10-K

As filed with the Securities and Exchange Commission on March 17, 2008

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

[ X ]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2007

or

[ ]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 000-50266

TRINITY CAPITAL CORPORATION

(Exact name of registrant as specified in its charter)

New Mexico	85-0242376
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
1200 Trinity Drive Los Alamos, New Mexico	87544
(Address of principal executive offices)	(Zip Code)
Registrant’s telephone number, including area code(505) 662-5171
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock
20,000,000 authorized shares
(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. [ ]  Yes  [ X ]  No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. [ ]  Yes  [ X ]  No

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. [ X ]  Yes  [ ]  No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.   [ X ]?Yes    [ ] No

Indicate by check mark whether 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 Act). (check one):

Large accelerated filer [ ] Accelerated filer [ X ] Non-accelerated filer[ ] (do not check if a smaller reporting company) Smaller reporting company [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). [ ]  Yes  [ X ]  No

The aggregate market value of the registrant’s common stock (“Common Stock”) held by non-affiliates as of June 30, 2007, the last business day of the registrant’s most recently completed second fiscal quarter, was approximately $127,969,000 (based on the last sale price of the Common Stock at June 30, 2007 of $28.48 per share).

As of March 10, 2008, there were 6,499,587 shares of Common Stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Document of the Registrant	Form 10-K Reference Location
Portions of the 2008 Proxy Statement	PART III

TABLE OF CONTENTS

PART I	1
Item 1. Business	1
Item 1A. Risk Factors	11
Item 1B. Unresolved Staff Comments	15
Item 2. Properties	16
Item 3. Legal Proceedings	16
Item 4. Submission of Matters to a Vote of Security Holders	16
PART II	17
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	17
Item 6. Selected Financial Data	20
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 7A. Quantitative and Qualitative Disclosure About Market Risk	43
Item 8. Financial Statements and Supplemental Data	46
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	81
Item 9A. Controls and Procedures	81
Item 9B. Other Information	82
PART III	82
Item 10. Directors, Executive Officers and Corporate Governance	82
Item 11. Executive Compensation	82
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	82
Item 13. Certain Relationships and Related Transactions, and Director Independence	83
Item 14. Principal Accounting Fees and Services	83
PART IV	84
Item 15. Exhibits and Financial Statement Schedules	84
Signatures	86

PART I

Please note: Unless the context clearly suggests otherwise, references in this Form 10-K to “us,” “we”, “our” or “the Company” include Trinity Capital Corporation and its wholly owned subsidiaries, including Los Alamos National Bank, TCC Appraisal Services Corporation, TCC Advisors Corporation, TCC Funds and Title Guaranty & Insurance Company.

Item 1. Business.

Trinity Capital Corporation

General. Trinity Capital Corporation (“Trinity”), a financial holding company organized under the laws of the State of New Mexico, is the sole shareholder of Los Alamos National Bank (the “Bank”), the sole shareholder of TCC Appraisal Services Corporation (“TCC Appraisals”), and the sole shareholder of Title Guaranty & Insurance Company (“Title Guaranty”). The Bank is the sole shareholder of TCC Advisors Corporation (“TCC Advisors”). Trinity is located in Los Alamos, New Mexico, a small community in the Jemez Mountains of Northern New Mexico. Los Alamos has approximately 19,000 residents and enjoys worldwide recognition as the birthplace of the atomic bomb. Today, Los Alamos National Laboratory (the “Laboratory”) remains a pre-eminent research facility for scientific and technological development in numerous scientific fields. The Laboratory employs (directly and indirectly) approximately 9,650 residents of Northern New Mexico, making it the largest employer in Los Alamos County. The Laboratory remains the cornerstone of the community and has attracted numerous other scientific businesses to the area.

Los Alamos National Bank is a full-service commercial banking institution with four bank offices in Los Alamos, White Rock and Santa Fe, New Mexico and a Loan Production Office in Albuquerque, New Mexico. The Bank was founded in 1963 by local investors to provide convenient, full-service banking to the unique scientific community that developed around the Laboratory and has expanded and continues to expand its market share and customer-base. In 1999, the Bank established its first office in Santa Fe after acquiring a substantial number of customers based in Santa Fe. In 2004, the Bank added a second office in Santa Fe to better serve its growing customer-base and continue to attract new customers. As of the June 30, 2007, Summary of Deposits (SOD) report published by the Federal Deposit Insurance Corporation, the Bank had the largest share of deposits in Santa Fe County. In 2005, the Bank determined the need for an additional site in Albuquerque, New Mexico to serve our commercial loan customers and established a Loan Production Office. Trinity also acquired a ground lease covering additional land in Santa Fe where we plan to begin construction on a third Santa Fe Bank office in 2008 to continue to better serve our customers on the southern side of Santa Fe and attract additional commercial and consumer customers based in this area. The Bank provides a broad range of banking products and services, including credit, cash management, deposit, asset management and trust products to our targeted customer base of individuals and small and medium-sized businesses. As of December 31, 2007, the Bank had total assets of $1.4 billion, net loans of $1.2 billion and deposits (net of deposits of affiliates) of $1.2 billion. The Bank created TCC Advisors in February 2006 to enable us to manage certain assets and register with the SEC as a Registered Investment Advisor should we choose to do so in the future. In February 2006, TCC Funds, a Delaware statutory trust was created with Trinity as its sponsor, to allow for the creation of a mutual fund.

Trinity acquired Title Guaranty in May 2000, making it the only title company in New Mexico to be owned by a financial or bank holding company. Title Guaranty is a title insurance company organized under the laws of the State of New Mexico doing business in Los Alamos and Santa Fe Counties. Title Guaranty opened its Santa Fe office in the Bank’s downtown Santa Fe facility in February 2005. The services provided by Title Guaranty complement those provided by Trinity’s other subsidiaries. Title Guaranty provides title insurance, closing services, escrow and notary service, title searches and title reports for Los Alamos and Santa Fe Counties.

TCC Appraisals is a real estate appraisal company created by Trinity in January 2006. TCC Appraisals provides residential real estate appraisals for properties in Los Alamos and Santa Fe Counties. TCC Appraisals’ offices are located in the Company’s headquarter building in Los Alamos.

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Corporate Structure. Trinity was organized in 1975 as a bank holding company, as defined in the Bank Holding Company Act of 1956, as amended, (“BHCA”) and in 2000 elected to become a financial holding company, as defined in that Act. Trinity acquired the stock of the Bank in 1977 and serves as the holding company for the Bank. In 2000, Trinity purchased Title Guaranty. In 2006, Trinity created TCC Appraisals. Title Guaranty, TCC Appraisals, and the Bank are wholly-owned subsidiaries of Trinity. The Bank created TCC Advisors in February 2006. In addition, Trinity owns all the common shares of four business trusts, created by Trinity for the sole purpose of issuing trust preferred securities which had an aggregate outstanding balance of $37.1 million at December 31, 2007. Trinity redeemed the trust preferred securities issued under Trinity Capital Trust II in December 2006 and dissolved that entity. In February 2006, Trinity created TCC Funds, a Delaware statutory trust created to allow for the creation and holding of mutual funds. Trinity’s sole business is the ownership of the outstanding shares of the Bank, TCC Appraisals, Title Guaranty and the administration of the Trusts. The address of our headquarters is 1200 Trinity Drive, Los Alamos, New Mexico 87544, our main telephone number is (505) 662-5171 and our general email address is tcc@lanb.com.

We maintain a website at www.lanb.com/tcc. We make available free of charge on or through our website, the annual report on Form 10-K, proxy statements, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after the Company electronically files such material with, or furnishes it to, the Securities and Exchange Commission. The Company will also provide copies of its filings free of charge upon written request to: TCC Stock Representative, Trinity Capital Corporation, 1200 Trinity Drive, Los Alamos, New Mexico 87544. In addition, you may read and copy any materials we filed with the SEC at the SEC’s Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers such as Trinity. Our filings are also available free of charge on the SEC’s website at http://www.sec.gov.

Regulation and Supervision

Financial institutions and their holding companies are extensively regulated under federal and state law. As a result, the growth and earnings performance of Trinity may be affected not only by management decisions and general economic conditions, but also by the requirements of state and federal statutes and by the regulations and policies of various bank regulatory authorities, including the Office of the Comptroller of the Currency (the “OCC”), the Board of Governors of the Federal Reserve System (the “Federal Reserve”) and the Federal Deposit Insurance Corporation (the “FDIC”). Furthermore, taxation laws administered by the Internal Revenue Service and state taxing authorities and securities laws administered by the Securities and Exchange Commission (the “SEC”) and state securities authorities have an impact on the business of Trinity. The effect of applicable statutes, regulations and regulatory policies may be significant, and cannot be predicted with a high degree of certainty.

Federal and state laws and regulations generally applicable to financial institutions regulate, among other things, the scope of business, the kinds and amounts of investments, reserve requirements, capital levels relative to operations, the nature and amount of collateral for loans, the establishment of branches, mergers and consolidations and the payment of dividends. This system of supervision and regulation establishes a comprehensive framework for the respective operations of Trinity and its subsidiaries and is intended primarily for the protection of FDIC-insured deposit funds and depositors, rather than shareholders.

The following is a summary of the material elements of the regulatory framework that applies to Trinity and its subsidiaries. It does not describe all of the statutes, regulations and regulatory policies that apply, nor does it restate all of the requirements of the statutes, regulations and regulatory policies that are described. As such, the following is qualified in its entirety by reference to the applicable statutes, regulations and regulatory policies. Any change in applicable law, regulations or regulatory policies may have a material effect on the business of Trinity and its subsidiaries.

General. Trinity, as the sole shareholder of the Bank, is a financial holding company. As a financial holding company, Trinity is registered with, and is subject to regulation by, the Federal Reserve under the Bank Holding Company Act of 1959, as amended (the “BHCA”). In accordance with Federal Reserve policy, Trinity is expected to act as a source of financial strength to the Bank and to commit resources to support the Bank in circumstances where Trinity might not otherwise do so. Under the BHCA, Trinity is subject to periodic examination by the Federal Reserve. Trinity is also required to file with the Federal Reserve periodic reports of Trinity’s operations and such additional information regarding Trinity and its subsidiaries as the Federal Reserve may require.

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Acquisitions, Activities and Change in Control.The primary purpose of a bank or financial holding company (collectively referred to herein as “bank holding company”) is to control banks.Under the BHCA, a bank holding company must obtain Federal Reserve approval before: (i) acquiring, directly or indirectly, ownership or control of any voting shares of another bank or bank holding company if, after the acquisition, it would own or control more than 5% of the voting shares of the other bank or bank holding company (unless it already owns or controls the majority of such shares); (ii) acquiring all or substantially all of the assets of another bank; or (iii) merging or consolidating with another bank holding company. Subject to certain conditions (including certain deposit concentration limits established by the BHCA), the Federal Reserve may allow a bank holding company to acquire banks located in any state of the United States. In approving interstate acquisitions, the Federal Reserve is required to give effect to applicable state law limitations on the aggregate amount of deposits that may be held by the acquiring bank holding company and its insured depository institution affiliates in the state in which the target bank is located (provided that those limits do not discriminate against out-of-state depository institutions or their holding companies) and state laws that require that the target bank have been in existence for a minimum period of time (not to exceed five years) before being acquired by an out-of-state bank holding company.

The BHCA generally prohibits a bank holding company from acquiring direct or indirect ownership or control of more than 5% of the voting shares of any company that is not a bank and from engaging in any business other than that of banking, managing and controlling banks or furnishing services to banks and their subsidiaries. This general prohibition is subject to a number of exceptions. The principal exception allows bank holding companies to engage in, and to own shares of companies engaged in, certain businesses found by the Federal Reserve to be “so closely related to banking ... as to be a proper incident thereto.” Under current regulations of the Federal Reserve, this authority would permit Trinity to engage in a variety of banking-related businesses, including the operation of a thrift, sales and consumer finance, equipment leasing, the operation of a computer service bureau (including software development), and mortgage banking and brokerage. The BHCA generally does not place territorial restrictions on the domestic activities of non-bank subsidiaries of bank holding companies.

Additionally, bank holding companies that meet certain eligibility requirements prescribed by the BHCA and elect to operate as financial holding companies may engage in, or own shares in companies engaged in, a wider range of nonbanking activities, including securities and insurance activities and any other activity that the Federal Reserve, in consultation with the Secretary of the Treasury, determines by regulation or order is financial in nature, incidental to any such financial activity or complementary to any such financial activity and does not pose a substantial risk to the safety or soundness of depository institutions or the financial system generally. Trinity has elected (and the Federal Reserve has accepted Trinity’s election) to operate as a financial holding company.

Federal law also prohibits any person or company from acquiring “control” of an FDIC-insured depository institution or its holding company without prior notice to the appropriate federal bank regulator. “Control” is conclusively presumed to exist upon the acquisition of 25% or more of the outstanding voting securities of a bank or bank holding company, but may arise under certain circumstances at 10% ownership.

Capital Requirements. Bank holding companies are required to maintain minimum levels of capital in accordance with Federal Reserve capital adequacy guidelines. If capital falls below minimum required levels, a bank holding company, among other things, may be denied approval to acquire or establish additional banks or non-bank businesses.

The Federal Reserve’s capital guidelines establish the following minimum regulatory capital requirements for bank holding companies: (i) a risk-based requirement expressed as a percentage of total assets weighted according to risk; and (ii) a leverage requirement expressed as a percentage of total assets. The risk-based requirement consists of a minimum ratio of total capital to total risk-weighted assets of 8% and a minimum ratio of Tier 1 capital to total risk-weighted assets of 4%. The leverage requirement consists of a minimum ratio of Tier 1 capital to total assets of 3% for the most highly rated companies, with a minimum requirement of 4% for all others. For purposes of these capital standards, Tier 1 capital consists primarily of permanent stockholders’ equity less intangible assets (other than certain loan servicing rights and purchased credit card relationships). Total capital consists primarily of Tier 1 capital plus certain other debt and equity instruments that do not qualify as Tier 1 capital and a portion of the company’s allowance for loan and lease losses.

The risk-based and leverage standards described above are minimum requirements. Higher capital levels will be required if warranted by the particular circumstances or risk profiles of individual banking organizations. For example, the Federal Reserve’s capital guidelines contemplate that additional capital may be required to take adequate account of, among other things, interest rate risk, or the risks posed by concentrations of credit, nontraditional activities or securities trading activities. Further, any banking organization experiencing or anticipating significant growth would be expected to maintain capital ratios, including tangible capital positions (i.e., Tier 1 capital less all intangible assets), well above the minimum levels. As of December 31, 2007, Trinity had regulatory capital in excess of the Federal Reserve’s minimum requirements.

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Dividends. Trinity’s ability to pay dividends to its shareholders may be affected by both general corporate law considerations and policies of the Federal Reserve applicable to bank holding companies. New Mexico law prohibits Trinity from paying dividends if, after giving effect to the dividend: (i) Trinity would be unable to pay its debts as they become due in the usual course of its business; or (ii) Trinity’s total assets would be less than the sum of its total liabilities and (unless Trinity’s articles of incorporation otherwise permit) the maximum amount that then would be payable, in any liquidation, in respect of all outstanding shares having preferential rights in liquidation. Additionally, policies of the Federal Reserve caution that a bank holding company should not pay cash dividends unless its net income available to common shareholders over the past year has been sufficient to fully fund the dividends and the prospective rate of earnings retention appears consistent with its capital needs, asset quality, and overall financial condition. The Federal Reserve also possesses enforcement powers over bank holding companies and their non-bank subsidiaries to prevent or remedy actions that represent unsafe or unsound practices or violations of applicable statutes and regulations. Among these powers is the ability to proscribe the payment of dividends by banks and bank holding companies.

Federal Securities Regulation. Trinity’s common stock is registered with the SEC under the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Consequently, Trinity is subject to the information, proxy solicitation, insider trading and other restrictions and requirements of the SEC under the Exchange Act.

Los Alamos National Bank

General. Los Alamos National Bank is a national banking organization created under the laws of the United States of America. The Bank is regulated primarily by the OCC, a branch of the Department of Treasury. The Bank currently has four full-service bank offices and one Loan Production Office. A fifth office is planned for construction in 2008. On December 31, 2007, the Bank received approval from the OCC for full-service operations at both the new Santa Fe office and to expand to full-service operations at the current Loan Production Office in Albuquerque. In February 2006, the Bank created TCC Advisors as a wholly owned subsidiary of the Bank.

Products and Services. The Bank provides a full range of financial services for deposit customers and we lend money to credit-worthy borrowers at competitive interest rates. Our strategy has been to position ourselves in the market as a low-fee, high-value community bank. Our products include certificates of deposits, checking and saving accounts, on-line banking, Individual Retirement Accounts, loans, mortgage loan servicing, trust and brokerage services, international services, and safe deposit boxes. These business activities make up our three key processes: investment of funds, generation of funds and service-for-fee income. We achieved our success in part by minimizing charges relating to the investment and generation of funds processes, i.e. loans, credit cards, checking, and savings accounts. The profitability of our operations depend primarily on our net interest income, which is the difference between total interest earned on interest-earning assets and total interest paid on interest-bearing liabilities, and our ability to maintain efficient operations. In addition to our net interest income, we produce income through our mortgage servicing operations and other income processes, such as trust and brokerage. A more complete description of our products and services makeup can be found under “Management’s Discussion and Analysis and Results of Operations” in Item 7 in this Form 10-K.

Lending Activities.

General.  We provide a broad range of commercial and retail lending services to corporations, partnerships, individuals and government agencies. We actively market our services to qualified borrowers. Lending officers continually build relationships with new borrowers entering our market areas as well as long-standing members of the local business community. We have established lending policies which include a number of underwriting factors to be considered in making a loan, including location, loan to value ratio, cash flow and the credit history of the borrower. Our current maximum lending limit to one borrower is approximately $19.7 million. Our loan portfolio is comprised primarily of loans in the areas of commercial real estate, residential real estate, construction, general commercial and consumer lending. As of December 31, 2007, residential mortgages made up approximately 30.8% of our loan portfolio; commercial real estate loans comprised approximately 32.6%; construction lending comprised 21.3%; general commercial loans comprised 10.1%; and consumer lending comprised 5.2%.

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Residential Real Estate Loans.  Residential mortgage lending has been a focal point since our formation in 1963. The majority of the residential mortgage loans we originate and retain are in the form of 15- and 30-year variable rate loans. We also originate 15- to 30-year fixed rate residential mortgages and we sell most of these to outside investors. We retain the servicing of almost all of the residential mortgages we originate. We believe the retention of mortgage servicing provides us with a relatively steady source of fee income as compared to fees generated solely from mortgage origination operations. Moreover, the retention of such servicing rights allows us to continue to have regular contact with mortgage customers and solidifies relationships with those customers. We do not engage in financing sub-prime loans nor do we participate in any sub-prime lending programs.

Commercial Real Estate Loans.  The largest portion of our loan portfolio is comprised of commercial real estate loans. Our focus in Commercial Real Estate lending concentrates on loans to building contractors and developers. The primary repayment risk for a commercial real estate loan is the failure of the business due to economic events or governmental regulations outside of the control of the borrower or lender that negatively impact the future cash flow and market values of the affected properties. We have collateralized these loans and, in most cases, take personal guarantees to help assure repayment. Our commercial real estate loans are primarily made based on the identified cash flow of the borrower and secondarily on the underlying real estate acting as collateral. Credit support provided by the borrower for most of these loans and the probability of repayment is based on the liquidation of the real estate and enforcement of a personal guarantee, if any exists

Construction Loans.  We are active in financing construction of residential and commercial properties in New Mexico, primarily in Northern New Mexico. We manage the risk of construction lending through the use of underwriting and construction loan guidelines and require the work be done by reputable contractors. Construction loans are structured either to be converted to permanent loans at the end of the construction phase or to be paid off upon receiving financing from another financial institution. The amount financed on construction loans is based on the appraised value of the property, as determined by an independent appraiser, and an analysis of the potential marketability and profitability of the project and the costs of construction. Construction loans generally have terms that do not exceed 24 months. Loan proceeds are typically disbursed on a percentage of completion basis, as determined by inspections, with all construction required to be completed prior to the final disbursement of funds.

Construction loans afford us the opportunity to increase the interest rate sensitivity of our loan portfolio and to receive yields higher than those obtainable on adjustable rate mortgage loans secured by existing residential properties. These higher yields correspond to the higher risks associated with construction lending.

Commercial Loans.  The Bank is an active commercial lender. Our focus in commercial lending concentrates on loans business services companies and retailers. The Bank provides various credit products to our commercial customers including lines of credit for working capital and operational purposes and term loans for the acquisition of equipment and other purposes. Collateral on commercial loans typically includes accounts receivable, furniture, fixtures, inventory and equipment. In addition, almost all commercial loans also have personal guarantees to assure repayment. The terms of most commercial loans range from one to seven years. A significant portion of our commercial business loans has floating interest rates or reprice within one year.

Consumer Loans.  We also provide all types of consumer loans including motor vehicle, home improvement, student loans, credit cards, signature loans and small personal credit lines. Consumer loans typically have shorter terms and lower balances with higher yields as compared to our other loans, but generally carry higher risks of default. Consumer loan collections are dependent on the borrower’s continuing financial stability, and thus are more likely to be affected by adverse personal circumstances.

Additional information on the risks associated with our banking activities and products and concentrations can be found under Risk Factors in Section 1A of this Form 10-K.

Market Area.

General. The economy in Northern New Mexico has remained fairly stable, although somewhat slower than historical activity levels. Unemployment remained low and approximately 7,300 new jobs were added to the New Mexico economy in 2007. Foreclosure rates have remained low in New Mexico relative to other states. New Mexico remains aggressive in lobbying new businesses to move to the state. The overall outlook for the New Mexico economy in 2008 is expected to be one of moderate, but steady growth through 2012.

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Los Alamos. The Bank’s customers are concentrated in northern and central New Mexico, particularly in Santa Fe and Los Alamos counties. Los Alamos, the base of our operations, lies within Los Alamos County. Los Alamos County has approximately 19,000 residents. Los Alamos County experienced minimal growth in its population of 1.3% from 1990 to 2000 and 3.7% from April 1, 2000 to July 1, 2006, due in part to the lack of significant parcels of additional land for development. The primary employer in Los Alamos County is the Laboratory, one of the world’s premier national security and scientific research and development institutions. The Laboratory is operated by Los Alamos National Security, LLC for the Department of Energy. The Laboratory employs approximately 9,000 employees and an additional 650 subcontractors. Most of the employees are scientists, engineers and technicians working in the areas of national security, bio-sciences, chemistry, computer science, earth and environmental sciences, materials science and physics, contributing to Los Alamos County’s exceptional percentages of the population with high school diplomas or equivalents (96.3%) and those with bachelor or higher degrees (60.5%) compared with national averages of 80.4% and 24.4% respectively. The concentration of highly skilled and highly educated residents provides the Bank with a sophisticated customer base and supports an average median income approximately 113% greater than the national average and an unemployment rate (1.7%) almost one-third the national average (5.0%). Median home values in Los Alamos County are well above average, $228,300 compared to $119,600 nationally, as is homeownership at 78.6% compared to a national average of 66.2%.

Santa Fe. In 1999, the Bank opened its first full-service office in Santa Fe, New Mexico and opened a second full-service office in Downtown Santa Fe in August of 2004. The Bank intends to open a third full-service office in south Santa Fe in 2009. The Bank’s continued expansion into Santa Fe has permitted the convenient provision of products and services to our existing customer base in Santa Fe as well as attracting new customers in Santa Fe. The addition of our second office in Santa Fe resulted in a considerable growth of our customer base by providing a convenient location for the large number of businesses and customers based near the Santa Fe Plaza, which is located near the center of the business district and government facilities. As of June 30, 2007, the Bank was the largest depository in Santa Fe according to the FDIC’s Summary of Deposits report.

Santa Fe serves as the capital of New Mexico and is located approximately 35 miles southeast of Los Alamos. The primary employers in Santa Fe County are the state and federal governments. Santa Fe County has approximately 142,000 residents with its local economy based primarily on government and tourism. We expanded to the Santa Fe market, in part, to take advantage of the population growth, which has been higher than the state and national averages. Santa Fe County is one of the fastest growing counties in the state, with an estimated increase in population of 30.7% from 1990 to 2000 compared to 20.1% for the state and 13.2% for the country as a whole, and 10.1% between April 1, 2000 and July 1, 2006, compared to 7.5% for the state and 6.4% for the country as a whole. Santa Fe County also has higher than average percentages of its population with high school diplomas or equivalents (84.5%) and those with bachelor or higher degrees (36.9%). The average median income in Santa Fe County is slightly higher (1.36%) than the national average and unemployment level (2.7%) almost one-half the national average (5.0%). Median home values in Santa Fe County are 55.36% above the national average, at $189,400 compared to $119,600 nationally, and homeownership is slightly higher at 68.6% compared to a national average of 66.2%.

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Albuquerque. The Bank opened a Loan Production Office in the Uptown area of Albuquerque, New Mexico in 2005. This office currently only offers loan services; however, the Bank received approval from the OCC on December 31, 2007 to provide full-services at this location. The Bank is currently evaluating its present and future opportunities in the Albuquerque area and incorporating these into our business strategy. As of December 31, 2007, the Bank had approximately $20.2 million in commercial loans, $63.7 million in commercial real estate loans, $33.9 in residential loans, $27.3 million in construction loans, $4.0 in consumer loans and $37.2 million in deposits in the greater Albuquerque area. Albuquerque is a city of approximately 472,000 and is located approximately 60 miles south of Los Alamos. The Albuquerque economy is more varied than either Los Alamos or Santa Fe, without a predominant industry or employer. Albuquerque had an estimated increase in population of 16.6% from 1990 to 2000 compared to 20.1% for the state and 13.2% for the country as a whole, and an increase of 5.1% between April 1, 2000 and July 1, 2006, compared to 7.5% for the state and 6.4% for the country as a whole. While Albuquerque has not grown as quickly as the overall state increases, the areas surrounding Albuquerque are some of the fastest growing in the state: the City of Rio Rancho, on the northern limits of Albuquerque grew 59.25% from 1990 to 2000 and an additional 40.33% from April 1, 2000 to July 1, 2006; Sandoval County to the north of Albuquerque, which includes the City of Rio Rancho, grew 41.99% from 1990 to 2000 and 25.6% from April 1, 2000 to July 1, 2006; and Bernalillo County, which includes Albuquerque, grew 15.83% from 1990 to 2000 and 10.6% from April 1, 2000 to July 1, 2006. Albuquerque has higher than average percentages of its population with high school diplomas or equivalents (85.9%) and those with bachelor or higher degrees (31.8%). The average median income in Albuquerque is 13.67% lower than the national average and unemployment levels (3.5%) are thirty-percent lower than the national average (5.0%). Median home values in Albuquerque are 6.68% above the national average, at $127,600 compared to $119,600 nationally, but homeownership is slightly lower at 60.4% compared to a national average of 66.2%.

Competition.  We face strong competition both in originating loans and in attracting deposits. Competition in originating real estate loans comes primarily from other commercial banks, savings institutions and mortgage bankers making loans secured by real estate located in our market area. Commercial banks and finance companies, including finance company affiliates of automobile manufacturers, provide vigorous competition in consumer lending. We compete for real estate and other loans principally on the basis of the interest rates and loan fees we charge, the types of loans we originate and the quality and speed of services we provide to borrowers. Insurance companies and internet-based financial institutions present growing areas of competition both for loans and deposits.

There is substantial competition in attracting deposits from other commercial banks, savings institutions, money market and mutual funds, credit unions and other investment vehicles. Our ability to attract and retain deposits depends on our ability to provide investment opportunities that satisfy the requirements of investors as to rate of return, liquidity, risk and other factors. Under the Gramm-Leach-Bliley Act enacted in 2000, securities firms and insurance companies that elect to become financial holding companies may acquire banks and other financial institutions. This has significantly changed the competitive environment in which we conduct business. The financial services industry has also become more competitive as technological advances enable companies to provide financial services to customers outside their traditional geographic markets and provide alternative methods for financial transactions. These technological advances may diminish the importance of depository institutions and other financial intermediaries in the transfer of funds between parties. 

Employees. As of December 31, 2007, the Bank had approximately 271 full time-equivalent employees. We are not a party to any collective bargaining agreements. Employee relations are excellent as evidenced by the results of our annual employee satisfaction surveys. Over the last six years, the results of the employee satisfaction survey have consistently shown satisfaction levels exceeding our peers according to the independent consultant hired to administer and evaluate our surveys.

Regulation and Supervision

General. Los Alamos National Bank is a national bank, chartered by the OCC under the National Bank Act. The deposit accounts of Los Alamos National Bank are insured by the FDIC’s Deposit Insurance Fund (“DIF”) to the maximum extent provided under federal law and FDIC regulations, and Los Alamos National Bank is a member of the Federal Reserve System. As a national bank, Los Alamos National Bank is subject to the examination, supervision, reporting and enforcement requirements of the OCC, the chartering authority for national banks. The FDIC, as administrator of the DIF, also has regulatory authority over Los Alamos National Bank. Los Alamos National Bank is also a member of the Federal Home Loan Bank System, which provides a central credit facility primarily for member institutions.

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Deposit Insurance. As an FDIC-insured institution, the Bank is required to pay deposit insurance premium assessments to the FDIC. The FDIC has adopted a risk-based assessment system whereby FDIC-insured depository institutions pay insurance premiums at rates based on their risk classification. An institution’s risk classification is assigned based on its capital levels and the level of supervisory concern the institution poses to the regulators. Under the regulations of the FDIC, as presently in effect, insurance assessments range from 0.05% to 0.43% of total deposits (subject to adjustment by the FDIC and the application of assessment credits, if any, issued by the FDIC in 2007).

FICO Assessments.   The Financing Corporation (“FICO”) is a mixed-ownership governmental corporation chartered by the former Federal Home Loan Bank Board pursuant to the Federal Savings and Loan Insurance Corporation Recapitalization Act of 1987 to function as a financing vehicle for the recapitalization of the former Federal Savings and Loan Insurance Corporation. FICO issued 30-year non-callable bonds of approximately $8.2 billion that mature by 2019. Since 1996, federal legislation has required that all FDIC-insured depository institutions pay assessments to cover interest payments on FICO’s outstanding obligations. These FICO assessments are in addition to amounts assessed by the FDIC for deposit insurance. During the year ended December 31, 2007, the FICO assessment rate was approximately 0.01% of deposits.

Supervisory Assessments. National banks are required to pay supervisory assessments to the OCC to fund the operations of the OCC. The amount of the assessment is calculated using a formula that takes into account the bank’s size and its supervisory condition.During the year ended December 31, 2007, Los Alamos National Bank paid supervisory assessments to the OCC totaling $293 thousand.

Capital Requirements.The OCC has established the following minimum capital standards for national banks, such as Los Alamos National Bank: (i) a leverage requirement consisting of a minimum ratio of Tier 1 capital to total assets of 3% for the most highly-rated banks with a minimum requirement of at least 4% for all others; and (ii) a risk-based capital requirement consisting of a minimum ratio of total capital to total risk-weighted assets of 8% and a minimum ratio of Tier 1 capital to total risk-weighted assets of 4%. In general, the components of Tier 1 capital and total capital are the same as those for bank holding companies discussed above.

The capital requirements described above are minimum requirements. Higher capital levels will be required if warranted by the particular circumstances or risk profiles of individual institutions. For example, the regulations of the OCC provide that additional capital may be required to take adequate account of, among other things, interest rate risk or the risks posed by concentrations of credit, nontraditional activities or securities trading activities.

Further, federal law and regulations provide various incentives to financial institutions to maintain regulatory capital at levels in excess of minimum regulatory requirements. For example, a financial institution that is “well-capitalized” may qualify for exemptions from prior notice or application requirements otherwise applicable to certain types of activities and may qualify for expedited processing of other required notices or applications. Additionally, one of the criteria that determines a bank holding company’s eligibility to operate as a financial holding company is a requirement that all of its financial institution subsidiaries be “well-capitalized.” Under the regulations of the OCC, in order to be “well-capitalized” a financial institution must maintain a ratio of total capital to total risk-weighted assets of 10% or greater, a ratio of Tier 1 capital to total risk-weighted assets of 6% or greater and a ratio of Tier 1 capital to total assets of 5% or greater.

Federal law also provides the federal banking regulators with broad power to take prompt corrective action to resolve the problems of undercapitalized institutions. The extent of the regulators’ powers depends on whether the institution in question is “adequately capitalized,” “undercapitalized,” “significantly undercapitalized” or “critically undercapitalized,” in each case as defined by regulation. Depending upon the capital category to which an institution is assigned, the regulators’ corrective powers include: (i) requiring the institution to submit a capital restoration plan; (ii) limiting the institution’s asset growth and restricting its activities; (iii) requiring the institution to issue additional capital stock (including additional voting stock) or to be acquired; (iv) restricting transactions between the institution and its affiliates; (v) restricting the interest rate the institution may pay on deposits; (vi) ordering a new election of directors of the institution; (vii) requiring that senior executive officers or directors be dismissed; (viii) prohibiting the institution from accepting deposits from correspondent banks; (ix) requiring the institution to divest certain subsidiaries; (x) prohibiting the payment of principal or interest on subordinated debt; and (xi) ultimately, appointing a receiver for the institution.

As of December 31, 2007: (i) Los Alamos National Bank was not subject to a directive from the OCC to increase its capital to an amount in excess of the minimum regulatory capital requirements; (ii) Los Alamos National Bank exceeded its minimum regulatory capital requirements under OCC capital adequacy guidelines; and (iii) Los Alamos National Bank was “well-capitalized,” as defined by OCC regulations.

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Dividends. The National Bank Act imposes limitations on the amount of dividends that may be paid by a national bank, such as Los Alamos National Bank. Generally, a national bank may pay dividends out of its undivided profits in such amounts and at such times as the bank’s board of directors deems prudent. Without prior OCC approval, however, a national bank may not pay dividends in any calendar year that, in the aggregate, exceed the bank’s year-to-date net income plus the bank’s retained net income for the two preceding years.

The payment of dividends by any financial institution is affected by the requirement to maintain adequate capital pursuant to applicable capital adequacy guidelines and regulations, and a financial institution generally is prohibited from paying any dividends if, following payment thereof, the institution would be undercapitalized. As described above, Los Alamos National Bank exceeded its minimum capital requirements under applicable guidelines as of December 31, 2007. As of December 31, 2007, approximately $18.1 million was available to be paid as dividends by Los Alamos National Bank. Notwithstanding the availability of funds for dividends, however, the OCC may prohibit the payment of any dividends by Los Alamos National Bank if the OCC determines such payment would constitute an unsafe or unsound practice.

Insider Transactions.Los Alamos National Bank is subject to certain restrictions imposed by federal law on extensions of credit to Trinity, on investments in the stock or other securities of Trinity and the acceptance of the stock or other securities of Trinity as collateral for loans. Los Alamos National Bank also is subject to certain restrictions imposed by federal law on extensions of credit by Los Alamos National Bank to its directors and officers, to directors and officers of Trinity and its subsidiaries, to principal shareholders of Trinity and to “related interests” of such directors, officers and principal shareholders. In addition, federal law and regulations may affect the terms upon which any person who is a director or officer of Trinity or Los Alamos National Bank or a principal shareholder of Trinity may obtain credit from banks with which Los Alamos National Bank maintains correspondent relationships.

Safety and Soundness Standards. The federal banking agencies have adopted guidelines that establish operational and managerial standards to promote the safety and soundness of federally insured depository institutions. The guidelines set forth standards for internal controls, information systems, internal audit systems, loan documentation, credit underwriting, interest rate exposure, asset growth, compensation, fees and benefits, asset quality and earnings.

In general, the safety and soundness guidelines prescribe the goals to be achieved in each area, and each institution is responsible for establishing its own procedures to achieve those goals. If an institution fails to comply with any of the standards set forth in the guidelines, the institution’s primary federal regulator may require the institution to submit a plan for achieving and maintaining compliance. If an institution fails to submit an acceptable compliance plan, or fails in any material respect to implement a compliance plan that has been accepted by its primary federal regulator, the regulator is required to issue an order directing the institution to cure the deficiency. Until the deficiency cited in the regulator’s order is cured, the regulator may restrict the institution’s rate of growth, require the institution to increase its capital, restrict the rates the institution pays on deposits or require the institution to take any action the regulator deems appropriate under the circumstances. Noncompliance with the standards established by the safety and soundness guidelines may also constitute grounds for other enforcement action by the federal banking regulators, including cease and desist orders and civil money penalty assessments.

Branching Authority. National banks headquartered in New Mexico, such as Los Alamos National Bank, have the same branching rights in New Mexico as banks chartered under New Mexico law, subject to OCC approval. New Mexico law grants New Mexico-chartered banks the authority to establish branches anywhere in the State of New Mexico, subject to receipt of all required regulatory approvals.

Federal law permits state and national banks to merge with banks in other states subject to: (i) regulatory approval; (ii) federal and state deposit concentration limits; and (iii) state law limitations requiring the merging bank to have been in existence for a minimum period of time (not to exceed five years) prior to the merger. The establishment of new interstate branches or the acquisition of individual branches of a bank in another state (rather than the acquisition of an out-of-state bank in its entirety) is permitted only in those states the laws of which expressly authorize such expansion.

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Financial Subsidiaries. Under Federal law and OCC regulations, national banks are authorized to engage, through “financial subsidiaries,” in any activity that is permissible for a financial holding company and any activity that the Secretary of the Treasury, in consultation with the Federal Reserve, determines is financial in nature or incidental to any such financial activity, except (i) insurance underwriting, (ii) real estate development or real estate investment activities (unless otherwise permitted by law), (iii) insurance company portfolio investments and (iv) merchant banking. The authority of a national bank to invest in a financial subsidiary is subject to a number of conditions, including, among other things, requirements that the bank must be well-managed and well-capitalized (after deducting from capital the bank’s outstanding investments in financial subsidiaries). Los Alamos National Bank has not applied for approval to establish any financial subsidiaries.

Federal Reserve System. Federal Reserve regulations, as presently in effect, require depository institutions to maintain non-interest earning reserves against their transaction accounts (primarily NOW and regular checking accounts), as follows: for transaction accounts aggregating $43.9 million or less, the reserve requirement is 3% of total transaction accounts; and for transaction accounts aggregating in excess of $43.9 million, the reserve requirement is $1.038 million plus 10% of the aggregate amount of total transaction accounts in excess of $43.9 million. The first $9.3 million of otherwise reservable balances are exempted from the reserve requirements. These reserve requirements are subject to annual adjustment by the Federal Reserve. Los Alamos National Bank is in compliance with the foregoing requirements.

Title Guaranty & Insurance Company

General. Title Guaranty is a title insurance company organized under the laws of New Mexico and doing business in Los Alamos and Santa Fe Counties. Trinity acquired Title Guaranty in May of 2000 to provide services related to the lending activities of the Bank. Title Guaranty has provided services to the Los Alamos community since its founding in 1963 and handled approximately 70% of the mortgages recorded in Los Alamos County in 2007. Title Guaranty continues to face strong competition in Los Alamos County from the two other title companies in Los Alamos which collectively handled approximately 30% of the mortgages recorded in Los Alamos County in 2007. Title Guaranty opened a second office in the Bank’s Downtown Santa Fe facility in February 2005, securing a title plant under a lease and purchase agreement with LandAmerica Capitol City Title Services, Inc. to provide title services and products in Santa Fe County. Title Guaranty faces strong competition in Santa Fe County from numerous other title companies. In 2007, Title Guaranty handled approximately 4.88% of the mortgages recorded in Santa Fe County. Title Guaranty is regulated by the New Mexico Public Regulation Commission’s Department of Insurance with which Title Guaranty is required to file annual experience reports and who audits Title Guaranty annually. The annual experience report requires that Title Guaranty be audited by a certified public accountant.

Products and Services. The products and services offered by Title Guaranty include: title insurance; closings, including purchase/sale, commercial, construction, refinance, tax deferred exchange, relocation, and courtesy; escrow and notary services; title searches; and title reports. Title insurance covers lenders, investors, and property owners from potential losses that can arise in real estate ownership and is typically required for loans collateralized by real property. To streamline its processes, Title Guaranty employs current technology allowing customers to view the status of their file online. Title Guaranty’s national underwriters are Chicago Title Insurance Company, Commonwealth Land Title Insurance Company, Fidelity National Title Insurance Company, Lawyers Title Insurance Corporation, United General Title Insurance Company and First American Title Insurance Company.

Employees. As of December 31, 2007, Title Guaranty had approximately 10 full time-equivalent employees. Title Guaranty is not a party to any collective bargaining agreements. Employee relations are excellent as evidenced by the results of our annual employee satisfaction surveys.

TCC Appraisal Services Corporation

General. TCC Appraisals is an appraisal company organized under the laws of New Mexico and doing business in Los Alamos County. Trinity acquired TCC Appraisals in January 2006 to provide services related to the lending activities of the Bank. TCC Appraisals handled approximately 85% of the residential appraisals in Los Alamos County in 2007. TCC Appraisals has limited competition in Los Alamos County in the form of a handful of appraisers who combined handle approximately 15% of residential appraisals. Our staff appraiser is regulated by the New Mexico Appraiser Board and is required to comply with the Uniform Standards of Professional Appraisal Practice (USPAP). Our staff appraiser is licensed by the New Mexico Appraiser Board and has not had any complaints filed against him with the State.

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Products and Services. Currently, TCC Appraisals provides residential appraisal services within Los Alamos and Santa Fe Counties. The primary customer for TCC Appraisals in 2007 was the Bank. TCC Appraisals’ other customers include other lenders, attorneys and homeowners.

Employees. As of December 31, 2007, TCC Appraisals had 2 full time-equivalent employees. TCC Appraisals is not a party to any collective bargaining agreements. Employee relations are excellent as evidenced by the results of our annual employee satisfaction surveys.

Trinity Capital Trust I, III, IV and V

Trinity Capital Trust I, Trinity Capital Trust III, Trinity Capital Trust IV, and Trinity Capital Trust V (the “Trusts”) are Delaware statutory business trusts formed in 2000, 2004, 2005, and 2006, for the purpose of issuing $10 million, $6 million, $10 million, and $10 million in trust preferred securities and lent the proceeds to Trinity. In December of 2006, Trinity redeemed all amounts due under Trinity Capital Trust II which was created in 2001 for the purpose of issuing $6 million in trust preferred securities. Trust II has been dissolved. Trinity guarantees, on a limited basis, payments of distributions on the trust preferred securities and payments on redemption of the trust preferred securities.

All trust preferred securities are currently included in the Tier 1 capital of Trinity for regulatory capital purposes. However, the Federal Reserve Board recently enacted a rule that may limit the inclusion of some of our trust preferred securities in Tier 1 capital for regulatory capital purposes after 2009, although we believe that we will be able to continue treating it all as Tier 1 capital under the rule. See Note 9, “Junior Subordinated Debt Owed to Unconsolidated Trusts” and Note 17, “Regulatory Matters” in the notes to consolidated financial statements included in Item 8, “Financial Statements and Supplementary Data,” of this report.

Item 1A. Risk Factors

In addition to the other information in this Annual Report on Form 10-K, shareholders or prospective investors should carefully consider the following risk factors:

Our profitability is dependent upon the health of the markets in which we operate. As the largest employer in Northern New Mexico, the health of the Laboratory is central to the economic health of both northern and central New Mexico. The main indicator of the Laboratory’s health is its funding. The Laboratory’s 2008 fiscal budget was approved with a stabilized level of funding at approximately $2.2 billion and the 2009 fiscal budget is expected to include a slight increase in funding. The Laboratory recently provided a voluntary separation package, resulting in approximately 430 employees departing, many of whom were at retirement age and continue to reside in Los Alamos or the surrounding counties, and has announced that it expects no further reductions in force. Any material decrease in the Laboratory’s funding may affect our customers' business and financial interests, adversely affect economic conditions in our market area, affect the ability of our customers to repay their loans to us and generally affect our financial condition and results of operations. The economy in Northern New Mexico as a whole has remained fairly stable, although somewhat slower than historical activity levels.

Interest rates and other conditions impact our results of operations. Our profitability is in part a function of net interest margin. Like most banking institutions, our net interest margin will be affected by general economic conditions and other factors, including fiscal and monetary policies of the federal government, that influence market interest rates and our ability to respond to changes in such rates. At any given time, our assets and liabilities will be such that they are affected differently by a given change in interest rates. As a result, an increase or decrease in rates, the length of loan terms or the mix of adjustable and fixed rate loans in our portfolio could have a positive or negative effect on our net income, capital and liquidity. We measure interest rate risk under various rate scenarios and using specific criteria and assumptions. A summary of this process, along with the results of our net interest income simulations is presented at “Quantitative and Qualitative Disclosures About Market Risk” included under Item 7A of Part II of this Form 10-K. Although we believe our current level of interest rate sensitivity is reasonable and effectively managed, significant fluctuations in interest rates may have an adverse effect on our business, financial condition and results of operations.

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We must effectively manage our credit risk, including risks specific to real estate value due to the large concentration of real estate loans in our loan portfolio. There are risks inherent in making any loan, including risks of nonpayment, risks resulting from uncertainties as to the future value of collateral and risks resulting from changes in economic and industry conditions. We attempt to minimize our credit risk through prudent loan underwriting procedures, careful monitoring of the concentration of our loans within specific industries, monitoring of our collateral values and market conditions, and periodic independent reviews of outstanding loans by our audit department, a third-party loan review as well as external auditors. However, we cannot assure such approval and monitoring procedures will eliminate these credit risks.

The majority of the Bank’s loan portfolio is invested in commercial real estate, residential real estate, construction, general commercial and consumer lending. The maximum amount we can loan to any one customer and their related entities (our “legal lending limit”) is smaller than the limits of our national and regional competitors with larger lending limits. While there is little demand for loans over our legal lending limit ($19.7 million), we can and have engaged in participation loans with other financial institutions to respond to customer requirements. However, there are some loans and relationships that we cannot effectively compete for due to our size

Real estate lending (including commercial, construction, and residential) is a large portion of our loan portfolio. These categories constitute $993.1 million, or approximately 84.7% of our total loan portfolio as of December 31, 2007. The market value of real estate can fluctuate significantly in a short period of time as a result of market conditions in the geographic area in which the real estate is located. Although a significant portion of such loans are secured by real estate as a secondary form of collateral, adverse developments affecting real estate values in one or more of our markets could increase the credit risk associated with our loan portfolio. Additionally, commercial real estate lending typically involves larger loan principal amounts and the repayment of the loans generally is dependent, in large part, on sufficient income from the properties securing the loans to cover operating expenses and debt service.Economic events or governmental regulations outside of the control of the borrower or lender could negatively impact the future cash flow and market values of the affected properties.

The Bank’s residential mortgage loan operations include origination, sale and servicing. The Bank’s residential mortgage loan portfolio does not include subprime mortgages and contains a limited number of non-traditional residential mortgages. The Bank employs prudent underwriting standards in making residential mortgage loans. The majority of the residential mortgage loans originated by the Bank are sold to third-party investors, primarily to the Federal National Mortgage Association (“Fannie Mae”). The Bank continues to service the majority of loans that are sold to third-party investors, to build on our relationship with the customers and provide a continuing source of income through mortgage servicing right fees. Neither Trinity nor the Bank have purchased or engaged in loan pools, such as CDOs, SIVs, or other instruments which contain subprime mortgage loans and have recently seen losses in value. As such, Trinity does not foresee any charge-offs, write-downs or other losses outside the ordinary course of business with respect to our residential mortgage operations.

The current real estate market in New Mexico has slowed, but not to the same extent as other areas of the nation. Residential real estate time on-the-market has increased, but home values have generally remained constant or increased slightly in our market areas. If the loans that are collateralized by real estate become troubled during a time when market conditions are declining or have declined, we may not be able to realize the amount of security that we anticipated at the time of originating the loan, which could cause us to increase our provision for loan losses and adversely affect our operating results and financial condition. To mitigate such risk, we employ the use of either TCC Appraisals or independent third parties to conduct appraisals on our real estate collateral and adhere to limits set on the percentages for the loan amount to the appraised value of the collateral. We continually monitor the real estate markets and economic conditions in the areas in which our loans are concentrated.

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Our construction and development loans are based upon estimates of costs and value associated with the complete project. These estimates may be inaccurate and we may be exposed to more losses on these projects than on other loans. At December 31, 2007, construction loans, including land acquisition and development, totaled $249.3 million, or 21.3%, of our total loan portfolio. Construction, land acquisition and development lending involve additional risks because funds are advanced based upon the value of the project, which is of uncertain value prior to its completion. Because of the uncertainties inherent in estimating construction costs, as well as the market value of the completed project and the effects of governmental regulation of real property and the general effects of the national and local economies, it is relatively difficult to evaluate accurately the total funds required to complete a project and the related loan-to-value ratio. As a result, construction loans often involve the disbursement of substantial funds with repayment dependent, in part, on the success of the ultimate project and the ability of the borrower to sell or lease the property, rather than the ability of the borrower or guarantor to repay principal and interest. If our appraisal of the value of the completed project proves to be overstated, we may have inadequate security for the repayment of the loan upon completion of construction of the project. If we are forced to foreclose on a project prior to or at completion due to a default, there can be no assurance that we will be able to recover all of the unpaid balance of, and accrued interest on, the loan as well as related foreclosure and holding costs. In addition, we may be required to fund additional amounts to complete the project and may have to hold the property for an unspecified period of time. We have attempted to address these risks through our underwriting procedures, compliance with applicable regulations, requiring that advances typically be made on a percentage of completion basis as determined by independent third party inspectors, and by limiting the amount of construction development lending.

Our allowance for loan losses must be managed to provide sufficient reserves to absorb potential losses in our loan portfolio. We established our allowance for loan losses in consultation with management, consultants and external auditor recommendations, and maintain it at a level considered adequate by management to absorb probable loan losses based on a continual analysis of our portfolio and market environment. The amount of loan losses is susceptible to changes in economic, operating and other conditions within our market, which may be beyond our control, and such losses may exceed current estimates. At December 31, 2007, our allowance for loan losses as a percentage of total loans was 1.15% and as a percentage of total non-performing loans was approximately 114.79%. Although management believes that the allowance for loan losses is adequate to absorb losses on any existing loans that may become uncollectible, we cannot predict loan losses with certainty, and we cannot assure that our allowance for loan losses will prove sufficient to cover actual loan losses. In addition, our regulators may require us to change the amount of our reserves for loan loss which must be funded from net income. Additional reserve allocations or loan losses in excess of our reserves may adversely affect our business, financial condition and results of operations. Additional information regarding our allowance for loan losses and the methodology we use to determine an appropriate level of reserves is located in the “Management’s Discussion and Analysis” section included under Item 7 of Part II of this Form 10-K.

Our growth must be effectively managed and our growth strategy involves risks that may impact our net income. As part of our general growth strategy, we may expand into additional communities or attempt to strengthen our position in our current markets to take advantage of expanding market share by opening new offices. To the extent that we undertake additional office openings, we are likely to experience the effects of higher operating expenses relative to operating income from the new operations for a period of time, which may have an adverse effect on our levels of reported net income, return on average equity and return on average assets. Our current growth strategies involve internal growth from our current offices and the opening of an additional office in Santa Fe during 2009. This new site will be approximately 15,000 square feet. Our experience has been rapid absorption of our Santa Fe offices, with our existing Santa Fe offices becoming profitable well ahead of budget; however, such rapid absorption is not guaranteed in the future.

We must compete with other banks and financial institutions in all lines of business. The banking and financial services business in our market is highly competitive. Our competitors include large regional banks, local community banks, savings institutions, securities and brokerage companies, mortgage companies, insurance companies, finance companies, money market mutual funds, credit unions and other non-bank financial service providers. Many of these competitors are not subject to the same regulatory restrictions and may therefore enable them to provide customers with an alternative to traditional banking services.

Increased competition in our market and market changes, such as interest rate changes, force management to better control costs in order to absorb any resultant narrowing of our net interest margin, i.e., the spread between the interest rates earned on investments and loans and the interest rates paid on deposits and other interest-bearing liabilities. Without effective management and cost controls, net income may be adversely impacted by changing conditions and competition. Our efficiency leads to a decreased cost of operation that allows us to effectively anticipate and respond to market and competitive changes without adversely affecting net income.

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We may need to raise additional capital in the future, which may not be available when it is needed. We are required by federal and state regulatory authorities to maintain adequate levels of capital to support our operations. We manage our growth rate to ensure that our existing capital resources will satisfy our capital requirements for the foreseeable future. However, regulatory requirements, growth in assets outpacing growth in capital or our growth strategy may present conditions that would create a need for additional capital from the capital markets. Our ability to raise additional capital, if needed, will depend on conditions in the capital markets at that time, which are outside our control, and on our financial performance. There may not always be capital available or available on favorable terms. These conditions may alter our strategic direction and require us to manage our growth to remain within capital limits relying solely on our earnings for capital formation, thereby materially reducing our growth rate.

Our ability to attract and retain management and key personnel may affect future growth and earnings. Much of our success to date has been influenced strongly by our ability to attract and to retain management experienced in banking and financial services and individuals familiar with the communities in our market areas. Our ability to retain executive officers, current management, office managers and loan officers at the Bank will continue to be important to the successful implementation of our strategy. It is also critical, as we grow, to be able to attract and retain qualified additional management and loan officers with the appropriate level of experience and knowledge about our market areas to implement our community-based operating strategy. The unexpected loss of any key personnel, or the inability to recruit and retain qualified personnel in the future, could have an adverse effect on our business, financial condition and results of operations.

Government regulation can result in limitations on our operations. We operate in a highly regulated environment and are subject to supervision and regulation by a number of governmental regulatory agencies, including the Federal Reserve, the OCC and the FDIC. Regulations adopted by these agencies, which are generally intended to provide protection for depositors and customers rather than for the benefit of shareholders, govern a comprehensive range of matters relating to ownership and control of our shares, our acquisition of other companies and businesses, permissible activities for us to engage in, maintenance of adequate capital levels and other aspects of our operations. These bank regulators possess broad authority to prevent or remedy unsafe or unsound practices or violations of law. The laws and regulations applicable to the banking industry could change at any time and we cannot predict the affects of these changes on our business and profitability. While we expect some regulatory changes to result from recent events leading to large losses from subprime and non-traditional mortgages and associated pooled security instruments, we believe that the Bank will benefit from the expected prohibition of abuses in the mortgage industry and increased disclosure requirements. However, any changes in regulation could also increase our cost of compliance and adversely affect profitability.

Technology is continually changing and we must effectively implement new innovations in providing services to our customers. The financial services industry is undergoing rapid technological changes with frequent innovations in technology-driven products and services. In addition to better serving customers, the effective use of technology increases our efficiency and enables us to reduce costs. Our future success will depend, in part, upon our ability to address the needs of our customers using innovative methods, processes and technology to provide products and services that will satisfy customer demands for convenience as well as to create additional efficiencies in our operations as we continue to grow and expand our market areas. In order to anticipate and develop new technology, we employ a full staff of internal information system developers and consider this area a core part of our business. In the past, we have been able to respond to technological changes faster and with greater flexibility than our competitors. However, we must continue to make substantial investments in technology, which may affect our net income. 

There is a limited trading market for our common shares and, as with all companies, shareholders may not be able to resell shares at or above the price shareholders paid for them. Our common stock is not listed on any automated quotation system or securities exchange and no firm makes a market in our stock.The trading in our common shares has less liquidity than many other companies quoted on the national securities exchanges or markets. A public trading market having the desired characteristics of depth, liquidity and orderliness depends on the presence in the market of willing buyers and sellers of our common shares at any given time. This presence depends on the individual decisions of investors and general economic and market conditions over which we have no control. We cannot insure volume of trading in our common shares will increase in the future.

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System failure or breaches of our network security could subject us to increased operating costs, damage to our reputation, litigation and other liabilities. The computer systems and network infrastructure we use could be vulnerable to unforeseen problems. Our operations are dependent upon our ability to protect our computer equipment against damage from physical theft, fire, power loss, telecommunications failure or a similar catastrophic event, as well as from security breaches, denial of service attacks, viruses, worms and other disruptive problems caused by hackers. Any damage or failure that causes an interruption in our operations could have a material adverse effect on our financial condition and results of operations. Computer break-ins, phishing and other disruptions could also jeopardize the security of information stored in and transmitted through our computer systems and network infrastructure, which may result in significant liability to us and may cause existing and potential customers to refrain from doing business with us as well as damage to our reputation in general.

The Federal Financial Institutions Examination Council (FFIEC) issued guidance for “Strong Authentication/Two Factor Authentication” in the Internet banking environment. All financial institutions were required to make changes to their online banking systems to meet the new FFIEC requirements. In response to this guidance, Trinity incorporated multiple layers of security to protect our customers’ financial data. Included in our security layers are highly sophisticated systems that continually monitor online banking activity. These systems constantly compare past and current activity to build system intelligence, providing profiles for each customer. We also altered our login pages to let our customers know they are communicating with the Bank and not a “spoofed” site. A Security-phrase is now required and entered via a virtual keyboard anytime we identify activity that warrants additional security concern (e.g., transferring funds out of our customers’ ownership). We have also made available, and in some cases require, the use of security tokens that generate a one-time-password. We further employ external information technology auditors to conduct extensive auditing and testing for any weaknesses in our systems, controls, firewalls and encryption to reduce the likelihood of any security failures or breaches. Although we, with the help of third-party service providers and auditors, intend to continue implementing security technology and establish operational procedures to prevent such damage, there can be no assurance that these security measures will be successful. In addition, advances in computer capabilities, new discoveries in the field of cryptography or other developments could result in a compromise or breach of the algorithms we and our third-party service providers use to encrypt and protect customer transaction data. A failure of such security measures could have a material adverse affect on our financial condition and results of operations.

We are subject to certain operational risks, including, but not limited to, customer or employee fraud and data processing system failures and errors. Employee errors and employee and customer misconduct could subject us to financial losses or regulatory sanctions and seriously harm our reputation. Employee errors could include data processing system failures and errors. Misconduct by our employees could include hiding unauthorized activities from us, improper or unauthorized activities on behalf of our customers or improper use of confidential information. It is not always possible to prevent employee errors and misconduct, and the precautions we take to prevent and detect this activity may not be effective in all cases. Employee errors could also subject us to financial claims for negligence. To mitigate operational risks, we maintain a system of internal controls and insurance coverage. Should our internal controls fail to prevent or detect an occurrence, or if any resulting loss is not insured or exceeds applicable insurance limits, it could have a material adverse affect on our business, financial condition and results of operations.

Failure to pay interest on our debt may adversely impact our ability to pay dividends. As of December 31, 2007, we had $37.1 million of junior subordinated debentures that are held by four business trusts that we control. Interest payments on the debentures must be paid before we pay dividends on our capital stock, including our Common Stock. In 2007, the interest payments totaled $3.1 million; however, the amount is subject to change each year due to a variable rate applicable to $6 million of the debentures. We have the right to defer interest payments on the debentures for up to 20 consecutive quarters. However, if we elect to defer interest payments, all deferred interest must be paid before we may pay dividends on our capital stock. Deferral of interest payments could also cause a decline in the market price of our Common Stock.

Item 1B. Unresolved Staff Comments.

None

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Item 2. Properties.

As of March 17, 2008, the Company conducted operations through five locations as shown below. Trinity is headquartered in the main Bank office in Los Alamos, New Mexico. Four banking offices are owned by the Bank and are not subject to any mortgages or material encumbrances; our Loan Production Office is leased office space. In addition to our offices, the Bank operates 27 automatic teller machines (“ATMs”) throughout northern New Mexico. The ATMs are housed either on bank properties or on leased property.

In addition to the properties at which offices are currently located, Trinity holds ground leases on approximately 3 acres of vacant land located at the intersection of Vegas Verdes Drive and Cerrillos Road in Santa Fe, New Mexico (referred to below as Santa Fe Office III (Cerrillos Road)). We are currently working on plans to construct a third Santa Fe office at this location. We anticipate construction will begin in 2008 with the office opening in 2009. A portion of the property will be sub-leased to additional tenants. We believe our facilities are adequate for our existing business as well as our present and immediately foreseeable needs.

Properties	Address	Entity
Company Headquarters	1200 Trinity Drive Los Alamos, New Mexico 87544	Trinity
Los Alamos Office	1200 Trinity Drive Los Alamos, New Mexico 87544	Bank, Title Guaranty, TCC Appraisals
White Rock Office	77 Rover White Rock, New Mexico 87544	Bank
Santa Fe Office I (Galisteo)	2009 Galisteo Street Santa Fe, New Mexico 87505	Bank
Santa Fe Office II (Downtown)	301 Griffin Street Santa Fe, New Mexico 87501	Bank, Title Guaranty
Albuquerque Loan Production Office	6301 Indian School Road, N.E. Albuquerque, New Mexico 87110	Bank
Santa Fe Office III (Cerrillos Road)	3674 Cerrillos Road and 1405 Vegas Verdes Drive Santa Fe, New Mexico	Vacant Land

Item 3. Legal Proceedings.

Trinity, the Bank, Title Guaranty, TCC Appraisals, TCC Advisors and TCC Funds are not involved in any pending legal proceedings, other than routine legal proceedings occurring in the normal course of business and those otherwise specifically stated herein, which, in the opinion of management, in the aggregate, are material to our consolidated financial condition.

The Bank is a stockholder of Visa, Inc., which is subject to an adverse judgment in a class action lawsuit arising from certain overcharges of fees. The effect of this judgment is immaterial to the Company’s financials.

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

No matters were submitted to a vote of security holders during the quarter ended December 31, 2007.

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PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. 

Market Information

Trinity’s common stock is not listed on any automated quotation system or securities exchange. No firm makes a market in our stock. As of March 10, 2008, there were 6,499,587 shares of common stock outstanding and approximately 1,400 shareholders of record. The most recent reported sale price of Trinity’s stock as of December 31, 2007 was $26.99 per share.

The tables below show the reported high and low sales prices of the common stock during the periods indicated. The prices below are only the trades where the price was disclosed to the Company. Private sales, where the value of the shares traded were not given to us, are not included. The following figures have been adjusted for all stock splits:

Quarter ending		High sales price		Low sales price
December 31, 2007	$	28.00	$	24.95
September 30, 2007		29.00		25.00
June 30, 2007		29.00		25.00
March 31, 2007		28.75		28.00
December 31, 2006	$	30.00	$	25.00
September 30, 2006		28.00		25.00
June 30, 2006		28.00		25.00
March 31, 2006		28.00		25.95

Dividend Policy

Since January 2006, Trinity paid dividends on our common stock as follows:

Date paid		Amount per share
January 11, 2008	$	0.40
July 13, 2007		0.35
January 12, 2007		0.35
July 14, 2006		0.34
January 13, 2006		0.34

Trinity’s ability to pay dividends to shareholders is largely dependent upon the dividends it receives from the Bank and the Bank is subject to regulatory limitations on the amount of cash dividends it may pay. Please see “Business—Trinity Capital Corporation—Supervision and Regulation—Dividends” and “Business—Los Alamos National Bank—Supervision and Regulation—Dividends” under Item 1 for a more detailed description of these limitations.

We have the right to, and may from time to time, enter into borrowing arrangements or issue other debt instruments, the provisions of which may contain restrictions on payment of dividends and other distributions on Trinity common stock and Trinity preferred stock. We have issued in the aggregate approximately $37.1 million in junior subordination debentures to Trinity Capital Trust I, Trinity Capital Trust III, Trinity Capital Trust IV and Trinity Capital Trust V. All of the common stock of the trusts is owned by Trinity and the debentures are the only assets of the trusts. Under the terms of the debentures, we may be prohibited, under certain circumstances, from paying dividends on shares of its common stock. None of these circumstances currently exist. As of the date hereof, we have not entered into any other arrangements that contain restrictions on the payment of dividends. We believe that Trinity can continue to pay comparable cash dividends to shareholders in the future, assuming that (a) we continue to be profitable, (b) we do not experience any unusual growth that would necessitate higher capital retention and (c) the regulatory environment on minimum capital requirements or maximum dividends paid does not change.

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Issuer Purchases of Equity Securities

During the fourth quarter of 2007, we repurchased the following securities:

Period	(a) Total number of shares purchased		(b) Average price paid per share		(c) Total number of shares purchased as part of publicly announced plans or programs	(d) Maximum approximate dollar value that may yet be purchased under the plans or programs
October 1-October 31, 2007	—		$	—	—	$	—
November 1-November 30, 2007	—			—	—		—
December 1-December 31, 2007	10,668	(1)		29.00	—		—
Total	10,668		$	29.00	—	$	—

_________________________

(1) In September 2007, a former employee exercised the put option on shares owned in the Employee Stock Ownership Plan. An initial repurchase of 5,342 was made in September 2007, with the remaining shares repurchased in December 2007. Total shares repurchased by Trinity under the put option were 16,010.

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Shareholder Return Performance Graph

The following graph and related information shall not be deemed to be filed, but rather furnished to the SEC by inclusion herein.

The following graph shows a comparison of cumulative total returns for Trinity, the NASDAQ Stock Market, an index of all bank stocks followed by SNL, an index of bank stock for banks with $1 billion to $5 billion in total assets followed by SNL, and an index of bank stocks that are quoted on the OTC-Bulletin Board and on Pink Sheets. The cumulative total shareholder return computations assume the investment of $100.00 on December 31, 2002 and the reinvestment of all dividends. Figures for Trinity’s common stock represent inter-dealer quotations, without retail markups, markdowns or commissions and do not necessarily represent actual transactions. The graph was prepared using data provided by SNL Securities LC, Charlottesville, Virginia.

	Period Ending
Index	12/31/2002		12/31/2003		12/31/2004		12/31/2005		12/31/2006		12/31/2007
Trinity Capital Corporation	$	100.00	$	147.15	$	149.05	$	138.78	$	146.00	$	140.81
NASDAQ Composite	100.00		150.01		162.89		165.13		180.85		198.60
SNL Bank	100.00		134.90		151.17		153.23		179.24		139.28
SNL Bank $1B - $5B	100.00		135.99		167.83		164.97		190.90		139.06
SNL >$500 OTC:BB and Pink Banks	100.00		139.37		163.02		173.49		190.35		175.39

In the past, the Company compared its Total Return Performance only to the NASDAQ Composite and SNL’s >$500M OTC-BB and Pink Banks. The Company decided to add additional comparative indexes as they more provide a more complete picture of the peer groups with whom the Company’s management compares the Company performance.

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Item 6. Selected Financial Data.

The following table sets forth certain consolidated financial and other data of Trinity at the dates and for the periods indicated.

	Year Ended December 31,
	2007			2006			2005			2004			2003
	(Dollars in thousands, except per share data)
Statement of Income Data:
Interest income	$	96,989		$	85,034		$	67,909		$	54,291		$	53,420
Interest expense	47,998			39,216			26,328			17,093			19,080
Net interest income	48,991			45,818			41,581			37,198			34,340
Provision for loan losses	4,200			5,172			2,850			2,100			3,350
Net interest income after provision for loan losses	44,791			40,646			38,731			35,098			30,990
Other income	10,508			10,287			10,249			10,466			17,870
Other expense	34,605			33,794			29,851			28,746			28,208
Income before income taxes	20,694			17,139			19,129			16,818			20,652
Income taxes	7,365			6,828			7,169			6,429			7,794
Net income	$	13,329		$	10,311		$	11,960		$	10,389		$	12,858
Common Share Data:
Earnings per common share	$	2.05		$	1.57		$	1.80		$	1.54		$	1.93
Diluted earnings per common share	2.03			1.56			1.79			1.52			1.90
Book value per common share (1)	13.58			12.35			11.54			10.84			9.86
Shares outstanding at end of period	6,482,650			6,532,898			6,554,559			6,732,748			6,701,478
Weighted average common shares outstanding	6,514,613			6,572,770			6,632,587			6,728,289			6,660,858
Diluted weighted average common shares outstanding	6,555,865			6,612,324			6,692,849			6,840,020			6,756,326
Dividend payout ratio (2)	36.59		%	43.95		%	35.56		%	39.61		%	29.02		%
Cash dividends declared per common share (3)	$	0.75		$	0.69		$	0.64		$	0.61		$	0.56

_________________________

(1)	Computed by dividing total stockholders’ equity, including net stock owned by Employee Stock Ownership Plan (“ESOP”), by shares outstanding at end of period.
(2)	Computed by dividing dividends declared per common share by earnings per common share.
(3)	Computed by dividing dividends on consolidated statements of changes in stockholders’ equity by weighted average common shares outstanding.

The following table reconciles net interest income on a fully tax-equivalent basis for the periods presented:

	Year Ended December 31,
	2007		2006		2005		2004		2003
	(Dollars in thousands, except per share data)
Net interest income	$	48,991	$	45,818	$	41,581	$	37,198	$	34,340
Tax-equivalent adjustment to net interest income	558		486		416		350		276
Net interest income, fully tax-equivalent basis	$	49,549	$	46,304	$	41,997	$	37,548	$	34,616

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	As of or for the Year Ended December 31,
	2007			2006			2005			2004			2003
	(Dollars in thousands)
Balance Sheet Data:
Investment securities	$	116,129		$	106,854		$	125,808		$	113,243		$	174,966
Loans, gross	1,171,106			1,131,724			1,019,380			894,321			740,523
Allowance for loan losses	13,533			12,167			8,842			8,367			7,368
Total assets	1,379,723			1,359,279			1,244,016			1,080,393			1,006,750
Deposits	1,175,458			1,162,741			1,041,848			880,581			836,195
Short-term and long-term borrowings, including ESOP borrowings and capital lease obligations	66,051			67,238			83,520			96,092			78,957
Junior subordinated debt owed to unconsolidated trusts	37,116			37,116			32,992			22,682			16,496
Stock owned by ESOP participants, net of unearned ESOP shares	16,656			17,438			16,100			18,078			18,256
Stockholders’ equity	71,371			63,240			59,518			54,878			47,802
Performance Ratios:
Return on average assets (1)	0.96		%	0.81		%	1.02		%	1.01		%	1.32		%
Return on average equity (2)	15.56		%	12.86		%	16.05		%	14.61		%	20.15		%
Net interest margin on a fully tax equivalent basis (3)	3.73		%	3.81		%	3.80		%	3.94		%	3.84		%
Loans to deposits	99.63		%	97.33		%	97.84		%	100.61		%	88.56		%
Efficiency ratio (4)	58.16		%	60.23		%	57.59		%	60.31		%	54.03		%
Asset Quality Ratios:
Non-performing loans to total loans	1.01		%	0.77		%	0.79		%	0.64		%	0.43		%
Non-performing assets to total assets	0.95		%	0.66		%	0.68		%	1.13		%	1.09		%
Allowance for loan losses to total loans	1.15		%	1.08		%	0.87		%	0.93		%	0.99		%
Allowance for loan losses to non-performing loans	114.79		%	138.77		%	110.02		%	146.23		%	230.83		%
Net loan charge-offs to average loans	0.24		%	0.17		%	0.24		%	0.14		%	0.35		%
Capital Ratios: (5)
Tier 1 capital (to risk-weighted assets)	10.32		%	9.60		%	10.10		%	10.65		%	10.64		%
Total capital (to risk-weighted assets)	12.11		%	11.50		%	11.67		%	11.59		%	11.61		%
Tier 1 capital (to average assets)	8.19		%	7.97		%	8.19		%	8.87		%	8.05		%
Average equity, including junior subordinated debt owed to unconsolidated trusts, to average assets	8.81		%	9.09		%	8.76		%	8.93		%	8.19		%
Average equity, excluding junior subordinated debt owed to unconsolidated trusts, to average assets	6.15		%	6.27		%	6.37		%	6.92		%	6.55		%
Other:
Banking facilities	4			4			4			4			3
Full-time equivalent employees	283			284			273			282			296

_________________________

(1)	Calculated by dividing net income by average assets.
(2)	Calculated by dividing net income by the average stockholders’ equity, including stock owned by ESOP participants, net of unearned ESOP shares, during the year.

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(3)	Calculated by dividing net interest income (adjusted to a fully tax-equivalent basis, adjusting for federal and state exemption of interest income and certain other permanent income tax differences) by average earning assets.
(4)	Calculated by dividing operating expense by the sum of net interest income and other income.
(5)	Ratios presented are for Trinity on a consolidated basis. See Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Capital Resources.”

Our summary consolidated financial information and other financial data contain information determined by methods other than in accordance with accounting principles generally accepted in the United States of America (GAAP). These measures include net interest margin on a fully tax equivalent basis and average equity including junior subordinated debt owed to unconsolidated trusts to average assets. Our management uses these non-GAAP measures in its analysis of our performance. The tax equivalent adjustment to net interest margin recognizes the income tax savings when comparing taxable and tax-exempt assets and adjusting for federal and state exemption of interest income and certain other permanent income tax differences. Banking and financial institution regulators include junior subordinated debt owed to unconsolidated trusts when assessing capital adequacy. Management believes the presentation of the financial measures excluding the impact of these items provides useful supplemental information that is helpful in understanding our financial results, as they provide a method to assess management’s success in utilizing non-equity sources of capital. This disclosure should not be viewed as a substitute for the results determined to be in accordance with GAAP, nor is it necessarily comparable to non-GAAP performance measures that may be presented by other companies.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation.

This discussion is intended to focus on certain financial information regarding Trinity and the Bank and is written to provide the reader with a more thorough understanding of its financial statements. The following discussion and analysis of Trinity’s financial position and results of operations should be read in conjunction with the information set forth in Item 7A, “Quantitative and Qualitative Disclosures about Market Risk” and the consolidated financial statements and notes thereto appearing under Item 8 of this Form 10-K.

Special Note Concerning Forward-Looking Statements

This document (including information incorporated by reference) contains, and future oral and written statements of the Company and its management may contain, forward-looking statements, within the meaning of such term in the Private Securities Litigation Reform Act of 1995, with respect to the financial condition, results of operations, plans, objectives, future performance and business of the Company. Forward-looking statements, which may be based upon beliefs, expectations and assumptions of the Company’s management and on information currently available to management, are generally identifiable by the use of words such as “believe,” “expect,” “anticipate,” “plan,” “intend,” “estimate,” “may,” “will,” “would,” “could,” “should” or other similar expressions. Additionally, all statements in this document, including forward-looking statements, speak only as of the date they are made, and the Company undertakes no obligation to update any statement in light of new information or future events.

The Company’s ability to predict results or the actual effect of future plans or strategies is inherently uncertain. The factors, which could have a material adverse effect on the operations and future prospects of the Company and its subsidiaries are detailed in the “Risk Factors” section included under Item 1A of Part I of this Form 10-K. In addition to the risk factors described in that section, there are other factors that may impact any public company, including ours, which could have a material adverse effect on the operations and future prospects of the Company and its subsidiaries. These additional factors include, but are not limited to, the following:

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These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements.

Critical Accounting Policies

Allowance for Loan Losses:  The allowance for loan losses is that amount which, in management's judgment, is considered appropriate to provide for potential losses in the loan portfolio. In analyzing the adequacy of the allowance for loan losses, management uses a comprehensive loan grading system to determine risk potential in the portfolio, and considers the results of periodic internal and external loan reviews. Historical loss experience factors and specific reserves for impaired loans, combined with other considerations, such as delinquency, non-accrual, trends on criticized and classified loans, economic conditions, concentrations of credit risk, and experience and abilities of lending personnel, are also considered in analyzing the adequacy of the allowance. Management uses a systematic methodology, which is applied at least quarterly, to determine the amount of allowance for loan losses and the resultant provisions for loan losses it considers adequate to provide for anticipated loan losses. This methodology includes a periodic detailed analysis of the loan portfolio, a systematic loan grading system and a periodic review of the summary of the allowance for loan and lease loss balance. In the event that different assumptions or conditions were to prevail, and depending upon the severity of such changes, the possibility of materially different financial condition or results of operations is a reasonable likelihood.

Three methods are used to evaluate the adequacy of the allowance for loan losses: (1) specific identification, based on management’s assessment of loans in our portfolio and the probability that a charge-off will occur in the upcoming quarter, per SFAS 114; (2) losses probable in the loan portfolio besides those specifically identified, based upon a migration analysis of the percentage of loans currently performing that have probable losses, as set forth in SFAS 5; and (3) qualitative adjustments based on management’s assessment of certain risks such as delinquency trends, watch-list and classified trends, changes in concentrations, economic trends, industry trends, non-accrual trends, exceptions and loan-to-value guidelines, management and staff changes and policy or procedure changes (as set forth in SFAS 5).

While management uses the best information available to make its evaluation, future adjustments to the allowance may be necessary if there are significant changes in economic conditions. In addition, as an integral part of their examination process regulatory agencies periodically review our allowance for loan losses and may require us to make additions to the allowance based on their evaluation of information available at the time of their examinations.

Mortgage Servicing Right (MSR) Assets:  Servicing residential mortgage loans for third-party investors represents a significant business activity of the Bank. As of December 31, 2007, mortgage loans serviced for others totaled $944.5 million. The MSRs on these loans total $8.1 million as of December 31, 2007. The expected and actual rates of mortgage loan prepayments are the most significant factors driving the value of MSRs. Increases in mortgage loan prepayments reduce estimated future net servicing cash flows because the life of the underlying loan is reduced. In determining the fair value of the MSRs, mortgage interest rates, which are used to determine prepayment rates and discount rates, are held constant over the estimated life of the portfolio. Fair values of the MSRs are calculated on a monthly basis. The values are based upon current market conditions and assumptions, which incorporate the expected life of the loans, estimated costs to service the loans, servicing fees to be received and other factors. MSRs are carried at the lower of the initial capitalized amount, net of accumulated amortization, or fair value.

The fair value of the MSRs is driven primarily by the effect current mortgage interest rates have on the likelihood borrowers will prepay the underlying mortgages by refinancing at a lower rate. Accordingly, higher interest rates decrease the likelihood of prepayment, extending the life of the MSRs and increasing the value of these assets. Lower interest rates increase the likelihood of prepayment, contracting the life of the MSRs and decreasing the value of these assets. This can have a significant impact on our income. There is no certainty on the direction and amount of interest rate changes looking forward, and therefore, there is no certainty on the amount or direction of the change in valuation.

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An analysis of changes in mortgage servicing rights asset follows:

	2007			2006			2005
	(In thousands)
Balance, beginning of year	$	9,867		$	11,009		$	11,858
Servicing rights originated and capitalized	1,236			1,602			1,909
Amortization	(2,853		)	(2,744		)	(2,758		)
	$	8,250		$	9,867		$	11,009

Below is an analysis of changes in the mortgage servicing right asset valuation allowance:

	2007			2006			2005
	(In thousands)
Balance, beginning of year	$	(752	)	$	(1,230	)	$	(3,487	)
Aggregate reductions credited to operations	702			484			3,267
Aggregate additions charged to operations	(134		)	(6		)	(1,010		)
	$	(184	)	$	(752	)	$	(1,230	)

The fair values of the MSRs were $8.5 million, $9.5 million and $10.5 million on December 31, 2007, 2006 and 2005, respectively.

The primary risk characteristics of the underlying loans used to stratify the servicing assets for the purposes of measuring impairment are interest rate and original term.

Our valuation allowance is used to recognize impairments of our MSRs. An MSR is considered impaired when the market value of the MSR is below the amortized book value of the MSR. The MSRs are accounted by risk tranche, with the interest rate and term of the underlying loan being the primary strata used in distinguishing the tranches. Each tranche is evaluated separately for impairment.

We have our MSRs analyzed for impairment on a monthly basis. The underlying loans on all serviced loans are analyzed and, based upon the value of MSRs that are traded on the open market, a current market value for each risk tranche in our portfolio is assigned. We then compare that market value to the current amortized book value for each tranche. The change in market value (up to the amortized value of the MSR) is recorded as an adjustment to the MSR valuation allowance, with the offset being recorded as an addition or a reduction to income.

The following assumptions were used to calculate the market value of the MSRs as of December 31, 2007, 2006 and 2005:

	At December 31,
	2007			2006			2005
Prepayment Standard Assumption (PSA) speed		232.00	%		193.00	%		165.00	%
Discount rate	10.00			10.00			9.01
Earnings rate	5.00			5.00			4.00

Overview

The year 2007 was the most profitable year in the history of the Company. During 2007 we experienced asset growth of $20.4 million (1.5%) but an increase in income of $3.0 million (29.3%), mainly due to an increase in net interest income of $3.2 million. The slow asset growth was part of the general economic slowdown experienced in the nation and our market area during the year, and it is anticipated that this trend will continue into 2008. Despite slow growth, the Bank grew to have the largest market share in Santa Fe County as measured by the Summery of Deposits (SOD) report compiled by the FDIC as of June 30, 2007. The Bank also received an “Outstanding” rating in our 2007 Community Reinvestment Act (CRA) examination. Fewer than 15% of banks nationwide receive this rating.

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Income Statement Analysis

Net Income-General. Trinity’s net income for the year ended December 31, 2007, totaled $13.3 million or $2.03 diluted earnings per share, compared to $10.3 million or $1.56 diluted earnings per share for 2006, an increase of $3.0 million in net income and an increase of $0.47 in diluted earnings per share. This increase in net income was primarily due to an increase in net interest income of $3.2 million and a decrease in the provision for loan losses expense of $972 thousand. The increase in net interest income was primarily due to an increase in the volume of earning assets. The provision for loan losses decreased between 2006 and 2007 due to a one-time contribution to the provision in the first quarter of 2006 based upon a single commercial loan which was subsequently charged-off in 2006 and an additional contribution in the third quarter 2006 based on the reserve for loan loss analysis which were not repeated in 2007. In addition, non-interest expense increased $811 thousand and non-interest income increased $221 thousand. The increase in non-interest expense was mainly due to an increase in salaries and employee benefits. The increase in non-interest income was mainly due to an increase in loan and other fees. Income tax expenses increased $537 thousand due to higher pre-tax income, which was partially offset by changes in tax estimates between the two periods.

The profitability of the Company’s operations depends primarily on its net interest income, which is the difference between total interest earned on interest-earning assets and total interest paid on interest-bearing liabilities. The Company’s net income is affected by its provision for loan losses as well as other income and other expenses. The allowance for loan losses reflects the amount thought to be adequate to cover probable credit losses in the loan portfolio. Non-interest income or other income consists of mortgage loan servicing fees, loan and other fees, service charges on deposits, gain on sale of loans, gain on sale of securities and other operating income. Other expenses include salaries and employee benefits, occupancy expenses, data processing expenses, marketing, amortization and valuation of mortgage servicing rights, supplies expense, loss on sale of other real estate owned, postage and other expenses.

The amount of net interest income is affected by changes in the volume and mix of interest-earning assets, the level of interest rates earned on those assets, the volume and mix of interest-bearing liabilities, and the level of interest rates paid on those interest-bearing liabilities. The provision for loan losses is dependent on changes in the loan portfolio and management’s assessment of the collectability of the loan portfolio, as well as economic and market conditions, which is discussed in more detail in “Critical Accounting Policies—Allowance for Loan Losses.” Other income and other expenses are impacted by growth of operations and growth in the number of accounts through core banking business growth.  Growth in operations affects other expenses as a result of additional employees, branch facilities and promotional marketing expense. Growth in the number of accounts affects other income including service fees as well as other expenses such as computer services, supplies, loss (gain) on sale of other real estate owned, postage, telecommunications and other miscellaneous expenses.

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Net Interest Income. The following tables present, for the periods indicated, the total dollar amount of interest income from average interest earning assets and the resultant yields, as well as the interest expense on average interest bearing liabilities, and the resultant costs, expressed both in dollars and rates:

	Year Ended December 31,
	2007						2006						2005
	Average Balance		Interest		Yield/ Rate		Average Balance		Interest		Yield/ Rate		Average Balance		Interest		Yield/ Rate
	(Dollars in thousands)
Interest Earning Assets:
Loans (1)	$	1,166,275	$	89,059	7.64	%	$	1,091,563	$	79,525	7.29	%	$	980,498	$	63,730	6.50	%
Taxable investment securities	101,800		4,917		4.83		87,795		3,703		4.22		77,549		2,364		3.05
Investment securities exempt from federal income taxes(2)	21,511		1,548		7.20		18,808		1,315		6.99		18,528		1,175		6.34
Federal funds sold	2,534		133		5.25		249		33		13.25		1,083		12		1.11
Other interest bearing deposits	36,120		1,798		4.98		17,080		851		4.98		26,564		969		3.65
Investment in unconsolidated trust subsidiaries	1,116		92		8.24		1,083		93		8.59		840		75		8.93
Total interest earning assets	1,329,356		97,547		7.34		1,216,578		85,520		7.03		1,105,062		68,325		6.18
Non-interest earning assets	63,587						62,410						63,760
Total assets	$	1,392,943					$	1,278,988					$	1,168,822
Interest Bearing Liabilities:
Deposits:
NOW deposits	$	95,123	$	2,372	2.49	%	$	87,280	$	1,820	2.09	%	$	93,127	$	1,226	1.32	%
Money market deposits	197,260		4,643		2.35		163,190		3,121		1.91		129,595		1,596		1.23
Savings deposits	257,478		6,888		2.68		244,039		5,652		2.32		260,930		4,074		1.56
Time deposits over $100,000	337,463		17,480		5.18		302,696		14,061		4.65		259,894		8,826		3.40
Time deposits under $100,000	216,393		10,763		4.97		185,392		8,003		4.32		157,279		4,914		3.12

(Continued on following page)

26

(Continued from prior page)

	Year Ended December 31,
	2007						2006						2005
	Average Balance		Interest		Yield/ Rate		Average Balance		Interest		Yield/ Rate		Average Balance			Interest		Yield/ Rate
	(Dollars in thousands)
Short-term borrowings, including ESOP borrowings	$	18,722	$	690	3.69	%	$	16,822	$	721	4.29	%	$		6,096	$	188	3.08	%
Long-term borrowings, including ESOP borrowings	45,441		1,802		3.97		65,365		2,559		3.91		78,003			3,011		3.86
Long-term capital lease obligations	2,211		293		13.25		—		—		—		—			—		—
Junior subordinated debt owed to unconsolidated trusts	37,116		3,067		8.26		36,031		3,279		9.10		27,936			2,493		8.92
Total interest bearing liabilities	1,207,207		47,998		3.98		1,100,815		39,216		3.56		1,012,860			26,328		2.60
Demand deposits—non-interest bearing	40,314						39,293						35,202
Other non-interest bearing liabilities	59,750						58,677						46,252
Stockholders’ equity, including stock owned by ESOP	85,672						80,203						74,508
Total liabilities and stockholders equity	$	1,392,943					$	1,278,988					$	1,168,822
Net interest income/ interest rate Spread (3)			$	49,549	3.36	%			$	46,304	3.47	%				$	41,997	3.58	%
Net interest margin on a fully tax equivalent basis (4)					3.73	%					3.81	%						3.80	%
Net interest margin (4)					3.69	%					3.77	%						3.76	%

_________________________

(1) Average loans includes non-accrual loans of $9.9 million, $8.2 million and $8.2 million for 2007, 2006 and 2005.

Interest income includes loan origination fees of $3.4 million, $3.4 million and $3.2 million for the years ended December 31, 2007, 2006 and 2005.

(2) Non-taxable investment income is presented on a fully tax equivalent basis, adjusting for federal and state exemption of interest income and certain other permanent income tax differences.

(3) Interest rate spread represents the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities and is presented on a fully tax equivalent basis.

(4) Net interest margin represents net interest income as a percentage of average interest-earning assets.

27

In 2007, net interest income on a fully tax equivalent basis increased $3.2 million (7.0%) to $49.5 million from $46.3 million in 2006. This increase resulted from an increase in interest income on a fully tax equivalent basis of $12.0 million (14.1%), which was partially offset by an increase in interest expense of $8.8 million (22.4%). The increase in interest income on a fully tax equivalent basis was primarily due to an increase in average interest-earning assets of $112.8 million (9.3%), which accounted for $7.5 million of the increase in interest income on a fully tax equivalent basis. The yield on interest-earning assets also increased 31 basis points, which accounted for $4.5 million of the increase. Interest expense increased primarily due to an increase in the cost of interest-bearing liabilities of 42 basis points, which accounted for $4.7 million of the increase. Average interest-bearing liabilities also increased by $106.4 million (9.7%), which accounted for $4.1 million of the increase. The net interest margin expressed in a fully tax equivalent basis decreased 8 basis points to 3.73% in 2007 from 3.81% in 2006.

In 2006, net interest income on a fully tax equivalent basis increased $4.3 million (10.3%) to $46.3 million from $42.0 million in 2005. This increase resulted from an increase in interest income on a fully tax equivalent basis of $17.2 million (25.2%), which was partially offset by an increase in interest expense of $12.9 million (49.0%). The increase in interest income on a fully tax equivalent basis was primarily due to an increase in the yield on interest-earning assets of 85 basis points, which accounted for $9.6 million of the increase. Average interest-earning assets also increased $111.5 million (10.1%), which accounted for $7.6 million of the increase in interest income on a fully tax equivalent basis. Interest expense increased primarily due to an increase in the cost of interest-bearing liabilities of 96 basis points, which accounted for $9.4 million of the increase. Average interest-bearing liabilities also increased by $88.0 million (8.7%), which accounted for $3.5 million of the increase. The net interest margin expressed in a fully tax equivalent basis increased 1 basis point to 3.81% in 2006 from 3.80% in 2005.

28

Volume, Mix and Rate Analysis of Net Interest Income. The following table presents the extent to which changes in volume, changes in interest rates, and changes in the interest rates times the changes in volume of interest-earning assets and interest-bearing liabilities have affected our interest income and interest expense during the periods indicated. Information is provided on changes in each category due to (i) changes attributable to changes in volume (change in volume times the prior period interest rate) and (ii) changes attributable to changes in interest rate (changes in rate times the prior period volume). Changes attributable to the combined impact of volume and rate have been allocated proportionally to the changes due to volume and the changes due to rate.

	Year Ended December 31,
	2007 Compared to 2006									2006 Compared to 2005
	Change Due to Volume			Change Due to Rate			Total Change			Change Due to Volume			Change Due to Rate			Total Change
	(In thousands)
Interest Earning Assets:
Loans	$	5,597		$	3,937		$	9,534		$	7,641		$	8,154		$	15,795
Taxable investment securities	636			578			1,214			343			996			1,339
Investment securities exempt from federal income taxes (1)	194			39			233			18			122			140
Federal funds sold	131			(31		)	100			(15		)	36			21
Other interest bearing deposits	948			(1		)	947			(409		)	291			(118		)
Investment in unconsolidated trust subsidiaries	3			(4		)	(1		)	21			(3		)	18
Total increase (decrease) in interest income	7,509			4,518			12,027			7,599			9,596			17,195
Interest Bearing Liabilities:
NOW deposits	174			378			552			(81		)	675			594
Money market deposits	723			799			1,522			515			1,010			1,525
Savings deposits	324			912			1,236			(279		)	1,857			1,578
Time deposits over $100,000	1,708			1,711			3,419			1,624			3,611			5,235
Time deposits under $100,000	1,445			1,315			2,760			985			2,104			3,089
Short-term borrowings	76			(107		)	(31		)	437			96			533
Long-term borrowings	(790		)	33			(757		)	(494		)	42			(452		)
Long-term capital lease obligations	293			—			293			—			—			—
Junior subordinated debt owed to unconsolidated trusts	97			(309		)	(212		)	736			50			786
Total increase (decrease) in interest expense	4,050			4,732			8,782			3,443			9,445			12,888
Increase (decrease) in net interest income	$	3,459		$	(214	)	$	3,245		$	4,156		$	151		$	4,307

_________________________

(1) Non-taxable investment income is presented on a fully tax equivalent basis, adjusting for federal and state exemption of interest income and certain other permanent income tax differences.

29

Other Income. Changes in other income between 2007, 2006 and 2005 were as follows:

	Year ended December 31,				Net			Year ended December 31,				Net
	2007		2006		difference			2006		2005		difference
	(In thousands)
Other income:
Mortgage loan servicing fees	$	2,468	$	2,641	$	(173	)	$	2,641	$	2,594	$	47
Loan and other fees	3,390		3,016		374			3,016		2,753		263
Service charges on deposits	1,714		1,561		153			1,561		1,489		72
Gain on sale of loans	1,658		1,587		71			1,587		2,377		(790		)
Gain on sale of securities	62		—		62			—		—		—
Other operating income	1,216		1,482		(266		)	1,482		1,036		446
	$	10,508	$	10,287	$	221		$	10,287	$	10,249	$	38

In 2007, other income increased $221 thousand (2.1%) to $10.5 million from $10.3 million in 2006. Loan and other fees increased $374 thousand mainly due to an increase in fees collected from ATM operations due largely to more foreign (non-Bank customer) transactions on our ATM machines, as well as an increase in Trust Department fees from an increased volume of business. Other operating income decreased $266 thousand (17.9%) mainly due to a decrease in title insurance premiums collected resultant from a lower number of policies written due to a general slow down in the real estate market. Service charges on deposits increased $153 thousand (9.8%) mainly due to an increase in overdraft fees collected, due to an increase of 8.0% in the overdraft fee during 2007.

In 2006 other income increased $38 thousand (0.4%) to $10.3 million from $10.2 million in 2005. Gain on sale of loans decreased $790 thousand (33.2%) due to the continued drop in mortgage loan activity under a slowing local housing market. Other operating income increased $446 thousand (43.1%) due to activities of the newly formed TCC Appraisal Services Corporation and increased revenues from Title Guaranty. Loans and other fees increased by $263 thousand (9.6%) largely due to a continued increase in ATM switch fees from increased debit card usage.

Other Expenses. Changes in other expenses between 2007 and 2006 and between 2006 and 2005 are as follows:

	Year ended December 31,					Net			Year ended December 31,				Net
	2007			2006		difference			2006		2005		difference
	(In thousands)
Other expenses:
Salaries and employee benefits	$	18,516		$	17,468	$	1,048		$	17,468	$	16,073	$	1,395
Occupancy	3,558			3,450		108			3,450		3,166		284
Data processing	1,855			1,921		(66		)	1,921		1,841		80
Marketing	1,971			1,698		273			1,698		1,509		189
Amortization and valuation of mortgage servicing rights	2,285			2,266		19			2,266		501		1,765
Supplies	785			657		128			657		686		(29		)
(Gain) loss on sale of other real estate owned	(120		)	215		(335		)	215		950		(735		)
Postage	642			572		70			572		582		(10		)
Other	5,113			5,547		(434		)	5,547		4,543		1,004
	$	34,605		$	33,794	$	811		$	33,794	$	29,851	$	3,943

30

Other expenses increased $811 thousand (2.4%) to $34.6 million in 2007 from $33.8 million in 2006. Salaries and employee benefits increased $1.0 million (6.0%) largely due to normal merit increases in salaries as well as an increase in the bonuses paid to employees (which is based directly on increases in net income). Other expenses decreased $434 thousand mainly due to a decrease in professional fees expense, as costs incurred in 2006 in connection with a quality assessment of the Bank to help us improve the efficiency of operations were not repeated in 2007. In addition, in 2006 we had a $500 thousand legal expense that was not repeated in 2007. (Gain) loss on sale of other real estate owned decreased $335 thousand (155.8%) mainly due to a drop in the sale activity in other real estate owned between the two periods, as well as a recovery on previously recorded losses on the sale of other real estate owned where the financing was made at below-market rates.

Other expenses increased $3.9 million (13.2%) to $33.8 million in 2006 from $29.9 million in 2005. Amortization and valuation of mortgage servicing rights increased $1.8 million (352.3%) largely due to a decrease in the recovery of mortgage servicing rights impairment in 2006 compared to 2005, due to a slowing of the increase in interest rates. Salaries and employee benefits increased $1.4 million (8.7%) largely due to an increase in the number of employees and normal merit increases in salaries, as well as the expensing of stock incentive plans pursuant to SFAS 123(R) (see “Item 8. Financial Statements and Supplemental Data—Notes to Consolidated Financial Statements—Note 12. Stock Incentives” on p. 72 of this Form 10-K). Other expenses increased $1.0 million (22.1%) due to an increase in other losses ($511 thousand) and bankcard expenses ($277 thousand). Other losses increased mainly due to a $500 thousand legal settlement.

Income Taxes. In 2007, income tax expense increased by $537 thousand (7.9%) from the previous year to a total of $7.4 million from $6.8 million, although the effective tax rate decreased from 39.8% in 2006 to 35.6% in 2007. The decrease was mainly attributable to a change in the estimate of current income tax expense, due to an immaterial over accrual of income taxes in the prior year.

In 2006, income tax expense decreased by $341 thousand (4.8%) from the previous year to a total of $6.8 million from $7.2 million, although the effective tax rate increased from 37.5% in 2005 to 39.8% in 2006. This increase in effective tax rate was attributable to permanent differences arising from the tax treatment of employee stock ownership plan expenses for tax and book purposes.

Balance Sheet Analysis

Balance Sheet-General. Total assets at December 31, 2007 were $1.4 billion, an increase in $20.4 million (1.5%) from December 31, 2006. Net loans increased $38.0 million (3.4%) during 2007, and cash and cash equivalents decreased $28.1 million (38.1%). Total investments increased $9.3 million (8.7%). During the same period, total liabilities increased $13.1 million (1.0%), remaining at $1.3 billion. The increase in total liabilities was primarily due to an increase in total deposits of $12.7 million (1.1%). Stockholders’ equity (including stock owned by the Employee Stock Ownership Plan) increased $7.3 million (9.1%) to $88.0 million on December 31, 2007 compared to $80.7 million on December 31, 2006.

Investment Securities. The primary purposes of the investment portfolio are to provide a source of earnings for liquidity management purposes, to provide collateral to pledge against public deposits and to control interest rate risk. In managing the portfolio, we seek to obtain the objectives of safety of principal, liquidity, diversification and maximized return on funds. For an additional discussion with respect to these matters, see “Liquidity” and “Capital Resources” under Item 7 and “Asset Liability Management” under Item 7A below.

31

The following tables set forth the amortized cost and fair value of our securities by accounting classification category and by type of security as indicated:

	At December 31,
	2007					2006				2005
	Amortized Cost			Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(In thousands)
Securities Available for Sale:
Government sponsored agencies	$	93,081		$	93,201	$	73,025	$	72,787	$	85,687	$	85,289
States and political subdivisions	6,391			6,385		15,190		15,157		5,984		5,937
Equity securities	1			4		1		6		1		5
Total securities available for sale	$	99,473		$	99,590	$	88,216	$	87,950	$	91,672	$	91,231
Securities Held to Maturity:
Government sponsored agencies	$	—		$	—	$	—	$	—	$	13,687	$	13,647
States and political subdivisions			9,159		9,159	10,968		10,961		12,925		12,918
Total securities held to maturity	$	9,159		$	9,159	$	10,968	$	10,961	$	26,612	$	26,565
Other securities:
Non-marketable equity securities (including FRB and FHLB stock)	$	6,264		$	6,264	$	6,820	$	6,820	$	6,973	$	6,973
Investment in unconsolidated trusts	1,116			1,116		1,116		1,116		992		992
Total other securities	$	7,380		$	7,380	$	7,936	$	7,936	$	7,965	$	7,965

Government sponsored agencies securities generally consist of fixed rate securities with maturities of one month to five years. States and political subdivisions investment securities consist of investment grade and local non-rated issues with maturities six months to thirty years.

Securities held from one issuer, Los Alamos Retirement Center, Inc., had a book value in excess of 10% of Trinity’s stockholders’ equity at December 31, 2007, with securities held by us totaling $9.2 million. Los Alamos Retirement Center, Inc. manages a nursing home and an assisted living facility in Los Alamos, New Mexico.

32

                The following table sets forth certain information regarding contractual maturities and the weighted average yields of our securities portfolio as of December 31, 2007:

	Due in One Year or Less				Due after One Year through Five Years				Due after Five Years through Ten Years				Due after Ten Years or no stated Maturity
	Balance		Weighted Average Yield		Balance		Weighted Average Yield		Balance		Weighted Average Yield		Balance		Weighted Average Yield
	(Dollars in thousands)
Securities Available for Sale:
Government sponsored agencies	$	66,453	4.83	%	$	26,628	4.20	%	—		—		—		—
States and political subdivision (1)	1,634		5.08	%	1,518		5.63	%	$	1,883	5.88	%	$	1,356	6.31	%
Equity securities	—		—		—		—		—		—			1	23.09	%
Total	$	68,087			$	28,146			$	1,883			$	1,357
Securities Held to Maturity:
Government sponsored agencies		—	—		—		—		—		—			—	—
States and political subdivision (1)		—	—			—	—		—		—		$	9,159	10.21	%
Total		—				—			—				$	9,159
Other securities:
Non-marketable Equity Securities (including FRB and FHLB stock) (2)	$	100	0.00	%		—	—		—		—		$	6,164	2.89	%
Investment in Unconsolidated trusts	—		—		—		—		—		—		1,116		8.17
Total	$	100				—			—				$	7,280

_________________________

(1) Yield is reflected on a fully tax equivalent basis, adjusting for federal and state exemption of interest income and certain other permanent income tax differences.

(2) Non-marketable Equity Securities includes a $100 thousand investment in the New Mexico Community Development Loan Fund, a tax-exempt non-profit corporation, which the Company made at 0.00% interest as a donation of interest to this corporation.

33

Loan Portfolio. The following tables set forth the composition of the loan portfolio:

	At December 31,
	2007					2006					2005					2004					2003
	Amount			Percent		Amount			Percent		Amount			Percent		Amount			Percent		Amount			Percent
	(Dollars in thousands)
Commercial	$	118,670		10.12	%	$	127,950		11.29	%	$	93,579		9.16	%	$	92,736		10.35	%	$	71,299		9.61	%
Commercial real estate	382,909			32.65		388,149			34.23		379,884			37.19		346,454			38.65		286,551			38.61
Residential real estate	360,934			30.77		324,051			28.58		313,693			30.71		282,380			31.50		222,282			29.95
Construction real estate	249,284			21.26		235,534			20.78		178,068			17.43		121,769			13.59		112,616			15.18
Installment and other	61,028			5.20		58,045			5.12		56,309			5.51		52,984			5.91		49,349			6.65
Total loans	1,172,825			100.00		1,133,729			100.00		1,021,533			100.00		896,323			100.00		742,097			100.00
Unearned income	(1,719		)			(2,005		)			(2,153		)			(2,002		)			(1,574		)
Gross loans	1,171,106					1,131,724					1,019,380					894,321					740,523
Allowance for loan losses	(13,533		)			(12,167		)			(8,842		)			(8,367		)			(7,368		)
Net loans	$	1,157,573				$	1,119,557				$	1,010,538				$	885,954				$	733,155

Net loans increased $38.0 million (3.4%) to $1.2 billion at December 31, 2007 from $1.1 billion at December 31, 2006. The increase was due primarily to growth in our residential real estate and construction real estate portfolios, which was partially offset by declines in our commercial non-real estate and commercial real estate portfolios. We expect lower loan growth than previous years in all loan categories as New Mexico’s economy slows.

Loan Maturities. The following table sets forth the maturity or repricing information for commercial and construction real estate loans outstanding at December 31, 2007:

	Due in One Year Or Less				Due after One Year Through Five Years				Due after Five Years
	Fixed Rate		Floating Rate		Fixed Rate			Floating Rate	Fixed Rate		Floating Rate	Total
	(In thousands)
Commercial loans and construction real estate loans	$	148,013	$	212,406	$	6,954	$	—	$	581	—	$	367,954

34

Asset Quality. The following table sets forth the amounts of non-performing loans and non-performing assets at the dates indicated:

	At December 31,
	2007			2006			2005			2004			2003
	(Dollars in thousands)
Non-accruing loans	$	11,789		$	8,767		$	8,037		$	5,714		$	3,112
Loans 90 days or more past due, still accruing interest	—			1			—			8			80
Total non-performing loans	$	11,789		$	8,768		$	8,037		$	5,722		$	3,192
Other real estate owned	1,358			165			375			6,438			7,383
Other repossessed assets	4			60			27			64			353
Total non-performing assets	$	13,151		$	8,993		$	8,439		$	12,224		$	10,928
Total non-performing loans to total loans	1.01		%	0.77		%	0.79		%	0.64		%	0.43		%
Allowance for loan losses to non-performing loans	114.79		%	138.77		%	110.02		%	146.23		%	230.83		%
Total non-performing assets to total assets	0.95		%	0.66		%	0.68		%	1.13		%	1.09		%

Non-performing Loans. Non-performing loans include (i) loans accounted for on a non-accrual basis, (ii) accruing loans contractually past due 90 days or more as to interest and principal and (iii) troubled debt restructurings. Management reviews the loan portfolio for problem loans on an ongoing basis. During the ordinary course of business, management may become aware of borrowers who may not be able to meet the contractual requirements of loan agreements. Such loans are placed under close supervision with consideration given to placing the loan on a non-accrual status, increasing the allowance for loan losses, and (if appropriate) partial or full charge-off. After a loan is placed on non-accrual status, any interest previously accrued, but not yet collected, is reversed against current income. When payments are received on non-accrual loans, such payments will be applied to principal and any interest portion included in the payments are not included in income. Loans will not be placed back on accrual status unless all back interest and principal payments are made. If interest on non-accrual loans had been accrued, such income would have amounted to $882 thousand and $734 thousand for the years ended December 31, 2007 and 2006, respectively. None of these amounts were included in interest income during these periods. Our policy is to place loans 90 days past due on non-accrual status. An exception is made when management believes the loan will become current and there is documented evidence of the borrower’s ability to repay. Non-accrual loans are further classified as impaired when underlying collateral is not sufficient to cover the loan balance and it is probable that we will not fully collect all principal and interest.

Non-performing assets returned to more historic levels in 2007 after two relatively low years. The Company has not engaged in sub-prime lending, has limited non-traditional mortgage products and no structured products or mortgage-backed securities which have recently seen losses in value. As such, we do not anticipate out-of-the-ordinary write-downs, charge-offs or losses from our residential portfolio.

Non-performing assets also consist of other repossessed assets and other real estate owned (“OREO”). OREO represents properties acquired through foreclosure or other proceedings and are recorded at the fair value less the estimated cost of disposal. OREO is evaluated regularly to ensure that the recorded amount is supported by its current fair value. Valuation allowances to reduce the carrying amount to fair value less estimated costs of disposal are recorded as necessary. Revenues and expenses from the operations of OREO and changes in the valuation are included in other income and other expenses on the income statement.

35

At December 31, 2007, total non-performing assets increased $4.2 million to $13.2 million from $9.0 million at December 31, 2006 due to an increase in non-accruing loans of $3.0 million and an increase in other real estate owned of $1.2 million. The increase in non-accruing loans was mainly due to the placing on non-accrual status during 2007 two commercial loan relationships totaling $1.5 million and one $1.1 million construction loan relationship. Management believes that one of the commercial loan customers has provided adequate collateral to secure the debt and restructured the loan. The borrower is in compliance with the modified terms. We have specifically identified the other commercial loan relationship in our allowance for loan losses and provided for the anticipated deficiency in collateral in the provision. We are currently proceeding with foreclosure on the construction loan collateral and expect the collateral to be sufficient to satisfy the outstanding debt. Other real estate owned increased mainly due to the acquisition of seven pieces of residential real estate resulting from foreclosure suits.

The following table presents an analysis of the allowance for loan losses for the periods presented:

	Year Ended December 31,
	2007			2006			2005			2004			2003
	(Dollars in thousands)
Balance at beginning of year	$	12,167		$	8,842		$	8,367		$	7,368		$	6,581
Provision for loan losses	4,200			5,172			2,850			2,100			3,350
Charge-offs:
Commercial	1,766			1,846			1,912			640			506
Commercial real estate	246			—			—			—			527
Residential real estate	363			113			125			188			305
Construction real estate	—			—			—			—			1,220
Installment and other	771			369			500			459			255
Total charge-offs	3,146			2,328			2,537			1,287			2,813
Recoveries:
Commercial	84			42			48			108			166
Commercial real estate	—			—			—			—			—
Residential real estate	56			1			—			1			11
Construction real estate	64			332			55			23			—
Installment and other	108			106			59			54			73
Total recoveries	312			481			162			186			250
Net charge-offs	2,834			1,847			2,375			1,101			2,563
Balance at end of year	$	13,533		$	12,167		$	8,842		$	8,367		$	7,368
Gross loans at end of year	$	1,171,106		$	1,131,724		$	1,019,380		$	894,321		$	740,523
Ratio of allowance to total loans	1.15		%	1.08		%	0.87		%	0.93		%	0.99		%
Ratio of net charge-offs to average loans	0.24		%	0.17		%	0.24		%	0.14		%	0.35		%

Net charge-offs for 2007 totaled $2.8 million, an increase of $987 thousand (53.4%) from 2006. The increase in net charge-offs was mainly due to an increase in charge-offs in installment and other loans of $402 thousand (108.9%) and a decrease in recoveries on construction real estate loans of $268 thousand (80.7%). The increase in installment and other charge offs was mainly due to an increase in the volume of installment loan charge-offs rather than to any single loan. The decrease in construction loan recoveries was due to a return to a more historically typical level of construction recoveries after an unusually large recovery made in 2006.

36

The following table sets forth the allocation of the allowance for loan losses for the years presented and the percentage of loans in each category to total loans. An allocation for a loan classification is only for internal analysis of the adequacy of the allowance and is not an indication of expected or anticipated losses:

	At December 31,
	2007					2006				2005				2004				2003
	Amount			Percent		Amount		Percent		Amount		Percent		Amount		Percent		Amount		Percent
	(Dollars in thousands)
Commercial	$	4,551		10.12	%	$	4,188	11.29	%	$	2,934	9.16	%	$	3,502	10.35	%	$	2,509	9.61	%
Commercial and residential real estate	4,308			63.42		4,681		62.81		3,086		67.90		2,511		70.15		3,192		68.56
Construction real estate	3,703			21.26		2,362		20.78		1,993		17.43		981		13.59		844		15.18
Installment and other	1,017			5.20		928		5.12		813		5.51		1,369		5.91		799		6.65
Unallocated	(46		)	N/A		8		N/A		16		N/A		4		N/A		24		N/A
Total	$	13,533		100.00	%	$	12,167	100.00	%	$	8,842	100.00	%	$	8,367	100.00	%	$	7,368	100.00	%

_________________________

N/A—not applicable

The allowance for loan losses increased $1.4 million (11.2%) from December 31, 2006 to December 31, 2007. Over the same period net loans increased 3.4%, the increase in allowance for loan losses was deemed prudent based upon the allowance for loan losses analysis. This was mainly due to an increase in the allowance allocated to construction loans. The allocation for construction loans increased $1.3 million (56.8%), mainly based upon our historical loss experience (based upon regression analysis) of $1.1 million. For further information, please see discussion in “Critical Accounting Policies—Allowance for Loan Losses”.

The portion of the allocation that was based upon historical loss experience (based upon migration analysis) increased by $951 thousand (13.7%) in 2007, from $6.9 million on December 31, 2006 to $7.9 million on December 31, 2007.  This was mainly due to increases in the allocation for construction real estate loans of $1.1 million. The increase in allocation based upon the migration analysis is due to our anticipation of economic slowing in the markets we serve and the effect on our asset quality. The allocation based upon qualitative adjustments increased $2 thousand (0.1%), remaining at $3.1 million.  The allocation for specifically identified loans increased by $466 thousand (21.4%), from $2.2 million on December 31, 2006 to $2.6 million on December 31, 2007.  This change was primarily due to an increase in specifically identified commercial loans of $385 thousand.

Additions to the allowance for loan losses, which are charged to earnings through the provision for loan losses, are determined based on a variety of factors, as indicated above. Although we believe the allowance for loan losses is sufficient to cover probable losses inherent in the loan portfolio, there can be no assurance that the allowance will prove sufficient to cover actual loan losses.

Potential Problem Loans. The Company utilizes an internal asset classification system as a means of reporting problem and potential problem assets. At scheduled Board of Directors meetings every quarter, a list of total adversely classified assets is presented, showing OREO, other repossessed assets, and all loans listed as “Substandard,” “Doubtful” and “Loss.”  All non-accrual loans are classed either as “Substandard” or “Doubtful” and are thus included in total adversely classified assets. A separate watch list of loans classified as “Special Mention” is also presented. An asset is classified Substandard if it is inadequately protected by the current net worth and paying capacity of the obligor or by the collateral pledged, if any. Substandard assets have well-defined weaknesses that jeopardize liquidation of the debt. There is a distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. Assets classified as Doubtful have all the weaknesses inherent in those classified Substandard, but weaknesses are so pronounced that collection or liquidation is highly questionable and improbable. Assets classified as Loss are those considered uncollectible and viewed as non-bankable assets worthy of charge-off. Special Mention Assets are those that have potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the Bank’s credit position at some future date.

37

The Company’s determinations as to the classification of its assets and the amount of its valuation allowances are subject to review by the Bank’s primary regulators, which can order the establishment of additional general or specific loss allowances. The OCC, in conjunction with the other federal banking agencies, has adopted an interagency policy statement on the allowance for loan losses. The policy statement provides guidance for financial institutions on both the responsibilities of management for the assessment and establishment of adequate allowances and guidance for banking agency examiners to use in determining the adequacy of general valuation guidelines. Generally, the policy statement recommends that (i) institutions have effective systems and controls to identify, monitor and address asset quality problems; (ii) management analyze all significant factors that affect the collectability of the portfolio in a reasonable manner; and (iii) management establish acceptable allowance evaluation processes that meet the objectives set forth in the policy statement. Management believes it establish an adequate allowance for probable loan losses. The Company analyzes its process regularly with modifications made as necessary, and reports those results quarterly at Board of Directors meetings. However, there can be no assurance that regulators, in reviewing the Company’s loan portfolio, will not request the Company to materially increase its allowance for loan losses. Although management believes that adequate specific and general loan loss allowances have been established, actual losses are dependent upon future events and, as such, further additions to the level of specific and general loan loss allowances may become necessary.

The following table shows the amounts of adversely classified assets and special mention loans as of the periods indicated:

	At December 31,
	2007		2006		2005		2004		2003
	(In thousands)
Loans classified as:
Substandard	$	19,053	$	12,924	$	14,484	$	15,810	$	9,815
Doubtful	2,644		2,177		1,414		201		180
Total adversely classified loans	21,697		15,101		15,898		16,011		9,995
Other real estate owned	1,358		165		375		6,438		7,383
Other repossessed assets	4		60		27		64		353
Total adversely classified assets	$	23,059	$	15,326	$	16,300	$	22,513	$	17,731
Special mention loans	$	30,715	$	9,044	$	14,836	$	22,834	$	17,507

Total adversely classified assets increased $7.7 million (50.5%) from December 31, 2006 to December 31, 2007.  The main reason was an increase of $6.1 million in substandard loans and an increase in other real estate owned of $1.2 million. Substandard loans increased because of the downgrading of two commercial, one construction and several residential real estate loans during the year, including those relationships discussed in “Balance Sheet Analysis - Non-Performing Loans” section on Page 35 above. Special mention loans increased $21.7 million (239.6%) between December 31, 2006 and December 31, 2007, primarily due to the downgrading of two large commercial real estate credits (composed of a $16.0 million credit and a relationship of $4.9 million) based upon their potential weaknesses, which warrants management’s close attention. Management is currently and will continue working closely with these customers to resolve the potential weaknesses. All non-performing loans are classified as either substandard or doubtful.

Sources of Funds

General. Deposits, short-term and long-term borrowings, loan and investment security repayments and prepayments, proceeds from the sale of securities, and cash flows generated from operations are the primary sources of our funds for lending, investing and other general purposes. Loan repayments are a relatively predictable source of funds except during periods of significant interest rate declines, while deposit flows tend to fluctuate with prevailing interests rates, money markets conditions, general economic conditions and competition.

Deposits. We offer a variety of deposit accounts with a range of interest rates and terms. Our core deposits consist of checking accounts, Negotiable Order of Withdrawal (NOW) accounts, Money Market Deposit Accounts (MMDA), savings accounts and non-public certificates of deposit. These deposits, along with public fund deposits and short-term and long-term borrowings are used to support our asset base. Our deposits are obtained predominantly from the geographic trade areas surrounding each of our office locations. We rely primarily on competitive rates along with customer service and long-standing relationships with customers to attract and retain deposits; however, market interest rates and rates offered by competing financial institutions significantly affect our ability to attract and retain deposits.

38

The following table sets forth the maturities of time deposits $100 thousand and over:

	At December 31, 2007
	(In thousands)
Time deposits $100,000 and over:
Maturing within three months	$	71,263
After three but within six months	199,312
After six but within twelve months	57,043
After twelve months	—
Total time deposits $100,000 and over:	$	327,618

Borrowings. We have access to a variety of borrowing sources and use short-term and long-term borrowings to support our asset base. Short-term borrowings include federal funds purchased, securities sold under agreements to repurchase and advances from Federal Home Loan Bank (“FHLB”) with remaining maturities under one year. Long-term borrowings are advances from the FHLB with remaining maturities over one year. Total short-term and long-term borrowings decreased $715 thousand (1.1%) at December 31, 2007 compared to December 31, 2006 due to scheduled payments on existing borrowings.

In addition to short- and long-term borrowings made by us, the ESOP uses borrowings to facilitate its ability to acquire stock for the benefit of all employees who participate in the plan.

The following table sets forth certain information regarding our borrowings for the periods indicated:

	At December 31,
	2007			2006			2005
	(Dollars in thousands)
Short-term borrowings:
Average balance outstanding	$	18,426		$	16,822		$	6,096
Maximum outstanding at any month-end during the period	44,400			42,350			23,000
Balance outstanding at end of period	40,000			681			10,000
Weighted average interest rate during the period	3.61		%	4.29		%	3.08		%
Weighted average interest rate at end of the period	3.22		%	4.10		%	3.92		%
Long-term borrowings:
Average balance outstanding	$	45,441		$	64,597		$	76,764
Maximum outstanding at any month-end during the period	63,600			71,650			86,836
Balance outstanding at end of period	23,569			63,603			72,306
Weighted average interest rate during the period	3.97		%	3.87		%	3.82		%
Weighted average interest rate at end of the period	4.90		%	3.85		%	3.88		%
Borrowings made by Employee Stock Ownership Plan (ESOP) to outside parties:
Average balance outstanding	$	296		$	768		$	1,239
Maximum outstanding at any month-end during the period	271			743			1,214
Balance outstanding at end of period	271			743			1,214
Weighted average interest rate during the period	8.11		%	7.94		%	6.17		%
Weighted average interest rate at end of the period	7.25		%	8.25		%	7.25		%
Junior subordinated debt owed to unconsolidated trusts:
Average balance outstanding	$	37,116		$	36,031		$	27,936
Maximum outstanding at any month-end during the period	37,116			43,302			32,992
Balance outstanding at end of period	37,116			37,116			32,992
Weighted average interest rate during the period	8.26		%	9.10		%	8.92		%
Weighted average interest rate at end of the period	8.13		%	8.02		%	8.75		%

39

Liquidity

Bank Liquidity. Liquidity management is monitored by the Asset/Liability Management Committee and Board of Directors of the Bank, who review historical funding requirements, current liquidity position, sources and stability of funding, marketability of assets, options for attracting additional funds, and anticipated future funding needs, including the level of unfunded commitments.

Our primary sources of funds are retail and commercial deposits, borrowings, public funds and funds generated from operations. Funds from operations include principal and interest payments received on loans and securities. While maturities and scheduled amortization of loans and securities provide an indication of the timing of the receipt of funds, changes in interest rates, economic conditions and competition strongly influence mortgage prepayment rates and deposit flows, reducing the predictability of the timing on sources of funds.

We adhere to a liquidity policy, approved by the Board of Directors, who set certain guidelines for liquidity purposes. This policy requires that we maintain the following liquidity ratios:

• Net on-hand liquidity to total assets (defined as interest-bearing short-term investments plus securities not needed for collateral less short-term borrowings divided by total assets) should be greater than 0%.

• Wholesale funding to total assets (defined as state deposits plus short and long-term borrowings divided by total assets) should be less than 20%.

• Unused funding lines to total assets (defined as unused borrowings lines available from FHLB and other banks divided by total assets) should be greater than 10%.

•  Loans to deposits less than 110%.

• Unused commitments to fund loans to total assets (defined as unused lines of credit likely to be funded divided by total assets) should be less than 5%.

At December 31, 2007 and 2006, we were in compliance with the foregoing policy.

At December 31, 2007, we had outstanding loan origination commitments and unused commercial and retail lines of credit of $206.4 million and standby letters of credit of $20.3 million. We anticipate we will have sufficient funds available to meet current origination and other lending commitments. Certificates of deposit scheduled to mature within one year totaled $453.8 million at December 31, 2007. Based upon our historical experience, we expect to retain a substantial majority of these certificates of deposit when they mature.

In the event that additional short-term liquidity is needed, we have established relationships with several large regional banks to provide short-term borrowings in the form of federal funds purchases. We have borrowed, and management believes that we could again borrow, $142.0 million for a short time from these banks on a collective basis. Additionally, we are a member of the FHLB and have the ability to borrow from the FHLB up to a total of $237.8 million in additional funds. As a contingency plan for significant funding needs, the Asset/Liability Management committee may also consider the sale of investment securities, selling securities under agreement to repurchase, sale of certain loans and/or the temporary curtailment of lending activities.

Company Liquidity. Trinity’s main sources of liquidity at the holding company level are dividends from the Bank.

The Bank is subject to various regulatory capital requirements administered by federal and state banking agencies, which affect their ability to pay dividends to Trinity. See Item 1, “Business—Trinity Capital Corporation—Supervision and Regulation—Dividends” and in Item 1, “Business—Los Alamos National Bank—Supervision and Regulation—Dividends.”  Failure to meet minimum capital requirements can initiate certain mandatory and discretionary actions by regulators that, if undertaken, could have a direct material effect on our financial statements. The minimum ratios required for the Bank to be considered “well capitalized” for regulatory purposes are 10%, 6% and 5%. At December 31, 2007, the Bank could pay a total of $18.1 million in dividends and still comply with minimum regulatory capital ratio requirements.

Contractual Obligations, Commitments, Contingent Liabilities and Off-balance Sheet Arrangements

We have various financial obligations, including contractual obligations and commitments, which may require future cash payments.

40

Contractual Obligations. The following table presents, as of December 31, 2007, significant fixed and determinable contractual obligations to third parties by payment date. Further discussion of the nature of each obligation is included in the notes to the consolidated financial statements.

	Payments Due by Period
	Total		One year or less		1-3 years		4-5 years		After 5 years
	(in thousands)
Deposits without a stated maturity (1)	$	637,766	$	637,766	$	—	$	—	$	—
Time deposits (1)	537,692		453,762			64,294		19,636		—
Short-term borrowings (1)	40,000		40,000		—		—		—
Long-term borrowings (1)	23,569		33		20,072		605			2,859
Borrowings made by ESOP to outside parties (1)	271		271		—		—		—
Operating leases	691		401		253		37		—
Capital leases	4,149		185		370		370		3,224
Junior subordinated debt owed to unconsolidated trusts (1)	37,116		—		—		—		37,116
Total contractual long-term cash obligations	$	1,281,254	$	1,132,418	$	84,989	$	20,648	$	43,199

_________________________

(1) Excludes interest.

Deposits without a stated maturity and time deposits do not necessarily represent future cash requirements. While these deposits contractually can be withdrawn by the customer on the dates indicated in the above table, historical experience has shown these deposits to have low volatility. Operating leases represent rental payments for office and storage property, as well as space for ATM installation in various locations. The capital lease was acquired in 2006 for construction of our third office in Santa Fe. The lease contains a purchase option in 2014 that we expect to exercise.

Commitments. The following table details the amounts and expected maturities of significant commitments as of December 31, 2007. Further discussion of these commitments is included in Notes 14 and 15 in Item 8, “Financial Statements and Supplementary Data” in this report.

	Total		One year or less		1-3 years		4-5 years		After 5 years
	(in thousands)
Commitments to extend credit:
Commercial	$	48,404	$	46,131	$	2,273	$	—	$		—
Commercial real estate	7,927		7,927		—		—		—
Residential real estate	2,500		2,500		—		—		—
Construction real estate	45,061		45,061		—		—		—
Revolving home equity and credit card lines	61,935		9,447		93		3,012			49,383
Other	40,597		40,554		2		10		31
Standby letters of credit	20,321		20,264		17		—		40
Total commitments to extend credit	226,745		171,884		2,385		3,022		49,454
Commitments to sell mortgage loans	1,581		1,581		—		—		—
ESOP liquidity put	16,428		3,286		6,571		6,571		—
Total commitments	$	244,754	$	176,751	$	8,956	$	9,593	$	49,454

Commitments to extend credit, including loan commitments and standby letters of credit, do not necessarily represent future cash requirements, as these commitments often expire without being drawn upon. Commitments to sell mortgage loans are offset by commitments from customers to enter into a mortgage loan. The contract with the customer specifically requires the customer to pay any fees that we incur in the event that we cannot deliver a mortgage to the buyer according to the contract with the buyer of the mortgage. The ESOP liquidity put is described in Note 11 in Item 8, “Financial Statements and Supplementary Data”, which is located elsewhere in this report.

41

Capital Resources

The Bank is subject to the risk based capital regulations administered by the banking regulatory agencies. The risk based capital guidelines are designed to make regulatory capital requirements more sensitive to differences in risk profiles among banks, to account for off-balance sheet exposure and to minimize disincentives for holding liquid assets. Under the regulations, assets and off-balance sheet items are assigned to broad risk categories, each with appropriate weights. The resulting capital ratios represent capital as a percentage of total risk weighted assets and off-balance sheet items. Under the prompt corrective action regulations, to be adequately capitalized a bank must maintain minimum ratios of total capital to risk-weighted assets of 8%, Tier 1 capital to risk-weighted assets of 4%, and Tier 1 capital to total assets of 4%. Failure to meet these capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators, which, if undertaken, could have a direct material effect on the Bank’s financial statements. As of December 31, 2007, the most recent notification from the federal banking regulators categorized the Bank as well capitalized. A well capitalized institution must maintain a minimum ratio of total capital to risk-weighted assets of at least 10%, a minimum ratio of Tier 1 capital to risk weighted assets of at least 6%, a minimum ratio of Tier 1 capital to total assets of at least 5% and must not be subject to any written order, agreement or directive requiring it to meet or maintain a specific capital level. There are no conditions or events since that notification that management believes have changed the Bank’s capital classification.

In order for the Company to be considered “adequately capitalized” on a consolidated basis, it must maintain a minimum ratio of Tier 1 capital to total assets of 4%, and a minimum ratio of total capital to risk-weighted assets of 8%. See Item 1. “Business—Supervision and Regulation—Capital Requirements”.

A certain amount of both the Company and the Bank’s Tier 1 capital was in the form of Trust Preferred Securities. Please see Note 9, “Junior Subordinated Debt Owed to Unconsolidated Trusts” in Item 8, “Financial Statements and Supplementary Data” in this report for details on the effect these have on risk based capital.

Trinity and the Bank were in full compliance with all capital adequacy requirements to which they are subject as of December 31, 2007. The required and actual amounts and ratios for Trinity and the Bank as of December 31, 2007 are presented below:

	Actual				For Capital Adequacy Purposes				To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio
	(Dollars in thousands)
As of December 31, 2007
Total capital (to risk-weighted assets):
Consolidated	$	137,100	12.11	%	$	90,606	8.00	%	N/A		N/A
Bank only	130,713		11.60		90,109		8.00		$	112,636	10.00	%
Tier 1 capital (to risk-weighted assets):
Consolidated	116,908		10.32		45,303		4.00		N/A		N/A
Bank only	117,179		10.40		45,054		4.00		67,582		6.00
Tier 1 capital (to average assets):
Consolidated	116,908		8.19		57,071		4.00		N/A		N/A
Bank only	117,179		8.25		56,788		4.00		70,985		5.00

_________________________

N/A—not applicable

42

Statement of Cash Flows

Our cash flows are comprised of three classifications: cash flows from operating activities, cash flows from investing activities and cash flows from financing activities. Net cash provided by operating activities was $20.8 million, $15.0 million and $18.8 million for 2007, 2006 and 2005. Net cash provided by operating activities increased by $5.8 million primarily due to an increase in cash provided by sales of loans held for sale, net of origination of loans held for sale, of $3.4 million. Net cash provided by operating activities decreased by $3.8 million from 2005 in 2006 largely due to a decrease in cash provided by sales of loans held for sale of $42.5 million, which was partially offset by a decrease in cash used by origination of loans held for sale of $38.2 million.

Net cash (used in) investing activities was ($53.6) million, ($98.7) million and ($137.4) million for 2007, 2006 and 2005. The decrease in cash used in investing activities of $45.1 million from 2006 to 2007 was primarily due to an increase in cash provided from the maturities and paydowns of securities of $78.4 million, a decrease in cash used by the funding of loans (net of repayments) of $68.0 million and an increase in cash provided by the sale of investment securities of $14.8 million. These items were partially offset by an increase in cash used for the purchasing of securities of $120.9 million. The decrease in cash used in investing activity of $38.7 million from 2005 to 2006 was mainly due to a decrease in the cash used for the purchase of investment securities of $28.8 million and a decrease of loans funded, net of repayments, of $15.8 million. These were partially offset by a decrease in proceeds from the maturities and paydowns of investment securities of $3.3 million.

Net cash provided by financing activities was $4.7 million, $102.7 million and $149.5 million for 2007, 2006 and 2005. Cash provided by financing activities decreased by $98.0 million from 2006 to 2007 primarily due to a decrease in cash provided by the net increase in deposits of $108.2 million, which was partially offset by a decrease in cash used in the repayment of borrowings of $17.3 million. Cash provided by financing activities decreased $46.8 million between 2005 and 2006 mainly due to a decrease in the proceeds from the issuances of borrowings of $30.0 million, a decrease in the growth of time deposits of $23.5 million and a decrease in the growth of demand, NOW and savings accounts of $16.9 million. These were partially offset by a decrease in the cash used by the repayment of borrowings of $24.1 million.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk.

Asset Liability Management

Our net interest income is subject to “interest rate risk” to the extent that it can vary based on changes in the general level of interest rates. It is our policy to maintain an acceptable level of interest rate risk over a range of possible changes in interest rates while remaining responsive to market demand for loan and deposit products. The strategy we employ to manage our interest rate risk is to measure our risk using an asset/liability simulation model and adjust the maturity of securities in its investment portfolio to manage that risk.

Interest rate risk can also be measured by analyzing the extent to which the repricing of assets and liabilities are mismatched to create an interest sensitivity “gap.” An asset or liability is considered to be interest rate sensitive within a specific time period if it will mature or reprice within that time period. The interest rate sensitivity gap is defined as the difference between the amount of interest earning assets maturing or repricing within a specific time period and the amount of interest bearing liabilities maturing or repricing within that same time period. A gap is considered positive when the amount of interest rate sensitive assets exceeds the amount of interest rate sensitive liabilities. A gap is considered negative when the amount of interest rate sensitive liabilities exceeds the amount of interest rate sensitive assets. During a period of rising interest rates, therefore, a negative gap would tend to adversely affect net interest income. Conversely, during a period of falling interest rates, a negative gap position would tend to result in an increase in net interest income.

43

The following tables set forth the amounts of interest earning assets and interest bearing liabilities outstanding at December 31, 2007, which we anticipate, based upon certain assumptions, to reprice or mature in each of the future time periods shown. Except as stated below, the amount of assets and liabilities shown which reprice or mature during a particular period were determined based on the earlier of the term to repricing or the term to repayment of the asset or liability. These tables are intended to provide an approximation of the projected repricing of assets and liabilities at December 31, 2007 on the basis of contractual maturities and scheduled rate adjustments within a three-month period and subsequent selected time intervals. The loan amounts in the table reflect principal balances expected to be reinvested and/or repriced as a result of contractual amortization and rate adjustments on adjustable-rate loans. The contractual maturities and amortization of loans and investment securities reflect modest prepayment assumptions. While NOW, money market and savings deposit accounts have adjustable rates, it is assumed that the interest rates on these accounts will not adjust immediately to changes in other interest rates. Therefore, the table is calculated assuming that these accounts will reprice based upon an historical analysis of decay rates of these particular accounts, with repricing assigned to these accounts from 1 to 11 months.

	Time to Maturity or Repricing
As of December 31, 2007:	0-90 Days			91-365 Days			1-5 Years			Over 5 Years				Total
	(Dollars in thousands)
Interest-earning Assets:
Loans	$	601,901		$	415,420		$	55,823		$		97,962		$	1,171,106
Loans held for sale	10,172			—			—			—				10,172
Investment securities	36,888			38,238			28,890			10,997				115,013
Securities purchased under agreements to resell	157			—			—			—				157
Interest-bearing deposits with banks	24,173			—			—			—				24,173
Investment in unconsolidated trusts	186			—			—			930				1,116
Total interest-earning assets	$	673,477		$	453,658		$	84,713		$	109,889			$	1,321,737
Interest-bearing Liabilities:
NOW deposits	$	69,929		$	38,393		$	—		$		—		$		108,322
Money market deposits	113,869			54,062			—			—				167,931
Savings deposits	201,349			71,589			—			—				272,938
Time deposits over $100,000	71,263			199,314			57,041			—				327,618
Time deposits under $100,000	59,995			123,190			26,889			—				210,074
Short-term borrowings	—			40,000			—			—				40,000
Long-term borrowings	8			25			20,677			2,859				23,569
Capital lease obligations	—			—			—			2,211				2,211
Borrowings made by ESOP to outside parties	271			—			—			—				271
Junior subordinated debt owed to unconsolidated trusts	6,186			—			—			30,930				37,116
Total interest-bearing liabilities	$	522,870		$	526,573		$	104,607		$	36,000			$		1,190,050
Rate sensitive assets (RSA)	$	673,477		$	1,127,135		$	1,211,848		$	1,321,737			$		1,321,737
Rate sensitive liabilities (RSL)	522,870			1,049,443			1,154,050			1,190,050				1,190,050
Cumulative GAP (GAP=RSA-RSL)	150,607			77,692			57,798			131,687				131,687
RSA/Total assets	48.81		%	81.69		%	87.83		%	95.80			%	95.80			%
RSL/Total assets	37.90		%	76.06		%	83.64		%	86.25			%	86.25			%
GAP/Total assets	10.92		%	5.63		%	4.19		%	9.54			%	9.54			%
GAP/RSA	22.36		%	6.89		%	4.77		%	9.96			%	9.96			%

Certain shortcomings are inherent in the method of analysis presented in the foregoing table. For example, although certain assets and liabilities may have similar maturities or periods to repricing, they may react in different degrees to changes in market interest rates. Also, the interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types of assets may lag behind changes in market rates. Additionally, in the event of a change in interest rates, prepayment and early withdrawal levels would likely deviate significantly from those assumed in calculating the table. Therefore, we do not rely solely on a gap analysis to manage our interest rate risk, but rather we use what we believe to be the more reliable simulation model relating to changes in net interest income.

44

Based on simulation modeling at December 31, 2007 and 2006, our net interest income would change over a one-year time period due to changes in interest rates as follows:

Change in Net Interest Income Over One Year Horizon

Changes in Levels of		At December 31, 2007					At December 31, 2006
Interest Rates		Dollar Change			Percentage Change		Dollar Change			Percentage Change
		(Dollars in thousands)
+ 2.00	%	$	3,823		7.60	%	$	(2,695	)	(5.69	)%
+ 1.00		1,997			3.97		(180		)	(0.38	)
(1.00	)	(2,148		)	(4.27	)	(1,629		)	(3.44	)
(2.00	)	(3,174		)	(6.31	)	(2,070		)	(4.37	)

Our simulations used assume the following:

1. Changes in interest rates are immediate.

2.             It is our policy that interest rate exposure due to a 2% interest rate rise or fall be limited to 15% of our annual net interest income, as forecasted by the simulation model. As demonstrated by the table above, our interest rate risk exposure was within this policy at December 31, 2007.

Changes in net interest income between the periods above reflect changes in the composition of interest earning assets and interest bearing liabilities, related interest rates, repricing frequencies, and the fixed or variable characteristics of the interest earning assets and interest bearing liabilities. Projections of income given by the model are not actual predictions, but rather show our relative interest rate risk. Actual interest income may vary from model projections.

45

Item 8. Financial Statements and Supplementary Data.

TRINITY CAPITAL CORPORATION AND SUBSIDIARIES

FINANCIAL STATEMENTS

Audited Financial Statements December 31, 2007, 2006, and 2005

INDEX

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING	47
REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	48
AUDITED FINANCIAL STATEMENTS	49
Consolidated Balance Sheets	49
Consolidated Statements of Income	51
Consolidated Statements of Changes in Stockholders’ Equity	52
Consolidated Statements of Cash Flows	55
Notes to Consolidated Financial Statements	57

46

Management’s Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting, and for performing an assessment of the effectiveness of internal control over financial reporting as of December 31, 2007. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company’s system of internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

Management performed an assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2007, based upon criteria in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on our assessment, management determined that the Company’s internal control over financial reporting was effective as of December 31, 2007.

47

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders

Trinity Capital Corporation

We have audited the accompanying balance sheets of Trinity Capital Corporation and subsidiaries (the Company) as of December 31, 2007 and 2006, and the related statements of income, changes in stockholders’ equity and comprehensive income, and cash flows for each of the years in the three-year period ended December 31, 2007. We also have audited the Company’s internal control over financial reporting as of December 31, 2007, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on these financial statements and an opinion on the Company’s internal control over financial reporting based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also include performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and Directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect of the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Trinity Capital Corporation as of December 31, 2007 and 2006, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2007, in conformity with accounting principles generally accepted in the United States of America. Also in our opinion Trinity Capital Corporation maintained, in all material respects, effective internal control over financial reporting as of December 31, 2007, based on criteria established in Internal Control - Integrated Framework issued by COSO.

Albuquerque, New Mexico

March 17, 2008

48

TRINITY CAPITAL CORPORATION & SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

December 31, 2007 and 2006

(Amounts in thousands, except share data)

	2007		2006
ASSETS
Cash and due from banks	$	21,194	$	23,292
Interest bearing deposits with banks	24,173		49,598
Federal funds sold and securities purchased under resell agreements	157		700
Cash and cash equivalents	45,524		73,590
Investment securities available for sale	99,590		87,950
Investment securities held to maturity, at amortized cost (fair value of $9,159 at December 31, 2007 and $10,961 at December 31, 2006)	9,159		10,968
Other investments	7,380		7,936
Loans (net of allowance for loan losses of $13,533 at December 31, 2007 and $12,167 at December 31, 2006)	1,157,573		1,119,557
Loans held for sale	10,172		10,349
Premises and equipment, net	24,071		24,255
Leased property under capital leases, net	2,211		2,211
Accrued interest receivable	9,781		9,465
Mortgage servicing rights, net	8,066		9,115
Other real estate owned	1,358		165
Other assets	4,838		3,718
Total assets	$	1,379,723	$	1,359,279
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities
Deposits:
Noninterest bearing	$	88,575	$	89,356
Interest bearing	1,086,883		1,073,385
Total deposits	1,175,458		1,162,741
Short-term borrowings	40,000		681
Long-term borrowings	23,569		63,603
Long-term capital lease obligations	2,211		2,211
Junior subordinated debt owed to unconsolidated trusts	37,116		37,116
Borrowings made by Employee Stock Ownership Plan (ESOP) to outside parties	271		743
Accrued interest payable	6,721		5,773
Other liabilities	6,350		5,733
Total liabilities	1,291,696		1,278,601

(Continued on following page)

49

TRINITY CAPITAL CORPORATION & SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

December 31, 2007 and 2006

(Amounts in thousands, except share data)

(Continued from previous page)

	2007			2006
Stock owned by Employee Stock Ownership Plan (ESOP) participants; 625,602 shares and 629,066 shares at 2007 and 2006, at fair value; net of unearned ESOP shares of 16,937 shares and 44,200 shares at 2007 and 2006, at historical cost	$	16,656		$	17,438
Commitments and contingencies (Note 14)
Stockholders’ equity
Common stock, no par, authorized 20,000,000 shares; issued 6,856,800 shares, shares outstanding 6,482,650 and 6,532,898 at 2007 and 2006	6,836			6,836
Additional paid-in capital	1,520			1,067
Retained earnings	72,610			62,939
Accumulated other comprehensive gain (loss)	72			(158		)
Total stockholders’ equity before treasury stock	81,038			70,684
Treasury stock, at cost, 357,213 shares and 279,702 shares at 2007 and 2006	(9,667		)	(7,444		)
Total stockholders’ equity	71,371			63,240
Total liabilities and stockholders’ equity	$	1,379,723		$	1,359,279

The accompanying notes are an integral part of these consolidated financial statements.

50

TRINITY CAPITAL CORPORATION & SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

Years Ended December 31, 2007, 2006 and 2005

(Amounts in thousands except per share data)

	2007			2006		2005
Interest income:
Loans, including fees	$	89,059		$	79,525	$	63,730
Investment securities:
Taxable	4,917			3,703		2,364
Nontaxable	990			829		759
Federal funds sold and securities purchased with agreements to resell	133			33		12
Other interest bearing deposits	1,798			851		969
Investment in unconsolidated trusts	92			93		75
Total interest income	96,989			85,034		67,909
Interest expense:
Deposits	42,146			32,657		20,636
Short-term borrowings	690			721		188
Long-term borrowings	1,802			2,559		3,011
Long-term capital lease obligations	293			—		—
Junior subordinated debt owed to unconsolidated trusts	3,067			3,279		2,493
Total interest expense	47,998			39,216		26,328
Net interest income	48,991			45,818		41,581
Provision for loan losses	4,200			5,172		2,850
Net interest income after provision for loan losses	44,791			40,646		38,731
Other income:
Mortgage loan servicing fees	2,468			2,641		2,594
Loan and other fees	3,390			3,016		2,753
Service charges on deposits	1,714			1,561		1,489
Gain on sale of loans	1,658			1,587		2,377
Gain on sale of securities	62			—		—
Other operating income	1,216			1,482		1,036
	10,508			10,287		10,249
Other expenses:
Salaries and employee benefits	18,516			17,468		16,073
Occupancy	3,558			3,450		3,166
Data processing	1,855			1,921		1,841
Marketing	1,971			1,698		1,509
Amortization and valuation of mortgage servicing rights	2,285			2,266		501
Supplies	785			657		686
(Gain) Loss on sale of other real estate owned	(120		)	215		950
Postage	642			572		582
Other	5,113			5,547		4,543
	34,605			33,794		29,851
Income before income taxes	20,694			17,139		19,129
Income taxes	7,365			6,828		7,169
Net income	$	13,329		$	10,311	$	11,960
Basic earnings per common share	$	2.05		$	1.57	$	1.80
Diluted earnings per common share	$	2.03		$	1.56	$	1.79

The accompanying notes are an integral part of these consolidated financial statements.

51

TRINITY CAPITAL CORPORATION & SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

Years Ended December 31, 2007, 2006 and 2005

(Amounts in thousands except share and per share data)

																Accumulated
	Common Stock, No Par								Additional							Other
	Issued			Held in Treasury, at cost					Paid-In			Retained				Comprehensive
	Shares	Amount		Shares		Amount			Capital			Earnings				Income (Loss)			Total
Balance, December 31, 2004	6,856,800	$	6,836	(25,734	)	$	(604	)	$	997		$	47,849			$	(200	)	$	54,878
Comprehensive income
Net income												11,960
Net change in unrealized gain on investment securities, available-for sale, net of taxes of $44																(73		)
Total comprehensive income																			11,887
Dividends									(59		)	(4,205			)				(4,264		)
Treasury shares purchased				(246,983	)	(6,422		)											(6,422		)
Treasury shares issued from exercise of stock options				42,719		1,046			(652		)								394
Tax benefit from the exercise of stock options									272										272
Decrease in stock owned by ESOP participants, 22,357 shares												688							688
Net change in the fair value of stock owned by ESOP participants												1,721							1,721
Allocation of ESOP shares									364										364
Balance, December 31, 2005	6,856,800	$	6,836	(229,998	)	$	(5,980	)	$	922		$		58,013		$	(273	)	$	59,518

(Continued on following page)

52

TRINITY CAPITAL CORPORATION & SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

Years Ended December 31, 2007, 2006 and 2005

(Amounts in thousands except share and per share data)

(Continued from prior page)

																					Accumulated
	Common Stock, No Par													Additional							Other
	Issued					Held in Treasury, at cost								Paid-In				Retained			Comprehensive
	Shares	Amount				Shares			Amount					Capital				Earnings			Income (Loss)				Total
Balance, December 31, 2005	6,856,800	$		6,836		(229,998	)		$	(5,980			)	$	922			$	58,013		$		(273	)	$	59,518
Comprehensive income
Net income																		10,311
Net change in unrealized gain on investment securities, available-for sale, net of taxes of $61																					115
Total comprehensive income																									10,426
Dividends														(48			)	(4,507		)					(4,555		)
Treasury shares purchased						(105,913		)	(2,926			)													(2,926		)
Treasury shares issued from exercise of stock options						56,209			1,462					(758			)								704
Tax benefit from the exercise of stock options														331											331
Increase in stock owned by ESOP participants, 14,508 shares																		(406		)					(406		)
Net change in the fair value of stock owned by ESOP participants																		(472		)					(472		)
Stock options and stock appreciation rights expensed														290											290
Allocation of ESOP shares														330											330
Balance, December 31, 2006	6,856,800		$		6,836	(279,702		)	$		(7,444	)		$		1,067		$	62,939		$	(158		)	$	63,240

(Continued on following page)

53

TRINITY CAPITAL CORPORATION & SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

Years Ended December 31, 2007, 2006 and 2005

(Amounts in thousands except share and per share data)

(Continued from prior page)

															Accumulated
	Common Stock, No Par								Additional						Other
	Issued			Held in Treasury, at cost					Paid-In			Retained			Comprehensive
	Shares	Amount		Shares		Amount			Capital			Earnings			Income (Loss)			Total
Balance, December 31, 2006	6,856,800	$	6,836	(279,702	)	$	(7,444	)	$	1,067		$	62,939		$	(158	)	$	63,240
Comprehensive income
Net income												13,329
Net change in unrealized gain on investment securities, available-for sale, net of taxes of $173															292
Reclassification of unrealized gains to realized gains, net of taxes of $22															(62		)
Total comprehensive income																		13,559
Dividends									(31		)	(4,859		)				(4,890		)
Treasury shares purchased				(88,524	)	(2,509		)										(2,509		)
Treasury shares issued from exercise of stock options				11,013		286			(110		)							176
Tax benefit from the exercise of stock options									57									57
Decrease in stock owned by ESOP participants, shares												100						100
Net change in the fair value of stock owned by ESOP participants												1,101						1,101
Stock options and stock appreciation rights expensed									238									238
Allocation of ESOP shares									299									299
Balance, December 31, 2007	6,856,800	$	6,836	(357,213	)	$	(9,667	)	$	1,520		$	72,610		$	72		$	71,371

The accompanying notes are an integral part of these consolidated financial statements.

54

TRINITY CAPITAL CORPORATION & SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended December 31, 2007, 2006 and 2005

(Amounts in thousands)

	2007			2006			2005
Cash Flows From Operating Activities
Net income	$	13,329		$	10,311		$	11,960
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization	2,343			2,380			2,620
Net amortization (accretion) of:
Mortgage servicing rights	2,853			2,744			2,758
Premiums and discounts on investment securities	(676		)	(364		)	814
Junior subordinated debt owed to unconsolidated trusts issuance costs	14			194			20
Provision for loan losses	4,200			5,172			2,850
Change in mortgage servicing rights valuation allowance	(568		)	(478		)	(2,257		)
(Gain) loss on sale of premises and equipment	(13		)	46			183
Gain on sale of available for sale securities	(62		)	—			—
Federal Home Loan Bank (FHLB) stock dividends received	(216		)	(271		)	(203		)
Loss on venture capital investments	78			—			—
Gain on sale of loans	(1,658		)	(1,587		)	(2,377		)
(Gain) loss on disposal of other real estate owned	(3		)	(18		)	157
Write-down of value of other real estate owned	—			40			793
(Increase) in other assets	(1,450		)	(2,532		)	(2,376		)
Increase in other liabilities	1,115			1,361			1,794
Release of Employee Stock Ownership Plan (ESOP) shares	717			790			794
Stock options and stock appreciation rights expensed	238			290			—
Tax benefit recognized for exercise of stock options	(57		)	(331		)	(272		)
Net cash provided by operating activities before originations and gross sales of loans	20,184			17,747			17,258
Gross sales of loans held for sale	135,644			139,753			182,271
Origination of loans held for sale	(135,045		)	(142,529		)	(180,757		)
Net cash provided by operating activities	20,783			14,971			18,772
Cash Flows From Investing Activities
Proceeds from maturities and paydowns of investment securities available for sale	128,500			36,373			14,075
Proceeds from maturities and paydowns of investment securities held to maturity	1,807			15,578			34,550
Proceeds from sale of investment securities, available for sale	14,784			—			—
Proceeds from sale of investment securities, other	1,648			1,636			—
Purchase of investment securities available for sale	(153,802		)	(32,486		)	(61,636		)
Purchase of investment securities other	(954		)	(1,336		)	(1,013		)
Proceeds from sale of other real estate owned	767			378			5,633
Loans funded, net of repayments	(44,173		)	(112,170		)	(127,954		)
Purchases of loans	—			(2,211		)	—
Purchases of premises and equipment	(2,146		)	(2,280		)	(1,854		)
Acquisition of leased property under capital leases	—			(2,211		)	—
Proceeds from sale of premises and equipment	—			—			100
Net cash used in investing activities	$	(53,569	)	$	(98,729	)	$	(137,368	)

(Continued on following page)

55

TRINITY CAPITAL CORPORATION & SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended December 31, 2007, 2006 and 2005

(Amounts in thousands)

(Continued from prior page)

	2007			2006			2005
Cash Flows From Financing Activities
Net increase in demand deposits, NOW accounts and savings accounts	$	34,421		$	22,605		$	39,492
Net (decrease) increase in time deposits	(21,704		)	98,288			121,775
Proceeds from issuances of borrowings	—			—			30,000
Repayment of borrowings	(715		)	(18,022		)	(42,100		)
Repayment of ESOP debt	(472		)	(471		)	(472		)
Acquisition of obligations under capital leases	—			2,211			—
Proceeds from issuance of junior subordinated debt owed to unconsolidated trusts	—			10,310			10,310
Repayment of junior subordinated debt owed to unconsolidated trusts	—			(6,186		)	—
Purchase of treasury stock	(2,509		)	(2,926		)	(6,422		)
Issuance of common stock for stock option plan	233			1,035			666
Dividend payments	(4,591		)	(4,509		)	(4,057		)
Tax benefit recognized for exercise of stock options	57			331			272
Net cash provided by financing activities	4,720			102,666			149,464
Net increase (decrease) in cash and cash equivalents	(28,066		)	18,908			30,868
Cash and cash equivalents:
Beginning of year	73,590			54,682			23,814
End of year	$	45,524		$	73,590		$	54,682
Supplemental Disclosures of Cash Flow Information
Cash payments for:
Interest	$	47,050		$	37,489		$	25,049
Income taxes	8,674			6,921			7,921
Non-cash investing and financing activities:
Transfers from loans to other real estate owned	1,957			190			520
Dividends declared, not yet paid	2,600			2,302			2,256
Change in unrealized (loss) gain on investment securities, net of taxes	230			115			(73		)

The accompanying notes are an integral part of these consolidated financial statements.

56

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Significant Accounting Policies

Consolidation:     The accompanying consolidated financial statements include the consolidated balances and results of operations of Trinity Capital Corporation (“Trinity”) and its wholly owned subsidiaries: Los Alamos National Bank (the “Bank”), Title Guaranty & Insurance Company (“Title Guaranty”), TCC Appraisal Services Corporation (“TCC Appraisals”), TCC Advisors Corporation (“TCC Advisors”) and TCC Funds, collectively referred to as the “Company.”  Trinity Capital Trust I (“Trust I”), Trinity Capital Trust III (“Trust III”), Trinity Capital Trust IV (“Trust IV”) and Trinity Capital Trust V (“Trust V”), collectively referred to as the “Trusts,” are trust subsidiaries of Trinity but are not consolidated in these financial statements (see “Consolidation” accounting policy below).  The business activities of the Company consist solely of the operations of its wholly owned subsidiaries. All significant inter-company balances and transactions have been eliminated in consolidation. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods have been made. 

Basis of financial statement presentation:  The consolidated financial statements include the accounts of the Company and its subsidiaries. The accounting and reporting policies of the Company conform to accounting principles generally accepted in the United States of America and general practices within the financial services industry. In preparing the financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and revenues and expenses for the year. Actual results could differ from those estimates. Areas involving the use of management’s estimates and assumptions, and which are more susceptible to change in the near term include the allowance for loan losses and initial recording and subsequent valuation for impairment of mortgage servicing rights.

Nature of operations:  The Company provides a variety of financial services to individuals, businesses and government organizations through its offices in Los Alamos and Santa Fe, New Mexico. Its primary deposit products are term certificate, NOW and savings accounts and its primary lending products are commercial, residential and construction real estate loans. The Company also offers trust and wealth management services, title insurance products and residential real estate appraisal services.

The Bank conducts its operations from its main office in Los Alamos and separate office locations in Santa Fe and White Rock, New Mexico and provides loan services from its loan production office in Albuquerque, New Mexico. The Bank also operates drive-up facilities and 27 automatic teller machines (ATM’s) in Los Alamos and surrounding geographic areas. Title Guaranty conducts its operations from its offices in Los Alamos and Santa Fe. TCC Appraisals conducts real estate appraisals in Los Alamos and Santa Fe Counties from its office in the Company headquarters.

Deposits with banks, federal funds sold and securities purchased under resell agreements:  For purposes of reporting cash flows, cash and cash equivalents includes cash on hand, amounts due from banks (including cash items in process of clearing), interest-bearing deposits with banks and federal funds sold.

Investment securities available for sale:  Securities classified as available for sale are those securities that the Company intends to hold for an indefinite period of time, but not necessarily to maturity. Any decision to sell a security classified as available for sale would be based on various factors, including significant movements in interest rates, changes in the maturity mix of assets and liabilities, liquidity needs, regulatory capital considerations, and other similar factors.

Securities available for sale are reported at fair value with unrealized gains or losses reported as accumulated other comprehensive income, net of the related deferred tax effect. The amortization of premiums and accretion of discounts, computed by the interest method over their contractual lives, are recognized in interest income. Realized gains or losses, determined on the basis of the cost of specific securities sold, are included in earnings. In addition, if a loss is deemed to be other than temporary, it is recognized as a realized loss in the income statement.

Investment securities held to maturity:  Securities classified as held to maturity are those securities that the Company has the ability and positive intent to hold until maturity. These securities are reported at amortized cost. Sales of investment securities held to maturity within three months of maturity are treated as maturities.

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Other investments: The Bank, as a member of the Federal Home Loan Bank of Dallas (the “FHLB”), is required to maintain an investment in capital stock of the FHLB based upon borrowings made from the FHLB and based upon various classes of loans in the Bank’s portfolio. FHLB and Federal Reserve Bank stock do not have readily determinable fair values as ownership is restricted and it lacks a market. As a result, these stocks are carried at cost and evaluated periodically by management for impairment.

The Company’s investment in the unconsolidated trusts is also reported as an investment in this line of the balance sheet. Also included is the Bank’s investment in certain venture capital funds. In addition, the Bank has other non-marketable investments that are carried at cost and evaluated periodically by management for impairment. Investments with fair values that are less than amortized cost are considered impaired. Impairment may result from either a decline in the financial condition of the issuing entity or, in the case of fixed rate investments, from rising interest rates. At each financial statement date, management assesses each investment to determine if impaired investments are temporarily impaired or if the impairment is other than temporary based upon the evidence available. Evidence evaluated includes (if applicable), but is not limited to, industry analyst reports, credit market conditions, and interest rate trends. If negative evidence outweighs positive evidence that the carrying amount is recoverable within a reasonable period of time, the impairment is deemed to be other-than-temporary and the security is written down in the period in which such determination is made.

Loans held for sale:  Loans held for sale are those loans the Company intends to sell. They are carried at the lower of aggregate cost or market value. Gains and losses on sales of loans are recognized at settlement dates and are determined by the difference between the sales proceeds plus the value of the mortgage servicing rights compared to the carrying value of the loans. These are generally sold within 30 to 60 days of origination.

Loans:  Loans are stated at the amount of unpaid principal reduced by the allowance for loan losses and unearned income.

Loan origination and commitment fees and certain direct loan origination costs are deferred and the net amount amortized as an adjustment of the related loan’s yield. The Company is amortizing these amounts over the estimated life of the loan. Commitment fees based upon a percentage of a customer’s unused line of credit and fees related to standby letters of credit are recognized over the commitment period. Net deferred fees on real estate loans sold in the secondary market reduce the cost basis in such loans.

Interest on loans is accrued and reported as income using the interest method on daily principal balances outstanding. The Bank generally discontinues accruing interest on loans when the loan becomes 90 days or more past due or when management believes that the borrower’s financial condition is such that collection of interest is doubtful. Cash collections on nonaccrual loans are credited to the loan balance, and no interest income is recognized on those loans until the principal balance has been determined to be collectible.

Loans, other than those included in large groups of smaller-balance homogeneous loans, are considered impaired when it is probable the Company will be unable to collect all contractual principal and interest payments due in accordance with the terms of the loan agreement. Impaired loans are measured based on the present value of expected future cash flows discounted at the loan’s effective interest rate or, as a practical expedient, at the loan’s observable market price or the fair value of the collateral if the loan is collateral dependent. The amount of impairment, if any, and any subsequent changes are included in the allowance for loan losses.

The allowance for loan losses is established through a provision for loan losses charged to expense. Loans are charged against the allowance for loan losses when management believes that collectability of the principal is unlikely. The allowance is an amount that management believes will be adequate to absorb probable losses on existing loans, based on an evaluation of the collectability of loans in the portfolio and prior loss experience. The allowance for loan losses is based on management’s evaluation of the loan portfolio giving consideration to the nature and volume of the loan portfolio, the value of underlying collateral, overall portfolio quality, review of specific problem loans, and prevailing economic conditions that may affect the borrower’s ability to pay. While management uses the best information available to make its evaluation, future adjustments to the allowance may be necessary if there are significant changes in economic conditions. In addition, regulatory agencies, as an integral part of their examination process, periodically review the subsidiary Bank’s allowance for loan losses, and may require the subsidiary bank to recognize additions to its allowance based on their judgments of information available to them at the time of their examinations.

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Premises and equipment:  Premises and equipment are carried at cost less accumulated depreciation and amortization. Depreciation and amortization is computed by the straight-line method for buildings and computer equipment over their estimated useful lives. Leasehold improvements are amortized over the term of the related lease or the estimated useful lives of the improvements, whichever is shorter. For owned and capitalized assets, estimated useful lives range from three to 39 years. Maintenance and repairs are charged to expense as incurred, while major improvements are capitalized and amortized to operating expense over their identified useful life. Generally, the useful life on software is three years; on computer and office equipment, five years; on furniture, 10 years; and on building and building improvements, 10 to 39 years.

Other real estate owned (“OREO”):  OREO includes real estate assets that have been received in full or partial satisfaction of debt. OREO is initially recorded and subsequently carried at the lower of cost or fair value less estimated selling costs. Any valuation adjustments required at the date of transfer are charged to the allowance for loan losses. Subsequently, unrealized losses and realized gains and losses on sale are included in other non-interest income. Operating results from OREO are recorded in other non-interest expense.

Mortgage servicing rights:  The Bank recognizes, as separate assets, rights to service mortgage loans for others, whether the rights are acquired through purchase or after origination and sale of mortgage loans. In cases where the mortgage loan is originated and sold, the total cost of the mortgage loan is allocated to the mortgage servicing right and to the loan based on their relative fair values.

The carrying amount of mortgage servicing rights, and the amortization thereon, is periodically evaluated in relation to estimated fair value. The Bank stratifies the underlying mortgage loan portfolio by certain risk characteristics, such as loan type, interest rate and maturity, for purposes of measuring impairment. The Bank estimates the fair value of each stratum by calculating the discounted present value of future net servicing income based on management’s best estimate of remaining loan lives. The Bank has determined that the primary risk characteristic of the mortgage servicing rights is the contractual interest rate of the underlying mortgage loans.

The carrying value of mortgage servicing rights is amortized in proportion to, and over the period of, estimated net servicing revenues.

Earnings per common share:  Basic earnings per share represent income available to common stockholders divided by the weighted-average number of common shares outstanding during the period. Diluted earnings per common share were determined assuming that all stock options were exercised at the beginning of the years presented. Unearned shares owned by the Employee Stock Ownership Plan (ESOP) are treated as not outstanding for the purposes of computing basic earnings per common share.

Average number of shares used in calculation of earnings per common share and diluted earnings per common share are as follows:

	2007			2006			2005
	(In thousands, except share and per share data)
Net income	$	13,329		$	10,311		$	11,960
Weighted average common shares issued	6,856,800			6,856,800			6,856,800
LESS: Weighted average treasury stock shares	(323,251		)	(237,679		)	(149,569		)
LESS: Weighted average unearned Employee Stock Ownership Plan (ESOP) stock shares	(18,936		)	(46,351		)	(74,644		)
Weighted average common shares outstanding, net	6,514,613			6,572,770			6,632,587
Basic earnings per common share	$	2.05		$	1.57		$	1.80
Weighted average dilutive shares from stock option plan	41,252			39,554			60,262
Weighted average common shares outstanding including dilutive shares	6,555,865			6,612,324			6,692,849
Diluted earnings per common share	$	2.03		$	1.56		$	1.79

Comprehensive income: Comprehensive income includes net income, as well as the change in net unrealized gain on investment securities available for sale, net of tax. Comprehensive income was $13.6 million, $10.4 million and $11.9 million for 2007, 2006 and 2005.

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Segment reporting:  The Company is managed as one unit and does not have separate operating segments. The Company’s chief operating decision-makers use consolidated results to make operating and strategic decisions.

Transfers of financial assets:  Transfers of financial assets are accounted for as sales only when the control over the financial assets has been surrendered. Control over transferred assets is deemed surrendered when (1) the assets have been isolated from the Company, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of the right) to pledge or exchange the transferred assets, and (3) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.

Impairment of long-lived assets:  Management periodically reviews the carrying value of its long-lived assets to determine if an impairment has occurred or whether changes in circumstances have occurred that would require a revision to the remaining useful life. In making such determination, management evaluates the performance, on an undiscounted basis, of the underlying operations or assets which give rise to such amount.

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 tax credit 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 a 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 enactment.

Stock-based compensation: The Company’s 1998 Stock Option Plan (“1998 Plan”) and Trinity Capital Corporation 2005 Stock Incentive Plan (“2005 Plan”) were created for the benefit of key management and select employees. Under the 1998 Plan, 400,000 shares (as adjusted for the stock split of December 19, 2002) from shares held in treasury or authorized but unissued common stock are reserved for granting options. Under the 2005 Plan, 500,000 shares from shares held in treasury or authorized but unissued common stock are reserved for granting stock-based incentive awards. Both of these plans were approved by the Company’s shareholders. The Board of Directors determines vesting and pricing of the awards. All stock options granted through December 31, 2005 were granted at or above the market value of the stock at the date of the grant, with the exception of the July 1998 stock option grant which was granted at $0.25 below the last reported sale price on the date of grant. All stock options vest in equal amounts over a three year period and must be exercised within ten years of the date of grant. Stock appreciation rights granted after December 31, 2005 were also granted at or above the market value of the stock at the date of the grant, with the exception of the January 1, 2006 stock appreciation right grants which were approved on December 15, 2005 and granted at the December 31, 2005 closing price to take advantage of accounting changes favorable to Trinity; and mature at five years.

Recent accounting pronouncements:

In September 2006, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 157, Fair Value Measurements. This Statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. This Statement applies under other accounting pronouncements that require or permit fair value measurements, the Board having previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute. Accordingly, this Statement does not require any new fair value measurements. However, for some entities, the application of this Statement will change current practice. This Statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. Earlier application was encouraged, provided that the reporting entity had not yet issued financial statements for that fiscal year, including financial statements for an interim period within that fiscal year. There was no material impact on the Company’s financial statements when this standard was adopted on January 1, 2008.

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In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities, which provides companies with an option to report selected financial assets and liabilities at fair value. The Standard’s objective is to reduce both complexity in accounting for financial instruments and the volatility in earnings caused by measuring related assets and liabilities differently. The standard requires companies to provide additional information that will help investors and other users of financial statements to more easily understand the effect of a company’s choice to use fair value on its earnings. It also requires entities to display the fair value of those assets and liabilities for which a company has chosen to use fair value on the face of the balance sheet. The new Statement does not eliminate disclosure requirements included in other accounting standards, including requirements for disclosures about fair value measurements included in FASB Statements No. 157, Fair Value Measurements, and No. 107, Disclosures about Fair Value of Financial Instruments. This Statement is effective as of the beginning of an entity’s first fiscal year beginning after November 15, 2007. Early adoption was permitted as of the beginning of the previous fiscal year provided that the entity made that choice in the first 120 days of that fiscal year and also elects to apply the provisions of FASB Statement No. 157. There was no material impact on the Company’s financial statements when this standard was adopted on January 1, 2008.

On January 1, 2007, the Company adopted FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes. The Company believes that it has appropriate support for the income tax positions taken and to be taken on its tax returns and that its accrual for tax liabilities are adequate for the open years based on an assessment of many factors including past experience and interpretations of tax law. The Company had no unrecognized tax benefits which would require an adjustment to the January 1, 2007 beginning balance of retained earnings. The Company had a net deferred tax liability of $92 thousand and a net deferred tax asset of $1.1 million as of January 1, 2007 and December 31, 2007, respectively.

In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations, and No. 160, Noncontrolling Interests in Consolidated Financial Statements. Effective for fiscal years beginning after December 15, 2008, the standards will improve, simplify, and converge internationally the accounting for business combinations and the reporting of noncontrolling interests in consolidated financial statements. Statement 141(R) improves reporting by creating greater consistency in the accounting and financial reporting of business combinations, resulting in more complete, comparable, and relevant information for investors and other users of financial statements. To achieve this goal, the new standard requires the acquiring entity in a business combination to recognize all (and only) the assets acquired and liabilities assumed in the transaction; establishes the acquisition-date fair value as the measurement objective for all assets acquired and liabilities assumed; and requires the acquirer to disclose to investors and other users all of the information they need to evaluate and understand the nature and financial effect of the business combination. Statement 141(R) also will reduce the complexity of existing GAAP. The newly issued standard includes both core principles and pertinent application guidance, eliminating the need for numerous EITF issues and other interpretative guidance. Statement 160 improves the relevance, comparability, and transparency of financial information provided to investors by requiring all entities to report noncontrolling (minority) interests in subsidiaries in the same way—as equity in the consolidated financial statements. Moreover, Statement 160 eliminates the diversity that currently exists in accounting for transactions between an entity and noncontrolling interests by requiring they be treated as equity transactions. The Company believes that adoption of these new standards On January 1, 2009 will not have a material effect on these financial statements.

Trust Assets:  Assets held by the Bank in fiduciary or agency capacities for its customers are not included in the accompanying consolidated balance sheets as such items are not assets of the Bank.

Reclassifications:  Certain prior year amounts have been reclassified to conform to the current year’s presentation.

Note 2. Restrictions on Cash and Due From Banks

The Bank is required to maintain reserve balances in cash or on deposit with the Federal Reserve Bank, based on a percentage of deposits. The total of those reserve balances was approximately $1.3 million and $2.6 million at December 31, 2007 and 2006.

The Company maintains some of its cash in bank deposit accounts at financial institutions other than its subsidiaries that, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts. The Company believes it is not exposed to any significant credit risk on cash and cash equivalents.

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Note 3. Investment Securities

Carrying amounts and fair values of investment securities are summarized as follows:

AVAILABLE FOR SALE	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(In thousands)
December 31, 2007:
Government sponsored agencies	$	93,081	$	122	$	(2	)	$	93,201
States and political subdivisions	6,391		21		(27		)	6,385
Equity securities	1		3		—			4
Totals	$	99,473	$	146	$	(29	)	$	99,590
December 31, 2006:
Government sponsored agencies	$	73,025	$	1	$	(239	)	$	72,787
States and political subdivisions	15,190			—	(33		)	15,157
Equity securities	1		5		—			6
Totals	$	88,216	$	6	$	(272	)	$	87,950

HELD TO MATURITY	Amortized Cost			Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(In thousands)
December 31, 2007:
States and political subdivisions	$	9,159		$	—	$	—		$	9,159
Totals	$	9,159		$	—	$	—		$	9,159
December 31, 2006:
States and political subdivisions	$		10,968	$	4	$	(11	)	$	10,961
Totals	$	10,968		$	4	$	(11	)	$	10,961

OTHER INVESTMENTS	Amortized Cost		Gross Unrealized Gains	Gross Unrealized Losses	Fair Value
	(In thousands)
December 31, 2007:
Non-marketable equity securities (including FRB and FHLB stock)	$	6,264	—	—	$	6,264
Investment in unconsolidated trusts	1,116		—	—	1,116
Totals	$	7,380	—	—	$	7,380
December 31, 2006:
Non-marketable equity securities (including FRB and FHLB stock)	$	6,820	—	—	$	6,820
Investment in unconsolidated trusts	1,116		—	—	1,116
Totals	$	7,936	—	—	$	7,936

Realized net gains on sale of securities available for sale are summarized as follows:

	For the Years Ended December 31,
	2007		2006		2005
	(In thousands)
Realized gains	$	62	$	—	$	—
Realized losses		—	—		—
Net gains	$	62	$	—	$	—

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A summary of unrealized loss information for investment securities, categorized by security type, at December 31, 2007 and 2006 is as follows:

	Less than 12 Months					12 Months or Longer					Total
AVAILABLE FOR SALE	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses (1), (2)			Fair Value		Unrealized Losses
December 31, 2007
Government sponsored agencies	$	5,002	$	(1	)	$	3,080	$	(1	)	$	8,082	$	(2	)
States and political subdivisions	1,193		(14		)	1,165		(13		)	2,358		(27		)
Equity securities	—		—			—		—			—		—
Totals	$	6,195	$	(15	)	$	4,245	$	(14	)	$	10,440	$	(29	)
December 31, 2006
Government sponsored agencies	$	19,422	$	(18	)	$	52,363	$	(221	)	$	71,785	$	(239	)
States and political subdivisions	8,116		(10		)	2,547		(23		)	10,663		(33		)
Equity securities	—		—			—		—			—		—
Totals	$	27,538	$	(28	)	$	54,910	$	(244	)	$	82,448	$	(272	)

	Less than 12 Months				12 Months or Longer					Total
HELD TO MATURITY	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(In thousands)
December 31, 2007
States and political subdivisions	$	—	$	—	$	—	$	—		$	—	$	—
Totals	$	—	$	—	$	—	$	—		$	—	$	—
December 31, 2006
States and political subdivisions	$	—	$	—	$	990	$	(11	)	$	990	$	(11	)
Totals	$	—	$	—	$	990	$	(11	)	$	990	$	(11	)

_________________________

(1) $1 thousand of the total unrealized losses twelve months or longer as of December 31, 2007 relates to unrealized losses on U.S. government sponsored agencies with an S&P quality rating of AAA. The Company has the ability to hold these securities until they mature. The remaining $13 thousand of unrealized losses twelve months or longer as of December 31, 2007 relates to unrealized losses on state, county and municipal securities with Moody ratings of Aaa to Aa3. The Company has the ability to hold these securities until they mature.

(2) $221 thousand of the total unrealized losses twelve months or longer as of December 31, 2006 relates to unrealized losses on U.S. government sponsored agencies with an S&P quality rating of AAA. The Company has the ability to hold these securities until they mature. The remaining $23 thousand of unrealized losses twelve months or longer as of December 31, 2006 relates to unrealized losses on state, county and municipal securities with Moody ratings of Aaa to Aa3. The Company has the ability to hold these securities until they mature.

The amortized cost and fair value of investment securities as of December 31, 2007 by contractual maturity are shown below.

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Maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without penalties.

	Available for Sale				Held to Maturity				Other Investments
	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(In thousands)
One year or less	$	68,087	$	68,171	$	—	$	—	$	100	$		100
One to five years	28,146		28,196		—		—			—			—
Five to ten years	1,883		1,885		—		—		—		—
Over ten years	1,356		1,334		9,159		9,159		—		—
Equity investments with no stated maturity	1		4		—		—		7,280		7,280
	$	99,473	$	99,590	$	9,159	$	9,159	$	7,380	$	7,380

Securities with carrying amounts of $21.1 million and $20.7 million at December 31, 2007 and 2006, respectively, were pledged as collateral on public deposits and for other purposes as required or permitted by law.

Note 4. Loans

Loans consisted of:

	December 31,
	2007			2006
	(In thousands)
Commercial loans	$	118,670		$	127,950
Commercial real estate	382,909			388,149
Residential real estate	360,934			324,051
Construction real estate	249,284			235,534
Installment and other	61,028			58,045
Total loans	1,172,825			1,133,729
Unearned income	(1,719		)	(2,005		)
Gross loans	1,171,106			1,131,724
Allowance for loan losses	(13,533		)	(12,167		)
Loans, net	$	1,157,573		$	1,119,557

Loans are made to individuals as well as commercial and tax exempt entities. Specific loan terms vary as to interest rate, repayment and collateral requirements based on the type of loan requested and the credit worthiness of the prospective borrower. Credit risk tends to be geographically concentrated, in that the majority of loan customers are located in the markets serviced by the Bank.

Non-performing loans as of December 31, 2007, 2006 and 2005 were as follows:

	December 31,
	2007		2006		2005
	(In thousands)
Non-accruing loans	$	11,789	$	8,767	$	8,037
Loans 90 days or more past due, still accruing interest	—		1		—
Total non-performing loans	$	11,789	$	8,768	$	$8,037

The reduction in interest income associated with loans on non-accrual status was $882 thousand, $734 thousand and $198 thousand for the years ended December 31, 2007, 2006 and 2005

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Information about impaired loans as of and for the years ended December 31, 2007, 2006 and 2005 is as follows:

	December 31,
	2007		2006		2005
	(In thousands)
Loans for which there was a related allowance for credit losses	$	6,234	$	6,302	$	6,233
Other impaired loans	3,653		2,174		480
Total impaired loans	$	9,887	$	8,476	$	6,713
Average monthly balance of impaired loans	$	6,843	$	5,968	$	5,790
Related allowance for credit losses	$	2,644	$	2,177	$	1,396
Interest income recognized on an accrual basis	—		—		—
Interest income recognized on a cash basis	$	98	$	90	$	253

Activity in the allowance for loan losses was as follows:

	Years Ended December 31,
	2007			2006			2005
	(In thousands)
Balance, beginning of year	$	12,167		$	8,842		$	8,367
Provision for loan losses	4,200			5,172			2,850
Charge-offs	(3,146		)	(2,328		)	(2,537		)
Recoveries	312			481			162
Net charge-offs	2,834			1,847			2,375
Balance, end of year	$	13,533		$	12,167		$	8,842

Loans outstanding to executive officers and directors of the Company, including companies in which they have management control or beneficial ownership, at December 31, 2007 and 2006, were approximately $2.8 million and $2.2 million. In the opinion of management, these loans have similar terms to other customer loans. An analysis of the activity related to these loans for the years ended December 31, 2007 and 2006 is as follows:

	December 31,
	2007			2006
	(In thousands)
Balance, beginning	$	2,240		$	3,171
Additions	1,316			914
Principal payments and other reductions	(764		)	(1,845		)
Balance, ending	$	2,792		$	2,240

Note 5. Loan Servicing and Mortgage Servicing Rights

Mortgage loans serviced for others are not included in the accompanying consolidated balance sheets. The unpaid balance of these loans as of December 31, 2007 and 2006, is summarized as follows:

	2007		2006
	(In thousands)
Mortgage loan portfolios serviced for:
Federal National Mortgage Association (FNMA)	$	942,579	$	951,200
Federal Home Loan Mortgage Corporation (FHLMC)	1,549		1,913
Other investors	342		1,253
	944,470		954,366
Mortgage loans underlying pass-through securities—FNMA	—		11
	$	944,470	$	954,377

Custodial balances on deposit at the Bank in connection with the foregoing loan servicing were approximately $4.5 million and $4.7 million as of December 31, 2007 and 2006. There were no custodial balances on deposit with other financial institutions during 2007 and 2006.

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An analysis of changes in mortgage servicing rights asset follows:

	2007			2006			2005
	(In thousands)
Balance, beginning of year	$	9,867		$	11,009		$	11,858
Servicing rights originated and capitalized	1,236			1,602			1,909
Amortization	(2,853		)	(2,744		)	(2,758		)
	$	8,250		$	9,867		$	11,009

Below is an analysis of changes in the mortgage servicing right asset valuation allowance:

	2007			2006			2005
	(In thousands)
Balance, beginning of year	$	(752	)	$	(1,230	)	$	(3,487	)
Aggregate reductions credited to operations	702			484			3,267
Aggregate additions charged to operations	(134		)	(6		)	(1,010		)
	$	(184	)	$	(752	)	$	(1,230	)

The fair values of the MSRs were $8.5 million, $9.5 million and $10.5 million on December 31, 2007, 2006 and 2005, respectively.

The primary risk characteristics of the underlying loans used to stratify the servicing assets for the purposes of measuring impairment are interest rate and original term.

Our valuation allowance is used to recognize impairments of our MSRs. An MSR is considered impaired when the market value of the MSR is below the amortized book value of the MSR. The MSRs are accounted by risk tranche, with the interest rate and term of the underlying loan being the primary strata used in distinguishing the tranches. Each tranche is evaluated separately for impairment.

Our MSRs are analyzed for impairment on a monthly basis. The underlying loans on all serviced loans are analyzed and, based upon the value of MSRs that are traded on the open market, a current market value for each risk tranche in our portfolio is assigned. We then compare that market value to the current amortized book value for each tranche. The change in market value (up to the amortized value of the MSR) is recorded as an adjustment to the MSR valuation allowance, with the offset being recorded as an addition or a reduction to income.

The following assumptions were used to calculate the market value of the MSRs as of December 31, 2007, 2006 and 2005:

	At December 31,
	2007			2006			2005
Prepayment Standard Assumption (PSA) speed		232.00	%		193.00	%		165.00	%
Discount rate	10.00			10.00			9.01
Earnings rate	5.00			5.00			4.00

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Note 6. Premises and Equipment

Premises and equipment consisted of:

	December 31,
	2007			2006
	(In thousands)
Land and land improvements	$	3,820		$	3,820
Buildings	15,820			15,663
Furniture and equipment	22,343			20,641
	41,983			40,124
Accumulated depreciation	(17,912		)	(15,869		)
	$	24,071		$	24,255

Depreciation on premises and equipment totaled $2.3 million, $2.4 million and $2.6 million for the years ended December 31, 2007, 2006 and 2005.

Note 7. Deposits

Deposits consisted of:

	December 31,
	2007		2006
	(In thousands)
Demand deposits, noninterest bearing	$	50,751	$	51,621
NOW and money market accounts	309,877		324,291
Savings deposits	277,138		227,433
Time certificates, $100,000 or more	327,618		351,562
Other time certificates	210,074		207,834
Total	$	1,175,458	$	1,162,741

At December 31, 2007, the scheduled maturities of time certificates were as follows:

	(In thousands)
2008	$	453,762
2009	27,325
2010	36,969
2011	13,152
2012	6,484
Thereafter	—
	$	537,692

The Company had no brokered deposits at December 31, 2007 or 2006.

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Note 8. Short- and Long-term Borrowings, including Borrowings made by Employee Stock Ownership Plan (ESOP)

Notes payable to the Federal Home Loan Bank (FHLB) at December 31, 2007 and 2006 were secured by a blanket assignment of mortgage loans or other collateral acceptable to FHLB, and generally had a fixed rate of interest, interest payable monthly and principal due at end of term, unless otherwise noted. The total value of loans under the blanket assignment as of December 31, 2007 was $431.1 million.

Maturity Date	Rate	Type	Index	Principal due	2007			2006
					(In thousands)
01/02/2007	4.121	Fixed	—	Monthly Amortization	$		—	$	276
01/02/2007	4.078	Fixed	—	Monthly Amortization	—			405
07/18/2008	3.221	Fixed	—	At maturity	40,000			40,000
03/22/2010	4.667	Fixed	—	At maturity	20,000			20,000
01/03/2011	6.031	Fixed	—	Monthly Amortization	1,269			1,303
04/27/2021	6.343	Fixed	—	At maturity	2,300			2,300
01/20/2008	7.250	Variable	Citibank Prime	Monthly Amortization	271			743
					$	63,840		$	65,027

The following is a summary of debt payments required for years after 2007. Included in 2008 is the final payment for the ESOP debt of $271 thousand:

	(In thousands)
2008	$	40,304
2009	36
2010	20,036
2011	36
2012	569
Thereafter	2,859
	$	63,840

Note 9. Junior Subordinated Debt Owed to Unconsolidated Trusts

The following table presents details on the junior subordinated debt owed to unconsolidated trusts as of December 31, 2007:

	Trust I			Trust III			Trust IV			Trust V
	(Dollars in thousands)
Date of issue	March 23, 2000			May 11, 2004			June 29, 2005			September 21, 2006
Amount of trust preferred securities issued	$	10,000		$	6,000		$	10,000		$	10,000
Rate on trust preferred securities	10.875		%	7.82% (variable		)	6.88		%	6.83		%
Maturity	March 8, 2030			September 8, 2034			November 23, 2035			December 15, 2036
Date of first redemption	March 8, 2010			September 8, 2009			August 23, 2010			September 15, 2011
Common equity securities issued	$	310		$	186		$	310		$	310
Junior subordinated deferrable interest debentures owed	$	10,310		$	6,186		$	10,310		$	10,310
Rate on junior subordinated deferrable interest debentures	10.875		%	7.82% (variable		)	6.88		%	6.83		%

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On the dates of issue indicated above, the Trusts, being Delaware statutory business trusts, issued trust preferred securities (the “trust preferred securities”) in the amount and at the rate indicated above.  These securities represent preferred beneficial interests in the assets of the Trusts.  The trust preferred securities will mature on the dates indicated, and are redeemable in whole or in part at the option of the Company at any time after the date of first redemption indicated above, with the approval of the Federal Reserve Board and in whole at any time upon the occurrence of certain events affecting their tax or regulatory capital treatment.  The Trusts also issued common equity securities to Trinity in the amounts indicated above.  The Trusts used the proceeds of the offering of the trust preferred securities to purchase junior subordinated deferrable interest debentures (the “debentures”) issued by the Company, which have terms substantially similar to the trust preferred securities.  The Company has the right to defer payments of interest on the debentures at any time or from time to time for a period of up to ten consecutive semi-annual periods with respect to each interest payment deferred.  Under the terms of the debentures, under certain circumstances of default or if the Company has elected to defer interest on the debentures, the Company may not, with certain exceptions, declare or pay any dividends or distributions on its capital stock or purchase or acquire any of its capital stock.  The Company used the majority of the proceeds from the sale of the debentures to add to Tier 1 or Tier 2 capital in order to support its growth and to purchase treasury stock.

Trinity owns all of the outstanding common securities of the Trusts.  The Trusts are considered variable interest entities (VIEs) under Financial Accounting Standards Board Interpretation (FIN) No. 46, “Consolidation of Variable Interest Entities, an interpretation of Accounting Research Bulletin No. 51”, as revised.  Prior to FIN 46, VIEs were generally consolidated by an enterprise when the enterprise had a controlling financial interest through ownership of a majority of voting interest in the entity.  Under FIN 46, a VIE should be consolidated by its primary beneficiary.  The Company implemented FIN 46 during the fourth quarter of 2003.  Because Trinity is not the primary beneficiary of the Trusts, the financial statements of the Trusts are no longer included in the consolidated financial statements of the Company.  The Company’s prior financial statements have been reclassified to de-consolidate the Company’s investment in the Trusts.

In March 2005, the Board of Governors of the Federal Reserve System issued a final rule allowing bank holding companies to continue to include qualifying trust preferred securities in their Tier 1 Capital for regulatory capital purposes, subject to a 25% limitation to all core (Tier I) capital elements, net of goodwill less any associated deferred tax liability.  The final rule provides a five-year transition period, ending March 31, 2009, for application of the aforementioned quantitative limitation.  As of December 31, 2007, 81.5% of the trust preferred securities noted in the table above qualified as Tier I capital and 18.5% qualified as Tier 2 capital under the final rule adopted in March 2005.

Payments of distributions on the trust preferred securities and payments on redemption of the trust preferred securities are guaranteed by the Company on a limited basis.  The Company also entered into an agreement as to expenses and liabilities with the Trusts pursuant to which it agreed, on a subordinated basis, to pay any costs, expenses or liabilities of the Trusts other than those arising under the trust preferred securities.  The obligations of the Company under the junior subordinated debentures, the related indenture, the trust agreement establishing the Trusts, the guarantee and the agreement as to expenses and liabilities, in the aggregate, constitute a full and unconditional guarantee by the Company of the Trusts’ obligations under the trust preferred securities.

On December 8, 2006, the Company exercised its option to call a Trust Preferred Security issue for $6.0 million that was issued originally on November 28, 2001 at a rate of 9.95%. The interest expense and issuance cost amortization during 2006 reflected this issue that is not presented in the table above.

Issuance costs of $615 thousand related to the first two trust preferred securities issues and the issue paid off during 2006 (not presented in the above table) were deferred and are being amortized over the period until mandatory redemption of the securities in March 2030 and September 2034, respectively.  During each 2007, 2006 and 2005, respectively, $14 thousand, $194 thousand and $20 thousand of these issuance costs were amortized. The total amount of the issuance costs of the issue paid off in 2006 was amortized during that year.  Unamortized issuance costs were $311 thousand, $325 thousand and $519 thousand at December 31, 2007, 2006 and 2005, respectively.  There were no issuance costs associated with the other trust preferred security issues.

Dividends accrued and unpaid to securities holders totaled $498 thousand and $488 thousand on December 31, 2007 and 2006, respectively.

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Note 10. Description of Leasing Arrangements

The Company is leasing land in Santa Fe with the intention of building an office on the site during 2008. The lease, has an 8 year term and expires in 2014, contains an option to purchase the land at a set price at the termination of the initial term of the lease. This lease is classified as a capital lease. In addition, the Company leases certain equipment, ATM location space, office space and storage space from other parties under operating leases expiring through 2010. Lease payments for the years ended December 31, 2007, 2006 and 2005 totaled $361 thousand, $289 thousand and $112 thousand, respectively.

The following is a schedule by years of future minimum lease payments under capital leases together with the present value of the net minimum lease payments as of December 31, 2007:

	(In thousands)
2008	$	185
2009	185
2010	185
2011	185
2012	185
Thereafter		3,224
Total minimum lease payments		4,149
Less: Amount representing estimated executory costs (such as taxes, maintenance and insurance), including profit thereon, included in total minimum lease payments		—
Net minimum lease payments		4,149
Less: Amount representing interest		(1,938	)
Present value of net minimum lease payments	$	2,211

Commitments for minimum future rentals under the operating leases were as follows at December 31, 2007:

	(In thousands)
2008	$	401
2009	127
2010	126
2011	37
2012	—
Thereafter		—
	$	691

Note 11. Retirement Plans

The Company has a qualified Employee Stock Ownership Plan (“ESOP”) for the benefit of all employees who are at least 18 years of age and have completed 1,000 hours of service during the Plan year. The employee’s interest in the ESOP vests over a period of seven years but will be reduced to a period of six years to comply with the requirements of the Pension Protection Act of 2006. The ESOP was established in January 1989 and is a defined contribution plan subject to the requirements of the Employee Retirement Income Security Act of 1974.

The ESOP provides for annual discretionary contributions by the Company as determined by its Board of Directors. The Company’s discretionary contributions to the ESOP in 2007, 2006 and 2005 were approximately $483 thousand, $512 thousand and $462 thousand, respectively.

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The ESOP had a note payable of $271 thousand outstanding with a local bank as of December 31, 2007. The note requires annual principal payments of $471 thousand with a final payment of principal on January 20, 2008. Interest is variable at Citibank Prime (7.25% at December 31, 2007) and is payable semi-annually. Collateral for this loan is Company stock owned by the ESOP and unallocated to the plan participants. Shares are released from collateral based upon the ratio of principal and interest paid during the year to total principal and interest paid for the current year and payable for all future plan years. Allocations of common stock released and forfeitures are based on the eligible base salary compensation of each participant. The note payable is recorded as debt and the shares pledged as collateral netted against stock owned by ESOP participants in the accompanying balance sheets. Dividends on allocated ESOP shares are recorded as a reduction of retained earnings; dividends on unallocated ESOP shares are recorded as a reduction of debt and accrued interest.

All shares held by the ESOP, which were acquired prior to the issuance of AICPA Statement of Position 93-6, Employers’ Accounting for Employee Stock Ownership Plans (SOP 93-6), are included in the computation of average common shares and common share equivalents. This accounting treatment is grandfathered under SOP 93-6 for shares purchased prior to December 31, 1992. As permitted by SOP 93-6, compensation expense for shares released is equal to the original acquisition cost of the shares if they were acquired prior to December 31, 1992. As shares acquired after SOP 93-6 are released from collateral, the Company reports compensation expense equal to the current fair value of the shares, and the shares become outstanding for earnings-per-share computations.

Shares of the Company held by the ESOP that were acquired prior to December 31, 1992 totaled 257,182 and 265,201 shares at December 31, 2007 and 2006, respectively.

Shares of the Company held by the ESOP that were acquired after December 31, 1992 are as follows:

	December 31,
	2007		2006
Allocated shares	324,220		248,557
Shares committed to be released	27,263		26,908
Unallocated (unearned) shares	16,937		44,200
Total shares acquired after December 31, 1992	368,420		319,665
Estimated fair value of unallocated (unearned) shares	$	457,000	$	1,271,000

There was no compensation expense recognized for ESOP shares acquired prior to December 31, 1992 during the years 2007, 2006 and 2005. Compensation expense recognized for ESOP shares acquired after December 31, 1992 during 2007, 2006 and 2005 was $666 thousand, $731 thousand and $683 thousand, respectively.

Under federal income tax regulations, the employer securities that are held by the Plan and its participants and that are not readily tradable on an established market or that are subject to trading limitations include a put option (liquidity put). The liquidity put is a right to demand that the Company buy shares of its stock held by the participant for which there is no readily available market. The put price is representative of the fair value of the stock. The Company may pay the purchase price over a five-year period. The purpose of the liquidity put is to ensure that the participant has the ability to ultimately obtain cash. The fair value of the allocated shares subject to repurchase was $16.4 million and $16.8 million as of December 31, 2007 and 2006.

The Company’s employees may also participate in a tax-deferred savings plan (401(k)) to which the Company does not contribute.

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Note 12. Stock Incentives

The Company’s 1998 Stock Option Plan (“1998 Plan”) and Trinity Capital Corporation 2005 Stock Incentive Plan (“2005 Plan”) were created for the benefit of key management and select employees. Under the 1998 Plan, 400,000 shares (as adjusted for the stock split of December 19, 2002) from shares held in treasury or authorized but unissued common stock are reserved for granting options. Under the 2005 Plan, 500,000 shares from shares held in treasury or authorized but unissued common stock are reserved for granting stock-based incentive awards. Both of these plans were approved by the Company’s shareholders. The Board of Directors determines vesting and pricing of the awards. All stock options granted through December 31, 2005 were granted at or above the market value of the stock at the date of the grant, with the exception of the July 1998 stock option grant which was granted at $0.25 below the last reported sale price on the date of grant. All stock options vest in equal amounts over a three year period and must be exercised within ten years of the date of grant. Stock appreciation rights granted after December 31, 2005 were also granted at or above the market value of the stock at the date of the grant, with the exception of the January 1, 2006 stock appreciation right grants which were approved on December 15, 2005 and granted at the December 31, 2005 closing price to take advantage of accounting changes favorable to Trinity; and mature at five years.

Effective January 1, 2006, the Company adopted SFAS No. 123(R), Share-Based Payment, which is an Amendment of FASB Statement Nos. 123 and 95. The Company adopted this standard using the modified prospective transition method. Prior to the adoption of SFAS 123(R), the Company measured stock-based compensation cost in accordance with the methods prescribed in Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees. Accordingly, no compensation cost was recognized for options granted and vested before January 1, 2006.

Under the provisions of SFAS 123(R), the Company is required to recognize compensation expense for share-based compensation that vest after adoption of the new standard. The Company uses the Black-Scholes model to value the stock options and stock appreciation rights on the date of the grant, and recognizes this expense over the remaining vesting term for the stock options or stock appreciation rights. Key assumptions used in this valuation method (detailed below) are the volatility of the Company’s stock price, a risk-free rate of return (using the U.S. Treasury yield curve) based on the expected term from grant date to exercise date and an annual dividend rate based upon the current market price. Expected term from grant date is based upon the historical time from grant to exercise experienced by the Company. Because share-based compensation vesting in the current periods was granted on a variety of dates, the assumptions are presented as weighted averages in those assumptions.

The following table details the assumptions used in the Black-Scholes model for share-based compensation granted:

	Twelve Months Ended December 31,
	2007		2006		2005
Stock price volatility	14.74	%	14.12	%	14.12	%
Risk-free rate	3.45	%	4.35	%	4.23	%
Expected dividends	2.79	%	2.29	%	2.29	%
Expected term (in years)	5		5		10

A summary of stock option and stock appreciation right activity under the 1998 Plan and the 2005 Plan as of December 31, 2007, and changes during the year is presented below:

	Shares		Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term, in years	Aggregate Intrinsic Value (in thousands)
Outstanding at January 1, 2007	357,408		$	25.92
Granted	103,000		26.86
Exercised	(11,013	)	16.00
Forfeited or expired	—		—
Outstanding at December 31, 2007	449,395		$	26.38	4.67	$	1,894
Exercisable at December 31, 2007	251,895		$	25.43	5.11	$	1,088

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The weighted-average grant date fair value of stock incentives granted during 2007, 2006 and 2005 was $3.74, $4.33 and $5.22, respectively. The total intrinsic value of options exercised during 2007, 2006 and 2005 was $64 thousand, $168 thousand and $56 thousand.

As of December 31, 2007, there was $624 thousand of total unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the 1998 Plan and the 2005 Plan. That cost is expected to be recognized over a weighted-average vesting period of 3.6 years. There were 69,997 shares vested during 2007. The total amount expensed of the shares that vested is $238 thousand in 2007.

The following pro forma information presents net income and earnings per share had the fair value method of SFAS No. 123 been used to measure compensation cost for stock option plans in 2005

	2005
	(In thousands except per share amounts)
Net income as reported	$	11,960
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects	(83		)
Pro forma net income	$	11,877
Earnings per share:
Basic — as reported	$	1.80
Basic — pro forma	$	1.79
Diluted — as reported	$	1.79
Diluted — pro forma	$	1.77

Note 13. Income Taxes

The current and deferred components of the provision for Federal income tax expense for the years 2007, 2006 and 2005 are as follows:

	Years Ended December 31,
	2007			2006			2005
	(In thousands)
Current income tax expense:
Federal	$	7,608		$	6,799		$	5,658
State	972			1,170			983
Deferred income tax (benefit) expense:
Federal	(1,074		)	(1,009		)	468
State	(141		)	(132		)	60
Total income tax expense	$	7,365		$	6,828		$	7,169

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A deferred tax asset or liability is recognized to reflect the net tax effects of temporary differences between the carrying amounts of existing assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant temporary differences that gave rise to the deferred tax assets and liabilities as of December 31, 2007 and 2006 were as follows:

	2007 Deferred					2006 Deferred
	Asset			Liability		Asset		Liability
	(In thousands)
Prepaid Expenses	$		—	$	321	$	—	$	232
Allowance for loan losses			5,358	—			4,817		—
Mortgage servicing rights	—				3,194		—		3,609
Investment securities	—			137			—		215
Premises and equipment	—			1,248			—		1,297
Stock dividends on FHLB stock	—			316			—		365
Loans	527			—			300		—
Unrealized gain on securities available for sale	—			46			105		—
Accrued compensation	274			—			251		—
Employee stock ownership plan (ESOP) compensation	17			—			38		—
Stock options and stock appreciation rights expensed	209			—			115		—
Other real estate owned (OREO)	—			—			—		—
Total deferred taxes	$	6,385		$	5,262	$	5,626	$	5,718

The net deferred tax asset of $1.1 million and deferred tax liability of $92 thousand in 2007 and 2006, respectively, was reported in other liabilities.

Items causing differences between the statutory tax rate and the effective tax rate are summarized as follows:

	Year ended December 31,
	2007					2006					2005
	Amount			Rate		Amount			Rate		Amount			Rate
	(In thousands)
Statutory tax rate	$	7,243		35.00	%	$	5,999		35.00	%	$	6,695		35.00	%
Net tax exempt interest income	(336		)	(1.62	)	(276		)	(1.61	)	(247		)	(1.29	)
Interest disallowance	49			0.24		30			0.18		23			0.12
Other, net	(283		)	(1.37	)	400			2.33		22			0.12
State income tax net of federal benefit	692			3.34		675			3.94		676			3.53
Provision for income taxes	$	7,365		35.59	%	$	6,828		39.84	%	$	7,169		37.48	%

Note 14. Commitments, Contingencies and Off-Balance Sheet Activities

Credit-related financial instruments:  The Company is a party to credit-related commitments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These credit-related commitments include commitments to extend credit, standby letters of credit and commercial letters of credit. Such credit-related commitments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheets.

The Company’s exposure to credit loss is represented by the contractual amount of these credit-related commitments. The Company follows the same credit policies in making credit-related commitments as it does for on-balance-sheet instruments.

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At December 31, 2007 and 2006, the following credit-related commitments were outstanding whose contract amounts represent credit risk:

	Contract Amount
	December 31, 2007		December 31, 2006
	(In thousands)
Unfunded commitments under lines of credit	$	206,424	$	192,252
Commercial and standby letters of credit	20,321		31,100

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require a payment of a fee. The commitments for equity lines of credit may expire without being drawn upon. Therefore, the total commitment amounts do not necessarily represent future cash requirements. The amount of collateral obtained, if it is deemed necessary by the Company, is based on management’s credit evaluation of the customer. Unfunded commitments under commercial lines of credit, revolving credit lines and overdraft protection agreements are commitments for possible future extensions of credit to existing customers. Overdraft protection agreements are uncollateralized, but most other unfunded commitments have collateral. These unfunded lines of credit usually do not contain a specified maturity date and may not necessarily be drawn upon to the total extent to which the Company is committed.

Outstanding Letters of Credit: In addition to short and long term borrowings from the Federal Home Loan Bank (FHLB), the FHLB has issued letters of credit to various public entities with deposits at the Bank. These letters of credit are issued to collateralize the deposits of these entities at the Bank as required or allowed under law. The total value of these letters of credit was $129.7 million and $128.1 million as of December 31, 2007 and December 31, 2006, respectively. As of December 31, 2007, all letters of credit had original terms of one year. These letters are secured under the blanket assignment of mortgage loans or other collateral acceptable to the FHLB that also secures our short and long term borrowings from FHLB.

Commercial and standby letters of credit are conditional credit-related commitments issued by the Company to guarantee the performance of a customer to a third party. Those letters of credit are primarily issued to support public and private borrowing arrangements. Essentially all letters of credit issued have expiration dates within one year. The credit risk involved in issuing letters of credit is the same as that involved in extending loans to customers. The Company generally holds collateral supporting those credit-related commitments, if deemed necessary. In the event the customer does not perform in accordance with the terms of the agreement with the third party, the Company would be required to fund the credit-related commitment. The maximum potential amount of future payments the Company could be required to make is represented by the contractual amount shown in the summary above. If the credit-related commitment is funded, the Company would be entitled to seek recovery from the customer. At December 31, 2007 and 2006, no amounts have been recorded as liabilities for the Company’s potential obligations under these credit-related commitments. The fair value of these credit-related commitments is approximately equal to the fees collected when granting these letters of credit. These fees collected were $26 thousand and $66 thousand as of December 31, 2007 and 2006, respectively, and are included in “other liabilities” on the Company’s balance sheet.

Concentrations of credit risk:  The majority of the loans, commitments to extend credit, and standby letters of credit have been granted to customers in Los Alamos, Santa Fe and surrounding communities. Although the Company has a diversified loan portfolio, a substantial portion of its loans are made to businesses and individuals associated with, or employed by, Los Alamos National Laboratory (“the Laboratory”). The ability of such borrowers to honor their contracts is predominately dependent upon the continued operation and funding of the Laboratory. Investments in securities issued by states and political subdivisions involve governmental entities within the state of New Mexico. The distribution of commitments to extend credit approximates the distribution of loans outstanding. Standby letters of credit were granted primarily to commercial borrowers.

Note 15. Litigation

Neither Trinity, the Bank, Title Guaranty, TCC Appraisals, TCC Advisors or TCC Funds are involved in any pending legal proceedings, other than routine legal proceedings occurring in the normal course of business and those otherwise specifically stated herein, which, in the opinion of management, in the aggregate, are not material to our consolidated financial condition.

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Note 16. Derivative Financial Instruments

In the normal course of business, the Bank uses a variety of financial instruments to service the financial needs of customers and to reduce its exposure to fluctuations in interest rates. Derivative instruments that the Bank uses as part of its interest rate risk management strategy include mandatory forward delivery commitments and rate lock commitments.

As a result of using over-the-counter derivative instruments, the Bank has potential exposure to credit loss in the event of nonperformance by the counterparties. The Bank manages this credit risk by selecting only well established, financially strong counterparties, spreading the credit risk amongst many such counterparties and by placing contractual limits on the amount of unsecured credit risk from any single counterparty. The Bank’s exposure to credit risk in the event of default by counterparty is the current cost of replacing the contracts net of any available margins retained by the Bank. However, if the borrower defaults on the commitment the Bank requires the borrower to cover these costs.

The Company adopted the provisions of SFAS No. 149 effective July 1, 2003. The Company’s derivative instruments outstanding at December 31, 2007 include commitments to fund loans held for sale. As per Staff Accounting Bulletin No. 105, Application of Accounting Principles to Loan Commitments, the interest rate lock commitment was valued at zero at inception. The rate locks will continue to be adjusted for changes in value resulting from changes in market interest rates.

The Company originates single-family residential loans for sale pursuant to programs with the Federal National Mortgage Association (“FNMA”). At the time the interest rate is locked in by the borrower, the Company concurrently enters into a forward loan sale agreement with respect to the sale of such loan at a set price in an effort to manage the interest rate risk inherent in the locked loan commitment. Any change in the fair value of the loan commitment after the borrower locks in the interest rate is substantially offset by the corresponding change in the fair value of the forward loan sale agreement related to such loan. The period from the time the borrower locks in the interest rate to the time the Company funds the loan and sells it to FNMA is generally 60 days. The fair value of each instrument will rise or fall in response to changes in market interest rates subsequent to the dates the interest rate locks and forward loan sale agreements are entered into. In the event that interest rates rise after the Company enters into an interest rate lock, the fair value of the loan commitment will decline. However, the fair value of the forward loan sale agreement related to such loan commitment should increase by substantially the same amount, effectively eliminating the Company’s interest rate and price risk.

At December 31, 2007 the Company had notional amounts of $2.0 million contracts with customers and $10.0 million contracts with FNMA in interest rate lock commitments outstanding related to loans being originated for sale. The related fair values of these commitments were an asset of $17 thousand and a liability of $25 thousand as of December 31, 2007.

The Company has outstanding loan commitments, excluding undisbursed portion of loans in process and equity lines of credit, of approximately $164.8 million and $166.1 million as of December 31, 2007 and 2006, respectively. Of these commitments outstanding, the breakdown between fixed and adjustable-rate loans is as follows:

	At December 31,
	2007		2006
	(In thousands)
Fixed-rate (ranging from 4.0% to 11.5%)	$	21,743	$	48,174
Adjustable-rate	143,067		117,975
Total	$	164,810	$	166,149

Note 17. Regulatory Matters

The Company’s primary source of cash is dividends from the Bank. The Bank is subject to certain restrictions on the amount of dividends that it may declare without prior regulatory approval. Generally, the Company cannot pay dividends that exceed its net income or that can only be funded that weaken its financial health. The Bank cannot pay dividends in any calendar year that, in the aggregate, exceed the Bank’s year-to-date net income plus its retained income for the two proceeding years. Additionally, the Bank cannot pay dividends that are in excess of the amount which would cause the Bank to fall below the minimum required for capital adequacy purposes.

76

The Company and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory—and additional discretionary—actions by regulators that, if undertaken, could have a direct material effect on the Company’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company’s and the Bank’s assets, liabilities, and certain off-balance-sheet items are calculated under regulatory accounting practices. The Company’s and the Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Prompt corrective action provisions are not applicable to bank holding companies.

Quantitative measures established by regulation to ensure capital adequacy require the Company and the Bank to maintain minimum amounts and ratios (set forth in the table below) of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier 1 capital (as defined) to average assets (as defined). Management believes the Company and the Bank meet all capital adequacy requirements to which they are subject as of December 31, 2007.

As of December 31, 2007, the Bank was “well capitalized” as defined by OCC regulations. To be categorized as well capitalized the Bank must maintain the total risk-based, Tier 1 risk-based, and Tier 1 leverage ratios as set forth in the well capitalized column in the table below. There are no conditions or events since that notification that management believes have changed the Bank’s category subsequent to this time.

The required and actual amounts and ratios for the Company and the Bank are presented below:

	Actual				For Capital Adequacy Purposes				To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio
	(Dollars in thousands)
As of December 31, 2007
Total capital (to risk-weighted assets):
Consolidated	$	137,100	12.11	%	$	90,606	8.00	%	N/A		N/A
Bank only	130,713		11.60		90,109		8.00		$	112,636	10.00	%
Tier 1 capital (to risk-weighted assets):
Consolidated	116,908		10.32		45,303		4.00		N/A		N/A
Bank only	117,179		10.40		45,054		4.00		67,582		6.00
Tier 1 capital (to average assets):
Consolidated	116,908		8.19		57,071		4.00		N/A		N/A
Bank only	117,179		8.25		56,788		4.00		70,985		5.00

	Actual				For Capital Adequacy Purposes				To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio
	(Dollars in thousands)
As of December 31, 2006
Total capital (to risk-weighted assets):
Consolidated	$	128,402	11.50	%	$	89,304	8.00	%	N/A		N/A
Bank only	121,655		10.97		88,724		8.00		$	110,905	10.00	%
Tier 1 capital (to risk-weighted assets):
Consolidated	107,125		9.60		44,652		4.00		N/A		N/A
Bank only	109,485		9.87		44,362		4.00		66,543		6.00
Tier 1 capital (to average assets):
Consolidated	107,125		7.97		53,757		4.00		N/A		N/A
Bank only	109,485		8.17		53,594		4.00		66,993		5.00

_________________________

N/A—not applicable

77

Note 18. Fair Value Information

Fair values are calculated based on the value of one unit without regard to any premium or discount that may result from concentrations of ownership of a financial instrument.

	Carrying Amount		Estimated Fair Value
	(In thousands)
December 31, 2007
Investments:
Available for sale	$	99,590	$	99,590
Held to maturity	9,159		9,159
Other investments	7,380		7,380
Loans, net	1,157,573		1,160,060
Mortgage servicing rights	8,066		8,531
Rate lock commitments, mandatory forward delivery commitments and pair offs, net asset	17		17
Rate lock commitments, mandatory forward delivery commitments and pair offs, net liability	25		25
Time deposits	537,692		539,754
Short- and long-term borrowings	63,569		64,600
Junior subordinated debt owed to unconsolidated trusts	37,116		37,973
Borrowings made by Employee Stock Ownership Plan (ESOP)	271		271
December 31, 2006
Investments:
Available for sale	$	87,950	$	87,950
Held to maturity	10,968		10,961
Other investments	7,936		7,936
Loans, net	1,119,557		1,097,391
Mortgage servicing rights	9,115		9,457
Rate lock commitments, mandatory forward delivery commitments and pair offs, net asset	7		7
Rate lock commitments, mandatory forward delivery commitments and pair offs, net liability	113		113
Time deposits	559,396		558,215
Short- and long-term borrowings	64,284		59,814
Junior subordinated debt owed to unconsolidated trusts	37,116		37,105
Borrowings made by Employee Stock Ownership Plan (ESOP)	743		743

Financial instruments whose carrying value is estimated to be equal to the fair value include: cash and due from banks, interest bearing deposits with banks, accrued interest receivable and payable, loans held for sale, demand deposits, negotiable orders of withdrawal and savings deposits. Management believes that the Company’s demand deposits, negotiable orders of withdrawal and savings deposits provide significant additional value that is not reflected above.

Commitments to extend lines of credit and standby letters of credit have fair values approximately equal to fees generated to extend such commitments and are not material.

Fair value is best determined upon quoted market prices. However, no active market exists for a significant portion of the Company’s financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using the present value of future cash flows, discounted by the current rates offered on financial instruments of a similar nature and term. Financial instruments with variable rates that reprice frequently and have no significant change in credit risk have a fair value equal to carrying value. Fair values for impaired loans are estimated using discounted cash flow analyses or underlying collateral values, where applicable.

Because of the inherent imprecision of estimating fair value discount rates for financial instruments for which no market value exists, management does not believe that the above information reflects the amounts that would be received (including any gains or losses) if assets and liabilities were sold.

78

Note 19. Condensed Parent Company Financial Information

The condensed financial statements of Trinity Capital Corporation (parent company only) are presented below:

Balance Sheets

	December 31,
	2007		2006
	(In thousands)
Assets
Cash	$	5,172	$	3,967
Investments in subsidiaries	120,310		113,309
Other assets	5,600		5,560
Total assets	$	131,082	$	122,836
Liabilities and Stockholders’ Equity
Dividends payable	$	2,600	$	2,302
Junior subordinated debt owed to unconsolidated trusts	37,116		37,116
Other liabilities	3,339		2,740
Stock owned by Employee Stock Ownership Plan (ESOP) participants	16,656		17,438
Stockholders’ equity	71,371		63,240
Total liabilities and stockholders’ equity	$	131,082	$	122,836

Statements of Income

	Years Ended December 31,
	2007			2006			2005
	(In thousands)
Dividends from subsidiaries	$	8,734		$	7,514		$	6,366
Interest and other income	242			—			—
Interest and other expense	(3,699		)	(3,718		)	(2,780		)
Income before income tax benefit and equity in undistributed net income of subsidiaries	5,277			3,796			3,586
Income tax benefit	1,558			1,363			1,065
Income before equity in undistributed net income of subsidiaries	6,835			5,159			4,651
Equity in undistributed net income of subsidiaries	6,494			5,152			7,309
Net income	$	13,329		$	10,311		$	11,960

79

Statements of Cash Flows

	Years Ended December 31,
	2007			2006			2005
	(In thousands)
Cash Flows From Operating Activities
Net income	$	13,329		$	10,311		$	11,960
Adjustments to reconcile net income to net cash (used in) operating activities:
Amortization of junior subordinated debt owed to unconsolidated trusts issuance costs	14			194			20
Equity in undistributed net income of subsidiaries	(6,494		)	(5,152		)	(7,309		)
Decrease (increase) in taxes receivable from subsidiaries	680			(678		)	2
(Increase) in other assets	(54		)	(95		)	(711		)
Increase (decrease) in other liabilities	607			1			(346		)
(Decrease) increase in TPS accrued dividend payable	(10		)	(6		)	83
Tax benefit recognized for exercise of stock options	(57		)	(331		)	(272		)
Net cash provided by operating activities	8,015			4,244			3,427
Cash Flows From Investing Activities
Purchase of loans	—			(2,211		)	—
Acquisition of leased property under capital leases	—			(2,211		)	—
Investments in and advances to subsidiaries	(238		)	(821		)	(8,310		)
Net cash (used in) investing activities	(238		)	(5,243		)	(8,310		)
Cash Flows From Financing Activities
Purchase of treasury stock	(2,509		)	(2,926		)	(6,422		)
Issuance of treasury stock	471			1,656			938
Dividends paid	(4,560		)	(4,461		)	(3,998		)
Dividends paid on unearned Employee Stock Ownership Plan (ESOP) stock	(31		)	(48		)	(59		)
Proceeds from issuance of junior subordinated debt owed to unconsolidated trusts	—			10,310			10,310
Repayment of junior subordinated debt owed to unconsolidated trusts	—			(6,186		)	—
Acquisition of obligations under capital leases	—			2,211			—
Tax benefit recognized for exercise of stock options	57			331			272
Net cash (used in) provided by financing activities	(6,572		)	887			1,041
Net increase (decrease) in cash	1,205			(112		)	(3,842		)
Cash:
Beginning of year	3,967			4,079			7,921
End of year	$	5,172		$	3,967		$	4,079

80

Note 20. Income by Quarter (Unaudited)

Presented in the table below is the income of the Company by quarter:

	Three Months Ended 2007								Three Months Ended 2006
	December		September		June		March		December		September		June		March
	(Thousands of dollars, except per share data)
Interest income	$	24,447	$	25,039	$	23,669	$	23,834	$	23,198	$	21,717	$	20,865	$	19,254
Interest expense	12,204		12,348		11,804		11,642		11,649		10,386		9,093		8,088
Net interest income	12,243		12,691		11,865		12,192		11,549		11,331		11,772		11,166
Provision for loan losses	1,050		1,050		1,050		1,050		1,050		1,322		900		1,900
Net interest income after provision for loan losses	11,193		11,641		10,815		11,142		10,499		10,009		10,872		9,266
Other income	2,552		2,653		2,875		2,428		2,040		2,776		2,903		2,396
Other expense	8,656		8,618		8,595		8,736		9,041		7,855		8,333		8,393
Income before income taxes	5,089		5,676		5,095		4,834		3,498		4,930		5,442		3,269
Income taxes	1,813		1,944		1,831		1,777		1,700		1,860		2,100		1,168
Net income	$	3,276	$	3,732	$	3,264	$	3,057	$	1,798	$	3,070	$	3,342	$	2,101
Basic earnings per share	$	0.51	$	0.57	$	0.50	$	0.47	$	0.27	$	0.47	$	0.51	$	0.32
Diluted earnings per share	$	0.50	$	0.57	$	0.50	$	0.46	$	0.28	$	0.46	$	0.50	$	0.32

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

Item 9A. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

We have established disclosure controls and procedures to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to the officers who certify our financial reports and to other members of senior management and the board of directors and to ensure that information that is required to be disclosed in reports we file with the SEC is properly and timely recorded, processed, summarized and reported. A review and evaluation was performed by our management, including the Company’s Chief Executive Officer (the “CEO”) and Chief Financial Officer (the “CFO”), of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2007 pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934. Based upon and as of the date of that review and evaluation, the CEO and CFO have concluded that our current disclosure controls and procedures were effective as of December 31, 2007.

Management’s Report on Internal Control Over Financial Reporting

Management’s Report on Internal Control over Financial Reporting appears under Item 8, “Financial Statements and Supplemental Data” on page 47 of this Form 10-K.

Changes in Internal Control over Financial Reporting

There have been no changes to our internal control over financial reporting during the last fiscal quarter that have affected, or are reasonably likely to affect, our internal control over financial reporting.

81

Item 9B. Other Information.

None

PART III

Item 10. Directors, Executive Officers and Corporate Governance

The following information is incorporated herein by reference to Trinity’s Proxy Statement for the Annual Meeting of Shareholders to be held on May 15, 2008 under the headings indicated: information with respect to Trinity’s directors, under the heading “Item I - Election of Directors;” information regarding Trinity’s audit committee and its designation of an audit committee financial expert, under the heading “Board of Directors and Corporate Governance – Audit Committee;” information regarding compliance with Section 16(a) of the Securities Exchange Act, under the heading “Section 16(a) Beneficial Ownership Reporting Compliance;” and information regarding Trinity’s executive officers, under the heading “Trinity’s Named Executive Officers.”

Trinity’s Code of Business Conduct and Business Ethics (the “Code”) exemplifies Trinity’s history of requiring adherence to high standards of ethical conduct and business practices. Trinity’s Code is available on Trinity’s website at www.lanb.com/tcc/management.asp. All of Trinity’s employees, officers, including the Chief Executive Officer, the Chief Financial Officer, and all directors are required to fully comply with the Code. If Trinity’s Code is amended or a waiver is granted, such modification or waiver will be posted promptly on the website in accordance with SEC rules.

Item 11. Executive Compensation.

The information regarding executive compensation appears in Trinity’s Proxy Statement for the Annual Meeting of Shareholders to be held on May 15, 2008 under the headings “Compensation Discussion and Analysis,” “Executive Compensation” and “Director Compensation” and is incorporated herein by reference; provided, however, that the Compensation Committee Report will not be deemed to be filed with the SEC.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The information regarding security ownership of certain beneficial owners and management appears in the Company’s Proxy Statement for the Annual Meeting of Shareholders to be held on May 15, 2008 under the heading “Security Ownership of Certain Beneficial Owners, Directors and Management” and is incorporated herein by reference.

Aggregated Equity Plan Information.Our current stock-based benefit plans and arrangements consist of the 1998 Stock Option Plan that was approved by shareholders at the 1998 Annual Meeting and the Trinity Capital Corporation 2005 Stock Incentive Plan that was approved by shareholders at the 2005 Annual Meeting. The following table provides information regarding the plans as of December 31, 2007.

Plan category	Number of securities to be issued upon exercise of outstanding options	Weighted-average exercise price of outstanding options	Number of securities remaining available for future issuance
Equity compensation plans approved by security holders	445,395	$ 26.39	333,500
Equity compensation plans not approved by security holders	—	—	—
Total	445,395	$ 26.39	333,500

82

Item 13. Certain Relationships and Related Transactions, and Director Independence.

The information regarding certain relationships and related transactions appears in the Company’s Proxy Statement for the Annual Meeting of Shareholders to be held on May 15, 2008 under the headings “Board of Directors and Corporate Governance – Director Independence” and “Board of Directors and Corporate Governance – Related Party Transactions” and is incorporated herein by reference.

Item 14. Principal Accounting Fees and Services.

The information regarding the principal accounting fees and services appears in the Company’s Proxy Statement for the Annual Meeting of Shareholders to be held on May 15, 2008 under the heading “Item II – Approval of Independent Registered Public Accountants” and is hereby incorporated by reference.

83

PART IV

Item 15. Exhibits and Financial Statement Schedules.

Financial Statements. All financial statements of Trinity are set forth under Item 8 of this Form 10-K.

Exhibits. The following exhibits are filed as part of this Form 10-K:

3.1 (1)	Articles of Incorporation of Trinity Capital Corporation
3.2 (1)	Amended and Restated By-Laws of Trinity Capital Corporation
4.1 (1)	Indenture dated as of March 23, 2000 among Trinity Capital Corporation, Trinity Capital Trust I and The Bank of New York
4.3 (2)	Indenture dated as of May 11, 2004 between Trinity Capital Corporation, Trinity Capital Trust III and Wells Fargo Bank, National Association
4.4 (4)	Indenture dated as of June 29, 2005 between Trinity Capital Corporation, Trinity Capital Trust IV and Wilmington Trust Company
4.5 (5)	Indenture dated as of September 21, 2006 between Trinity Capital Corporation, Trinity Capital Trust V and Wilmington Trust Company.
10.1 (1)	Los Alamos National Bank Employee Stock Ownership Plan
10.2 (1)	Trinity Capital Corporation 1998 Stock Option Plan
10.3 (1)	Promissory Note dated July 16, 2001, in the original principal amount of $3,300,075, made to the benefit of Valley National Bank, located in Espanola, New Mexico
10.4 (2)	Form of stock option grant agreement
10.5 (3)	Trinity Capital Corporation 2005 Stock Incentive Plan
10.6 (3)	Trinity Capital Corporation 2005 Deferred Income Plan
10.7 (6)	Director fee schedule
10.8 (2)	Form of stock appreciation right grant agreement
10.9	Employment Agreement dated January 16, 2007 between Trinity Capital Corporation, Los Alamos National Bank and William C. Enloe
10.10	Employment Agreement dated January 16, 2007 between Trinity Capital Corporation, Los Alamos National Bank and Steve W. Wells
10.11	Amendment to Employment Agreement dated January 16, 2007 between Trinity Capital Corporation, Los Alamos National Bank and William C. Enloe dated March 13, 2008.
10.12	Amendment to Employment Agreement dated January 16, 2007 between Trinity Capital Corporation, Los Alamos National Bank and Steve W. Wells dated March 13, 2008.
21.1	Subsidiaries
31.1	Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a)
31.2	Certification on Chief Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a)

84

32.1	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
99.1 (1)	Audit Committee Charter

_________________________

(1)	Incorporated by reference to the Company’s Form 10 filed on April 30, 2003, as amended.
(2)	Incorporated by reference to the Company’s Form 8-K filed August 22, 2005
(3)	Incorporated by reference to the Company’s Form S-8 filed on July 28, 2005
(4)	Incorporated by reference to the Company’s Form 10-Q filed on August 9, 2005
(5)	Incorporated by reference to the Company’s Form 10-Q filed on November 9, 2006
(6)	Incorporated by reference to the Company’s Form 10-K for the fiscal year ended December 31, 2004

SIGNATURES

Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: March 17, 2008	TRINITY CAPITAL CORPORATION
	By:	/s/ William C. Enloe
		William C. Enloe President and Chief Executive Officer

85

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Name		Title	Date
/s/ William C. Enloe	President, Chief Executive Officer		March 17, 2008
William C. Enloe	and Director
/s/ Daniel R. Bartholomew
Daniel R. Bartholomew	Chief Financial Officer		March 17, 2008
	and Principal Accounting Officer
/s/ Jeffrey F. Howell
Jeffrey F. Howell	Chairman of the Board and Director		March 17, 2008
/s/ Deborah U. Johnson
Deborah U. Johnson	Director		March 17, 2008
/s/ Jerry Kindsfather
Jerry Kindsfather	Director		March 17, 2008
/s/ Arthur B. Montoya, Jr.
Arthur B. Montoya, Jr.	Director		March 17, 2008
/s/ Lewis A. Muir
Lewis A. Muir	Director		March 17, 2008
/s/ Stanley D. Primak
Stanley D. Primak	Director		March 17, 2008
/s/ Charles A. Slocomb
Charles A. Slocomb	Director		March 17, 2008
/s/ Steve W. Wells
Steve W. Wells	Secretary and Director		March 17, 2008
/s/ Robert P. Worcester
Robert P. Worcester	Vice-Chairman and Director		March 17, 2008

86

EX-10

Exhibit 10.11

EMPLOYMENT AGREEMENT

AMENDMENT #1

This Employment Agreement Amendment #1 (“Amendment #1”) is entered into as of March 13, 2008, by and between TRINITY CAPITAL CORPORATION, a New Mexico corporation (“Trinity”), LOS ALAMOS NATIONAL BANK, a national banking association (“LANB”), TITLE GUARANTY & INSURANCE COMPANY, a New Mexico corporation (“Title Guaranty”), each with their principal offices in Los Alamos, New Mexico (collectively, the “Companies”), and WILLIAM C. ENLOE (“Enloe”), and describes the terms and conditions modifying the Employment Agreement (the “Employment Agreement”) between Companies and Enloe dated January 16, 2007.

WHEREAS, Companies entered into the Employment Agreement believing it to be in their best interests that Enloe continue to be employed by the Companies on the terms and conditions contained therein and Enloe was willing to be so employed; and

WHEREAS, the Parties wish to modify certain terms and conditions of the Employment Agreement as provided herein to comply with recent changes in the laws and regulations and to include terms reflecting its practice with regard to Enloe’s Company automobile and related expenses.

NOW, THEREFORE, in consideration of the mutual promises and upon the terms and conditions set forth below, the parties agree as follows:

1. Automobile, Expenses and Insurance: Section C.4.c. of the Employment Agreement is hereby amended and restated to provide for the following Fringe Benefits as a portion of Mr. Enloe’s Compensation:

c. Automobile, Expenses and Insurance. LANB shall provide an automobile for use by Enloe during the term of the Employment Agreement. As the automobile shall be considered an expense of LANB, any personal usage of the automobile by Enloe will be charged to his personal account. LANB and Enloe agree to designate one-half (1/2) of the monthly lease payments as compensation to LANB for Enloe’s personal usage of the automobile and that such payments will be deducted from Enloe’s after-tax pay. LANB will be responsible for the lease and associated fees of the automobile, licensing and taxes, general repair, maintenance and gas. Enloe will purchase all gas for personal usage. Enloe shall be covered under Trinity’s insurance for all automobile insurance deemed necessary under the laws of the State of New Mexico.

2. Expenses: Section C.4.d. of the Employment Agreement is hereby modified to provide that all reimbursement of expenses shall occur by the end of the year following the year in which such expenses were incurred. Any request for reimbursement past this time period will not be paid.

Employment Agreement Amendment #1

William C. Enloe

Page 2 of 3

3. Cure Period: Section D.6.b. of the Employment Agreement is hereby modified to provide Enloe must provide any advance written notice of this intention to terminate his employment pursuant to a Detrimental Change in Duties within ninety (90) days of the initial occurrence of such a condition. In addition, Trinity, or its successor, shall have thirty (30) days to cure the condition specified in such notice of Detrimental Change in Duties.

4. Definition of “Specified Employee”: The following definition shall be added to Section D.9. of the Employment Agreement to define the term “specified employee”:

A Specified Employee is defined as:

An employee who, at any time during the plan year, is—

(i) an officer of the employer having an annual compensation greater than $130,000,

(ii) a 5-percent owner of the employer, or

(iii) a 1-percent owner of the employer having an annual compensation from the employer of more than $150,000.

For purposes of clause (i), no more than 50 employees (or, if lesser, the greater of 3 or 10 percent of the employees) shall be treated as officers. In the case of plan years beginning after December 31, 2002, the $130,000 amount in clause (i) shall be adjusted at the same time and in the same manner as under section 415(d) of the Internal Revenue Code, except that the base period shall be the calendar quarter beginning July 1, 2001, and any increase under this sentence which is not a multiple of $5,000 shall be rounded to the next lower multiple of $5,000. For purposes of determining the number of officers taken into account under clause (i), employees described in section 414(q)(5) of the Internal Revenue Code shall be excluded.

5. Separation of Service: The following subsection shall be added as Section D.12 of the Employment Agreement:

12. Separation of Service. Termination of Enloe’s employment shall be deemed to occur only where such termination satisfies the definition of a “separation of service” as defined under Section 409A of the Internal Revenue Code of 1986, as amended from time to time.

6. Section 409A: The following section shall be added as section J of the Employment Agreement:

J. Section 409A. It is intended that this Agreement shall comply with the provisions of Code Section 409A and the Treasury regulations relating thereto so as not to subject Enloe to the payment of additional taxes and interest under Code Section 409A. In furtherance of this intent, this

Employment Agreement Amendment #1

William C. Enloe

Page 3 of 3

Agreement shall be interpreted, operated and administered in a manner consistent with these intentions, and to the extent that any regulations or other guidance issued under Code Section 409A would result in Enloe being subject to payment of additional income taxes or interest under Code Section 409A, the Parties agree to amend this Agreement to maintain to the maximum extent practicable the original intent of this Agreement while avoiding the application of such taxes or interest under Code Section 409A.

IN WITNESS WHEREOF, the Companies have caused this Employment Agreement Amendment #1 to be executed by its duly authorized officer and William C. Enloe has hereunto signed this Amendment #1 on the date first above written.

WILLIAM C. ENLOE TRINITY CAPITAL CORPORATION

_/s/ William C. Enloe  /s/ Robert P. Worcester

William C. Enloe	By:	Robert P. Worcester
	Its:	Compensation Committee Chair

EX-10

Exhibit 10.12

EMPLOYMENT AGREEMENT

AMENDMENT #1

This Employment Agreement Amendment #1 (“Amendment #1”) is entered into as of March 13, 2008, by and between TRINITY CAPITAL CORPORATION, a New Mexico corporation (“Trinity”), LOS ALAMOS NATIONAL BANK, a national banking association (“LANB”), TITLE GUARANTY & INSURANCE COMPANY, a New Mexico corporation (“Title Guaranty”), each with their principal offices in Los Alamos, New Mexico (collectively, the “Companies”), and STEVE W. WELLS (“Wells”), and describes the terms and conditions modifying the Employment Agreement (the “Employment Agreement”) between Companies and Wells dated January 16, 2007.

WHEREAS, Companies entered into the Employment Agreement believing it to be in their best interests that Wells continue to be employed by the Companies on the terms and conditions contained therein and Wells was willing to be so employed; and

WHEREAS, the Parties wish to modify certain terms and conditions of the Employment Agreement as provided herein to comply with recent changes in the laws and regulations.

NOW, THEREFORE, in consideration of the mutual promises and upon the terms and conditions set forth below, the parties agree as follows:

1. Expenses: Section C.4.c. of the Employment Agreement is hereby modified to provide that all reimbursement of expenses shall occur by the end of the year following the year in which such expenses were incurred. Any request for reimbursement past this time period will not be paid.

2. Cure Period: Section D.6.b. of the Employment Agreement is hereby modified to provide Wells must provide any advance written notice of this intention to terminate his employment pursuant to a Detrimental Change in Duties within ninety (90) days of the initial occurrence of such a condition. In addition, Trinity, or its successor, shall have thirty (30) days to cure the condition specified in such notice of Detrimental Change in Duties.

3. Definition of “Specified Employee”: The following definition shall be added to Section D.9. of the Employment Agreement to define the term “specified employee”:

A Specified Employee is defined as:

An employee who, at any time during the plan year, is—

(i) an officer of the employer having an annual compensation greater than $130,000,

(ii) a 5-percent owner of the employer, or

Employment Agreement Amendment #1

Steve W. Wells

Page 2 of 3

(iii) a 1-percent owner of the employer having an annual compensation from the employer of more than $150,000.

For purposes of clause (i), no more than 50 employees (or, if lesser, the greater of 3 or 10 percent of the employees) shall be treated as officers. In the case of plan years beginning after December 31, 2002, the $130,000 amount in clause (i) shall be adjusted at the same time and in the same manner as under section 415(d) of the Internal Revenue Code, except that the base period shall be the calendar quarter beginning July 1, 2001, and any increase under this sentence which is not a multiple of $5,000 shall be rounded to the next lower multiple of $5,000. For purposes of determining the number of officers taken into account under clause (i), employees described in section 414(q)(5) of the Internal Revenue Code shall be excluded.

4. Separation of Service: The following subsection shall be added as Section D.12 of the Employment Agreement:

12. Separation of Service. Termination of Wells’ employment shall be deemed to occur only where such termination satisfies the definition of a “separation of service” as defined under Section 409A of the Internal Revenue Code of 1986, as amended from time to time.

5. Section 409A: The following section shall be added as section J of the Employment Agreement:

J. Section 409A. It is intended that this Agreement shall comply with the provisions of Code Section 409A and the Treasury regulations relating thereto so as not to subject Wells to the payment of additional taxes and interest under Code Section 409A. In furtherance of this intent, this Agreement shall be interpreted, operated and administered in a manner consistent with these intentions, and to the extent that any regulations or other guidance issued under Code Section 409A would result in Wells being subject to payment of additional income taxes or interest under Code Section 409A, the Parties agree to amend this Agreement to maintain to the maximum extent practicable the original intent of this Agreement while avoiding the application of such taxes or interest under Code Section 409A.

Employment Agreement Amendment #1

Steve W. Wells

Page 3 of 3

IN WITNESS WHEREOF, the Companies have caused this Employment Agreement Amendment #1 to be executed by its duly authorized officer and Steve W. Wells has hereunto signed this Amendment #1 on the date first above written.

STEVE W. WELLS TRINITY CAPITAL CORPORATION

/s/ Steve W. Wells            /s/ Robert P. Worcester

Steve W. Wells	By:	Robert P. Worcester
	Its:	Compensation Committee Chair

EX-31

Exhibit 31.1

I, William C. Enloe, certify that:

1. I have reviewed this annual report on Form 10-K of Trinity Capital Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purpose in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting, and;

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a) All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 17, 2008	/s/ William C. Enloe
	William C. Enloe
	President and Chief Executive Officer

EX-31

Exhibit 31.2

I, Daniel R. Bartholomew, certify that:

1. I have reviewed this annual report on Form 10-K of Trinity Capital Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purpose in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting, and;

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a) All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 17, 2008	/s/ Daniel R. Bartholomew
	Daniel R. Bartholomew
	Chief Financial Officer

EX-32

Exhibit 32.1

CERTIFICATION OF CEO PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report on Form 10-K of Trinity Capital Corporation, a New Mexico corporation (the “Company”), for the period ended December 31, 2007 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), William C. Enloe, as President and Chief Executive Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ William C. Enloe

William C. Enloe

President and Chief Executive Officer

March 17, 2008

EX-32

Exhibit 32.2

CERTIFICATION OF CFO PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report on Form 10-K of Trinity Capital Corporation, a New Mexico corporation (the “Company”), for the period ended December 31, 2007 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Daniel R. Bartholomew as Chief Financial Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Daniel R. Bartholomew

Daniel R. Bartholomew

Chief Financial Officer

March 17, 2008