrue interest when the loan is both well secured and in the process of collection. Other real estate owned consists of real properties that secured loans on which we have taken title in partial or complete satisfaction of the loan.

When a loan is placed on nonaccrual status, all interest previously accrued but uncollected is reversed against current period operating results. Income on such loans is then recognized only to the extent that cash is received and, where the ultimate collection of the carrying amount of the loan is probable, after giving consideration to the borrower’s current financial condition, historical repayment performance and other factors. Accrual of interest is resumed only when (i) principal and interest are brought fully current, and (ii) such loan is either considered, in management’s judgment, to be fully collectible or otherwise well secured and in the process of collection.

The following table sets forth information about non-performing assets at the dates indicated (dollars in thousands):

	June 30, 2008		December 31, 2007
Loans 90 Days Past Due and Still
Accruing Interest	$	548	$	-
Nonaccrual Loans		1,475		920

Total Nonperforming Loans		2,023		920

Other Real Estate Owned		1,537		-

Total Nonperforming Assets	$	3,560	$	920

Nonperforming Loans as a
Percentage of Total Loans		0.66%		0.43%
Allowance for Loan Losses as a Percentage
of Nonperforming Loans		151.26%		443.15%
Nonperforming Assets as a
Percentage of Total Assets		0.78%		0.34%

The increase in nonperforming assets resulted primarily from placing two SBA loans, one real estate construction loan and one commercial loan on nonaccrual, as well as taking two properties in settlement of SBA loan obligations. The current economic slowdown has negatively affected the ability of borrowers to meet their payment obligations under the terms of the loans. Management continues to actively evaluate the entire loan portfolio as part of their internal credit review process.

Provision and Changes in Allowance for Loan Losses

The following table summarizes the allocation of the allowance for loan losses by loan type as of the indicated date and the percent of loans in each category to total loans (dollars in thousands):

	June 30, 2008				December 31, 2007
	Amount		Loan Percent		Amount		Loan Percent
Commercial	$	2,325		26.5%	$	1,286		26.5%
Real Estate - Construction		1,637		13.0%		1,163		17.5%
Real Estate - Other		1,213		58.0%		1,468		52.7%
Consumer		210		2.5%		152		3.3%
Unallocated		-		n/a		8		n/a
Total	$	5,385		100.0%	$	4,077		100.0%

The following table presents an analysis of changes in the allowance for loan losses during the periods indicated (dollars in thousands):

		Three-month period ended June 30,					Six-month period ended June 30,
		Belvedere SoCal			Professional Business Bank		Belvedere SoCal			Professional Business Bank
		2008			2007		2008			2007
Balance at beginning of period	$	6,254		$	2,026		$	4,077		$	1,869
Allowance acquired at acquisition of Spectrum								1,436

Charge-offs:
Commercial		(110	)		-			(110	)		-
Real Estate - Construction		(1,796	)		-			(1,934	)		-
Real Estate - Other		-			-			-			-
Consumer		(67	)		(2	)		(161	)		(2	)
Total charge-offs		(1,973	)		(2	)		(2,205	)		(2	)

Recoveries:
Commercial		-			-			-			-
Real Estate - Construction		-			-			-			-
Real Estate - Other		-			-			-			-
Consumer		-			-			-			-
Total recoveries		-			-			-			-

Additional provision		1,104			380			2,061			537
Balance at end of period	$	5,385		$	2,404		$	5,385		$	2,404

At June 30, 2008 and December 31, 2007, the allowance for loan losses was 1.75% and 1.90%, respectively, of total loans.

Investment Portfolio

All investment securities are classified as available-for-sale. The following table summarizes the types, amounts, yields and maturities of investment securities held as of the dates indicated (dollars in thousands):

	June 30, 2008						December 31, 2007
					Weighted						Weighted
	Amortized		Market		Average		Amortized		Market		Average
	Cost		Value		Yield		Cost		Value		Yield
Available-for-Sale Securities

U.S. Government Agencies
Within One Year	$	8,524	$	8,543		3.86%	$	2,004	$	2,002		4.24%
One to Five Years		3,205		3,152		5.73%		2,024		2,024		5.42%
Subtotal		11,729		11,695		4.36%		4,028		4,026		4.40%

Government Guaranteed Collateralized Mortgage Obligations
After Five Years to Ten Years		904		895		4.29%		-		-
Subtotal		904		895		4.29%		-		-

States and Political Subdivisions
One to Five Years		337		327	3.57%		-		-
After Five Years to Ten Years		1,089		1,056	3.90%		-		-
Over Ten Years		7,623		7,335	4.17%		-		-
Subtotal		9,049		8,718	4.12%		-		-
Mortgage-Backed Securities
Within One Year		1,680		1,689	3.25%		-		-
One to Five Years		2,434		2,444	4.41%		1,230		1,231	4.16%
After Five Years to Ten Years		4,448		4,337	4.87%		558		559	4.98%
Over Ten Years		2,216		2,180	4.98%		2,953		2,970	4.78%
Subtotal		10,778		10,650	4.53%		4,741		4,760	4.84%

Total	$	32,460	$	31,958	4.35%	$	8,769	$	8,786	4.56%

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Market risk is the risk of loss in a financial instrument arising from adverse changes in market prices, interest rates, foreign currency exchange rates, commodity prices and equity prices. SoCal's market risk arises primarily from interest rate risk inherent in its lending, investment and deposit taking activities. Management uses various asset/liability strategies to manage the re-pricing characteristics of SoCal's earning assets and funding liabilities to ensure that exposure to interest rate fluctuations is within its guidelines of acceptable risk-taking. Hedging strategies, including the terms and pricing of loans, investments, deposits and borrowings, are used to reduce mismatches in interest rate re-pricing opportunities of portfolio assets and their funding sources.

Interest rate risk is addressed by the Asset Liability Management Committee (“ALCO”) which is comprised of executive officers of SoCal. The ALCO monitors interest rate risk by analyzing the potential impact on the net value of equity and net interest income from potential changes in interest rates, and considers the impact of alternative strategies or changes in balance sheet structure. The ALCO manages SoCal's balance sheet in part to maintain, within acceptable ranges, the potential impact on net value of equity and net interest income despite fluctuations in market interest rates.

Exposure to interest rate risk is reviewed on at least a quarterly basis by the ALCO and the Board of Directors. Interest rate risk exposure is measured using interest rate sensitivity analysis to determine the change in net portfolio value in the event of hypothetical changes in interest rates. If potential changes to the net value of equity and net interest income resulting from hypothetical interest rate changes are not within the limits established by the Board of Directors, management may adjust the asset and liability mix to bring interest rate risk within approved limits.

There have been no significant changes in SoCal's exposure to interest rate risk previously disclosed in SoCal's 10-KSB filed with the Securities and Exchange Commission on March 31, 2008.

Item 4. Controls and Procedures

Evaluation of Controls and Procedures

With the participation of management, including our Chief Executive Officer and Chief Financial Officer, the effectiveness of SoCal's disclosure controls and procedures (as defined in Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) were evaluated as of the end of the period covered by this Quarterly Report on Form 10-Q. Based upon that evaluation, SoCal's Chief Executive Officer and Chief Financial Officer have concluded that:

(a) information required to be disclosed by SoCal in this Quarterly Report on Form 10-Q and the other reports which SoCal files or submits under the Exchange Act would be accumulated and communicated to SoCal's management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure;

(b) information required to be disclosed by SoCal in this Quarterly Report on Form 10-Q and the other reports which SoCal files or submits under the Exchange Act would be recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms; and

(c) SoCal's disclosure controls and procedures are effective as of the end of the period covered by this Quarterly Report on Form 10-Q to ensure that material information relating to SoCal and its consolidated subsidiary is made known to them, particularly during the period for which periodic reports, including this Quarterly Report on Form 10-Q, are being prepared.

Changes in Internal Control over Financial Reporting

There were no changes during the period covered by this Quarterly Report on Form 10-Q in SoCal's internal control over financial reporting (as defined in Rule 15d-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

There have been no material changes in legal proceedings as described in the Company’s Annual Report on Form 10-KSB for the year ended December 31, 2007.

Item 1A. Risk Factors

There have been no material changes in the discussion pertaining to risk factors found in “Business – Factors that may Affect our Performance” that was provided in the December 31, 2007 Form 10-KSB.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

SoCal, on January 31, 2008, also completed its sale of $22 million of its common stock at a price of $16.75 per share to Belvedere Capital Fund II L.P. (the “Fund”) for cash to fund the cash portion of the Spectrum acquisition. The sale of common stock to the Fund was exempt from registration under the Securities Act of 1933 pursuant to section 4(2) as it did not involve any public offering. The purchase price per share was calculated as the average closing bid price of SoCal’s common stock on the OTC Bulletin Board over the five trading days preceding the closing of the transaction. The price was within the range of fair prices as determined by a financial advisor hired by SoCal. After the sale of the shares, the Fund now owns approximately 73% of SoCal’s common stock on a fully diluted basis. The stock purchase agreement also provided for a transaction fee of $740,000 payable by SoCal to the Fund in consideration for the services provided by the Fund to SoCal in connection with the Spectrum Bank acquisition.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Submission of Matters to a Vote of Security Holders

SoCal held its Annual Meeting of Shareholders on June 23, 2008. The following matters were presented and voted on at the meeting:

1. Election of Directors. The following, all of which were the incumbent directors of the Company, were elected to serve until the next annual meeting of shareholders. The directors elected were:

	Votes	Votes
	For	Withheld
William Baribault	2,900,437	28,936
Alison Davis	2,899,351	30,022
Justin Evans	2,900,437	28,936
Alan Lane	2,900,437	28,936
Larry Tashjian	2,900,437	28,936

2. Election of Independent Accounting Firm. The election of Perry-Smith, LLP as SoCal’s independent registered public accounting firm for the year ending December 31, 2008 was ratified with 2,900,233 shares voting for, 14,138 shares voting against, 15,002 shares abstaining.

Item 5. Other Information

None.

Item 6. Exhibits

31.1	Rule 15d-14(a) Certification by Chief Executive Officer

31.2	Rule 15d-14(a) Certification by Chief Financial Officer

32.1	Section 1350 Certifications

10.1	Baribault Employment Agreement

10.2	Baribault Time-Vest Option Agreement

10.3	Baribault Performance-Vest Option Agreement

10.4	Baribault Modified Time-Vest Option Agreement

______________________

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

BELVEDERE SOCAL

By:	/s/ WILLIAM BARIBAULT
	William Baribault President and Chief Executive Officer (Principal Executive Officer)

Dated: August 14, 2008

BELVEDERE SOCAL

By:	/s/ MICHAEL McCALL
	Michael McCall Chief Financial Officer (Principal Financial Officer)

Dated: August 14, 2008