SOURCE: Vineyard National Bancorp

August 06, 2008 09:30 ET

Vineyard National Bancorp Reports Results of Operations for the Second Quarter 2008

CORONA, CA--(Marketwire - August 6, 2008) - Vineyard National Bancorp (the "company") (NASDAQ: VNBC), parent company of Vineyard Bank, N.A. ("Vineyard") and other subsidiaries today reported a loss for the quarter ended June 30, 2008 of $62.5 million, or $6.46 per common share, compared with net earnings of $6.0 million, or $0.53 per diluted common share, for the quarter ended June 30, 2007. The net loss for the second quarter of 2008 was due primarily to $40.5 million of provision for loan losses, principally associated with Vineyard's land and single family residential ("SFR") tract construction loans originated between 2005 and 2007, and a tax provision of $20.3 million resulting primarily from the creation of a valuation allowance on the company's deferred tax asset.

James LeSieur, interim chief executive officer, stated, "Despite the current economic environment and additional challenges arising in the second quarter, Vineyard continues to make significant strides toward the resolution of our asset quality issues and the implementation of other risk mitigation measures. Payoffs of our luxury home construction loans, loan sales and the sale of other real estate owned properties have made positive contributions. We continue to work diligently to maintain core deposit relationships and have been successful in attracting new deposits. Management remains committed to executing the strategies necessary to reduce risk, fulfill the requirements established with our regulators, and meet our internal objectives. Therefore, although there are still significant challenges, Vineyard is starting to see positive results from the strategies that have been put in place."

Liquidity

Effective April 21, 2008, the Federal Home Loan Bank ("FHLB") reduced Vineyard's borrowing capacity from 40% to 30% of Vineyard's total assets. However, the reduction had limited impact as Vineyard's borrowing availability was already limited to the amount of eligible collateral that can be pledged to secure that borrowing facility. At June 30, 2008, based on its eligible pledged loan and investment collateral, that availability was $289.4 million of which $155.0 million was outstanding. Therefore, Vineyard had a remaining borrowing availability of $134.4 million.

On July 24, 2008, Vineyard borrowed $126.0 million from the FHLB, consisting of four $31.5 million advances with terms ranging from 9 months to 1 year. As a result of these term borrowings, Vineyard had a remaining borrowing availability of $2.2 million available against its loan and investment collateral pledged at the FHLB. The proceeds from the FHLB advances were invested in federal funds sold for liquidity needs. At July 24, 2008 Vineyard had an aggregate of $178.0 million invested in federal funds sold.

On August 1, 2008, Vineyard entered into an intercreditor agreement with the FHLB and Federal Reserve Bank of San Francisco ("FRB") establishing a borrowing facility under the FRB Discount Window program whereby certain eligible loans pledged to the FRB, and approved by the FHLB, may be used to support any advances from the FRB Discount Window.

Vineyard currently has no unsecured correspondent banking facilities with borrowing availability.

As a result of the issuance of the Consent Order by the Office of the Comptroller of the Currency ("OCC") on July 22, 2008, Vineyard will no longer be able to accept, renew or rollover brokered deposits unless and until such time as we receive a waiver from the FDIC. Vineyard has requested a waiver from the FDIC, but there can be no assurance that such a waiver will be granted, or granted on the terms requested.

2008 Operating Objectives

As disclosed previously, the company has established the following five primary objectives as a basis to reduce risk, refocus on core operations and reposition the company to achieve the long-term success of the franchise:

1) Reduce the Overall Risk Profile of the company. This objective includes
   the significant reduction of SFR tract construction lending and related
   land development projects, enhanced borrower sponsorship requirements,
   increased and expanded core deposit growth, business and commercial
   real estate lending in supportive sub-markets, and enhanced balance
   sheet management;

2) Loan Portfolio Management.  In order to produce a base of stabilized
   long-term earnings, the company will seek to proactively rebalance the
   existing loan portfolio and diversify new business generation to reduce
   its risk profile, meet its targeted concentration ranges within
   sub-markets and sub-portfolios, and maintain an overall portfolio yield
   consistent with quality and sustainable returns;

3) Liquidity Enhancement and Funding Cost Reduction. The company will seek
   to reduce its funding costs by an intensified focus on lower cost core
   deposits, cash management driven business relationships, the effective
   repricing of its time deposit portfolio in a decreasing interest rate
   environment, and reduction of its reliance on higher costing
   liabilities;

4) Corporate Reallocation and Reorganization. To improve its operating
   efficiencies, the company will continually review its resource
   allocation to ensure the optimum allocation of talent among functions.
   The company seeks to continue to deploy and redeploy resources, both
   personnel and other operating costs, toward achievement of our
   objectives; and

5) Protection and Preservation of Capital.  The company will focus on
   protecting and preserving capital. Income from Vineyard, in the long
   term, is expected to be a contributor to increasing capital and
   accretive to the company's risk based capital ratios. In light of
   current economic conditions and to address the deterioration in the
   loan portfolio, the company has significantly curtailed new loan
   generation, which combined with loan sales and repayments may make
   additional capital available. In addition, in order to address the
   financial impact of the abrupt and severe decline in real estate values
   and the potential continuing deterioration in the loan portfolio, the
   company will also pursue strategic alternatives, which may include a
   significant capital raise, to strengthen its capital.

Balance Sheet

As part of the operating objectives described above, the company implemented actions to manage its loan production levels resulting in a net contraction of its balance sheet during the first half of 2008. The company compressed its balance sheet by $118.8 million during the six months ended June 30, 2008, or 5%, from $2.5 billion at December 31, 2007 to $2.4 billion at June 30, 2008. During the six months ended June 30, 2008, Vineyard decreased its loan balance, including loans held-for-sale, by $169.8 million. This loan balance decrease was comprised primarily of $413.3 million in loan payoffs and paydowns, $64.1 million of net charge-offs and $31.0 million of net loan sales, offset by $338.2 million in disbursements on new and existing loan commitments.

Following its exit from the tract lending business, the company continues to work to reduce its existing portfolio exposure in the tract construction market. At June 30, 2008, Vineyard's outstanding tract construction loans, including those SFR tract loans held for sale, totaled $105.3 million, a decrease of $24.7 million, or 19.0% since March 31, 2008. This second quarter 2008 decrease was primarily related to the charge-off of $21.5 million of tract construction loans, and $12.1 million of principal paydowns and payoffs, net of $7.9 million of disbursements on existing loans. Unfunded commitments for the tract construction portfolio totaled $15.3 million at June 30, 2008, a decrease of $17.1 million, or 52.7%, from March 31, 2008.

The company had a net increase of $146.4 million in deposits during the second quarter of 2008, related primarily to an increase in time deposit accounts, of which $266.3 million came from brokered CDs. There was also a $5.0 million increase in exchange balances, which are 1031 exchange balances associated with 1031 Exchange Advantage, Inc. and 1031 Funding & Reverse Corp. (collectively, the "exchange companies"). As a result of the increase in funding deposits and loan paydowns, the company decreased its FHLB borrowings from $227.0 million at March 31, 2008 to $155.0 million at June 30, 2008.

Asset Quality

Non-accrual loans

During the second quarter of 2008, non-accrual loans increased to $192.6 million at June 30, 2008 from its $105.2 million level at March 31, 2008. The increase is principally associated with loans originated between 2005 and 2007. Of the balance of non-accrual loans at June 30, 2008, $12.3 million relates to commercial real estate construction loans, $39.7 million relates to land loans, $56.1 million relates to luxury construction loans and $73.5 relates to SFR tract construction loans. The company had a loss of $3.4 million of interest income associated with new non-accrual loans in the second quarter of 2008. Loans are placed on non-accrual status if there is reasonable doubt as to the collectability of principal and interest in accordance with the original credit terms.

(Dollars in Thousands)        June 30, 2008            March 31, 2008
                        ------------------------- -------------------------
                        Non-accrual    Specific   Non-accrual    Specific
Loan Type                 Balance      Reserve      Balance      Reserve
                        ------------ ------------ ------------ ------------
Construction and Land:
  Single-family tract   $     73,485 $      2,050 $     87,042 $      2,227
  Single-family luxury        56,140        3,456        4,523           46
  CRE Construction            12,321            -            -            -
  Land                        39,660        9,698        6,205            -
Commercial and
 residential real
 estate                        4,642          908        4,965        1,133
SBA                            1,569            -        1,533            -
Other                          4,832        2,000          903            -
                        ------------ ------------ ------------ ------------
  Total                 $    192,649 $     18,113 $    105,171 $      3,406
                        ============ ============ ============ ============

Charged-off loans

During the quarter ended June 30, 2008, the company recorded $36.5 million in net charge-offs, which equates to 1.79% of average gross loans for the quarter. Of the charge-offs, $21.5 million relate to tract construction loans and $13.1 million relate to land loans.

Other Real Estate Owned

During the second quarter of 2008, other real estate owned ("OREO"), which consists of properties obtained through foreclosure, decreased from $12.6 million to $6.2 million.

The decrease is due primarily to the tract land project, which encompassed one hundred finished residential lots in a 1,788 unit planned development project within the Temecula Valley region of southern California, sold during the second quarter of 2008 at its then book value of $6.1 million resulting in no further loss.

The balance of OREO at June 30, 2008 includes $1.1 million in a SFR tract construction loan and $0.4 million in a SBA loan, which was transferred to OREO at the end of second quarter of 2008, and $4.6 million in a SFR tract construction loan which was transferred to OREO in the fourth quarter of 2007. That OREO was written down further by $0.6 million during the second quarter of 2008.

The company is actively pursuing disposition of the foreclosed assets.

Deferred Tax Asset

Deferred tax assets and liabilities are recognized for future tax consequences of the difference between the carrying amount of assets and liabilities and their respective tax bases, as well as operating loss and tax credit carry forwards. A valuation allowance is established against deferred tax assets when, in the judgment of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

During the second quarter of 2008, the company provided a full valuation allowance against its deferred tax asset, due to uncertainty related to its eventual realizability. The ultimate realizability of the deferred tax asset is dependent upon the Company's ability to derive benefits for the tax deductions inherent in the deferred tax asset by getting refunds for taxes paid in the past or by reducing future tax obligations. Accordingly, management's judgments regarding the nature of future reversals of existing temporary differences, future taxable income and available tax planning strategies impact the degree to which a valuation allowance is determined to be necessary. These judgments are based in part on factors that may or may not be entirely within the control of management, such as judgments regarding future economic conditions and changes within the business environment in which we operate. Depending on how these factors change in the future, management's judgment regarding the need for a valuation allowance against its deferred tax asset could change.

Current Tax Receivable

As of June 30, 2008, we had a current net income tax receivable of $23.8 million primarily reflecting the impact of utilizing net operating losses generated during the current year to reduce our tax liabilities in prior tax years. Any remaining net operating losses generated in the current year, which would expire in 2028, remain available to offset future taxable income. The utilization of these net operating loss carryforwards to offset future taxable income could have a positive impact on our future net income by reducing the amount of income taxes recognized in our consolidated statements of operations.

Extension of Maturity Date and Subsequent Default on Line of Credit

As previously disclosed, the company and First Tennessee Bank, National Association ("First Tennessee") entered into the Fourth Modification and Covenant Waiver Agreement (the "Agreement") on July 1, 2008 which, among other things, extended the maturity date of the company's line of credit from First Tennessee from June 30, 2008 to August 29, 2008 at an annual interest rate of LIBOR plus 3.50%, and granted and/or extended the waiver by First Tennessee of certain financial and other covenant failures of the company through August 29, 2008. The outstanding balance of the line of credit, which is secured by 100% of Vineyard's common stock, was $48.3 million at June 30, 2008. The company paid First Tennessee a lender fee equal to 0.25% of the outstanding balance of the line of credit, or $0.1 million, in connection with the Agreement.

Also as previously disclosed, the company notified First Tennessee on July 24, 2008 of, and requested a waiver with respect to, an event of default under the line of credit which occurred by virtue of the Consent Order that was issued by the OCC on July 22, 2008. As a result, unless First Tennessee subsequently waives this event of default, First Tennessee will be entitled to accelerate the maturity date of the line of credit and otherwise exercise its rights as a secured party against the collateral to collect, enforce or satisfy the obligations under the line of credit.

Results of Operations

For the quarter ended June 30, 2008, gross loan interest income was $34.9 million, a decrease of $9.6 million, or 22% as compared to the same period in 2007. The effective yield of the loan portfolio in the second quarter of 2008 was 6.9%, as compared to 8.8% for the same period in 2007. The increase in non-accrual loans negatively impacted our gross interest income and loan yield due to $3.4 million of interest income lost associated with new non-accrual loans in the second quarter. Had all existing non-accrual loans performed during the second quarter of 2008, interest income would have been greater by $9.8 million.

Total net revenues (net interest income plus other operating income) for the quarter ended June 30, 2008 were $17.8 million, a decrease of $7.0 million, or 28%, as compared to the same period in 2007.

These results of operations produced a net interest margin of 3.14% for the second quarter of 2008, as compared to 4.13% for the same period in 2007 and 3.47% for the first quarter of 2008.

Total operating expenses for the quarter-ended June 30, 2008 were $19.5 million, as compared to $14.2 million for the same period in 2007. The increase from 2007 is primarily attributable to additional professional services fees of approximately $3.5 million which include audit and legal expenses and approximately $2.0 million in the write down of assets including Goodwill.

Capital Resources

At June 30, 2008, stockholders' equity of the company totaled $29.5 million, a decrease of $83.5 million, or 74% as compared to December 31, 2007. In addition, the company's Tier 1 Risk-Based and Leverage capital ratios of 1.52% and 1.43%, respectively, were below the minimum regulatory ratio requirement of 4.0%. Management is currently addressing capital concerns at the company and is actively pursuing strategic alternatives for raising capital. The company also expects to enter into an agreement with the FRB to address the capital needs of the company as well as other risk management and operational matters.

Despite the impact of the additional provision and charge-offs, Vineyard has $186.4 million in common equity and was mathematically considered to be "well capitalized" at June 30, 2008. At June 30, 2008, Vineyard's Tier 1 Risk-Based and Leverage capital ratios were 8.76% and 8.28%, respectively, as compared to the "well capitalized" minimum ratios of 6.0% and 5.0%, respectively. It is intended that the continued effort to strategically contract assets will assist in bolstering Vineyard's capital.

By virtue of the Consent Order that was issued by the OCC on July 22, 2008, Vineyard is now classified as "adequately capitalized" notwithstanding the fact that its actual capital ratios at June 30, 2008 met the criteria for being considered "well capitalized."

Payment of Dividends

The company's ability to pay cash dividends is limited by California law. With certain exceptions, a California corporation may not pay a dividend to its shareholders unless (i) its retained earnings equal at least the amount of the proposed dividend, or (ii) after giving effect to the dividend, the corporation's assets would equal at least 1.25 times its liabilities and, for corporations with classified balance sheets, the current assets of the corporation would be at least equal to its current liabilities or, if the average of the earnings of the corporation before taxes on income and before interest expense for the two preceding fiscal years was less than the average of the interest expense of the corporation for those fiscal years, at least equal to 1.25 times its current liabilities.

At June 30, 2008, the company had an accumulated deficit of $81.2 million and did not otherwise satisfy the minimum asset to liability ratios for paying dividends under California law. As a result, the company is legally prohibited from paying dividends on both its common stock and preferred stock. The company expects that it will be legally prohibited from paying dividends on both its common stock and preferred stock for the foreseeable future.

In addition, the company's primary regulator, the FRB, on May 16, 2008, advised the company that in light of the company's obligation to serve as a source of financial and managerial strength to Vineyard, the company may not make payments to third parties, without prior approval from the FRB, including, without limitation, dividend payments to the holders of its common stock and preferred stock.

About Vineyard National Bancorp

The company is a $2.4 billion bank holding company headquartered in Corona and the parent company of Vineyard and the exchange companies. Vineyard, also headquartered in Corona, operates through sixteen full-service banking centers and four regional financial centers in the counties of Los Angeles, Marin, Monterey, Orange, Riverside, San Bernardino, San Diego, Santa Clara and Ventura, Calif. The exchange companies are headquartered in Encinitas, Calif. The company's common stock is traded on the NASDAQ Global Market System under the symbol "VNBC." For additional information on the company visit www.vnbcstock.com or for additional information on Vineyard and to access internet banking, please visit www.vineyardbank.com. For additional information on the exchange companies, please visit www.1031exchangeadvantage.com.

This press release contains forward-looking statements as referenced in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are inherently unreliable and actual results may vary. Factors which could cause actual results to differ from these forward-looking statements include changes in the competitive marketplace, changes in the interest rate environment, economic conditions, outcome of pending litigation, risks associated with credit quality and other factors discussed in the company's filings with the Securities and Exchange Commission. The company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

                VINEYARD NATIONAL BANCORP AND SUBSIDIARIES
                        CONSOLIDATED BALANCE SHEETS
             (dollars in thousands, except per share amounts)
                                (unaudited)


                             June 30,     June 30,
                               2008         2007       $ Change   % Change
                           -----------  -----------  -----------  --------
Assets
   Loans, net of unearned
    income                 $ 1,892,947  $ 2,031,872  $  (138,925)       -7%
      Less: Allowance for
       loan losses             (52,175)     (21,255)     (30,920)      145%
                           -----------  -----------  -----------  --------
         Net Loans           1,840,772    2,010,617     (169,845)       -8%
   Loans held-for-sale          64,801          296       64,505     21792%
   Investment securities       150,718      223,793      (73,075)      -33%
   Federal funds sold          178,000       23,000      155,000       674%
                           -----------  -----------  -----------  --------
         Total Earnings
          Assets             2,234,291    2,257,706     (178,415)       -8%
                           -----------  -----------  -----------  --------

   Cash and due from banks      27,271       42,526      (15,255)      -36%
   Premises and equipment,
    net                         17,225       18,861       (1,636)       -9%
   Income tax receivable,
    net                         23,823       (1,582)      25,405     -1606%
   Deferred tax asset                -       17,056      (17,056)     -100%
   Other real estate owned       6,175       11,653       (5,478)      -47%
   Goodwill and other
    intangibles                  1,553       42,884      (41,331)      -96%
   Other assets                 54,146       23,932       30,214       126%
                           -----------  -----------  -----------  --------
            Total Assets   $ 2,364,484  $ 2,413,036  $   (48,552)       -2%
                           ===========  ===========  ===========  ========


Liabilities and
 Stockholders' Equity
Liabilities
      Deposits
      Non-interest bearing $   233,704  $   301,281  $   (67,577)      -22%
      Interest-bearing       1,711,591    1,561,211      150,380        10%
                           -----------  -----------  -----------  --------
         Total Deposits      1,945,295    1,862,492       82,803         4%

   Exchange balances            23,125            -       23,125       100%
   Federal Home Loan Bank
    advances                   155,000      210,000      (55,000)      -26%
   Other borrowings             48,300       26,000       22,300        86%
   Subordinated debt             5,000        5,000            -         0%
   Junior subordinated
    debentures                 115,470      115,470            -         0%
   Other liabilities            42,779       22,037       20,742        94%
                           -----------  -----------  -----------  --------
         Total Liabilities   2,334,969    2,240,999       93,970         4%
                           -----------  -----------  -----------  --------

Stockholders' Equity
   Common stock equity          90,805      102,945      (12,140)      -12%
   Preferred stock equity       31,615       31,694          (79)        0%
   Retained (deficit) /
    earnings                   (82,573)      49,123     (131,696)     -268%
   Unallocated ESOP shares      (4,873)      (5,487)         614       -11%
   Cumulative other
    comprehensive loss          (5,459)      (6,238)         779       -12%
                           -----------  -----------  -----------  --------
         Total
          Stockholders'
          Equity                29,515      172,037     (142,522)      -83%
                           -----------  -----------  -----------  --------
            Total
             Liabilities
             and
             Stockholders'
             Equity        $ 2,364,484  $ 2,413,036  $   (48,552)       -2%
                           ===========  ===========  ===========  ========

Total non-performing
 loans/Gross loans (1)           11.64%        0.60%

Number of shares of common
 stock outstanding (2)       9,669,661   10,671,690


(1) Total non-performing loans include non-accrual loans, renegotiated
    loans and accruing loans that are more than 90 days past due.  For
    purposes of this calculation, gross loans include loans held-for-sale.
(2) Number of shares of common stock outstanding at June 30, 2008 and June
    30, 2007 excludes 217,930 and 245,368 unreleased and unallocated ESOP
    shares, respectively.




                VINEYARD NATIONAL BANCORP AND SUBSIDIARIES
                        CONSOLIDATED BALANCE SHEETS
             (dollars in thousands, except per share amounts)
                                (unaudited)


                             June 30,     December
                               2008       31, 2007     $ Change   % Change
                           -----------  -----------  -----------  --------
Assets
   Loans, net of unearned
    income                 $ 1,892,947  $ 2,008,071  $  (115,124)       -6%
      Less: Allowance for
       loan losses             (52,175)     (48,849)      (3,326)        7%
                           -----------  -----------  -----------  --------
         Net Loans           1,840,772    1,959,222     (118,450)       -6%
   Loans held-for-sale          64,801      119,427      (54,626)      -46%
   Investment securities       150,718      202,387      (51,669)      -26%
   Federal funds sold          178,000       36,000      142,000       394%
                           -----------  -----------  -----------  --------
         Total Earnings
          Assets             2,234,291    2,317,036     (224,745)      -10%
                           -----------  -----------  -----------  --------

   Cash and due from banks      27,271       47,537      (20,266)      -43%
   Premises and equipment,
    net                         17,225       18,326       (1,101)       -6%
   Income tax receivable,
    net                         23,823        3,208       20,615       643%
   Deferred tax asset                -       28,357      (28,357)     -100%
   Other real estate owned       6,175       17,375      (11,200)      -64%
   Goodwill and other
    intangibles                  1,553        4,637       (3,084)      -67%
   Other assets                 54,146       46,803        7,343        16%
                           -----------  -----------  -----------  --------
            Total Assets   $ 2,364,484  $ 2,483,279  $  (118,795)       -5%
                           ===========  ===========  ===========  ========


Liabilities and
 Stockholders' Equity
Liabilities
   Deposits
      Non-interest bearing $   233,704  $   316,905  $   (83,201)      -26%
      Interest-bearing       1,711,591    1,618,747       92,844         6%
                           -----------  -----------  -----------  --------
         Total Deposits      1,945,295    1,935,652        9,643         0%

   Exchange balances            23,125       47,515      (24,390)      -51%
   Federal Home Loan Bank
    advances                   155,000      175,000      (20,000)      -11%
   Other borrowings             48,300       45,250        3,050         7%
   Subordinated debt             5,000        5,000            -         0%
   Junior subordinated
    debentures                 115,470      115,470            -         0%
   Other liabilities            42,779       46,367       (3,588)       -8%
                           -----------  -----------  -----------  --------
         Total Liabilities   2,334,969    2,370,254      (35,285)       -1%
                           -----------  -----------  -----------  --------

Stockholders' Equity
   Common stock equity          90,805       94,499       (3,694)       -4%
   Preferred stock equity       31,615       31,615            -         0%
   Retained deficit            (82,573)      (5,372)     (77,201)     1437%
   Unallocated ESOP shares      (4,873)      (5,168)         295        -6%
   Cumulative other
    comprehensive loss          (5,459)      (2,549)      (2,910)      114%
                           -----------  -----------  -----------  --------
         Total
          Stockholders'
          Equity                29,515      113,025      (83,510)      -74%
                           -----------  -----------  -----------  --------
            Total
             Liabilities
             and
             Stockholders'
             Equity        $ 2,364,484  $ 2,483,279  $  (118,795)       -5%
                           ===========  ===========  ===========  ========

Total non-performing
 loans/Gross loans (1)           11.64%        3.55%

Number of shares of common
 stock outstanding (2)       9,669,661   10,053,994

(1) Total non-performing loans include non-accrual loans, renegotiated
    loans and accruing loans that are more than 90 days past due.  For
    purposes of this calculation, gross loans include loans held-for-sale.
(2) Number of shares of common stock outstanding at June 30, 2008 and
    December 31, 2007 excludes 217,930 and 231,781 unreleased and
    unallocated ESOP shares, respectively.




                VINEYARD NATIONAL BANCORP AND SUBSIDIARIES
                  CONSOLIDATED STATEMENTS OF OPERATIONS
             (dollars in thousands, except per share amounts)
                                (unaudited)


                              Three Months Ended
                                   June 30,
                            ----------------------
                               2008        2007      $ Change    % Change
                            ----------  ----------  ----------  ----------
Interest Income
   Loans, including fees    $   34,945  $   44,518  $   (9,573)        -22%
   Investment securities         2,395       2,967        (572)        -19%
                            ----------  ----------  ----------  ----------
      Total Interest Income     37,340      47,485     (10,145)        -21%

Interest Expense
   Deposits                     15,332      17,181      (1,849)        -11%
   Borrowings and debt
    obligations                  4,753       6,934      (2,181)        -31%
                            ----------  ----------  ----------  ----------
      Total Interest
       Expense                  20,085      24,115      (4,030)        -17%

Net Interest Income             17,255      23,370      (6,115)        -26%
Provision for loan losses       40,500         500      40,000        8000%
                            ----------  ----------  ----------  ----------
   Net interest (loss) /
    income after provision
    for loan losses            (23,245)     22,870     (46,115)       -202%

Other Income
   Fees and service charges        424         416           8           2%
   Gain on sale of SBA
    loans and SBA broker
    fee income                       4         581        (577)        -99%
   Gain on sale of non-SBA
    loans                           48         337        (289)        -86%
   Other income                     70         128         (58)        -45%
                            ----------  ----------  ----------  ----------
      Total Other Income           546       1,462        (916)        -63%


Other Expenses
   Salaries and benefits         6,593       7,856      (1,263)        -16%
   Occupancy and equipment       2,605       2,475         130           5%
   Legal services                1,792         286       1,506         527%
   Audit services                  674         186         488         262%
   Other professional
    services                     1,822         360       1,462         406%
   Office supplies, postage
    and telephone                  534         572         (38)         -7%
   Business development            351         594        (243)        -41%
   Insurance and
    assessments                    640         413         227          55%
   Loan related                  1,171         267         904         339%
   Write down of assets          1,957           -       1,957         100%
   Other expense                 1,380       1,165         215          18%
                            ----------  ----------  ----------  ----------
      Total Other
       Expenses                 19,519      14,174       5,345          38%

(Loss) / earnings before
 income taxes                  (42,218)     10,158     (52,376)       -516%
Income tax provision            20,270       4,156      16,114         388%
                            ----------  ----------  ----------  ----------
      Net (Loss) /
       Earnings             $  (62,488) $    6,002  $  (68,490)      -1141%
                            ==========  ==========  ==========  ==========

Preferred stock dividend    $        -  $      231  $     (231)       -100%

Weighted average shares
 outstanding used in
 (loss) / earnings per share
 calculation
      Basic                  9,666,546  10,670,850
      Diluted (3)            9,666,546  10,938,741

(Loss) / Earnings per
 common share
      Basic                 $    (6.46) $     0.54  $    (7.00)      -1296%
      Diluted (3)           $    (6.46) $     0.53  $    (6.99)      -1319%

Efficiency Ratio (4)               110%         57%


(3) In a net loss scenario, diluted loss per share equals basic loss per
    share.
(4) The efficiency ratio is calculated by dividing total operating expenses
    by net interest income and total other income.




                VINEYARD NATIONAL BANCORP AND SUBSIDIARIES
                  CONSOLIDATED STATEMENTS OF OPERATIONS
             (dollars in thousands, except per share amounts)
                                (unaudited)


                               Six Months Ended
                                   June 30,
                            ----------------------
                               2008        2007      $ Change    % Change
                            ----------  ----------  ----------  ----------
Interest Income
  Loans, including fees     $   75,418  $   86,729  $  (11,311)        -13%
  Investment securities          4,074       5,905      (1,831)        -31%
                            ----------  ----------  ----------  ----------
    Total Interest Income       79,492      92,634     (13,142)        -14%

Interest Expense
  Deposits                      32,439      34,254      (1,815)         -5%
  Borrowings and debt
   obligations                   9,916      12,517      (2,601)        -21%
                            ----------  ----------  ----------  ----------
    Total Interest Expense      42,355      46,771      (4,416)         -9%

Net Interest Income             37,137      45,863      (8,726)        -19%
Provision for loan losses       67,400       1,700      65,700        3865%
                            ----------  ----------  ----------  ----------
  Net interest (loss) /
   income after provision
   for loan losses             (30,263)     44,163     (74,426)       -169%

Other Income
  Fees and service charges         772         899        (127)        -14%
  Gain on sale of SBA loans
   and SBA broker fee income       174       1,181      (1,007)        -85%
  (Loss) / gain on sale of
   securities and non-SBA
   loans                           (83)        337        (420)       -125%
  Other income                     144         247        (103)        -42%
                            ----------  ----------  ----------  ----------
    Total Other Income           1,007       2,664      (1,657)        -62%

Other Expenses
  Salaries and benefits         14,982      15,450        (468)         -3%
  Occupancy and equipment        5,309       4,933         376           8%
  Legal services                 2,474         426       2,048         481%
  Audit services                 1,502         361       1,141         316%
  Other professional
   services                      3,352         692       2,660         384%
  Office supplies, postage
   and telephone                 1,075       1,199        (124)        -10%
  Business development             934       1,160        (226)        -19%
  Insurance and assessments      1,113         765         348          45%
  Loan related                   1,753         480       1,273         265%
  Write down of assets           5,825           -       5,825         100%
  Other expense                  2,375       1,835         540          29%
                            ----------  ----------  ----------  ----------
    Total Other Expenses        40,694      27,301      13,393          49%

(Loss) / earnings before
 income taxes                  (69,950)     19,526     (89,476)       -458%
Income tax provision             5,790       8,015      (2,225)        -28%
                            ----------  ----------  ----------  ----------
    Net (Loss) / Earnings   $  (75,740) $   11,511  $  (87,251)       -758%
                            ==========  ==========  ==========  ==========

Preferred stock dividend    $      644  $      460  $      184          40%

Weighted average shares
 outstanding used in
 (loss) / earnings per
 share calculation
    Basic                    9,698,289  10,677,123
    Diluted (3)              9,698,289  10,940,857

(Loss) / Earnings per
 common share
    Basic                   $    (7.88) $     1.03  $    (8.91)       -865%
    Diluted (3)             $    (7.88) $     1.01  $    (8.89)       -880%

Efficiency Ratio (4)               107%         56%

(3) In a net loss scenario, diluted loss per share equals basic loss per
    share.
(4) The efficiency ratio is calculated by dividing total operating expenses
    by net interest income and total other income.




                VINEYARD NATIONAL BANCORP AND SUBSIDIARIES
                          FINANCIAL PERFORMANCE
                                (unaudited)
                          (dollars in thousands)


                              Three Months Ended June 30,
              ------------------------------------------------------------
                          2008                           2007
              -----------------------------  -----------------------------
                                    Average                        Average
                Average              Yield/    Average              Yield/
                Balance   Interest    Cost     Balance   Interest    Cost
              ----------  --------- -------  ----------  --------- -------
Assets
  Gross loans
   (5)        $2,045,364  $  34,945    6.87% $2,037,736  $  44,518    8.76%
  Investment
   securities
   (6)           175,784      2,395    5.46%    240,668      2,967    4.93%
              ----------  ---------          ----------  ---------
    Total
     interest-
     earning
     assets    2,221,148     37,340    6.76%  2,278,404     47,485    8.36%
  Other assets   160,971                        129,410
  Less:
   allowance
   for loan
   losses        (52,656)                       (21,057)
              ----------                     ----------
    Total
     average
     assets   $2,329,463                     $2,386,757
              ==========                     ==========

Liabilities and
 Stockholders'
  Equity
   Interest-
   bearing
   deposits
   (7)        $1,527,069     15,332    4.04% $1,463,184     17,181    4.71%
  FHLB
   advances      202,002      2,270    4.46%    292,648      3,687    5.02%
  Other
   borrowings     49,185        827    6.65%     48,285        830    6.80%
  Subordinated
   debt            5,000         74    5.88%      5,000        109    8.61%
  Junior
   subordinated
   debentures    115,470      1,582    5.42%    115,470      2,308    7.91%
              ----------  ---------          ----------  ---------
    Total
     interest-
     bearing
     liabil-
     ities     1,898,726     20,085    4.23%  1,924,587     24,115    5.01%
                          ---------                      ---------
  Demand
   deposits      267,744                        286,878
  Exchange
   balances       22,763                              -
  Other
   liabilities    57,639                         24,800
              ----------                     ----------
    Total
     average
     liabil-
     ities     2,246,872                      2,236,265
  Preferred
   stock
   equity         31,615                         10,876
  Common stock
   equity, net
   of cumulative
   other
   comprehensive
   loss           50,976                        139,616
              ----------                     ----------
    Stockhol-
     ders'
     equity       82,591                        150,492
              ----------                     ----------
    Total
     liabil-
     ities and
     stockhol-
     ders'
     equity   $2,329,463                     $2,386,757
              ==========                     ==========

Net interest
 spread (8)                            2.53%                          3.35%
                                    =======                        =======
Net interest
 margin (9)               $  17,255    3.14%             $  23,370    4.13%
                          ========= =======              ========= =======


Return on
 Average
 Assets                              -10.80%                          1.01%
Return on
 Average
 Tangible
 Assets (10)                         -10.80%                          1.06%
Return on
 Average
 Common
 Equity                             -491.07%                         16.58%
Return on
 Average
 Tangible
 Common
 Equity (11)                        -536.58%                         24.74%
Net
 Charge-off's/
 Average
 Gross Loans                           1.79%                          0.00%

(5) The average loan balances include loans held-for-sale and non-accrual
    loans.
(6) The yield for investment securities is based on historical amortized
    cost balances.
(7) Includes savings, NOW, money market, and time certificate of deposit
    accounts.
(8) Net interest spread represents the average yield earned on
    interest-earning assets less the average rate paid on interest-bearing
    liabilities.
(9) Net interest margin is computed by dividing net interest income by
    total average earning assets.
(10) Return on average tangible assets is computed by dividing net income
     excluding core deposit amortization for the period by average tangible
     assets. Average tangible assets equal average total assets less
     average identifiable intangible assets and goodwill.
(11) Return on average tangible common stockholders' equity is computed by
     dividing net income applicable to common stock excluding core deposit
     amortization for the period by average tangible common stockholders'
     equity. Average tangible common stockholders' equity equals average
     total common stockholders' equity less average identifiable intangible
     assets and goodwill.




                VINEYARD NATIONAL BANCORP AND SUBSIDIARIES
                          FINANCIAL PERFORMANCE
                                (unaudited)
                          (dollars in thousands)


                                Six Months Ended June 30,
              ------------------------------------------------------------
                          2008                           2007
              -----------------------------  -----------------------------
                                    Average                        Average
                Average              Yield/    Average              Yield/
                Balance   Interest    Cost     Balance   Interest    Cost
              ----------  --------- -------  ----------  --------- -------
Assets
  Gross loans
   (5)        $2,087,215  $  75,418    7.27% $1,990,824  $  86,729    8.79%
  Investment
   securities
   (6)           178,660      4,074    4.57%    240,867      5,905    4.91%
              ----------  ---------          ----------  ---------
    Total
     interest-
     earning
     assets    2,265,875     79,492    7.05%  2,231,691     92,634    8.37%
 Other assets    153,891                        128,675
 Less:
  allowance
  for loan
  losses         (52,215)                       (20,488)
              ----------                     ----------
    Total
     average
     assets   $2,367,551                     $2,339,878
              ==========                     ==========

Liabilities
 and
 Stockholders'
 Equity
  Interest-
   bearing
   deposits
   (7)        $1,550,757     32,439    4.21% $1,474,127     34,254    4.69%
  FHLB
   advances      197,576      4,541    4.57%    249,220      6,241    5.01%
  Other
   borrowings     46,908      1,599    6.74%     41,554      1,465    7.01%
  Subordinated
   debt            5,000        175    6.93%      5,000        218    8.67%
  Junior
   subordinated
   debentures    115,470      3,601    6.17%    115,470      4,593    7.91%
              ----------  ---------          ----------  ---------
    Total
     interest-
     bearing
     liabil-
     ities     1,915,711     42,355    4.43%  1,885,371     46,771    4.99%
                          ---------                      ---------
  Demand
   deposits      278,206                        282,394
  Exchange
   balances       28,221                              -
  Other
   liabilities    51,423                         24,296
              ----------                     ----------
    Total
     average
     liabil-
     ities     2,273,561                      2,192,061
  Preferred
   stock
   equity         31,615                         10,274
  Common stock
   equity, net
   of cumulative
   other
   comprehensive
   loss           62,375                        137,543
              ----------                     ----------
    Stock-
    holders'
    equity        93,990                        147,817
              ----------                     ----------
    Total
     liabil-
     ities and
     stock-
     holders'
     equity   $2,367,551                     $2,339,878
              ==========                     ==========

Net interest
 spread (8)                            2.62%                          3.38%
                                    =======                        =======
Net interest
 margin (9)               $  37,137    3.31%             $  45,863    4.15%
                          ========= =======              ========= =======


Return on
 Average
 Assets                               -6.44%                          0.99%
Return on
 Average
 Tangible
 Assets (10)                          -6.43%                          1.04%
Return on
 Average
 Common
 Equity                             -245.86%                         16.20%
Return on
 Average
 Tangible
 Common
 Equity (11)                        -264.06%                         24.40%
Net
 Charge-off's/
 Average Gross
 Loans                                 3.07%                          0.01%

(5) The average loan balances include loans held-for-sale and non-accrual
    loans.
(6) The yield for investment securities is based on historical amortized
    cost balances.
(7) Includes savings, NOW, money market, and time certificate of deposit
    accounts.
(8) Net interest spread represents the average yield earned on
    interest-earning assets less the average rate paid on interest-bearing
    liabilities.
(9) Net interest margin is computed by dividing net interest income by
    total average earning assets.
(10) Return on average tangible assets is computed by dividing net income
     excluding core deposit amortization for the period by average tangible
     assets. Average tangible assets equal average total assets less
     average identifiable  intangible assets and goodwill.
(11) Return on average tangible common stockholders' equity is computed by
     dividing net income applicable to common stock excluding core deposit
     amortization for the period by average tangible common stockholders'
     equity. Average tangible common stockholders' equity equals average
     total common stockholders' equity less average identifiable intangible
     assets and goodwill.




                VINEYARD NATIONAL BANCORP AND SUBSIDIARIES
    Earning Asset, Funding Liability and Operating Expenses Composition
                                (unaudited)
                          (dollars in thousands)



                   June       March      December   September      June
                 30, 2008    31, 2008    31, 2007    30, 2007    30, 2007
                ----------  ----------  ----------  ----------  ----------
Earning Assets
Loans
  Commercial and
   industrial   $  179,345  $  165,300  $  156,966  $  147,799  $  133,255
  Real estate
   construction
   and land:
    Single-family
     luxury        536,795     573,104     582,962     577,155     497,494
    Single-family
     tract          54,431     130,003     146,627     163,396     183,395
    Commercial     227,694     218,499     198,186     163,573     162,514
    Land:
      Single-
       family
       luxury       25,282      24,560      22,931      16,648      19,946
      Single-
       family
       tract        30,031      59,647      64,405      61,760      38,878
      Commercial    12,592      14,766      15,439      19,444      30,686
      Other          5,390         906         909         795      25,099
  Real estate
   mortgage:
    Commercial     527,135     525,198     553,531     569,167     604,157
    Multi-family
     residential   139,152      88,370      93,662      97,971     185,450
    All other
     residential    53,903      68,584      56,257      60,944      53,533
  Consumer loans    99,891     108,736     115,702     112,064      97,752
  All other
   loans
   (including
   overdrafts)          58          71         264          54         194
                ----------  ----------  ----------  ----------  ----------
                 1,891,699   1,977,744   2,007,841   1,990,770   2,032,353
  Unearned
   premium on
   acquired
   loans             2,565       2,863       3,272       3,110       2,627
  Deferred loan
   fees             (1,317)     (2,083)     (3,042)     (3,235)     (3,108)
                ----------  ----------  ----------  ----------  ----------
      Loans,
       net of
       unearned
       income    1,892,947   1,978,524   2,008,071   1,990,645   2,031,872
                ----------  ----------  ----------  ----------  ----------

Loans
 held-for-sale      64,801     103,061     119,427     143,737         296
Investment
 securities        150,718     158,418     202,387     216,556     223,793
                ----------  ----------  ----------  ----------  ----------
        Total
         Earning
         Assets $2,108,466  $2,240,003  $2,329,885  $2,350,938  $2,255,961
                ==========  ==========  ==========  ==========  ==========

Unfunded Loan
 Commitments
  Commercial and
   industrial   $  118,778  $  138,613  $  151,584  $  125,431  $  109,696
  Real estate
   construction
   and land:
    Single-
     family
     luxury        144,275     208,835     243,739     269,863     261,299
    Single-
     family
     tract          15,294      32,355      57,239      59,035     108,898
    Commercial      71,960      94,193     115,919     101,719     118,851
    Land             1,236       6,617       8,930      10,236      12,928
  Real estate
   mortgage:
    Commercial       8,639       8,841       8,780      14,005      14,736
    Multi-family
     residential     1,246       1,376       1,662       1,901         709
    All other
     residential    16,021      16,455      20,684      23,683      19,569
  Consumer loans    13,052      12,192       9,799       9,305       5,948
                ----------  ----------  ----------  ----------  ----------
      Total
       Unfunded
       Loan
       Commit-
       ments    $  390,501  $  519,477  $  618,336  $  615,178  $  652,634
                ==========  ==========  ==========  ==========  ==========

Funding
 Liabilities
Deposits
  Non-interest
   bearing      $  233,704  $  302,886  $  316,905  $  292,172  $  301,281
  Money market     366,924     444,989     568,713     597,620     575,867
  Savings and
   NOW             111,902     145,276     136,982      63,582      69,471
  Time deposits  1,232,765     905,707     913,052     897,497     915,873
                ----------  ----------  ----------  ----------  ----------
      Total
       Deposits  1,945,295   1,798,858   1,935,652   1,850,871   1,862,492
                ----------  ----------  ----------  ----------  ----------

Exchange
 balances           23,125      18,135      47,515           -           -
FHLB advances      155,000     227,000     175,000     271,000     210,000
Other
 borrowings         48,300      54,300      45,250      33,100      26,000
Subordinated
 debt                5,000       5,000       5,000       5,000       5,000
Junior
 subordinated
 debentures        115,470     115,470     115,470     115,470     115,470
                ----------  ----------  ----------  ----------  ----------
      Total
       Funding
       Liabil-
       ities    $2,292,190  $2,218,763  $2,323,887  $2,275,441  $2,218,962
                ==========  ==========  ==========  ==========  ==========

Quarterly
 Operating
 Expenses
  Salary and
   benefits     $    6,593  $    8,389  $    7,623  $    8,132  $    7,856
  Occupancy and
   equipment         2,605       2,704       2,513       2,554       2,475
  Professional
   services          4,288       3,040       1,120         763         832
  Office
   supplies,
   postage and
   telephone           534         541         562         567         572
  Business
   development         351         583         564         500         594
  Insurance and
   assessments         640         473         535         327         413
  Loan related       1,171         582         439         363         267
  Write-down of
   assets              600       3,868       2,274         397           -
  Write-down of
   goodwill          1,357           -      40,771           -           -
  Other
   operating
   expenses          1,380         995       1,349       1,112       1,165
                ----------  ----------  ----------  ----------  ----------
      Total
       Operating
       Expenses $   19,519  $   21,175  $   57,750  $   14,715  $   14,174
                ==========  ==========  ==========  ==========  ==========

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