SOURCE: Vineyard National Bancorp

January 30, 2008 17:03 ET

Vineyard National Bancorp Reports Asset Quality, Risk Reduction Strategy, and Fourth Quarter and Full Year Loss Reflecting a Non-Cash $40.8 Million Charge to Write-Down Goodwill

CORONA, CA--(Marketwire - January 30, 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 December 31, 2007 of $41.3 million, or $4.11 per diluted share, compared with net earnings of $5.5 million, or $0.48 per diluted share, for the quarter ended December 31, 2006. This net loss for the quarter was due primarily to Vineyard's non-cash $40.8 million write-down of goodwill, $9.2 million loan loss provision and $2.1 million write-down of other real estate owned.

Due to fourth quarter results, the company reported a net loss of $24.4 million, or $2.48 per diluted share, compared with net earnings of $19.7 million, or $1.80 per diluted share, for the years ended December 31, 2007 and 2006, respectively.

Due to the recent volatility within the banking industry and the related decline in market value for many banks, including Vineyard, the company incurred a fourth quarter 2007 non-cash charge of $40.8 million for the write-off of all goodwill associated with Vineyard. This charge does not affect the company's tangible equity or its liquidity position. Further, Vineyard's regulatory capital ratios are unaffected by this write-off of goodwill, with all ratios far in excess of "well capitalized" designation. Separately, neither the company nor Vineyard is operating under any regulatory order or directive to increase its capital resources.

The write-down of goodwill has a significant impact on our fourth quarter results. Accordingly, when this charge is excluded from expenses, our results increase to net earnings of $16.4 million for the year ended December 31, 2007, as compared to the actual net loss of $24.4 million. For the year ended December 31, 2007, we believe the following component to be of significance with regards to the net loss:

(Dollars in thousands)                        December 31, 2007
                                    --------------------------------------
                                    Three months ended       Year ended
                                    -------------------  -----------------
GAAP Net Loss                       $           (41,348) $         (24,366)
Write-down of goodwill                           40,771             40,771
                                    -------------------  -----------------
Non-GAAP Net (Loss) / Earnings,
 net of goodwill write-down         $              (577) $          16,405
                                    ===================  =================

"Although the write-down of goodwill had a significant effect on our 2007 net income, we believe the long-term foundational strength of our company is intact. Furthermore, with respect to matters which continue to affect near term results, we continue ongoing evaluations of our other assets including the loan portfolio and other real estate owned. In light of the significant and continuing deterioration in several of the residential construction markets in which Vineyard has lending exposure, combined with our efforts to rapidly exit the single family tract construction business line, we accelerated our efforts to close out certain lending projects that we have financed. As of December 31, 2007 a review of approximately 300 luxury construction home loans, 35 tract development projects, and 20 land development loans was completed. This review confirmed that it is doubtful that we will fully collect all principal and interest due us on one land loan held for tract development and four active tract construction projects. As such, we designated these five loans as impaired; we placed them on non-accrual loan status, funded a $2.4 million specific valuation allowance within the provision for loan losses on these loans, and charged-off $3.9 million as uncollectible. These projects continue to sell housing units or be completed, though at a slower pace than originally anticipated and at unit prices which are below our respective loan amounts," said James LeSieur, interim chief executive officer.

LeSieur also added, "We will continue thorough reviews of our portfolios on an ongoing basis and will take appropriate steps to aggressively address and mitigate any further deterioration to our portfolio. Though the fourth quarter results are clearly disappointing, we believe that we have a strong committed management team and that our aggressive risk mitigation tactics will restore the operations of Vineyard to previous levels with a much lower risk profile. Vineyard's core operations for the fourth quarter, in spite of these negative credit costs, were positive and provided the ability to absorb these large credit costs."

Fourth quarter and year-end 2007 operating highlights include:

--  net interest income before provision for loan losses was  $23.3
    million for the fourth quarter of 2007, an increase of $0.5 million or 2%
    as compared to $22.8 million for the same period in 2006;  net interest
    income before provision for loan losses for the year-ended 2007 was  $93.5
    million, an increase of $10.4 million or 13% as compared to $83.1 million
    for the same period in 2006;
    
--  total assets were $2.5 billion at year-end December 31, 2007, an
    increase of $241.0 million, or 11% over the year-end December 31, 2006
    level, and an increase of $23.7 million, or 1% over the third quarter of
    2007;
    
--  total loans, net of unearned income, including loans held-for-sale,
    were $2.1 billion at year-end December 31, 2007, an increase of $229.8
    million, or 12.1% over the year-end December 31, 2006 level, and a decrease
    of $2.4 million, or 0.1% over the third quarter of 2007;
    
--  total deposits at Vineyard (the subsidiary bank) were $2.0 billion at
    year-end December 31, 2007, an increase of $168.2 million, or 9% over year-
    end December 31, 2006, and an increase of $120.5 million, or 6% over third
    quarter 2007. During the fourth quarter 2007, Vineyard's demand deposits
    increased by $60.5 million, or 20%, to $368.7 million;
    
--  in December 2007, the company acquired 1031 Exchange Advantage Inc.
    and 1031 Funding & Reverse Corp. (collectively, the "exchange companies")
    which had funds of $47.5 million at December 31, 2007 and are recorded as
    "Exchange balances" in the consolidated reports, of which $35.5 million was
    maintained as demand deposits at Vineyard and reduced its cost of funds;
    
--  the company's net interest margin for the fourth quarter 2007 was
    3.91%, as compared to 4.19% for the third quarter 2007 and 4.31% for the
    fourth quarter 2006. Our net interest margin was adversely affected by a
    $0.5 million interest reversal on new non-accrual loans in the fourth
    quarter 2007, as well as market interest rate reductions caused by the
    Federal Reserve Bank's rate cuts.
    

Income Statement

For the quarter-ended December 31, 2007, net interest income before the provision for loan losses was $23.3 million, an increase of $0.5 million, or 2% as compared to the same period in 2006. These results produced a net interest margin of 3.91% for the quarter-ended December 31, 2007, as compared to 4.31% for the same period in 2006. The net interest income for the full year-ended December 31, 2007 was $93.5 million, an increase of $10.4 million, or 13% as compared to the same period in 2006. These results produced a net interest margin of 4.10%, as compared to 4.37% for the same period in 2006.

For the quarter-ended December 31, 2007, gross loan interest income was $45.5 million, an increase of $3.7 million, or 9% as compared to the same period in 2006. The effective yield of the loan portfolio in the fourth quarter 2007 was 8.40%. Gross loan interest income for the year-ended December 31, 2007 was $177.9 million, producing an effective yield on the loan portfolio of 8.67%, as compared to $146.2 million and 8.95% respectively, for the year-ended December 31, 2006.

Total net revenues (net interest income plus other operating income) for the quarter-ended December 31, 2007 was $24.6 million, an increase of $0.2 million, or 1% as compared to the same period in 2006. Total net revenues for the year-ended December 31, 2007 were $98.1 million, as compared to $88.7 million for the same period in 2006.

The total provision for loan losses for the quarter-ended December 31, 2007 was $9.2 million, and is attributable to an increase in non-performing loans and substandard assets. By comparison, the provision for loan losses was $1.0 million for the quarter-ended September 30, 2007 and $1.1 million for the quarter-ended December 31, 2006. Net charge-offs for the quarter-ended December 31, 2007 were $4.4 million, as compared to $0.1 million for the same period in 2006.

The total provision for loan losses for the year-ended December 31, 2007 was $11.9 million, as compared to $4.1 million for the year-ended December 31, 2006. Net charge-offs for the year-ended December 31, 2007 were $4.7 million, as compared to $0.3 million for the year-ended December 31, 2006.

The provision for loan losses, net of the charge-offs, increased the allowance for loan losses to $26.9 million, or 1.34% of the gross loan portfolio at December 31, 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 1.38% at December 31, 2007. Based on management's evaluation and analysis of portfolio credit quality identified at December 31, 2007 and prevailing economic conditions, the company believes these reserves are adequate. Adverse changes to borrower capacity and liquidity, and further downward real estate valuations would likely increase problem assets, defaults and increased levels of loan loss provisioning.

Total operating expenses for the quarter-ended December 31, 2007 were $57.4 million, as compared to $14.0 million for the same period in 2006. The increase from 2006 is primarily attributable to the previously discussed non-cash charge of $40.8 million against goodwill and the $2.1 million write-down of other real estate owned. Total operating expenses for the year-ended December 31, 2007 were $99.4 million, as compared to $51.0 million for the same period in 2006. The company's total operating expenses for the quarter-ended September 30, 2007 were $14.7 million.

The company's efficiency ratio, which measures the relationship of total operating expenses to total operating income, was 234%, including those expenses discussed above, for the quarter-ended December 31, 2007, as compared to 58% for the same period in 2006. The efficiency ratio for the year-ended December 31, 2007 was 101%, as compared to 58% for the year-ended December 31, 2006. The significant increase in the company's efficiency ratio was primarily a result of the write-off of $40.8 million in goodwill. For the year ended December 31, 2007, we believe the following components to be of significance with regards to the efficiency ratio:

(Dollars in thousands)                    December 31, 2007
                            ----------------------------------------------
                              Three months ended          Year ended
                            ----------------------  ----------------------
                                        Efficiency              Efficiency
                             Balance       Ratio     Balance       Ratio
                            ----------  ----------  ----------  ----------
GAAP Operating Expenses     $   57,395         234% $   99,411         101%
Less: Write-down of
 goodwill                      (40,771)        166%    (40,771)         41%
                            ----------  ----------  ----------  ----------
Non-GAAP Operating Expenses,
 net of goodwill write-down $   16,624          68% $   58,640          60%
                            ==========  ==========  ==========  ==========

Given that the write-down of goodwill is not expected to occur as part of our ongoing operations, we believe that the non-GAAP efficiency ratio of 68% and 60% for the quarter and year ended December 31, 2007, respectively, as compared to the actual ratios of 234% and 101% for the same periods, respectively, is more meaningful.

In summary, besides the non-cash charge to goodwill, in the fourth quarter 2007 the company experienced credit-related declines which resulted in a provision for loan losses of $9.2 million, a write-down of assets of $2.1 million in foreclosed real estate owned, interest reversal of $0.5 million, and $0.2 million of expenses relating to foreclosure, including legal fees, appraisals, and taxes.

Goodwill Write-Down

As previously noted, the company wrote-down $40.8 million of its goodwill during the fourth quarter of 2007. Generally Accepted Accounting Principles ("GAAP") requires that when a company's market value becomes less than the value of stockholders' equity, an assessment of impairment of goodwill must be performed. The company's goodwill was primarily associated with its acquisition of Rancho Bank on July 31, 2006. The four operating locations acquired continue to be significant contributors to the operations of the company and have been integrated into our core operations. However, the company's market valuation as a whole has been significantly impacted with concerns related to the financial sector, California housing and real estate lending operations. GAAP requires that we use the most readily available indicator of market value as part of our assessment of goodwill impairment, which is the market price of the company's stock. While we believe our current trading value is more indicative of concerns noted above, we determined that the current market value of our stock was not sufficient to support the carrying value of goodwill under the current accounting guidance. As a result, we were required to record a permanent write-down of goodwill. As the goodwill was not tax deductible at the time of acquisition, there is no corresponding tax impact for the write-off of this asset.

This charge is not expected to impact the company's ongoing operations or management's strategic plan, which calls for a reduced risk profile as discussed later under "2008 Operating Environment and Objectives." The tangible book value of the company, which was $9.19 at December 31, 2007, remained unchanged with this action.

Balance Sheet

At December 31, 2007, loans outstanding, net of unearned income, including loans held-for-sale, were $2.1 billion, as compared to the December 31, 2006 level of $1.9 billion. The largest dollar components of this increase in 2007 are centered in the established commercial real estate and single family residential ("SFR") luxury construction product lines, followed by business lending and consumer loans.

The company remains committed to accelerating its efforts to reduce the risk profile in the current loan portfolio by focusing its expertise in the diversified luxury home construction, commercial real estate, commercial construction and business lending product lines, while reducing its exposure in the tract home construction and land financing lines. Due to the continued distressed credit environment, management made the decision in mid-2007 to tighten its underwriting criteria related to tract construction loans. As a result of the deteriorating market conditions and tightened underwriting criteria, there was a significant decrease in the company's tract construction loan originations for the year-ended December 31, 2007.

Throughout the 2007 operating year, the company made significant efforts in producing earning assets while reconstituting its loan portfolio mix. Our loan balance, net of unearned income, for the quarter-ended December 31, 2007, decreased by $2.4 million, as compared to loan growth of $102.2 million in the third quarter 2007, $35.4 million in the second quarter 2007, and $94.5 million in the first quarter 2007. These quarterly changes in loan balances are net of loan participations sold of $37.1 million, $3.5 million, $65.8 million and $8.2 million, for the fourth quarter 2007, third quarter 2007, second quarter 2007 and first quarter 2007, respectively.

As the company continued its efforts to diversify its loan portfolio, for the quarter-ended and year-ended December 31, 2007, it sold and participated loans totaling $37.1 million and $114.6 million, respectively. The majority of the participations were in construction loan balances of approximately $70.9 million for the year-ended December 31, 2007.

Asset Quality

Non-accrual loans

At December 31, 2007, the company's non-accruing loans amounted to $39.6 million, an increase of $28.0 million as compared to third quarter 2007. The change in non-accrual loans during the fourth quarter related mainly to the following two items: 1) the transfer of two tract development loans totaling $6.8 million from the company's loan portfolio to "other real estate owned"; and 2) the addition of six loans to non-accrual status totaling $35.4 million in December 2007. Of the six additions, one is a land development loan ($6.9 million), one is a loan secured by an income producing property ($2.5 million), and four are tract construction projects ($25.9 million). Although each of the four tract construction projects have units in escrow, respective project absorption rates have slowed and current unit sales prices are below original expectations. The loss of accrued interest income associated with these newest non-accrual loans amounted to $0.5 million in the fourth quarter 2007. 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 following schedule sets forth the non-accrual loans at December 31, 2007.

(Dollars in Thousands)
                                                Original
                                     Location     Note    Current  Specific
Loan Type           Description       County     Amount   Balance  Reserve
                  ----------------- ---------- ---------- -------- --------
SFR tract                               Santa
 construction              16 homes    Barbara $    8,385 $  5,606 $      -
SFR tract
 construction              19 homes  Riverside      6,144    3,609        -
SFR tract                                 San
 construction     35 homes/ 35 lots Bernardino     22,500   14,886    2,020
SFR tract
 construction      10 homes/ 9 lots   Imperial      2,140    1,831      405
Land, for tract
 construction              112 lots     Fresno      7,280    6,934        -
SFR condo
 construction             12 condos  San Diego      6,231    2,300       88
Commercial real                           Los
 estate                  1 building    Angeles      1,118      860        -
Commercial real
 estate                  1 building  Riverside      2,558    2,494        -
Consumer &
 commercial SBA             Various    Various      2,262    1,032        -
                                               ---------- -------- --------
 Total                                         $   58,618 $ 39,552 $  2,513
                                               ========== ======== ========

Other real estate owned

As of December 31, 2007, the company had $17.6 million in other real estate owned, which is comprised of loans that have been foreclosed upon. It includes $6.8 million in two loans which were transferred to other real estate owned in the fourth quarter of 2007, a $1.2 million SBA-guaranteed loan which was transferred to other real estate owned in the third quarter of 2007, and a $9.6 million (net of a $2.1 million write-down) 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 is actively pursuing disposition of these foreclosed assets and believes that the current carrying value of the real estate owned is recoverable.

Deposit Acquisition and Funding Strategies

At December 31, 2007, total deposits were $1.9 billion, as compared to the September 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 $316.9 million at December 31, 2007, an increase of $24.7 million during the fourth quarter of 2007, as compared to the $292.2 million level at September 30, 2007. Non-interest bearing demand deposits also experienced a slight increase of $24.0 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, and continues to expand its cash management client acquisitions.

Money market and saving deposits were $663.8 million at December 31, 2007, an increase of $46.3 million, or 7.5% over the $617.5 million level at September 30, 2007 and an increase of $78.2 million, or 13.3% over the $585.6 million level at December 31, 2006.

Time deposits have increased $15.6 million from the $897.5 million level at September 30, 2007 and $32.9 million, or 3.7%, since December 31, 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 supplemented its funding base with FHLB borrowings and the acquisition of the exchange companies. Vineyard had $175.0 million in FHLB borrowings at December 31, 2007, a decrease from the $271.0 million level at September 30, 2007. While the FHLB can be accessed at rates that are less expensive than retail time deposits, it lacks any opportunity to expand into core depository relationships. Conversely, the acquisition of the exchange companies resulted in approximately $47.5 million in low cost exchange balances at year-end 2007, with the opportunity to expand the deposit base as a new business line. The company intends to 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.

Capital Resources

At December 31, 2007, stockholders' equity of the company totaled $128.7 million, a decrease of $14.4 million, or 10% as compared to December 31, 2006. The company's net book value per share of its common stock decreased from $12.49 at December 31, 2006 to $9.66 per share at December 31, 2007. This was principally caused by the company's non-cash $40.8 million write-down of goodwill.

For the quarter-ended December 31, 2007, the company declared cash dividends of $0.8 million and $0.7 million on its common and preferred stock, respectively. For the full year-ended December 31, 2007 cash dividends for the company's common and preferred stock amounted to $3.4 million and $1.7 million, respectively.

Stock Repurchase Program

The company previously announced its activity and intention with regards to its authorized stock repurchase program, which had $19.8 million remaining in capacity at year-end 2007. The company will continue to consider the repurchase of its common stock on the open market, from time to time and subject to market conditions, as it manages its balance sheet and capital resources.

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 12.4% and 10.9% at December 31, 2007, respectively.

2008 Operating Environment and Objectives

The company recognizes that the challenging real estate and operating environments will require a disciplined focus to achieve quality earnings with a reduced risk profile. Beginning in 2007, and now continuing into 2008, four primary objectives have been established as a basis for long-term success of the Vineyard franchise. Following are the objectives:

(i)     Reduce the Overall Risk Profile of the Company: This objective
        includes the significant reduction of SFR tract construction
        lending and land development projects, enhanced borrower
        sponsorship requirements, increased and expanded core deposit
        growth, expanded business and commercial real estate lending in
        supportive sub-markets, enhanced balance sheet management through
        stabilized asset growth and allowing for capital formation to be
        accretive to ratios and reserves;

(ii)    Loan Portfolio Management:  In order to produce a base of
        stabilized long-term earnings, the company will proactively
        rebalance the existing loan portfolio and pursue new and
        diversified 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;

(iii)   Liquidity Enhancement and Funding Cost Reduction: The company will
        reduce its funding costs by an intensified focus on low to moderate
        cost 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
        wholesale borrowings; and

(iv)    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 will continue to deploy and redeploy
        resources, both personnel and other operating costs, toward the
        objectives established above.

The company anticipates that the implementation of these objectives, subject to a stabilized real estate market, will facilitate a return of the company's earnings to levels consistent with prior periods.

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 is a $2.5 billion financial holding company headquartered in Corona and the parent company of Vineyard and the exchange companies. Vineyard, also headquartered in Corona, operates through 16 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 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)

                                 December     December                %
                                 31, 2007     31, 2006   $ Change   Change
                               -----------  -----------  ---------  ------

Assets
   Loans, net of unearned
    income                     $ 2,012,598  $ 1,902,244  $ 110,354       6%
      Less: Allowance for
       loan losses                 (26,876)     (19,689)    (7,187)     37%
                               -----------  -----------  ---------  ------
         Net Loans               1,985,722    1,882,555    103,167       5%
   Loans held-for-sale             119,427            -    119,427     100%
   Investment securities           202,387      233,600    (31,213)    -13%
                               -----------  -----------  ---------  ------
         Total Earning
          Assets                 2,307,536    2,116,155    191,381       9%
                               -----------  -----------  ---------  ------

   Cash and cash equivalents        83,537       35,129     48,408     138%
   Premises and equipment, net      18,326       20,402     (2,076)    -10%
   Other real estate owned          17,560            -     17,560     100%
   Goodwill and other
    intangibles                      4,637       43,265    (38,628)    -89%
   Other assets                     67,186       42,788     24,398      57%
                               -----------  -----------  ---------  ------
           Total Assets        $ 2,498,782  $ 2,257,739  $ 241,043      11%
                               ===========  ===========  =========  ======


Liabilities and Stockholders' Equity
Liabilities
   Deposits
      Non-interest bearing     $   316,905  $   292,917  $  23,988       8%
      Interest-bearing           1,618,747    1,513,496    105,251       7%
                               -----------  -----------  ---------  ------
         Total Deposits          1,935,652    1,806,413    129,239       7%

   Exchange balances                47,515            -     47,515     100%
   Federal Home Loan Bank
    advances                       175,000      126,000     49,000      39%
   Other borrowings                 45,250       40,000      5,250      13%
   Subordinated debt                 5,000        5,000          -       0%
   Junior subordinated
    debentures                     115,470      115,470          -       0%
   Other liabilities                46,197       21,796     24,401     112%
                               -----------  -----------  ---------  ------
         Total Liabilities       2,370,084    2,114,679    255,405      12%

Stockholders' Equity
   Common stock equity             104,800      143,073    (38,273)    -27%
   Preferred stock equity           31,615        9,665     21,950     227%
   Unallocated ESOP shares          (5,168)      (5,765)       597     -10%
   Cumulative other
    comprehensive loss              (2,549)      (3,913)     1,364     -35%
                               -----------  -----------  ---------  ------
         Total Stockholders'
          Equity                   128,698      143,060    (14,362)    -10%
                               -----------  -----------  ---------  ------
             Total Liabilities
              and Stockholders'
              Equity           $ 2,498,782  $ 2,257,739  $ 241,043      11%
                               ===========  ===========  =========  ======

Total non-performing
 loans/Gross loans (1)                1.86%        0.88%

Number of shares of common
 stock outstanding (2)          10,053,971   10,681,482

Net book value of common
 stock (3)                     $      9.66  $     12.49
Tangible book value of
 common stock (4)              $      9.19  $      8.44
Net book value of common
 stock, excluding other
 comprehensive loss (3)        $      9.91  $     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 December 31, 2007 and
    December 31, 2006 excludes 231,804 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 SUBSIDIARIES
                        CONSOLIDATED BALANCE SHEETS
             (dollars in thousands, except per share amounts)
                                (unaudited)

                                 December     September                %
                                 31, 2007     30, 2007   $ Change   Change
                               -----------  -----------  ---------  ------

Assets
   Loans, net of unearned
    income                     $ 2,012,598  $ 1,990,645  $  21,953       1%
      Less: Allowance for
       loan losses                 (26,876)     (22,037)    (4,839)     22%
                               -----------  -----------  ---------  ------
         Net Loans               1,985,722    1,968,608     17,114       1%
   Loans held-for-sale             119,427      143,737    (24,310)    -17%
   Investment securities           202,387      216,556    (14,169)     -7%
                               -----------  -----------  ---------  ------
         Total Earning Assets    2,307,536    2,328,901    (21,365)     -1%
                               -----------  -----------  ---------  ------

   Cash and cash equivalents        83,537       29,286     54,251     185%
   Premises and equipment, net      18,326       18,593       (267)     -1%
   Other real estate owned          17,560       12,862      4,698      37%
   Goodwill and other
    intangibles                      4,637       42,730    (38,093)    -89%
   Other assets                     67,186       42,677     24,509      57%
                               -----------  -----------  ---------  ------
             Total Assets      $ 2,498,782  $ 2,475,049  $  23,733       1%
                               ===========  ===========  =========  ======


Liabilities and Stockholders'
 Equity
Liabilities
   Deposits
      Non-interest bearing     $   316,905  $   292,172  $  24,733       8%
      Interest-bearing           1,618,747    1,558,699     60,048       4%
                               -----------  -----------  ---------  ------
         Total Deposits          1,935,652    1,850,871     84,781       5%

   Exchange balances                47,515            -     47,515     100%
   Federal Home Loan Bank
    advances                       175,000      271,000    (96,000)    -35%
   Other borrowings                 45,250       33,100     12,150      37%
   Subordinated debt                 5,000        5,000          -       0%
   Junior subordinated
    debentures                     115,470      115,470          -       0%
   Other liabilities                46,197       24,239     21,958      91%
                               -----------  -----------  ---------  ------
         Total Liabilities       2,370,084    2,299,680     70,404       3%

Stockholders' Equity
   Common stock equity             104,800      153,618    (48,818)    -32%
   Preferred stock equity           31,615       31,626        (11)      0%
   Unallocated ESOP shares          (5,168)      (5,320)       152      -3%
   Cumulative other
    comprehensive loss              (2,549)      (4,555)     2,006     -44%
                               -----------  -----------  ---------  ------
         Total Stockholders'
          Equity                   128,698      175,369    (46,671)    -27%
                               -----------  -----------  ---------  ------
             Total Liabilities
              and Stockholders'
              Equity           $ 2,498,782  $ 2,475,049  $  23,733       1%
                               ===========  ===========  =========  ======

Total non-performing
 loans/Gross loans (1)                1.86%        0.66%

Number of shares of common
 stock outstanding (2)          10,053,971   10,561,489

Net book value of common
 stock (3)                     $      9.66  $     13.61
Tangible book value of
 common stock (4)              $      9.19  $      9.56
Net book value of common
 stock, excluding other
 comprehensive loss (3)        $      9.91  $     14.04


(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 December 31, 2007 and
    September 30, 2007 excludes 231,804 and 238,306 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 SUBSIDIARIES
                    CONSOLIDATED STATEMENTS OF EARNINGS
             (dollars in thousands, except per share amounts)
                                (unaudited)


                                   Three Months Ended
                                      December 31,
                                 ----------------------
                                                                      %
                                    2007        2006     $ Change   Change
                                 ----------  ----------  ---------  ------
Interest Income
   Loans, including fees         $   45,496  $   41,818  $   3,678       9%
   Investment securities              2,619       3,035       (416)    -14%
                                 ----------  ----------  ---------  ------
      Total Interest Income          48,115      44,853      3,262       7%

Interest Expense
   Deposits                          18,787      17,722      1,065       6%
   Borrowings and debt
    obligations                       5,997       4,331      1,666      38%
                                 ----------  ----------  ---------  ------
      Total Interest Expense         24,784      22,053      2,731      12%

Net Interest Income                  23,331      22,800        531       2%
Provision for loan losses             9,200       1,050      8,150     776%
                                 ----------  ----------  ---------  ------
      Net interest income after
       provision for loan losses     14,131      21,750     (7,619)    -35%

Other Income
   Fees and service charges             484         558        (74)    -13%
   Gain on sale of SBA loans and
    SBA broker fee income               442         783       (341)    -44%
   Gain on sale of securities
    and non-SBA loans                   149          34        115     338%
   Other income                         150         159         (9)     -6%
                                 ----------  ----------  ---------  ------
      Total Other Income              1,225       1,534       (309)    -20%

      Gross Operating Income         15,356      23,284     (7,928)    -34%

Operating Expenses
   Salaries and benefits              7,623       7,943       (320)     -4%
   Occupancy and equipment            2,513       2,584        (71)     -3%
   Marketing                            230         230          -       0%
   Professional services              1,119         818        301      37%
   Office supplies, postage and
    telephone                           562         590        (28)     -5%
   Business development                 564         579        (15)     -3%
   Write-down of assets               2,089           -      2,089     100%
   Write-down of goodwill            40,771           -     40,771     100%
   Other operating expense            1,924       1,268        656      52%
                                 ----------  ----------  ---------  ------
      Total Operating Expenses       57,395      14,012     43,383     310%

(Loss) / Earnings before income
 taxes                              (42,039)      9,272    (51,311)   -553%
Income tax (benefit) / provision       (691)      3,782     (4,473)   -118%
                                 ----------  ----------  ---------  ------
      Net (Loss) / Earnings      $  (41,348) $    5,490  $ (46,838)   -853%
                                 ==========  ==========  =========  ======

Preferred stock dividend         $      665  $      234  $     431     184%

Weighted average shares
 outstanding used in earnings
 per share calculation (6)
   Basic                         10,226,436  10,666,450
   Diluted                       10,226,436  10,923,053

(Loss) / Earnings per common
 share (6)
   Basic                         $    (4.11) $     0.49  $   (4.60)   -939%
   Diluted                       $    (4.11) $     0.48  $   (4.59)   -956%

Efficiency Ratio (5)                    234%         58%


(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 SUBSIDIARIES
                    CONSOLIDATED STATEMENTS OF EARNINGS
             (dollars in thousands, except per share amounts)
                                (unaudited)


                                 Year Ended December 31,
                                 ----------------------
                                                                      %
                                    2007        2006     $ Change   Change
                                 ----------  ----------  ---------  ------
Interest Income
   Loans, including fees         $  177,852  $  146,183  $  31,669      22%
   Investment securities             11,582      12,137       (555)     -5%
                                 ----------  ----------  ---------  ------
      Total Interest Income         189,434     158,320     31,114      20%

Interest Expense
   Deposits                          72,022      57,858     14,164      24%
   Borrowings and debt
    obligations                      23,901      17,372      6,529      38%
                                 ----------  ----------  ---------  ------
      Total Interest Expense         95,923      75,230     20,693      28%

Net Interest Income                  93,511      83,090     10,421      13%
Provision for loan losses            11,900       4,125      7,775     188%
                                 ----------  ----------  ---------  ------
      Net interest income after
       provision for loan losses     81,611      78,965      2,646       3%

Other Income
   Fees and service charges           1,847       1,825         22       1%
   Gain on sale of SBA loans and
    SBA broker fee income             1,768       2,839     (1,071)    -38%
   Gain on sale of securities
    and non-SBA loans                   486         456         30       7%
   Other income                         479         502        (23)     -5%
                                 ----------  ----------  ---------  ------
      Total Other Income              4,580       5,622     (1,042)    -19%

      Gross Operating Income         86,191      84,587      1,604       2%

Operating Expenses
   Salaries and benefits             31,205      28,764      2,441       8%
   Occupancy and equipment           10,000       9,247        753       8%
   Marketing                            928       1,253       (325)    -26%
   Professional services              3,361       2,766        595      22%
   Office supplies, postage and
    telephone                         2,328       2,097        231      11%
   Business development               2,224       2,216          8       0%
   Write-down of assets               2,486           -      2,486     100%
   Write-down of goodwill            40,771           -     40,771     100%
   Other operating expense            6,108       4,674      1,434      31%
                                 ----------  ----------  ---------  ------
      Total Operating Expenses       99,411      51,017     48,394      95%

(Loss) / Earnings before income
 taxes                              (13,220)     33,570    (46,790)   -139%
Income tax provision                 11,146      13,825     (2,679)    -19%
                                 ----------  ----------  ---------  ------
      Net (Loss) / Earnings      $  (24,366) $   19,745  $ (44,111)   -223%
                                 ==========  ==========  =========  ======

Preferred stock dividend         $    1,735  $      900  $     835      93%

Weighted average shares
 outstanding used in earnings
 per share calculation (6)
   Basic                         10,540,917  10,153,919
   Diluted                       10,540,917  10,493,968

(Loss) / Earnings per common
 share (6)
   Basic                         $    (2.48) $     1.86  $   (4.34)   -233%
   Diluted                       $    (2.48) $     1.80  $   (4.28)   -238%

Efficiency Ratio (5)                    101%         58%


(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 SUBSIDIARIES
                          FINANCIAL PERFORMANCE
                                (unaudited)
                          (dollars in thousands)


                            Three Months Ended December 31,
              ------------------------------------------------------------
                          2007                           2006
              -----------------------------  -----------------------------
                Average             Average    Average             Average
                                     Yield/                         Yield/
                Balance   Interest    Cost     Balance   Interest    Cost
              ----------  --------- -------  ----------  --------- -------
Assets
  Gross loans
   (7)        $2,149,887  $  45,496    8.40% $1,837,749  $  41,818    9.03%
  Investment
   securities
   (8)           229,046      2,619    4.57%    262,176      3,035    4.63%
              ----------  ---------          ----------  ---------
    Total
     interest-
     earning
     assets    2,378,933     48,115    8.03%  2,099,925     44,853    8.48%
  Other assets   153,557                        123,824
  Less:
   allowance
   for loan
   losses        (22,163)                       (18,863)
              ----------                     ----------
    Total
     average
     assets   $2,510,327                     $2,204,886
              ==========                     ==========

Liabilities and
 Stockholders'
 Equity
  Interest-
   bearing
   deposits
   (9)        $1,599,551     18,787    4.66% $1,521,213     17,722    4.62%
 Federal Home
  Loan Bank
  advances       247,275      3,048    4.85%    109,971      1,347    4.86%
 Other
  borrowings      26,301        530    7.89%     26,950        531    7.71%
 Subordinated
  debt             5,000        108    8.44%      5,000        110    8.54%
 Junior
  subordinated
  debentures     115,470      2,311    7.83%    115,470      2,343    7.94%
              ----------  ---------          ----------  ---------
    Total
     interest-
     bearing
     liab-
     ilities   1,993,597     24,784    4.92%  1,778,604     22,053    4.92%
                          ---------                      ---------
  Demand
   deposits      299,532                        264,335
  Exchange
   balances       10,261                              -
  Other
   liabilities    33,316                         22,996
              ----------                     ----------
    Total
     average
     liabili-
     ties      2,336,706                      2,065,935
  Preferred
   stock
   equity         31,622                          9,665
  Common stock
   equity, net
   of cumulative
   other
   comprehensive
   loss          141,999                        129,286
              ----------                     ----------
    Stockhol-
     ders'
     equity      173,621                        138,951
              ----------                     ----------
    Total
     liabili-
     ties and
     stockho-
     lders'
     equity   $2,510,327                     $2,204,886
              ==========                     ==========

Net interest
 spread (10)                           3.11%                          3.56%
                                    =======                        =======
Net interest
 margin (11)              $  23,331    3.91%             $  22,800    4.31%
                          ========= =======              ========= =======


Return on
 Average
 Assets                               -6.53%                          0.99%
Return on
 Average
 Tangible
 Assets (12)                          -6.63%                          1.04%
Return on
 Average
 Common
 Equity                             -117.38%                         16.13%
Return on
 Average
 Tangible
 Common
 Equity (13)                        -168.62%                         25.43%
Net
 Charge-offs
 /Average
 Gross Loans                           0.20%                          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 SUBSIDIARIES
                          FINANCIAL PERFORMANCE
                                (unaudited)
                          (dollars in thousands)


                                Year Ended December 31,
              ------------------------------------------------------------
                          2007                           2006
              -----------------------------  -----------------------------
                Average             Average    Average             Average
                                     Yield/                         Yield/
                Balance   Interest    Cost     Balance   Interest    Cost
              ----------  --------- -------  ----------  --------- -------
Assets
  Gross loans
   (7)        $2,051,119  $ 177,852    8.67% $1,632,995  $ 146,183    8.95%
  Investment
   securities
   (8)           237,793     11,582    4.87%    267,288     12,137    4.54%
              ----------  ---------          ----------  ---------
    Total
     interest-
     earning
     assets    2,288,912    189,434    8.28%  1,900,283    158,320    8.33%
  Other assets   136,618                         91,397
  Less:
   allowance
   for loan
   losses        (21,138)                       (16,390)
              ----------                     ----------
    Total
     average
     assets   $2,404,392                     $1,975,290
              ==========                     ==========

Liabilities
 and
 Stockholders'
 Equity
  Interest-
   bearing
   deposits
   (9)        $1,533,175     72,022    4.70% $1,341,767     57,858    4.31%
  Federal Home
   Loan Bank
   advances      239,713     11,931    4.94%    156,430      7,353    4.70%
  Other
   borrowings     31,262      2,290    7.23%     14,799      1,119    7.45%
  Subordinated
   debt            5,000        436    8.60%      5,000        423    8.34%
  Junior
   subordinated
   debentures    115,470      9,244    7.90%    108,606      8,477    7.70%
              ----------  ---------          ----------  ---------
    Total
     interest-
     bearing
     liab-
     ilities   1,924,620     95,923    4.97%  1,626,602     75,230    4.62%
                          ---------                      ---------
  Demand
   deposits      289,036                        206,782
  Exchange
   balances        2,586                              -
  Other
   liabilities    27,321                         19,868
              ----------                     ----------
    Total
     average
     liabili-
     ties      2,243,563                      1,853,252
  Preferred
   stock
   equity         21,053                          9,665
  Common stock
   equity, net
   of cumulative
   other
   comprehensive
   loss          139,776                        112,373
              ----------                     ----------
    Stockhol-
     ders'
     equity      160,829                        122,038
              ----------                     ----------
    Total
     liabili-
     ties and
     stockho-
     lders'
     equity   $2,404,392                     $1,975,290
              ==========                     ==========

Net interest
 spread (10)                           3.31%                          3.71%
                                    =======                        =======
Net interest
 margin (11)              $  93,511    4.10%             $  83,090    4.37%
                          ========= =======              ========= =======


Return on
 Average
 Assets                               -1.01%                          1.00%
Return on
 Average
 Tangible
 Assets (12)                          -1.00%                          1.03%
Return on
 Average
 Common
 Equity                              -18.67%                         16.77%
Return on
 Average
 Tangible
 Common
 Equity (13)                         -26.31%                         20.54%
Net
 Charge-offs/
 Average
 Gross Loans                           0.23%                          0.02%


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


               December 31, September 30, June 30,   March 31, December 31,
                  2007         2007        2007        2007        2006
                ----------  ----------  ----------  ----------  ----------
Earning Assets
Loans
  Commercial and
   industrial   $  156,965  $  147,799  $  133,255  $  127,164  $  122,257
  Real estate
   construction
   and land:
    Single-family
     luxury        582,962     577,155     497,494     553,333     514,385
    Single-family
     tract         151,155     163,396     183,395     160,270     152,060
    Commercial     198,186     163,573     162,514     136,465     134,404
    Land:                                                          112,418
     Single-
      family
      luxury
      (14)          22,931      16,648      19,946      17,382         N/A
     Single-
      family
      tract (14)    64,405      61,760      38,878      70,761         N/A
     Commercial
      (14)          15,439      19,444      30,686      23,046         N/A
     Other (14)        909         795      25,099       6,284         N/A
  Real estate
   mortgage:
    Commercial     553,531     569,167     604,157     565,199     531,159
    Multi-family
     residential    93,662      97,971     185,450     213,877     222,470
    All other
     residential    56,257      60,944      53,533      43,954      49,353
  Consumer loans   115,702     112,064      97,752      80,306      65,914
  All other loans
   (including
   overdrafts)         264          54         194          70          98
                ----------  ----------  ----------  ----------  ----------
                 2,012,368   1,990,770   2,032,353   1,998,111   1,904,518
  Unearned
   premium on
   acquired
   loans             3,272       3,110       2,627       2,050       1,696
  Deferred loan
   fees             (3,042)     (3,235)     (3,108)     (3,842)     (3,970)
                ----------  ----------  ----------  ----------  ----------
   Loans, net
    of unearned
    income       2,012,598   1,990,645   2,031,872   1,996,319   1,902,244
                ----------  ----------  ----------  ----------  ----------

Loans
 held-for-sale     119,427     143,737         296         441           -
Investment
 securities        202,387     216,556     223,793     232,504     233,600
                ----------  ----------  ----------  ----------  ----------
   Total
    Earning
    Assets,
    excluding
    Allowance
    for Loan
    Losses      $2,334,412  $2,350,938  $2,255,961  $2,229,264  $2,135,844
                ==========  ==========  ==========  ==========  ==========

Unfunded Loan
 Commitments
  Commercial and
   industrial   $  151,584  $  125,431  $  109,696  $  110,649  $   97,655
  Real estate
   construction
   and land:
    Single-family
     luxury        243,739     269,863     261,299     281,842     264,967
    Single-family
     tract          57,239      59,035     108,898     126,463     150,702
    Commercial     115,919     101,719     118,851     102,308     119,134
    Land             8,930      10,236      12,928      13,495      16,336
  Real estate
   mortgage:
    Commercial       8,780      14,005      14,736      13,388      14,221
    Multi-family
     residential     1,662       1,901         709         961       1,194
    All other
     residential    20,684      23,683      19,569      19,388      16,496
  Consumer loans     9,799       9,305       5,948       5,663       4,089
                ----------  ----------  ----------  ----------  ----------
   Total
    Unfunded
    Loan
    Commitments $  618,336  $  615,178  $  652,634  $  674,157  $  684,794
                ==========  ==========  ==========  ==========  ==========

Funding
 Liabilities
Deposits
  Non-interest
   bearing      $  316,905  $  292,172  $  301,281  $  287,866  $  292,917
  Money market     568,713     597,620     575,867     618,954     562,622
  Savings and
   NOW             136,982      63,582      69,471      69,947      70,741
  Time deposits    913,052     897,497     915,873     790,965     880,133
                ----------  ----------  ----------  ----------  ----------
   Total
    Deposits     1,935,652   1,850,871   1,862,492   1,767,732   1,806,413
                ----------  ----------  ----------  ----------  ----------

Exchange
 balances           47,515           -           -           -           -
FHLB advances      175,000     271,000     210,000     244,000     126,000
Other
 borrowings         45,250      33,100      26,000      45,400      40,000
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
    Liabilities $2,323,887  $2,275,441  $2,218,962  $2,177,602  $2,092,883
                ==========  ==========  ==========  ==========  ==========

Operating
 expenses (15)
  Salary and
   benefits     $    7,623  $    8,132  $    7,856  $    7,594  $    7,943
  Occupancy and
   equipment         2,513       2,554       2,475       2,458       2,584
  Marketing            230         275         227         196         230
  Professional
   services          1,119         763         832         647         818
  Office
   supplies,
   postage and
   telephone           562         567         572         627         590
  Business
   development         564         500         594         566         579
  Write-down of
   assets            2,089         397           -           -           -
  Write-down of
   goodwill         40,771           -           -           -           -
  Other operating
   expenses          1,924       1,527       1,618       1,039       1,268
                ----------  ----------  ----------  ----------  ----------
   Total
    operating
    expenses    $   57,395  $   14,715  $   14,174  $   13,127  $   14,012
                ==========  ==========  ==========  ==========  ==========


(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.