UNITED STATES

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-QSB

(Mark one)

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

For the quarterly period ended September 30, 2007

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

Commission file number 333-133004

SOLERA NATIONAL BANCORP, INC.

(Exact name of registrant as specified in its charter)

319 S. Sheridan Blvd.

Lakewood, CO 80226

303-209-8600

(Address and telephone number of principal executive offices and principal place of business)

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes o  No x

State the number of shares outstanding of each of the issuers classes of common equity, as of the last practicable date:  As of November 13, 2007, 2,262,837 shares of the registrant’s common stock, $0.01 par value, were issued and outstanding.

Transitional Small Business Disclosure Format (check one)    Yes o  No x

FORM 10-QSB

SOLERA NATIONAL BANCORP, INC.

INDEX

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INTRODUCTORY NOTE

This Quarterly Report on Form 10-QSB contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 about Solera National Bancorp (the “Company”) and our subsidiary, Solera National Bank (the “Bank”) that are subject to risks and uncertainties.  Forward-looking statements include information concerning future financial performance, business strategy, projected plans and objectives.  Statements preceded by, followed by or that otherwise include the words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “may increase,” “may fluctuate” and similar expressions of future or conditional verbs such as “will,” “should,” “would,” and “could” are generally forward-looking in nature and not historical facts.  Actual results may differ materially from those projected, implied, anticipated or expected in the forward-looking statements.  Readers of this quarterly report should not rely solely on the forward-looking statements and should consider all uncertainties and risks throughout this report. The statements are representative only as of the date they are made, and Solera National Bancorp, Inc. (sometimes referred to herein as on a consolidated basis as the Company, we, us, or similar phrasing) undertakes no obligation to update any forward-looking statement.

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

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

•                  the Company has a very limited operating history upon which to base an estimate of its future financial performance;

•                  the Company expects to incur losses during its initial years of operations;

•                  Solera National Bank’s failure to implement its business strategies may adversely affect the Company’s financial performance;

•                  the departures of key personnel or directors may impair Solera National Bank’s operations;

•                  Solera National Bank will face intense competition from a variety of competitors;

•                  Solera National Bank’s legal lending limits may impair its ability to attract borrowers;

•                  an economic downturn, especially one affecting Solera National Bank’s primary service areas, may have an adverse effect on its financial performance;

•                  the Company could be negatively affected by changes in interest rates;

•                  the Company does not intend to pay dividends in the foreseeable future;

•                  the Company is subject to extensive regulatory oversight, which could restrain our growth and profitability;

•                  the Company may not be able to raise additional capital on terms favorable to it;

•                  the liquidity of the Company common stock will be affected by its limited trading market;

•                  monetary policy and other economic factors could adversely affect the Company’s profitability;

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•                  the Company’s certificate of incorporation and bylaws, and the employment agreements of our Executive Officers, contain provisions that could make a takeover more difficult;

•                  management of Solera National Bank may be unable to adequately measure and limit credit risk associated with Solera National Bank’s loan portfolio, which would affect the Company’s profitability;

•                  government regulation may have an adverse effect on the Company’s profitability and growth;

•                  the effects of competition from other commercial banks, thrifts, mortgage banking firms, consumer finance companies, credit unions, securities brokerage firms, insurance companies, money market and other mutual funds, and other financial institutions operating in our market area and elsewhere, including institutions operating regionally, nationally, and internationally, together with such competitors offering banking products and services by mail, telephone, computer, and the Internet; and

•                  management’s ability to manage these and other risks.

For a discussion of these and other risks and uncertainties that could cause actual results to differ from those contained in the forward-looking statements, see “Risk Factors” in the Company’s registration statement on Form SB-2 (File 333-138042) filed by the Company under the Securities Act of 1933, as such registration statement became effective on March 7, 2007, as well as supplements and amendments thereto, including the Company’s registration statement on Form SB-2 (File 333-145861) filed on September 4, 2007 and declared effective on September 11, 2007, and the Company’s other filings with the SEC, all of which are available on the SEC’s website at www.sec.gov.  All forward looking statements are qualified in their entirety by this cautionary statement, and the Company undertakes no obligation to revise or update this Quarterly Report on Form 10-QSB to reflect events or circumstances after the date hereof.  New factors emerge from time to time, and it is not possible for us to predict which factors, if any, will arise.  In addition, the Company cannot assess the impact of each factor on the Company’s business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

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PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Solera National Bancorp, Inc.
(A Development Stage Enterprise)

Balance Sheets
September 30, 2007 and December 31, 2006 (Unaudited)

See Notes to Financial Statements.

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Statements of Operations
For the Three and Nine Months Ended September 30, 2007 and 2006 and

the Period from January 3, 2005 (Inception) through September 30, 2007 (Unaudited)

See Notes to Financial Statements.

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Statements of Changes in Stockholders’ Equity/(Deficit)
For Nine Months Ended September 30, 2007 and September 30, 2006 and

the Period from January 3, 2005 (Inception) through September 30, 2007 (Unaudited)

See Notes to Financial Statements.

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Statements of Cash Flows
For the Nine Months Ended September 30, 2007 and 2006, and Period
from January 3, 2005 (Inception) through September 30, 2007 (Unaudited)

See Notes to Financial Statements.

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SOLERA NATIONAL BANCORP, INC.

UNAUDITED CONDENSED NOTES TO FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF ORGANIZATION

The Company is a Delaware corporation that was incorporated in 2006 to organize and serve as the holding company for Solera National Bank, a national bank that opened for business on September 10, 2007.  Solera National Bank is a full-service commercial bank headquartered in Lakewood, Colorado initially serving the Denver metropolitan area.  The Company is a development stage enterprise as defined by the Financial Accounting Standards Board Statement (“FASB”) No. 7, Accounting and Reporting by Development Stage Enterprises, as it continues to devote substantially all its efforts to establishing a new business. Although the planned principal operations commenced on September 10, 2007, there have been no significant revenue from operations as of September 30, 2007.

NOTE 2 - BASIS OF PRESENTATION

The accompanying unaudited condensed financial statements contain all adjustments (consisting only of normal recurring adjustments) which, in the opinion of management, are necessary to present fairly the financial position of Solera National Bancorp, Inc. (the “Company”) as of September 30, 2007, and the results of its operations for the three months and nine months ended September 30, 2007 and September 30 2006, respectively, and for the period from January 3, 2005 (inception) to September 30, 2007.  Cash flows are presented for the nine months ended September 30, 2007 and September 30, 2006, respectively, and for the period from January 3, 2005 (inception) to September 30, 2007.  Certain reclassifications have been made to the consolidated financial statements and related notes of prior periods to conform to the current presentation. These reclassifications had no impact on Stockholders’ deficit or net loss for the periods. Additionally, certain information and footnote disclosures normally included in financial statements have been condensed or omitted pursuant to rules and regulations of the U.S. Securities and Exchange Commission.  The Company believes that the disclosures in the unaudited condensed financial statements are adequate to make the information presented not misleading.  However, these unaudited condensed financial statements should be read in conjunction with the financial statements and footnotes thereto included in the registration statement on Form SB-2 (File No. 333-138042) and supplements thereto, filed by the Company under the Securities Act of 1933, as such registration statement became effective on March 7, 2007, and all of the Company’s other filings with the SEC from March 7, 2007 through the current date pursuant to the Securities Exchange Act of 1934.

At September 30, 2007, the Company is considered to be in the development stage because it has devoted substantially all of its efforts since formation to primarily preparing applications with various bank regulatory authorities for permission to organize a national bank and a bank holding company, and taking all other actions necessary to organize and charter Solera National Bank.  The Company received approval as a bank in organization in the first quarter of 2007, conducted an initial closing of its common stock offering and commenced banking operations during the third quarter of 2007.  Successful completion of the Company’s development program and, ultimately, the attainment of profitable operations are dependent on future events, including the successful execution of the Company’s business plan and achieving a level of revenue adequate to support the Company’s cost structure.

The Company is subject to various risks and uncertainties frequently encountered by companies in the early stages.  Such risks and uncertainties include, but are not limited to, its limited operating history, competition, dependence on key personnel and management of rapid growth.  To address these risks, the Company 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 customer service and attract, retain and motivate qualified personnel.  There can be no guarantee that the Company will be successful in addressing these or other such risks.

To date, the Company has funded its activities primarily through contributions from the Organizers (see Note 4), proceeds from borrowings on a line of credit (see Note 13) and funding from the proceeds of a common stock offering which closed on gross proceeds of $22,628,370.  The Company is continuing to offer for sale additional shares of its common stock at $10 per share up to a maximum of 2,880,000 shares (see Note 3). As of November 13, 2007, the Company has received subscriptions for approximately 103,000 shares, or $1,030,000.  The proceeds from the sale of these

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shares will be utilized primarily as additional capital for Solera National Bank.  The Company’s cash and cash equivalents at September 30, 2007 and December 31, 2006 totaled $18.1 million and $6,978, respectively.  Management believes cash currently on hand will provide adequate funding through September 30, 2008.  There can be no assurance that the Company will achieve or sustain profitability or positive cash flow from its operations.

Critical Accounting Policies

Income taxes:  Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss carryforwards, and deferred tax liabilities are recognized for taxable temporary differences.  Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases.  Deferred tax assets are reduced by valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.  Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of the enactment.

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

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

The Company has established a formal process for determining an adequate allowance for loan losses.  The allowance for loan losses calculation process has two components.  The first component represents the allowance for loan losses for impaired 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 as well as third-party information, such as appraisals.  If an impaired loan is unsecured, it is evaluated using a discounted cash flow of the payments expected over the life of the loan using the loan’s effective interest rate and giving consideration to currently existing factors that would impact the amount or timing of the cash flows.  The second component is the allowance for loan losses calculated under FASB Statement No. 5, Accounting for Contingencies (SFAS 5 Component), and represents the estimated probable losses inherent within the portfolio due to uncertainties in economic conditions, delays in obtaining information about a borrower’s financial condition, delinquent loans that have not been determined to be impaired, trends in speculative construction real estate lending, results of internal and external loan reviews, and other factors.  This component of the allowance for loan losses is calculated by assigning a certain risk weighting, within a predetermined range, to each identified risk factor.  The recorded allowance for loan losses is the aggregate of the SFAS 114 Component and SFAS 5 Component.

NOTE 3 - COMMON STOCK OFFERING

The Company closed the initial offering for 2,262,837 shares of its common stock at an offering price of $10 per share, or $22.6 million.  $208,562 of direct offering costs were incurred to raise the Company’s initial capital and have been offset against the initial proceeds of the capital raise to yield a net opening capital of $22.4 million.  In addition, the Company issued one stock warrant for every five shares of common stock purchased. The warrants entitle the holder thereof to purchase one share of the Company’s common stock for $12.50 at any time prior to September 10, 2010.

The offering was not underwritten.  Subject to compliance with applicable federal and state securities laws, the offering was made on a best efforts basis through the Company’s Organizers, executive officers and directors, who did not receive any commission or other compensation in connection with these activities.

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The Company will continue to offer the remaining shares and warrants until December 31, 2007, however, the Company may close the offering at any time prior to that date.

NOTE 4 - ADVANCES FROM ORGANIZERS

The Company’s Organizers advanced funds for organizational and other pre-operating expenses.  These advances were non-interest bearing.  During the third quarter 2007, the Organizer advances were either repaid or were converted into common stock on the same terms as the initial offering.

Additionally, as consideration to the Organizers upon Solera National Bank opening for business on September 10, 2007, the Company issued to each Organizer one warrant for every $10 that the Organizer had at risk during the pre-operating and organizational phase.  Each warrant entitles its holder to purchase one share of the Company’s common stock for $10 at any time prior to September 10, 2017.

NOTE 5 - LOANS

Loans consist of the following:

In the ordinary course of business, the Company had no loans receivable from directors, executive officers and principal shareholders (holders of more than five percent of the outstanding common shares) of the Company at September 30, 2007.

NOTE 6 - DEPOSITS

Deposits are summarized as follows:

NOTE 7 - PREMISES AND EQUIPMENT

Premises and equipment at September 30, 2007 and December 31, 2006 consist of the following:

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Depreciation and amortization expense for the three and nine months ended September 30, 2007 was $19,557 and $51,097, respectively.  Depreciation and amortization expense for the three and nine months ended September 30, 2006 was $749 and $1,276, respectively,

 The Company has operating leases for its main banking office, space in an office building and an ATM machine with future minimum lease payments as of September 30, 2007, as follows:

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”) in October 2007 with an effective date of September 10, 2007.  Under the terms of the Plan, officers and key employees may be granted both nonqualified and incentive stock options and directors and other consultants, who are not also officers or employees, may only be granted nonqualified stock options. The Board reserved 20% of the total number of shares of common stock subscribed for in the offering for issuance under the stock incentive plan.  Based on the initial closing of the offering, approximately 452,500 options have been reserved for issuance under the stock incentive plan.  The Company intends to reserve 576,000 options if it attains the maximum offering amount. The Plan provides for options to purchase shares of common stock at a price not less than 100% of the fair market value of the stock on the date of grant.  Stock options expire no later than ten years from the date of the grant and generally vest over four years.  The Plan provides for accelerated vesting if there is a change of control, as defined in the Plan.  The Company recognized stock-based compensation cost of $12,502 during the third quarter 2007.  No tax benefit related to stock-based compensation will be recognized until the Company is profitable.

The Company accounts for its stock-based compensation under the provisions of SFAS 123R.  The fair value of each option grant was estimated on the date of grant using the Black-Scholes-Merton option pricing model with the following assumptions presented below:

Since the Bank has no historical stock activity, the expected volatility is based on the historical volatility of similar banks that have a longer trading history.  The expected term represents the estimated average period of time that the options will remain outstanding.  Since the Bank does not have sufficient historical data on the exercise of stock options, the expected term is based on the “simplified” method that measures the expected term as the average of the vesting period and the contractual term. The risk free rate of return reflects the grant date interest rate offered for zero coupon U.S. Treasury bonds with the same expected term as the options.

No options were exercised, vested or forfeited during the third quarter ended September 30, 2007.  However, the Company recognized expense for 5,026 options, representing a pro-rata amount of the options that will vest at the end of year one.  As of September 30, 2007, there was $887,640 of total unrecognized compensation cost related to the outstanding stock options that will be recognized over a weighted-average period of 3.94 years.

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The following is a summary of the Company’s non-vested options at September 30, 2007:

NOTE 9 - WARRANTS

The Company funded organizational and pre-opening expenses of approximately $3.6 million from direct cash advances made by its Organizers and from draws made under a $2.9 million line of credit with The Bankers Bank of Georgia.  Each Organizer and one non-organizer director provided a limited guarantee on amounts drawn under the line of credit.  Accordingly, in recognition of the substantial financial risks undertaken by the members of the organizing group, the Company granted an aggregate of 317,335 warrants to its Organizers and one non-organizer Director.  Each of our Organizers who provided cash advances of $30,000 and a limited guarantee received warrants to purchase the lesser of 16,181 shares of the Company’s common stock or the number of shares actually subscribed for in the offering.  One Organizer, both individually and through an affiliated entity, provided a cash advance of $480,000 and a limited guarantee, and received warrants to purchase 40,000 shares of the Company’s common stock.  Another Organizer, who provided a cash advance of $130,000 and a limited guarantee, received warrants to purchase 25,000 shares of the Company’s common stock.  These warrants will be exercisable at a price of $10.00 per share, the initial offering price, and may be exercised anytime prior to September 10, 2017.

Each of the Company’s initial shareholders was granted one warrant to purchase an additional share, at an exercise price of $12.50 per share, for every five shares purchased during the Company’s initial public offering.  The shareholder warrants are fully vested and exercisable at any time prior to September 10, 2010.

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The Company determined the fair value of the warrants granted following the provisions of SFAS 123R.  The fair value of each warrant grant was estimated on the date of grant using the Black-Scholes-Merton option pricing model with the following assumptions presented below:

Since the Bank has no historical stock activity, the expected volatility is based on the historical volatility of similar banks that have a longer trading history.  The expected term represents the estimated average period of time that the warrants will remain outstanding.  The risk free rate of return reflects the grant date interest rate offered for zero coupon U.S. Treasury bonds with the same expected term as the warrants.

The fair market value of the shareholder warrants totaled $119,930 and the fair market value of the organizer warrants totaled $625,467 after considering estimated forfeitures of 50% and 10%, respectively.  This cost was treated as a component of equity and was included in total offering costs of $953,960.

NOTE 10 - NONINTEREST EXPENSE

The following table details the items comprising General and administrative expenses:

NOTE 11 - INCOME TAXES

The Company adopted the provisions of Financial Standards Accounting Board (“FASB”) Interpretation No. 48 Accounting for Uncertainty in Income Taxes (“FIN 48”), an interpretation of FASB Statement No. 109 effective on January 1, 2007.  FIN 48 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.  FIN 48 also provides guidance on the accounting for and disclosure of unrecognized tax benefits, interest and penalties.  Adoption of FIN 48 did not have a material impact on the Corporation’s unaudited condensed financial statements.

The Company has provided a 100% valuation allowance for its net deferred tax asset due to uncertainty of realization during the carryforward period.

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NOTE 12 - RELATED-PARTY TRANSACTIONS

Certain Organizers and proposed Officers of the Company and Bank were employed as consultants during the third quarter.  Under these consulting agreements, the Company has incurred costs of approximately $137,000 and $129,000 for the three-month periods ended September 30, 2007 and September 30, 2006, respectively, and approximately $543,000 and $379,000 for the nine-month periods ended September 30, 2007 and September 30, 2006, respectively.  Additionally, the Company has incurred costs under these consulting agreements of approximately $1,319,000 for the period January 3, 2005 (inception) through September 30, 2007.  The consulting agreements were terminated for Officers on September 10, 2007, the date employment agreements commenced.

The Company utilized a temporary staffing service for payroll administration of temporary staff engaged during the organization stage.  The temporary staffing company is owned by an Organizer.  The Company incurred approximately $20,100 and $20,000 for the three-month periods ended September 30, 2007 and September 30, 2006, respectively, and approximately $81,200 and $27,300 for the nine-month periods ended September 30, 2007 and September 30, 2006, respectively.  Additionally the Company incurred approximately $120,600 for the period January 3, 2005 (inception) through September 30, 2007.

The Company utilized a law firm for leases for the main banking office and corporate offices.  One of the Organizers is a partner with the firm.  The Company incurred $0 and approximately $400 for the three-month periods ended September 30, 2007 and September 30, 2006, respectively, and $0 and approximately $9,200 for the nine-month periods ended September 30, 2007 and September 30, 2006, respectively.  The Company incurred approximately $9,200 for the period January 3, 2005 (inception) and September 30, 2007.

NOTE 13 - NOTE PAYABLE

In September 2007, the Company used proceeds from the initial public offering to pay off the $2.9 million line of credit that was used to fund pre-opening expenses in excess of Organizer advances.  Interest expense of $39,409 and $21,758 was recognized during the three months ended September 30, 2007 and 2006, respectively, on the line of credit.  Interest expense of $113,977 and $32,822 was recognized during the nine months ended September 30, 2007 and 2006, respectively.  And interest expense of $169,724 was recognized from inception to September 30, 2007 on the line of credit.

NOTE 14 - OTHER BORROWINGS

The Company has capital leases for bank equipment, furniture and signage that are being leased for 5 years with a bargain purchase option at the end of the lease term.  In accordance with SFAS No. 13, Accounting for Leases, the asset and the capital lease liability have been recorded at the lesser of the fair market value or the present value of the future minimum lease payments.

The following is an analysis of the leased property under capital lease:

The following is a schedule, by years, of the future minimum lease payments under capital leases as of September 30, 2007:

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NOTE 15 - LOSS ON ABANDONMENT OF LEASE

In January 2007, the Company entered into a plan to abandon its corporate headquarters for cost reduction purposes.  Management relocated its corporate offices to the main bank office on July 27, 2007.  The Company is currently seeking a sub-lessee for the vacated premises.  The Company recorded an estimated loss of $169,674 as a result of abandoning its corporate headquarters.  The amount was calculated to be the difference between the present value of future lease obligations and the present value of estimated sub-lease income.  In accordance with SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities, this loss will be adjusted in future periods for changes in the timing or amounts of the estimated future cash flows.

NOTE 16 - COMMITMENTS AND CONTINGENCIES

At September 30, 2007, the Company had no outstanding loan origination commitments and no unused commercial and retail lines of credit and one standby letter of credit for $9,000.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF OPERATION

The following discussion and analysis presents the Company’s consolidated financial condition as of September 30, 2007 and results of operations for the three and nine months ended September 30, 2007 and 2006, respectively.  The discussion should be read in conjunction with the financial statements and the notes related thereto which appear elsewhere in this Quarterly Report on Form 10-QSB.

OVERVIEW

We are a Delaware corporation that was incorporated on January 12, 2006 to organize and serve as the holding company for Solera National Bank, a national bank that opened for business on September 10, 2007.  Solera National Bank is a full-service commercial bank headquartered in Lakewood, Colorado serving the Denver metropolitan area.  Our main banking office is located at 319 S. Sheridan Blvd., Lakewood, Colorado 80226.  Our telephone number is (303) 209-8600.

PLAN OF OPERATIONS

We offer a broad range of commercial and consumer banking services to small and medium-sized businesses, licensed professionals and individuals who we believe will be particularly responsive to the personalized service that Solera National Bank intends to provide to its customers.  We believe that local ownership and control will allow the Bank to serve customers more efficiently and effectively and will aid in our growth and success.  Solera National Bank intends to compete on the basis of providing a unique and personalized banking experience combined with a full range of services, customized and tailored to fit the individual needs of its clients.  Solera National Bank intends to serve the entire market area and intends to target the local Hispanic population due to the significant growth in this demographic and the inability of traditional banks to fully service the needs of the Hispanic population because of cultural and language barriers.

During the quarter, we received approval from the Federal Reserve Bank of Kansas City to operate as a bank holding company for Solera National Bank.  Additionally, we closed on our initial public offering and Solera National Bank received final regulatory approvals and began operations on September 10, 2007.

As of September 30, 2007, the Company had purchased or acquired under capital leases, property and equipment of approximately $425,000.  In addition, the Company has incurred a total of $567,000 for leasehold improvements made at its main banking office.  We are currently in the process of recruiting additional employees and currently have 15 employees.

Results of Operations for the Three and Nine Months Ended September 30, 2007

The following discussion focuses on the Company’s financial condition and results of operations for the three months and nine months ended September 30, 2007.  The Company’s principal operations for the three months and the nine months ended September 30, 2007 consisted of the operations of Solera National Bank, which opened for business September 10, 2007.

In connection with the Company’s closing of its initial public offering, Solera National Bank opened for business on September 10, 2007.  Accordingly, the following discussion is limited as the Company’s principal operations were conducted for only 21 days of the third quarter 2007.  As such, a discussion of the comparison to prior financial results is not meaningful to an understanding of our current business and, therefore, has been omitted from this Report.  Similarly, results of operations for the nine months ended September 30, 2007 are virtually identical to prior periods as the Company continued to incur losses from pre-opening expenses and other costs of the offering, with the exception of the receipt of approximately $22.6 million in cash.  As a result, a discussion of the Company’s financial condition and results of operation for the nine months ended September 30, 2007 has also been omitted from this Report, as it would not be meaningful to an understanding of our current business.

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Net Interest Income and Net Interest Margin

Net interest income is the difference between interest income, principally from loan, lease and investment securities portfolios, and interest expense, principally on customer deposits and borrowings.  Net interest income will be our principal source of earnings.  Changes in net interest income result from changes in volume, spread and margin. Volume refers to the average dollar level of interest-earning assets and interest-bearing liabilities.  Spread refers to the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities. Margin refers to net interest income divided by average interest-earning assets, and is influenced by the level and relative mix of interest-earning assets and interest-bearing liabilities.

Net interest income was $164,000 in the third quarter of 2007. Our annualized net interest margin was 5.5% for the 3 months ended September 30, 2007.  Excluding the interest income on the escrow account and interest expense on the note payable, our annualized net interest margin would have been 5.6%.

Total interest income was $204,000 for the third quarter of 2007. Average net loans were $24,000 and average investments, primarily overnight investments with the Federal Reserve, were $17.4 million.

Total interest expense was $40,000 in the third quarter of 2007.  This consisted primarily of interest expense on the $2.9 million line-of-credit with the Bankers Bank of Georgia.  Interest expense of $53 was incurred during the 21 days the bank was opened during the third quarter on average interest-bearing deposits of $106,000 for the same period.

Provision for Loan Losses

We determine a provision for loan losses that we consider sufficient to maintain an allowance to absorb probable losses inherent in our portfolio as of the balance sheet date. For additional information concerning this determination, see the section of this discussion and analysis captioned “Allowance for Loan Losses.”

In the third quarter of 2007, our provision for loan and lease losses was $0.  Because Solera National Bank recently opened, there were no charge-offs or non-performing loans during the third quarter of 2007.

Noninterest Income

The non-interest income for the quarter ended September 30, 2007 was negligible.  In general, deposit accounts incur service charges one month in arrears.  Due to the low volume of accounts and the brief amount of time any of the accounts had been opened, only $346 of service charges was collected.

Noninterest Expense

Our total noninterest expense was $916,000 in the third quarter of 2007.  This expense is not representative of future expense, as Solera National Bank was open for less than one-third of the quarter and the Company recorded a $170,000 loss on abandonment of lease as well as additional start-up expenses.  While it is anticipated that the overall volume of noninterest expense will continue to increase as Solera National Bank grows, management is committed to controlling costs and expects to moderate these increases relative to revenue growth.

Occupancy expenses totaled $297,000 for the third quarter of 2007, attributable primarily to the recognition of $170,000 for the abandonment of leased property.  See additional discussion in Note 15.  The remaining occupancy expense consists primarily of lease expense for the bank’s main office.

Salaries and employee benefits totaled $177,000 for the third quarter of 2007.  The Company employed 15 full-time equivalent employees as of September 30, 2007.

Management fees of $137,000 for the third quarter 2007 were fees paid to the Bank’s management team before the Bank opened and the managers became employees of the Bank.

Promotional expenses were $97,000 for the third quarter of 2007. This included expenses for marketing collateral, development of our advertising campaign and sponsorship of key community events to coincide with Solera National Bank’s opening.

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Professional fees of $56,000 for the third quarter of 2007 were primarily attributable to legal expenses related to the opening of Solera National Bank.

Consulting expense was $8,000 for the third quarter of 2007, attributable primarily to information technology consulting to establish the bank’s infrastructure.

Other expenses of $144,000 for the third quarter of 2007 included $69,000 for printing, stationery and supplies, $20,000 for temporary labor, $10,000 for training and education, $9,000 for postage and shipping, $7,000 for travel and entertainment, $7,000 for data processing fees, $6,000 for telephone, $6,000 for insurance and $10,000 for other miscellaneous expenses.

Pre-opening expenses for the nine-month period ended September 30, 2007 were $1.3 million.

Income Taxes

No federal or state tax expense has been recorded for the quarter ended September 30, 2007, based upon net operating losses.  Since it is uncertain that the Company will become profitable, the deferred tax benefit accumulated to date has a full valuation allowance so that the net deferred tax benefit at September 30, 2007 is $0.

Financial Condition

Total assets as of September 30, 2007 were $19.7 million, primarily the result of the net proceeds from the initial public offering, net of the repayment of the note payable.

As of September 30, 2007, shareholders’ equity was $18.6 million, as a result of the initial public offering, partially offset by the inception-to-date losses from start-up activities and current operations.

Short-Term Investments and Interest-bearing Deposits in Other Financial Institutions

At September 30, 2007, Solera National Bank had $17.6 million in federal funds sold.  Federal funds sold allow Solera National Bank to meet liquidity requirements and provide temporary holdings until the funds can be otherwise deployed or invested.

Investment Securities

Our investment portfolio will primarily serve as a source of interest income and, secondarily, as a source of liquidity and a management tool for our interest rate sensitivity.  We manage our investment portfolio according to a written investment policy established by our Board of Directors.

At September 30, 2007, Solera National Bank’s securities consisted solely of Federal Reserve Bank Stock, having an amortized cost of $525,000, and a weighted average yield of 6%.

Loan Portfolio

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