SOURCE: Vineyard National Bancorp

October 22, 2007 08:30 ET

Vineyard National Bancorp Reports Third Quarter Operating Results, Accelerating Efforts in Balance Sheet Repositioning and Reduction of Risk Profile

CORONA, CA--(Marketwire - October 22, 2007) - Vineyard National Bancorp (the "company") (NASDAQ: VNBC), and its subsidiary Vineyard Bank, N.A. ("Vineyard"), today reported earnings for the three months ended September 30, 2007 of $5.5 million, or $0.45 per diluted common share, compared with net earnings of $4.7 million, or $0.40 per diluted common share, for the same period in 2006. These results reflect increases of 18% and 13% for net earnings and diluted earnings per share, respectively.

For the nine months ended September 30, 2007, the company reported net earnings of $17.0 million, or $1.46 per diluted share, compared with net earnings of $14.3 million, or $1.31 per diluted share, for the comparable period in 2006. These results produce increases of 19% and 11% for net earnings and diluted earnings per share, respectively. All diluted earnings per share amounts have been adjusted to reflect the company's 5% stock dividend which occurred during the second quarter of 2007.

Third Quarter 2007 Operating Highlights:

--  Total assets were $2.5 billion at September 30, 2007, an increase of
    $217.3 million, or 10% over the December 31, 2006 level, and an increase of
    $58.5 million, or 2% over the June 30, 2007 level. Total asset growth year
    over year was $321.9 million, or 15%.
    
--  Loans, net of unearned income, were $2.0 billion at September 30, 2007
    and loans held-for-sale amounted to $143.7 million.   Total loans,
    including loans held-for-sale, increased $232.1 million, or 12% over the
    December 31, 2006 level, and increased $102.2 million, or 5% over the June
    30, 2007 level. Total loan growth year over year was $338.3 million, or   
    19%, net of loans sold of $93.6 million.
    
--  The company's net interest margin improved to 4.19% for the third
    quarter 2007 as compared to 4.13% for the second quarter 2007, with
    stabilization in loan yields and cost of deposits while deposit balances
    remained relatively unchanged in composition and absolute dollars for the
    quarter and year to date periods.
    
--  Provision for loan losses during the third quarter 2007 was $1.0
    million. This compares with a provision for loan losses of $0.5 million in
    the previous quarter and $1.2 million in the third quarter of 2006.  Though
    problem assets remained relatively unchanged during the quarter, there may
    be increased levels in subsequent quarters should borrower capacity erode
    and markets sustain further duress. Net charge-offs of $0.4 million during
    the third quarter of 2007 were centered in SBA-related credit facilities.
    
--  The company also incurred costs of $0.3 million associated with other
    real estate owned and problem loans, and $0.4 million associated with the
    reclassification of loans held-for-sale, in addition to $0.1 million of
    foregone interest income on a new non-accruing loan during the third
    quarter. The company also elected to defer sales on its SBA guaranteed
    loans, which reduced other income for the quarter.
    

Loan Composition and Market Conditions

The company is accelerating its efforts to reduce the risk profile in the current loan portfolio by focusing its core expertise in the diversified luxury home construction, commercial real estate and business lending product lines, while reducing its exposure in the tract home construction and land financing lines. At the same time, the company has identified a portfolio of well seasoned and performing commercial real estate and multi-family loans that no longer produce significant enough net interest margin opportunities to the company. The company will attempt to convert these assets into newly deployable funds for new lending opportunities. This initiative will increase the company's liquidity and better manage its resources.

The company's loan portfolio amounted to $2.1 billion at September 30, 2007, as compared to $2.0 billion at June 30, 2007 and $1.8 billion at September 30, 2006. The $102.2 million growth in loans in the third quarter of 2007 was primarily centered in the company's luxury home construction division, which grew by a net $79.7 million during the three months ended September 30, 2007. This division spans several geographic markets including the southern California coastal regions in Orange and Los Angeles counties and Marin and Santa Clara counties of northern California. This growth was mainly comprised of $116.5 million in new gross commitments, $66.9 million in disbursements on existing commitments, net of payoffs of $63.3 million.

The luxury home portfolio continues to produce solid performance metrics, including absorption rates and valuation strength. This division, which operates primarily along the coastal regions of California, has been largely unaffected by market slowdowns and has historically demonstrated core strength during other California real estate cycles. The company will continue its market penetration within this product line while focusing on borrower strength, liquidity and capacity to absorb a potential softening demand. Moreover, luxury home buyers appear to be relatively inelastic to recent market and economic changes and continue to demonstrate demand for this product.

Our single-family residential tract construction division, which operates primarily in the Inland Empire region of southern California, has experienced a significant slowdown in the last few quarters, as home sales decline, inventory levels build, and this market continues to soften in pricing. In the quarter-ended September 30, 2007, this division experienced a net $20.0 million decrease in outstanding loans, and a reduction in unfunded commitments of $49.9 million.

The Company is currently financing approximately 33 single family residential tract construction projects within southern California, with the average commitment amount of approximately $6.7 million. The amount, size and geographic diversity of these projects help mitigate some of the risks inherent within this product line. The majority of the Company's builder clients continue to offer various buyer incentives to move inventory in this marketplace and complete projects based on on-going absorption rates. The company has met with each of its clients to determine appropriate exit strategies and risk profiles for each project. The outstanding loan balance in this division is 8.2% of loans, net of unearned income at September 30, 2007.

Together with the reduction in single-family residential tract construction loans, the company is managing its risk profile by decreasing its concentration of land loans. During the quarter-ended September 30, 2007, the company decreased its land loan portfolio by a net $16.0 million, with the remaining composition centered in commercial, luxury and tract land projects located principally within southern California.

Also accounting for the company's loan growth during the third quarter of 2007 was an increase of $14.5 million in commercial and industrial loans, and an increase of $13.0 million in commercial real estate loans, net of $48.0 million commercial real estate loans reclassified to held-for-sale status. The demand for office, retail and industrial space continues to be strong within the southern California region. At the same time, the company continues to deploy a highly focused effort in commercial and business lending and depository opportunities, which is supported by cash management products.

The company is also increasing its efforts within the commercial real estate lending space with a focus on borrowers with substantial holdings, liquidity and strength, and expansive operations seeking to reposition mature properties. The company has allocated significant personnel and resources during the past six months to building out its commercial income property lending operations, which also includes secondary marketing opportunities. The continuing efforts to balance the loan portfolio through loan sales and/or participations should ultimately enhance portfolio yields, provide for liquidity and expand diversification of risk.

During September 2007, the company transferred $141.3 million of performing, well-collateralized multifamily and commercial real estate loans to held-for-sale status. As part of the company's continuing strategy to deploy funds into higher yielding products, management anticipates selling these loans, which have a weighted average yield of 6.50% and reinvesting the funds into higher yielding loan products, thereby easing existing pressure on the net interest margin. In transferring the loans into held-for-sale, the company established a valuation reserve of $0.4 million to record these loans at the lower of cost or fair value with a corresponding provision to non-interest expense.

The company's loans are underwritten in accordance with regulatory requirements and internal underwriting policies which require, among other things, adequate collateral and a demonstrated ability to repay the loan through evidence of income, assets, and/or pre-funded interest reserves, which are typically required on construction loans. The company's management is committed to upholding internal underwriting standards, as well as maintaining an adequate level of loan loss reserves for on and off-balance sheet loans and commitments.

Asset Quality

Non-accrual loans

At September 30, 2007, the company's non-accruing loans amounted to $11.5 million, a decrease of $0.6 million as compared to second quarter 2007. The decrease in non-accrual loans during the third quarter related mainly to the following three items: 1) the pay down of $0.7 million on a $2.6 million real estate secured non-accrual loan related to a completed condominium project in the final stages of sales; 2) the transfer of a $1.2 million SBA-guaranteed real estate secured loan from the company's loan portfolio to "other real estate owned" in July 2007; and 3) the addition to non-accrual of a $1.4 million single-family tract construction loan made up of seven completed and unsold homes in September 2007. The loss of interest income associated with this newest non-accrual loan amounted to $0.1 million.

The $11.5 million outstanding balance of non-accruing loans at September 30, 2007, mainly consisted of four real estate secured loans in the aggregate amount of $10.4 million. 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. The company believes these non-performing assets are adequately collateralized or maintain sufficient guarantees.

Other real estate owned

As of September 30, 2007, the company had $12.9 million in other real estate owned, which is comprised of loans that have been foreclosed upon. It includes a $1.2 million SBA-guaranteed loan which was transferred to other real estate owned in the third quarter of 2007, and an $11.7 million tract development land loan which was foreclosed in the second quarter of 2007. The tract land foreclosure encompasses one hundred finished residential lots in a 1,788 unit planned development project within the Temecula Valley region of southern California. The company believes that this foreclosed project may be resolved in 2009 after the project's master developer, its primary lender and the city resolve issues which have substantially delayed this project. The company is actively pursuing disposition of these two foreclosed assets and believes they are adequately collateralized.

Allowance for loan losses

The company recorded a provision for loan losses of $1.0 million during the three months ended September 30, 2007. As a part of its overall review of the adequacy of its loan loss reserves, the company continually assesses both quantitative and qualitative factors in conjunction with loan specific performance. The provision followed a provision in the second quarter of 2007 in the amount of $0.5 million, and brings the 2007 year-to-date loan provision to $2.7 million.

The provision for loan losses increased the allowance for loan losses to $22.0 million, or 1.11% of the gross loan portfolio at September 30, 2007. The company also has a reserve for unfunded loan commitments, principally related to its construction loans, in the amount of $0.8 million (recorded in other liabilities), producing total reserves as a percent of gross loans outstanding of 1.15% at September 30, 2007. Based on management's evaluation and analysis of portfolio credit quality and prevailing economic conditions, the company believes these reserves are at an appropriate level. Adverse changes to borrower capacity and liquidity, and further downward real estate valuations may likely increase problem assets, defaults and increased levels of loan loss provisioning.


Deposit Acquisition and Funding Strategies

At September 30, 2007, total deposits were $1.9 billion, as compared to the June 30, 2007 and December 31, 2006 levels of $1.9 billion and $1.8 billion, respectively.

Non-interest bearing demand deposits, which are principally concentrated in business relationships, were $292.1 million at September 30, 2007, a decrease of $9.1 million during the third quarter of 2007, as compared to the $301.3 million level at June 30, 2007. Non-interest bearing demand deposits also experienced a slight decrease of $0.7 million over the $292.9 million level at December 31, 2006. The company continues to expend significant resources toward the acquisition of new business demand relationships. While the increases in new relationships have produced increases in the related demand balances, subsequent reductions in other relationships whether by reduction in balances or a shifting into higher costing liquid money market accounts have neutralized these advances.

Money market deposits were $597.6 million at September 30, 2007, an increase of $21.8 million, or 3.8% over the $575.9 million level at June 30, 2007 and an increase of $35.0 million, or 6.2% over the $562.6 million level at December 31, 2006.

Time deposits have decreased $18.4 million from the $915.9 million level at June 30, 2007 and increased $17.4 million, or 2.0%, since December 30, 2006, mainly as a result of the company's promotional rate programs.

In response to the current market's strong competition for deposit accounts, the company has supplemented its funding base with $271.0 million in FHLB borrowings at September 30, 2007, an increase from the $126.0 million and $210.0 million levels at December 31, 2006 and June 30, 2007 levels, respectively. While these sources can be accessed at rates that are less expensive than retail time deposits, they lack any opportunity to expand into core depository relationships. The company will continue to deploy tactical marketing and deposit acquisition strategies aimed at increasing the core relationship accounts, with a broader array of products, and a more stabilized cost of funding.

Income Statement and Net Interest Margin

The company's net income for the three and nine months ended September 30, 2007 totaled $5.5 million and $17.0 million, respectively, compared with $4.7 million and $14.3 million for the same periods in 2006, respectively. The company experienced a decline in quarterly net income from its $6.0 million level for the three months ended June 30, 2007.

For the three months ended September 30, 2007, net interest income before the provision for loan losses was $24.3 million, an increase of $3.1 million, or 15% as compared to the same period in 2006. These results produced a net interest margin of 4.19% for the quarter-ended September 30, 2007, as compared to 4.13% for the quarter-ended June 30, 2007 and compared to 4.32% for the quarter-ended September 30, 2006.

The yield on loans during the third quarter 2007 remained relatively unchanged: 8.76% for the three months ended June 30, 2007 versus 8.74% for the three months ended September 30, 2007. The yield on loans has declined from its 8.95% level for the three months ended September 30, 2006. The yield on loans began declining in mid-2006 due to compression in construction yields resulting from higher competition in this product, as well as a change in the loan portfolio mix and lost interest on non-accrual loans.

The company saw a nominal improvement in its cost of funds in the third quarter 2007 from its 4.36% level for the quarter-ended June 30, 2007 to 4.33% for the quarter-ended September 30, 2007. The cost of deposits increased to 4.02% for the quarter-ended September 30, 2007, as compared to the 3.94% and 3.82% levels for the quarters-ended June 30, 2007 and September 30, 2006, respectively. The increase was primarily related to the steady rise in money market and time deposit accounts as the company has offered competitive promotional rates throughout the year in order to attract and maintain deposits in a fiercely competitive marketplace. In addition, the lack of demand deposit account growth has caused the company to rely on higher-costing money market and time deposit accounts.

The cost of FHLB borrowings decreased during the third quarter of 2007, from 5.02% for the three months ended June 30, 2007 to 4.86% for the three months ended September 30, 2007.

The company expects continued improvement in its net interest margin based on its strategic initiatives. The company's management will continue to deploy funds from loan payoffs and deposit generation into commercial and commercial real estate loans in order to diversify the loan portfolio, reduce loan-related risk, and improve the loan yield. The company also expects an increase in loan yields as the $143.7 million in loans held-for-sale are sold and reinvested into higher yielding loans.

As a result of the federal funds rate decrease in September 2007, the company also expects its junior subordinated debentures and subordinated debentures to reprice downward within the coming quarter. These anticipated decreases in the cost of funds will likely alleviate some of the compression on the net interest margin.

Other income for the three months ended September 30, 2007 was approximately half the balance of the same period in 2006, partially due to the strategic deferral of periodic SBA loan sales. The company expects to consolidate its third and fourth quarter SBA production to achieve more efficient pricing execution.

Total operating expenses increased to $14.7 million, as compared to $14.2 million for the quarter ended June 30, 2007 and $13.5 million for the comparable period in 2006. The largest increases were centered in personnel costs, related to further investments in relationship management and the expansion of the company's lending disciplines. Other operating expenses also increased during the third quarter 2007 as a result of $0.4 million in losses from revaluing the loans held-for-sale to the lower of cost or fair market value as well as $0.3 million related to costs incurred on other real estate property taxes and legal and collection costs associated with other problem loan assets and other real estate owned during the third quarter of 2007. These increases to other operating expenses were offset against a $0.2 million decrease in the provision for unfunded commitments.

The company's efficiency ratio, which measures the relationship of total operating expenses and total operating income, increased to 59% for the quarter-ended September 2007, as compared to 57% for the second quarter 2007 and 60% the same period in 2006. The company's desired long-term efficiency ratio is a range of 50% to 52%, which it believes best leverages the established infrastructure and allows for acquisition of new client relationships.

"While significant efforts continue to be deployed in mitigating credit exposure in softening markets, an equal measure of energy is focused on growing the Vineyard franchise. The third quarter produced operating results that were generally acceptable in terms of direction of the company, and established a basis for a positive finish for 2007 and an optimistic outlook given our initiatives as we enter 2008," stated Norman Morales, president and chief executive officer. "Our efforts are directed in reducing the risk profile of the company while capturing certain opportunities that surround southern California, which remains a diverse and strong economy."

Capital Resources

At September 30, 2007, stockholders' equity of the company totaled $175.4 million, an increase of $32.3 million, or 23% as compared to December 31, 2006. The company's net book value per share of its common stock increased from $12.49 at December 31, 2006 to $13.61 per share at September 30, 2007.

For the quarter-ended September 2007, the company declared cash dividends of $0.9 million and $0.6 million on its common and preferred stock, respectively.

Vineyard continues to be "well-capitalized" pursuant to the guidelines established by regulatory agencies. To be considered "well-capitalized" a bank must have total risk-based capital of 10% or greater, and a leverage ratio of 5% or greater. Vineyard's total risk-based and leverage capital ratios were 12.2% and 11.4% at September 30, 2007, respectively.

As a continuing component of its Shareholders' Relations Program, the company is preparing a presentation describing its operating performance and strategies. The presentation will be accessible at www.vnbcstock.com.

The company, headquartered in Corona, is a financial holding company and the parent company of Vineyard. Vineyard, also headquartered in Corona, operates through 16 full-service banking centers and four regional financial centers located in the counties of Los Angeles, Marin, Monterey, Orange, Riverside, San Bernardino, San Diego, Santa Clara and Ventura, Calif. The company's common stock is traded on the NASDAQ Global Market System under the symbol "VNBC."

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 SUBSIDIARY
                        CONSOLIDATED BALANCE SHEETS
             (dollars in thousands, except per share amounts)
                                (unaudited)


                                    September    December               %
                                     30, 2007    31, 2006   $ Change Change
                                    ----------  ----------  --------  ----
Assets
  Loans, net of unearned income     $1,990,645  $1,902,244  $ 88,401     5%
    Less allowance for loan losses     (22,037)    (19,689)   (2,348)   12%
                                    ----------  ----------  --------  ----
      Net Loans                      1,968,608   1,882,555    86,053     5%
  Loans held-for-sale                  143,737           -   143,737   100%
  Investment securities                216,556     233,600   (17,044)   -7%
                                    ----------  ----------  --------  ----
      Total Earnings Assets          2,328,901   2,116,155   212,746    10%
                                    ----------  ----------  --------  ----

  Cash and cash equivalents             29,286      35,129    (5,843)  -17%
  Premises and equipment, net           18,593      20,402    (1,809)   -9%
  Other real estate owned               12,862           -    12,862   100%
  Goodwill and other intangibles        42,730      43,265      (535)   -1%
  Other assets                          42,677      42,788      (111)    0%
                                    ----------  ----------  --------  ----
      Total Assets                  $2,475,049  $2,257,739  $217,310    10%
                                    ==========  ==========  ========  ====


Liabilities and Stockholders' Equity
Liabilities
  Deposits
    Non-interest bearing            $  292,172  $  292,917  $   (745)    0%
    Interest-bearing                 1,558,699   1,513,496    45,203     3%
                                    ----------  ----------  --------  ----
      Total Deposits                 1,850,871   1,806,413    44,458     2%

  Federal Home Loan Bank advances      271,000     126,000   145,000   115%
  Other borrowings                      33,100      40,000    (6,900)  -17%
  Subordinated debt                      5,000       5,000         -     0%
  Junior subordinated debentures       115,470     115,470         -     0%
  Other liabilities                     24,239      21,796     2,443    11%
                                    ----------  ----------  --------  ----
      Total Liabilities              2,299,680   2,114,679   185,001     9%

Stockholders' Equity
  Common stock equity                  153,618     143,073    10,545     7%
  Preferred stock equity                31,626       9,665    21,961   227%
  Unallocated ESOP shares               (5,320)     (5,765)      445    -8%
  Cumulative other comprehensive loss   (4,555)     (3,913)     (642)   16%
                                    ----------  ----------  --------  ----
      Total Stockholders' Equity       175,369     143,060    32,309    23%
                                    ----------  ----------  --------  ----
        Total Liabilities and
         Stockholders' Equity       $2,475,049  $2,257,739  $217,310    10%
                                    ==========  ==========  ========  ====

Total non-performing loans/Gross
 loans (1)                                0.66%       0.88%

Number of shares of common stock
 outstanding (2)                    10,561,489  10,681,482

Net book value of common stock (3)  $    13.61  $    12.49
Tangible book value of common stock
 (4)                                $     9.56  $     8.44
Net book value of common stock,
 excluding other comprehensive loss
 (3)                                $    14.04  $    12.85


(1) Total non-performing loans include non-accrual 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 September 30, 2007 and
    December 31, 2006 excludes 238,306 and  257,828 unreleased and
    unallocated ESOP shares, respectively. The outstanding shares were
    retrospectively adjusted for the 5% stock dividend issued June 22,
    2007.
(3) "Net book value of common stock" is calculated by dividing
    stockholders' equity available to common shareholders by the number of
    shares of common stock outstanding at period-end. "Net book value of
    common stock, excluding other comprehensive loss" eliminates cumulative
    other comprehensive loss from the numerator. Book value per share was
    retrospectively adjusted for the 5% stock dividend issued June 22,
    2007.
(4) "Tangible book value of common stock" is calculated by dividing
    stockholders' equity available to common shareholders, less goodwill
    and other intangible assets, by the number of common shares outstanding
    at period-end. Book value per share was retrospectively adjusted for
    the 5% stock dividend issued June 22, 2007.




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


                                    September   September               %
                                     30, 2007    30, 2006   $ Change Change
                                    ----------  ----------  --------  ----
Assets
  Loans, net of unearned income     $1,990,645  $1,796,064  $194,581    11%
    Less allowance for loan losses     (22,037)    (18,740)   (3,297)   18%
                                    ----------  ----------  --------  ----
      Net Loans                      1,968,608   1,777,324   191,284    11%
  Loans held-for-sale                  143,737           -   143,737   100%
  Investment securities                216,556     239,714   (23,158)  -10%
                                    ----------  ----------  --------  ----
      Total Earnings Assets          2,328,901   2,017,038   311,863    15%
                                    ----------  ----------  --------  ----

  Cash and cash equivalents             29,286      29,761      (475)   -2%
  Premises and equipment, net           18,593      21,162    (2,569)  -12%
  Other real estate owned               12,862           -    12,862   100%
  Goodwill and other intangibles        42,730      44,434    (1,704)   -4%
  Other assets                          42,677      40,715     1,962     5%
                                    ----------  ----------  --------  ----
        Total Assets                $2,475,049  $2,153,110  $321,939    15%
                                    ==========  ==========  ========  ====


Liabilities and Stockholders' Equity
Liabilities
  Deposits
    Non-interest bearing            $  292,172  $  253,927  $ 38,245    15%
    Interest-bearing                 1,558,699   1,458,905    99,794     7%
                                    ----------  ----------  --------  ----
      Total Deposits                 1,850,871   1,712,832   138,039     8%

  Federal Home Loan Bank advances      271,000     127,000   144,000   113%
  Other borrowings                      33,100      35,500    (2,400)   -7%
  Subordinated debt                      5,000       5,000         -     0%
  Junior subordinated debentures       115,470     115,470         -     0%
  Other liabilities                     24,239      20,724     3,515    17%
                                    ----------  ----------  --------  ----
      Total Liabilities              2,299,680   2,016,526   283,154    14%

Stockholders' Equity
  Common stock equity                  153,618     137,799    15,819    11%
  Preferred stock equity                31,626       9,665    21,961   227%
  Unallocated ESOP shares               (5,320)     (5,898)      578   -10%
  Cumulative other comprehensive loss   (4,555)     (4,982)      427    -9%
                                    ----------  ----------  --------  ----
      Total Stockholders' Equity       175,369     136,584    38,785    28%
                                    ----------  ----------  --------  ----
        Total Liabilities and
         Stockholders' Equity       $2,475,049  $2,153,110  $321,939    15%
                                    ==========  ==========  ========  ====

Total non-performing loans/Gross
 loans (1)                                0.66%       0.80%

Number of shares of common stock
 outstanding (2)                    10,561,489  10,624,331

Net book value of common stock (3)  $    13.61  $    11.95
Tangible book value of common stock
 (4)                                $     9.56  $     7.76
Net book value of common stock,
 excluding other comprehensive loss
 (3)                                $    14.04  $    12.41


(1) Total non-performing loans include non-accrual 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 September 30, 2007 and
    September 30, 2006 excludes 238,306 and 263,792 unreleased and
    unallocated ESOP shares, respectively. The outstanding shares were
    retrospectively adjusted for the 5% stock dividend issued June 22,
    2007.
(3) "Net book value of common stock" is calculated by dividing
    stockholders' equity available to common shareholders by the number of
    shares of common stock outstanding at period-end. "Net book value of
    common stock, excluding other comprehensive loss" eliminates cumulative
    other comprehensive loss from the numerator. Book value per share was
    retrospectively adjusted for the 5% stock dividend issued June 22,
    2007.
(4) "Tangible book value of common stock" is calculated by dividing
    stockholders' equity available to common shareholders, less goodwill
    and other intangible assets, by the number of common shares outstanding
    at period-end. Book value per share was retrospectively adjusted for
    the 5% stock dividend issued June 22, 2007.




                 VINEYARD NATIONAL BANCORP AND SUBSIDIARY
                    CONSOLIDATED STATEMENT OF EARNINGS
             (dollars in thousands, except per share amounts)
                                (unaudited)


                                      Three Months Ended
                                        September 30,
                                    ----------------------              %
                                       2007        2006     $ Change Change
                                    ----------  ----------  --------  ----
Interest Income
  Loans, including fees             $   45,627  $   37,916  $  7,711    20%
  Investment securities                  3,058       3,010        48     2%
                                    ----------  ----------  --------  ----
    Total Interest Income               48,685      40,926     7,759    19%
                                    ----------  ----------  --------  ----

Interest Expense
  Deposits                              18,981      16,066     2,915    18%
  Borrowings and debt obligations        5,387       3,667     1,720    47%
                                    ----------  ----------  --------  ----
    Total Interest Expense              24,368      19,733     4,635    23%
                                    ----------  ----------  --------  ----

Net Interest Income                     24,317      21,193     3,124    15%
Provision for loan losses                1,000       1,175      (175)  -15%
                                    ----------  ----------  --------  ----
    Net interest income after
     provision for loan losses          23,317      20,018     3,299    16%
                                    ----------  ----------  --------  ----

Other Income
  Fees and service charges                 464         548       (84)  -15%
  Gain on sale of SBA loans and SBA
   broker fee income                       145         659      (514)  -78%
  Gain on sale of non-SBA loans              -          36       (36) -100%
  Other income                              82         117       (35)  -30%
                                    ----------  ----------  --------  ----
    Total Other Income                     691       1,360      (669)  -49%
                                    ----------  ----------  --------  ----

    Gross Operating Income              24,008      21,378     2,630    12%

Operating Expenses
  Salaries and benefits                  8,132       7,648       484     6%
  Occupancy and equipment                2,554       2,411       143     6%
  Marketing                                275         323       (48)  -15%
  Professional services                    763         669        94    14%
  Business development                     500         542       (42)   -8%
  Other operating expense                2,491       1,917       574    30%
                                    ----------  ----------  --------  ----
    Total Operating Expenses            14,715      13,510     1,205     9%
                                    ----------  ----------  --------  ----

Earnings before income taxes             9,293       7,868     1,425    18%
Income tax provision                     3,822       3,214       608    19%
                                    ----------  ----------  --------  ----
    Net Earnings                    $    5,471  $    4,654  $    817    18%
                                    ==========  ==========  ========  ====

Weighted average shares outstanding
 used in diluted EPS calculation(6) 10,817,194  10,971,567

Earnings per common share (6)
  Basic                             $     0.46  $     0.42  $   0.04    10%
  Diluted                           $     0.45  $     0.40  $   0.05    13%

Efficiency Ratio (5)                        59%         60%


(5) The efficiency ratio is calculated by dividing total operating expenses
    by net interest income before provision for loan losses plus total
    other income.
(6) Number of shares and earnings per share were retrospectively adjusted
    for the 5% stock dividend issued June 22, 2007.




                 VINEYARD NATIONAL BANCORP AND SUBSIDIARY
                    CONSOLIDATED STATEMENT OF EARNINGS
             (dollars in thousands, except per share amounts)
                                (unaudited)


                                      Nine Months Ended
                                        September 30,
                                    ----------------------              %
                                       2007        2006     $ Change Change
                                    ----------  ----------  --------  ----
Interest Income
  Loans, including fees             $  132,356  $  104,365  $ 27,991    27%
  Investment securities                  8,963       9,102      (139)   -2%
                                    ----------  ----------  --------  ----
    Total Interest Income              141,319     113,467    27,852    25%
                                    ----------  ----------  --------  ----

Interest Expense
  Deposits                              53,235      40,136    13,099    33%
  Borrowings and debt obligations       17,904      13,041     4,863    37%
                                    ----------  ----------  --------  ----
    Total Interest Expense              71,139      53,177    17,962    34%
                                    ----------  ----------  --------  ----

Net Interest Income                     70,180      60,290     9,890    16%
Provision for loan losses                2,700       3,075      (375)  -12%
                                    ----------  ----------  --------  ----
    Net interest income after
     provision for loan losses          67,480      57,215    10,265    18%
                                    ----------  ----------  --------  ----

Other Income
  Fees and service charges               1,363       1,267        96     8%
  Gain on sale of SBA loans and SBA
   broker fee income                     1,326       2,056      (730)  -36%
  Gain on sale of non-SBA loans            337         422       (85)  -20%
  Other income                             329         343       (14)   -4%
                                    ----------  ----------  --------  ----
    Total Other Income                   3,355       4,088      (733)  -18%
                                    ----------  ----------  --------  ----

    Gross Operating Income              70,835      61,303     9,532    16%

Operating Expenses
  Salaries and benefits                 23,582      20,821     2,761    13%
  Occupancy and equipment                7,487       6,663       824    12%
  Marketing                                698       1,023      (325)  -32%
  Professional services                  2,242       1,948       294    15%
  Business development                   1,660       1,637        23     1%
  Other operating expense                6,347       4,913     1,434    29%
                                    ----------  ----------  --------  ----
    Total Operating Expenses            42,016      37,005     5,011    14%
                                    ----------  ----------  --------  ----

Earnings before income taxes            28,819      24,298     4,521    19%
Income tax provision                    11,837      10,043     1,794    18%
                                    ----------  ----------  --------  ----
    Net Earnings                    $   16,982  $   14,255  $  2,727    19%
                                    ==========  ==========  ========  ====

Weighted average shares outstanding
 used in diluted EPS calculation(6) 10,912,048  10,362,832

Earnings per common share (6)
  Basic                             $     1.49  $     1.36  $   0.13    10%
  Diluted                           $     1.46  $     1.31  $   0.15    11%

Efficiency Ratio (5)                        57%         57%


(5) The efficiency ratio is calculated by dividing total operating expenses
    by net interest income before provision for loan losses plus total
    other income.
(6) Number of shares and earnings per share were retrospectively adjusted
    for the 5% stock dividend issued June 22, 2007.




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


                                Three Months Ended September 30,
                      ----------------------------------------------------
                                2007                       2006
                      -------------------------  -------------------------
                                         Average                    Average
                        Average           Yield    Average           Yield
                        Balance  Interest /Cost    Balance  Interest /Cost
                      ----------  ------- -----  ----------  ------- -----
Assets
  Gross loans (7)     $2,070,975  $45,627  8.74% $1,681,047  $37,916  8.95%
  Investment
   securities (8)        240,492    3,058  5.08%    265,389    3,010  4.53%
                      ----------  -------        ----------  -------
    Total interest-
     earning assets    2,311,467   48,685  8.36%  1,946,436   40,926  8.35%
  Other assets           135,305                    105,862
  Less: allowance for
   loan losses           (21,390)                   (17,116)
                      ----------                 ----------
    Total average
     assets           $2,425,382                 $2,035,182
                      ==========                 ==========

Liabilities and
 Stockholders' Equity
  Interest-bearing
   deposits (9)       $1,582,967   18,981  4.76% $1,440,164   16,066  4.43%
  Federal Home Loan
   Bank advances         213,450    2,642  4.86%     70,610      862  4.84%
  Other borrowings        15,974      295  7.23%     18,077      352  7.63%
  Subordinated debt        5,000      110  8.62%      5,000      112  8.72%
  Junior subordinated
   debentures            115,470    2,340  7.93%    115,470    2,341  7.93%
                      ----------  -------        ----------  -------
    Total interest-
     bearing
     liabilities       1,932,861   24,368  4.99%  1,649,321   19,733  4.75%
                                  -------                    -------
  Demand deposits        291,606                    229,122
  Other liabilities       27,276                     23,676
                      ----------                 ----------
    Total average
     liabilities       2,251,743                  1,902,119
  Preferred stock
   equity                 31,693                      9,665
  Common stock equity,
   net of cumulative
   other comprehensive
   loss                  141,946                    123,398
                      ----------                 ----------
    Stockholders'
     equity              173,639                    133,063
                      ----------                 ----------
    Total liabilities
     and stockholders'
     equity           $2,425,382                 $2,035,182
                      ==========                 ==========

Net interest spread (10)                   3.37%                      3.60%
                                          =====                      =====
Net interest margin (11)          $24,317  4.19%             $21,193  4.32%
                                  ======= =====              ======= =====


Return on Average
 Assets                                    0.89%                      0.91%
Return on Average
 Tangible Assets (12)                      0.94%                      0.95%
Return on Average
 Common Equity                            13.59%                     14.21%
Return on Average
 Tangible Common
 Equity (13)                              20.07%                     19.44%
Net Charge-off's/Average
 Gross Loans                               0.01%                      0.01%

(7)  The average loan balances include loans held-for-sale and non-accrual
     loans.
(8)  The yield for investment securities is based on historical amortized
     cost balances.
(9)  Includes savings, NOW, money market, and time certificate of deposit
     accounts.
(10) Net interest spread represents the average yield earned on interest-
     earning assets less the average rate paid on interest-bearing
     liabilities.
(11) Net interest margin is computed by dividing net interest income by
     total average earning assets.
(12) 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.
(13) 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 SUBSIDIARY
                          FINANCIAL PERFORMANCE
                                (unaudited)
                          (dollars in thousands)


                                Nine Months Ended September 30,
                    ------------------------------------------------------
                                2007                       2006
                    --------------------------- --------------------------
                                        Average                     Average
                      Average            Yield   Average             Yield
                      Balance   Interest /Cost   Balance    Interest /Cost
                    ----------  -------- -----  ----------  -------- -----
Assets
  Gross loans (7)   $2,017,835  $132,356  8.77% $1,563,994  $104,365  8.92%
  Investment
   securities (8)      240,740     8,963  4.97%    269,012     9,102  4.51%
                    ----------  --------        ----------  --------
    Total interest-
     earning assets  2,258,575   141,319  8.36%  1,833,006   113,467  8.27%
  Other assets         130,910                      80,468
  Less: allowance
   for loan losses     (20,792)                    (15,557)
                    ----------                  ----------
    Total average
     assets         $2,368,693                  $1,897,917
                    ==========                  ==========

Liabilities and
 Stockholders' Equity
  Interest-bearing
   deposits (9)     $1,510,806    53,235  4.71% $1,281,294    40,136  4.19%
  Federal Home Loan
   Bank advances       237,166     8,883  4.96%    172,087     6,006  4.67%
  Other borrowings      32,933     1,760  7.05%     10,704       588  7.24%
  Subordinated debt      5,000       328  8.65%      5,000       313  8.27%
  Junior subordinated
   debentures          115,470     6,933  7.92%    106,293     6,134  7.61%
                    ----------  --------        ----------  --------
    Total interest-
     bearing
     liabilities     1,901,375    71,139  4.99%  1,575,378    53,177  4.50%
                                --------                    --------
  Demand deposits      285,499                     187,387
  Other liabilities     25,300                      18,774
                    ----------                  ----------
    Total average
     liabilities     2,212,174                   1,781,539
  Preferred stock
   equity               17,492                       9,665
  Common stock equity,
   net of cumulative
   other comprehensive
   loss                139,027                     106,713
                    ----------                  ----------
    Stockholders'
     equity            156,519                     116,378
                    ----------                  ----------
    Total liabilities
     and stockholders'
     equity         $2,368,693                  $1,897,917
                    ==========                  ==========

Net interest spread (10)                  3.37%                       3.77%
                                         =====                       =====
Net interest margin (11)        $ 70,180  4.17%             $ 60,290  4.40%
                                ======== =====              ======== =====


Return on Average
 Assets                                   0.96%                       1.00%
Return on Average
 Tangible Assets (12)                     1.01%                       1.02%
Return on Average
 Common Equity                           15.30%                      17.03%
Return on Average
 Tangible Common
 Equity (13)                             22.89%                      19.07%
Net Charge-off's/
 Average Gross Loans                      0.02%                       0.01%


(7)  The average loan balances include loans held-for-sale and non-accrual
     loans.
(8)  The yield for investment securities is based on historical amortized
     cost balances.
(9)  Includes savings, NOW, money market, and time certificate of deposit
     accounts.
(10) Net interest spread represents the average yield earned on interest-
     earning assets less the average rate paid on interest-bearing
     liabilities.
(11) Net interest margin is computed by dividing net interest income by
     total average earning assets.
(12) 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.
(13) 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 SUBSIDIARY
    Earning Asset, Funding Liability and Operating Expenses Composition
                                (unaudited)
                          (dollars in thousands)


                    September   June 30,  March 31,   December  September
                     30, 2007     2007       2007     31, 2006   30, 2006
                    ---------- ---------- ---------- ---------- ----------
Earning Assets
Loans
 Commercial and
  industrial        $  147,799 $  133,255 $  127,164 $  122,257 $  111,850
 Real estate
  construction and
  land:
  Single-family
   luxury              577,155    497,494    553,333    514,385    507,390
  Single-family
   tract               163,396    183,395    160,270    152,060    132,966
  Commercial           163,573    162,514    136,465    134,404     90,513
  Land:                                                 112,418    104,082
   Single-family
    luxury (14)         16,648     19,946     17,382        N/A        N/A
   Single-family
    tract (14)          61,760     38,878     70,761        N/A        N/A
   Commercial (14)      19,444     30,686     23,046        N/A        N/A
   Other (14)              795     25,099      6,284        N/A        N/A
 Real estate
  mortgage:
  Commercial           569,167    604,157    565,199    531,159    500,994
  Multi-family
   residential          97,971    185,450    213,877    222,470    241,113
  All other
   residential          60,944     53,533     43,954     49,353     58,712
 Consumer loans        112,064     97,752     80,306     65,914     51,785
 All other loans
  (including
  overdrafts)               54        194         70         98        139
                    ---------- ---------- ---------- ---------- ----------
                     1,990,770  2,032,353  1,998,111  1,904,518  1,799,544
 Unearned premium on
  acquired loans         3,110      2,627      2,050      1,696      1,239
 Deferred loan fees     (3,235)    (3,108)    (3,842)    (3,970)    (4,719)
                    ---------- ---------- ---------- ---------- ----------
   Loans, net of
    unearned income  1,990,645  2,031,872  1,996,319  1,902,244  1,796,064
                    ---------- ---------- ---------- ---------- ----------

Loans held-for-sale    143,737        296        441          -          -
Investment
 securities            216,556    223,793    232,504    233,600    239,714
                    ---------- ---------- ---------- ---------- ----------
    Total Earning
     Assets, excluding
     Allowance for
     Loan Losses    $2,350,938 $2,255,961 $2,229,264 $2,135,844 $2,035,778
                    ========== ========== ========== ========== ==========

Unfunded Loan
 Commitments
 Commercial and
  industrial        $  125,431 $  109,696 $  110,649 $   97,655 $   87,283
 Real estate construction
 and land:
  Single-family
   luxury              269,863    261,299    281,842    264,967    290,434
  Single-family
   tract                59,035    108,898    126,463    150,702    164,737
  Commercial           101,719    118,851    102,308    119,134    103,563
  Land                  10,236     12,928     13,495     16,336     26,026
 Real estate
  mortgage:
  Commercial            14,005     14,736     13,388     14,221     15,836
  Multi-family
   residential           1,901        709        961      1,194      2,176
  All other
   residential          23,683     19,569     19,388     16,496     15,085
 Consumer loans          9,305      5,948      5,663      4,089      4,061
                    ---------- ---------- ---------- ---------- ----------
   Total Unfunded
    Loan Commitments$  615,178 $  652,634 $  674,157 $  684,794 $  709,201
                    ========== ========== ========== ========== ==========

Funding Liabilities
Deposits
 Non-interest
  bearing           $  292,172 $  301,281 $  287,866 $  292,917 $  253,927
 Money market          597,620    575,867    618,954    562,622    506,532
 Savings and NOW        63,582     69,471     69,947     70,741     75,787
 Time deposits         897,497    915,873    790,965    880,133    876,586
                    ---------- ---------- ---------- ---------- ----------
   Total Deposits    1,850,871  1,862,492  1,767,732  1,806,413  1,712,832
                    ---------- ---------- ---------- ---------- ----------

FHLB advances          271,000    210,000    244,000    126,000    127,000
Other borrowings        33,100     26,000     45,400     40,000     35,500
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
     Liabilities    $2,275,441 $2,218,962 $2,177,602 $2,092,883 $1,995,802
                    ========== ========== ========== ========== ==========


Operating expenses (15)
 Salary and benefits$    8,132 $    7,856 $    7,594 $    7,943 $    7,648
 Occupancy and
  equipment              2,554      2,475      2,458      2,584      2,411
 Marketing                 275        227        196        230        323
 Professional
  services                 763        832        647        818        669
 Business
  development              500        594        566        579        542
 Other operating
  expenses               2,491      2,190      1,666      1,858      1,917
                    ---------- ---------- ---------- ---------- ----------
   Total operating
    expenses        $   14,715 $   14,174 $   13,127 $   14,012 $   13,510
                    ========== ========== ========== ========== ==========

(14) Land loans by category were not previously tracked. The Company began
     tracking land loan type in the first quarter of 2007 and will continue
     to do so going forward.
(15) Represents quarterly expense amounts.