SOURCE: Vineyard National Bancorp

May 01, 2008 22:26 ET

Vineyard National Bancorp Reports Revised Results of Operations for the Quarter and Year Ended 2007 and Results for the First Quarter 2008

CORONA, CA--(Marketwire - May 1, 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 March 31, 2008 of $16.6 million, or $1.77 per common share, compared with net earnings of $5.5 million, or $0.48 per common share, for the quarter ended March 31, 2007. The net loss for the first quarter of 2008 was due primarily to $26.9 million of provision for loan losses, principally associated with Vineyard's construction loans originated between 2005 and 2007. The company also reported revised results for the quarter and the year ended December 31, 2007 of a net loss of $57.0 million, or $5.64 per common share, for the quarter ended December 31, 2007, and a net loss of $40.0 million, or $3.96 per common share, for the year ended December 31, 2007. The company's audit for the year ended December 31, 2007 is not yet complete. These numbers are not audited, and there could be further changes upon completion of the audit.

On January 30, 2008, the company had announced a fourth quarter 2007 net loss of $41.3 million and a net loss for the year of $24.4 million. Since that date, the company has obtained updated appraisals and additional data which indicate further declines in loan values at year end than that which earlier data had indicated. These declines are primarily related to the tract and related land loan portfolios. The company has also completed a review of its current methodology for determining an adequate allowance for loan losses. Based upon the abrupt and severe declines in real estate values reflected in the data, the company has added $26.5 million of provision for loan losses and has charged off an additional $4.5 million of tract construction loans for the fourth quarter of 2007. The increase in provision for loan losses, net of tax, increased the company's fourth quarter 2007 consolidated net loss to $57.0 million, or $5.64 per common share.

The allowance for loan losses at December 31, 2007 totaled $48.8 million, and net charge-offs for the year ended December 31, 2007 equaled $9.2 million. The balance of non-performing loans at December 31, 2007 was $75.4 million.

As previously reported, the company incurred a fourth quarter 2007 non-cash charge of $40.8 million for the write-off of goodwill. As shown below, when this one time charge is excluded from expenses, the company's results reflected net operating earnings of $0.7 million for the year ended December 31, 2007, as compared to the actual net loss of $40.0 million.

(Dollars in thousands)                         Year ended
                                              December 31,
                                                  2007
                                             --------------
GAAP Net Loss                                $      (40,039)
Write-down of goodwill                               40,771
                                             --------------
Non-GAAP Net Operating Earnings,
 net of goodwill write-down                  $          732
                                             ==============

2008 Operating Objectives

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

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

2. Loan Portfolio Management: In order to produce a base of
   stabilized long-term earnings, the company will seek to proactively
   rebalance the existing loan portfolio and 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;

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

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


Balance Sheet

As part of the operating objectives described above, the company implemented actions to manage its loan production levels resulting in a net contraction of its balance sheet during the first quarter of 2008. Overall, the company compressed its balance sheet by $128.7 million, or 5%, during the first quarter of 2008, from $2.5 billion at December 31, 2007 to $2.4 billion at March 31, 2008. Of this strategic contraction, $45.9 million relates to loans, including loans held-for-sale. During the first quarter of 2008, this loan balance decrease was comprised primarily of $199.4 million in loan payoffs or principal paydowns, $27.5 million of net charge-offs and $9.5 million of net loan sales, offset by $190.5 million in disbursements on new and existing loan commitments.

As discussed above, the company is reducing its exposure in the tract construction market. As of December 31, 2007, Vineyard had $146.6 million of tract construction loans outstanding and $57.2 million of unfunded tract construction loan commitments. At March 31, 2008, Vineyard's outstanding tract construction loans totaled $130.0 million, a decrease of $16.6 million or 11.3% since December 31, 2007, and its unfunded commitments for the tract construction portfolio totaled $32.4 million, a decrease of $24.9 million, or 43.5% from December 31, 2007. While $21.3 million of the loan balance decrease resulted from the charge-off of tract construction loans, there were $7.1 million of principal paydowns and payoffs associated with this portfolio during the first quarter of 2008.

The company continues to focus on the previously stated objectives of its 2008 strategic plan, which called for the reduction of the company's overall risk profile, including a significant reduction of the tract construction loan portfolio, and a focus on loan portfolio management, which called for a rebalancing of the existing loan portfolio to produce a base of stabilized long-term earnings.

Commensurate with the company's asset contraction, there was a $136.8 million decrease in deposits during the first quarter of 2008, related primarily to a decline in money market deposit accounts. There was also a $29.4 million decrease in exchange balances, which are 1031 exchange balances associated with 1031 Exchange Advantage, Inc. and 1031 Funding & Reverse Corp. (collectively, the "exchange companies"), the company's consolidated subsidiaries. As a result of the decline in funding deposits, the company increased its FHLB borrowings from $175.0 million at December 31, 2007 to $227.0 million at March 31, 2008.

Asset Quality

Non-accrual loans

During the first quarter of 2008, the company placed $49.4 million of loans on non-accrual status, increasing the balance of non-accrual loans to $105.2 million at March 31, 2008 from its $75.4 million level at December 31, 2007. Of the increase in non-accrual loans, $37.9 million relates to tract construction loans, $3.2 million relates to land loans and $2.6 million relates to luxury construction loans. The loss of previously accrued interest income associated with these new non-accrual loans totaled $1.1 million in the first quarter of 2008. Loans are placed on non-accrual status if there is reasonable doubt as to the collectability of principal and interest in accordance with the original credit terms.

(Dollars in Thousands)          March 31, 2008        December 31, 2007
                            ----------------------- -----------------------
                            Non-accrual  Specific   Non-accrual  Specific
   Loan Type                  Balance     Reserve     Balance     Reserve
                            ----------- ----------- ----------- -----------
Construction and Land:
  Single-family tract       $    87,042 $     2,227 $    61,741 $    19,773
  Single-family luxury            4,523          46       2,300          88
  Land                            6,205           -       6,934         493
Commercial and
 residential real estate          4,965       1,133       2,494         494
SBA                               1,533           -       1,753           -
Other                               903           -         140           -
                            ----------- ----------- ----------- -----------
  Total                     $   105,171 $     3,406 $    75,362 $    20,848
                            =========== =========== =========== ===========

Charged-off loans

During the quarter ended March 31, 2008, the company recorded $27.5 million in net charge-offs, which equates to 1.29% of average gross loans for the quarter. Of the charge-offs, $21.3 million relate to tract construction loans and $4.7 million relate to land loans. Of the loans charged-off during the first quarter 2008, $11.5 million were on non-accrual status at December 31, 2007.

Other Real Estate Owned

During the first quarter 2008, other real estate owned ("OREO"), which consists of properties obtained through foreclosure, decreased from $17.4 million to $12.6 million. The decrease was primarily related to a $3.7 million OREO write-down and $1.1 million of paydowns from OREO sales. There were no new OREO properties in the first quarter of 2008.

The balance of OREO at March 31, 2008 includes $5.9 million in two tract loans which were transferred to OREO in the fourth quarter of 2007, a $0.6 million (net of $0.6 million in sales proceeds) SBA-guaranteed loan which was transferred to OREO in the third quarter of 2007, and a $6.1 million (net of a $5.6 million write-down) tract development land loan which was foreclosed upon in the second quarter of 2007.

The $3.7 million OREO write-down relates primarily to the tract development land foreclosure, which encompassed one hundred finished residential lots in a 1,788 unit planned development project within the Temecula Valley region of southern California. The property was sold subsequent to March 31, 2008 for net proceeds of $6.1 million with no further loss. The company is actively pursuing disposition of the remaining foreclosed assets.

Results of Operations

As previously stated, the company recorded a net loss of $16.6 million for the three months ended March 31, 2008, as compared to net income of $5.5 million in the same quarter in 2007. The net loss in the first quarter of 2008 is mainly attributable to a provision for loan losses of $26.9 million. These results of operations produced a net interest margin of 3.47% for the first quarter of 2008, as compared to 4.18% for the same period in 2007 and 3.91% for the fourth quarter of 2007.

For the quarter-ended March 31, 2008, gross loan interest income was $40.5 million, a decrease of $1.7 million, or 4% as compared to the same period in 2007. The effective yield of the loan portfolio in the first quarter 2008 was 7.6%, as compared to 8.8% for the same period in 2007. The increase in non-accrual loans negatively impacted our loan yield due to the $1.1 million of interest reversal during the first quarter of 2008.

Total net revenues (net interest income plus other operating income) for the quarter ended March 31, 2008 were $20.3 million, a decrease of $3.4 million, or 14% as compared to the same period in 2007.

Total operating expenses for the quarter-ended March 31, 2008 were $21.2 million, as compared to $13.1 million for the same period in 2007. The increase from 2007 is primarily attributable to 1) approximately $1.7 million related to the year-end audit and legal expenses, 2) the $3.7 million write-down of other real estate owned and 3) $1.5 million in separation costs to the company's former chief executive officer who resigned in January 2008.

Jim LeSieur, interim chief executive officer, stated, "Although we are disappointed with the overall results, we have made significant progress in identifying asset quality issues and making objective assessments of the financial impact of those problems. The Board of Directors and our management team are committed to taking all necessary actions to continue to reduce the company's overall risk profile, strengthen its capital base and return the company to sustainable profitability as quickly as possible. We made a significant step in achieving those objectives by having a realistic evaluation of the challenges we need to overcome."

Capital Resources

At March 31, 2008, stockholders' equity of the company totaled $92.9 million, a decrease of $20.1 million, or 18% as compared to December 31, 2007. The company's net book value per share of its common stock decreased from $8.10 at December 31, 2007 to $6.34 per share at March 31, 2008. This was principally caused by the company's net loss for the first quarter of 2008. In addition, the company's Tier 1 Risk-Based and Leverage capital ratios of 5.1% and 5.0%, respectively, exceeded the minimum regulatory ratio requirement of 4.0%.

Despite the impact of the additional provision and charge-offs, Vineyard was considered to be "Well Capitalized" at March 31, 2008, and it is intended that the strategic contraction of assets will assist in the preservation of Vineyard's capital. At March 31, 2008, Vineyard's Tier 1 Risk-Based and Leverage capital ratios were 10.0% and 9.8%, respectively, far in excess of the "Well Capitalized" minimum ratios of 6.0% and 5.0%, respectively.

Payment of Dividends

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

At March 31, 2008, the company had an accumulated deficit of $23.4 million and did not otherwise satisfy the minimum asset to liability ratios for paying dividends under California law. As a result, the company is legally prohibited from paying dividends on both its common stock and preferred stock. The company expects that it will be legally prohibited from paying dividends on both its common stock and preferred stock for the foreseeable future.

Strategic Capital Activities

In order to address the financial impact of the abrupt and severe decline in real estate values and the consequent increase in the company's provision for loan losses, the company has engaged financial advisors to explore strategic alternatives, including potential significant capital raises. The company has engaged in preliminary discussions with a limited number of parties concerning possible transactions which would infuse significant additional capital into the company, and the company currently remains in discussions with one of those parties.

Update on Timing of Filing of the Annual Report on Form 10-K

The company continues to be delayed in the filing of its Annual Report on Form 10-K. The delay relates primarily to an investigation by the company's Audit Committee regarding the nature, scope and circumstances of certain internal violations of security policies, procedures and controls of the information technology function ("IT Review") and the impact of those violations on the company's internal control functions.

In addition to the IT Review, the company also completed an extended evaluation of Vineyard's allowance for loan loss methodology and related matters (the "ALL Review"). Though unaudited, the results of the company's ALL Review are reflected in the financial statements included in this release. The company does not expect the IT Review to have an impact on the company's financial statements.

Upon filing of the Annual Report on Form 10-K, the company intends to schedule a conference call and webcast to discuss the company's results of operations and to answer questions from analysts, investors, and shareholders.

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

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

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


                         March 31,    March 31,
                           2008         2007       $ Change     % Change
                        -----------  -----------  -----------  -----------
Assets
  Loans, net of
   unearned income      $ 1,978,524  $ 1,996,319  $   (17,795)          -1%
  Less: Allowance for
   loan losses              (48,222)     (20,827)     (27,395)         132%
                        -----------  -----------  -----------  -----------
    Net Loans             1,930,302    1,975,492      (45,190)          -2%
  Loans held-for-sale       103,061          441      102,620        23270%
  Investment securities     158,418      232,504      (74,086)         -32%
                        -----------  -----------  -----------  -----------
    Total Earnings
     Assets               2,191,781    2,208,437      (16,656)          -1%
                        -----------  -----------  -----------  -----------

  Cash and cash
   equivalents               35,452       37,724       (2,272)          -6%
  Premises and
   equipment, net            17,950       19,642       (1,692)          -9%
  Other real estate
   owned                     12,642            -       12,642          100%
  Goodwill and other
   intangibles                4,501       43,074      (38,573)         -90%
  Other assets               92,276       42,794       49,482          116%
                        -----------  -----------  -----------  -----------
     Total Assets       $ 2,354,602  $ 2,351,671  $     2,931            0%
                        ===========  ===========  ===========  ===========

Liabilities and
 Stockholders' Equity
Liabilities
  Deposits
    Non-interest
     bearing            $   302,886  $   287,866  $    15,020            5%
    Interest-bearing      1,495,972    1,479,866       16,106            1%
                        -----------  -----------  -----------  -----------
      Total Deposits      1,798,858    1,767,732       31,126            2%

  Exchange balances          18,135            -       18,135          100%
  Federal Home Loan Bank
   advances                 227,000      244,000      (17,000)          -7%
  Other borrowings           54,300       45,400        8,900           20%
  Subordinated debt           5,000        5,000            -            0%
  Junior subordinated
   debentures               115,470      115,470            -            0%
  Other liabilities          42,942       26,762       16,180           60%
                        -----------  -----------  -----------  -----------
    Total Liabilities     2,261,705    2,204,364       57,341            3%
                        -----------  -----------  -----------  -----------

Stockholders' Equity
  Common stock equity        90,874       90,217          657            1%
  Preferred stock equity     31,615        9,665       21,950          227%
  Retained (deficit) /
   earnings                 (23,430)      56,534      (79,964)        -141%
  Unallocated ESOP
   shares                    (5,009)      (5,629)         620          -11%
  Cumulative other
   comprehensive loss        (1,153)      (3,480)       2,327          -67%
                        -----------  -----------  -----------  -----------
    Total Stockholders'
     Equity                  92,897      147,307      (54,410)         -37%
                        -----------  -----------  -----------  -----------
     Total Liabilities
      and Stockholders'
      Equity            $ 2,354,602  $ 2,351,671  $     2,931            0%
                        ===========  ===========  ===========  ===========

Total non-performing
 loans/Gross loans (1)         5.86%        0.67%

Number of shares of
 common stock
 outstanding (2)          9,659,401   10,665,327

Net book value of
 common stock (3)       $      6.34  $     12.91
Tangible book value of
 common stock (4)       $      5.88  $      8.87
Net book value of
 common stock,
 excluding other
 comprehensive loss (3) $      6.46  $     13.23


(1) Total non-performing loans include non-accrual loans, renegotiated
    loans and accruing loans that are more than 90 days past due. For
    purposes of this calculation, gross loans include loans held-for-sale.
(2) Number of shares of common stock outstanding at March 31, 2008 and
    March 31, 2007 excludes 225,040 and  251,731 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.
(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.




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


                         March 31,   December 31,
                           2008         2007       $ Change     % Change
                        -----------  -----------  -----------  -----------
Assets
  Loans, net of
   unearned income      $ 1,978,524  $ 2,008,071  $   (29,547)          -1%
    Less: Allowance
     for loan losses        (48,222)     (48,849)         627           -1%
                        -----------  -----------  -----------  -----------
      Net Loans           1,930,302    1,959,222      (28,920)          -1%
  Loans held-for-sale       103,061      119,427      (16,366)         -14%
  Investment securities     158,418      202,387      (43,969)         -22%
                        -----------  -----------  -----------  -----------
    Total Earnings
     Assets               2,191,781    2,281,036      (89,255)          -4%
                        -----------  -----------  -----------  -----------

  Cash and cash
   equivalents               35,452       83,537      (48,085)         -58%
  Premises and
   equipment, net            17,950       18,326         (376)          -2%
  Other real estate
   owned                     12,642       17,375       (4,733)         -27%
  Goodwill and other
   intangibles                4,501        4,637         (136)          -3%
  Other assets               92,276       78,368       13,908           18%
                        -----------  -----------  -----------  -----------
     Total Assets       $ 2,354,602  $ 2,483,279  $  (128,677)          -5%
                        ===========  ===========  ===========  ===========


Liabilities and
 Stockholders' Equity
Liabilities
  Deposits
    Non-interest
     bearing            $   302,886  $   316,905  $   (14,019)          -4%
    Interest-bearing      1,495,972    1,618,747     (122,775)          -8%
                        -----------  -----------  -----------  -----------
      Total Deposits      1,798,858    1,935,652     (136,794)          -7%

  Exchange balances          18,135       47,515      (29,380)         -62%
  Federal Home Loan Bank
   advances                 227,000      175,000       52,000           30%
  Other borrowings           54,300       45,250        9,050           20%
  Subordinated debt           5,000        5,000            -            0%
  Junior subordinated
   debentures               115,470      115,470            -            0%
  Other liabilities          42,942       46,367       (3,425)          -7%
                        -----------  -----------  -----------  -----------
    Total Liabilities     2,261,705    2,370,254     (108,549)          -5%
                        -----------  -----------  -----------  -----------

Stockholders' Equity
  Common stock equity        90,874       94,499       (3,625)          -4%
  Preferred stock equity     31,615       31,615            -            0%
  Retained deficit          (23,430)      (5,372)     (18,058)         336%
  Unallocated ESOP
   shares                    (5,009)      (5,168)         159           -3%
  Cumulative other
   comprehensive loss        (1,153)      (2,549)       1,396          -55%
                        -----------  -----------  -----------  -----------
   Total Stockholders'
    Equity                   92,897      113,025      (20,128)         -18%
                        -----------  -----------  -----------  -----------
     Total Liabilities
      and Stockholders'
      Equity            $ 2,354,602  $ 2,483,279  $  (128,677)          -5%
                        ===========  ===========  ===========  ===========

Total non-performing
 loans/Gross loans (1)         5.86%        3.55%

Number of shares of
 common stock
 outstanding (2)          9,659,401   10,053,971

Net book value of
 common stock (3)       $      6.34  $      8.10
Tangible book value of
 common stock (4)       $      5.88  $      7.64
Net book value of
 common stock,
 excluding other
 comprehensive loss (3) $      6.46  $      8.35


(1) Total non-performing loans include non-accrual loans, renegotiated
    loans and accruing loans that are more than 90 days past due. For
    purposes of this calculation, gross loans include loans held-for-sale.
(2) Number of shares of common stock outstanding at March 31, 2008 and
    December 31, 2007 excludes 225,040 and  231,804 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.
(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.


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


                             Three Months Ended
                                  March 31,
                            ----------------------
                               2008        2007      $ Change    % Change
                            ----------  ----------  ----------  ----------
Interest Income
  Loans, including fees     $   40,473  $   42,211  $   (1,738)         -4%
  Investment securities          1,679       2,938      (1,259)        -43%
                            ----------  ----------  ----------  ----------
    Total Interest Income       42,152      45,149      (2,997)         -7%

Interest Expense
  Deposits                      17,107      17,073          34           0%
  Borrowings and debt
   obligations                   5,163       5,583        (420)         -8%
                            ----------  ----------  ----------  ----------
    Total Interest Expense      22,270      22,656        (386)         -2%

Net Interest Income             19,882      22,493      (2,611)        -12%
Provision for loan losses       26,900       1,200      25,700        2142%
                            ----------  ----------  ----------  ----------
  Net interest (loss) /
   income after provision
   for loan losses              (7,018)     21,293     (28,311)       -133%

Other Income
  Fees and service charges         348         483        (135)        -28%
  Gain on sale of SBA loans
   and SBA broker fee
   income                          170         600        (430)        -72%
  Loss on sale of
   securities and non-SBA
   loans                          (131)          -        (131)       -100%
  Other income                      74         119         (45)        -38%
                            ----------  ----------  ----------  ----------
    Total Other Income             461       1,202        (741)        -62%

    Gross Operating (Loss)
     / Income                   (6,557)     22,495     (29,052)       -129%

Operating Expenses
  Salaries and benefits          8,389       7,594         795          10%
  Occupancy and equipment        2,704       2,458         246          10%
  Professional services          3,040         647       2,393         370%
  Office supplies, postage
   and telephone                   541         627         (86)        -14%
  Business development             583         566          17           3%
  Write down of assets           3,868           -       3,868         100%
  Other operating expense        2,050       1,235         815          66%
                            ----------  ----------  ----------  ----------
    Total Operating
     Expenses                   21,175      13,127       8,048          61%

(Loss) / earnings before
 income taxes                  (27,732)      9,368     (37,100)       -396%
Income tax (benefit) /
 provision                     (11,136)      3,859     (14,995)       -389%
                            ----------  ----------  ----------  ----------
    Net (Loss) / Earnings   $  (16,596) $    5,509  $  (22,105)       -401%
                            ==========  ==========  ==========  ==========

Preferred stock dividend    $      645  $      229  $      416         182%

Weighted average shares
 outstanding used in
 (loss) / earnings per
 share calculation (5)
    Basic                    9,730,002  10,683,466
    Diluted (7)              9,730,002  10,927,114

(Loss) / Earnings per
 common share (5)
    Basic                   $    (1.77) $     0.49  $    (2.26)       -461%
    Diluted (7)             $    (1.77) $     0.48  $    (2.25)       -469%

Efficiency Ratio (6)               104%         55%

(5) Number of share and per share amounts were retrospectively adjusted for
    the 5% stock dividend issued June 22, 2007.
(6) The efficiency ratio is calculated by dividing total operating expenses
    by net interest income and total other income.
(7) In a net loss scenario, diluted loss per share equals basic loss per
    share.





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


                        Three Months Ended
                    --------------------------
                      March 31,   December 31,
                        2008          2007        $ Change      % Change
                    ------------  ------------  ------------  ------------
Interest Income
  Loans, including
   fees             $     40,473  $     45,496  $     (5,023)          -11%
  Investment
   securities              1,679         2,619          (940)          -36%
                    ------------  ------------  ------------  ------------
    Total Interest
     Income               42,152        48,115        (5,963)          -12%

Interest Expense
  Deposits                17,107        18,787        (1,680)           -9%
  Borrowings and
   debt obligations        5,163         5,997          (834)          -14%
                    ------------  ------------  ------------  ------------
    Total Interest
     Expense              22,270        24,784        (2,514)          -10%

Net Interest Income       19,882        23,331        (3,449)          -15%
Provision for loan
 losses                   26,900        35,700        (8,800)          -25%
                    ------------  ------------  ------------  ------------
  Net interest loss
   after provision
   for loan losses        (7,018)      (12,369)        5,351           -43%

Other Income
  Fees and service
   charges                   348           484          (136)          -28%
  Gain on sale of
   SBA loans and
   SBA broker fee
   income                    170           442          (272)          -62%
  (Loss) / gain on
   sale of
   securities and
   non-SBA loans            (131)          149          (280)         -188%
  Other income                74           150           (76)          -51%
                    ------------  ------------  ------------  ------------
    Total Other
     Income                  461         1,225          (764)          -62%

    Gross Operating
     Loss                 (6,557)      (11,144)        4,587           -41%

Operating Expenses
  Salaries and
   benefits                8,389         7,623           766            10%
  Occupancy and
   equipment               2,704         2,513           191             8%
  Professional
   services                3,040         1,120         1,920           171%
  Office supplies,
   postage and
   telephone                 541           562           (21)           -4%
  Business
   development               583           564            19             3%
  Write-down of
   assets                  3,868         2,274         1,594            70%
  Write-down of
   goodwill                    -        40,771       (40,771)         -100%
  Other operating
   expense                 2,050         2,323          (273)          -12%
                    ------------  ------------  ------------  ------------
    Total Operating
     Expenses             21,175        57,750       (36,575)          -63%

Loss before income
 taxes                   (27,732)      (68,894)       41,162           -60%
Income tax benefit       (11,136)      (11,873)          737            -6%
                    ------------  ------------  ------------  ------------
    Net Loss        $    (16,596) $    (57,021) $     40,425           -71%
                    ============  ============  ============  ============

Preferred stock
 dividend           $        645  $        665  $        (20)           -3%

Weighted average
 shares outstanding
 used in loss
 per share
 calculation (5)
    Basic              9,730,002    10,226,436
    Diluted (7)        9,730,002    10,226,436

Loss per common
 share (5)
    Basic           $      (1.77) $      (5.64) $       3.87           -69%
    Diluted (7)     $      (1.77) $      (5.64) $       3.87           -69%

Efficiency Ratio (6)         104%          235%


(5) Number of share and per share amounts were retrospectively adjusted for
    the 5% stock dividend issued June 22, 2007.
(6) The efficiency ratio is calculated by dividing total operating expenses
    by net interest income and total other income.
(7) In a net loss scenario, diluted loss per share equals basic loss per
    share.





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


                                 Three Months Ended March 31,
                    ------------------------------------------------------
                               2008                        2007
                    --------------------------  --------------------------
                                        Average                     Average
                      Average            Yield/   Average            Yield/
                      Balance   Interest  Cost    Balance   Interest  Cost
                    ----------  -------- -----  ----------  -------- -----
Assets
 Gross loans (8)    $2,129,067  $ 40,473  7.65% $1,943,391  $ 42,211  8.81%
 Investment
  securities (9)       181,536     1,679  3.70%    241,068     2,938  4.89%
                    ----------  --------        ----------  --------
   Total interest-
    earning assets   2,310,603    42,152  7.34%  2,184,459    45,149  8.38%
 Other assets          144,326                     127,932
 Less: allowance
  for loan losses      (51,775)                    (19,913)
                    ----------                  ----------
   Total average
    assets          $2,403,154                  $2,292,478
                    ==========                  ==========

Liabilities and
 Stockholders'
 Equity
 Interest-bearing
  deposits (10)     $1,574,445    17,107  4.37% $1,485,193    17,073  4.66%
 FHLB advances         193,150     2,272  4.67%    205,309     2,554  5.00%
 Other borrowings       44,631       771  6.84%     34,748       635  7.31%
 Subordinated debt       5,000       101  7.98%      5,000       109  8.73%
 Junior
  subordinated
  debentures           115,470     2,019  6.92%    115,470     2,285  7.92%
                    ----------  --------        ----------  --------
   Total interest-
    bearing
    liabilities      1,932,696    22,270  4.62%  1,845,720    22,656  4.96%
                                --------                    --------
 Demand deposits       288,669                     277,860
 Exchange balances      33,679                           -
 Other liabilities      42,758                      24,370
                    ----------                  ----------
   Total average
    liabilities      2,297,802                   2,147,950
 Preferred stock
  equity                31,615                       9,665
 Common stock
  equity, net of
  cumulative other
  comprehensive
  loss                  73,737                     134,863
                    ----------                  ----------
   Stockholders'
    equity             105,352                     144,528
                    ----------                  ----------
   Total
    liabilities and
    stockholders'
    equity          $2,403,154                  $2,292,478
                    ==========                  ==========

Net interest spread (11)                  2.72%                       3.42%
                                         =====                       =====
Net interest margin (12)        $ 19,882  3.47%             $ 22,493  4.18%
                                ======== =====              ======== =====


Return on Average
 Assets                                  -2.78%                       0.97%
Return on Average
 Tangible Assets (13)                    -2.76%                       1.03%
Return on Average
 Common Equity                          -94.04%                      15.88%
Return on Average
 Tangible Common
 Equity (14)                            -99.47%                      24.19%
Net Charge-off's/
 Average Gross
 Loans                                    1.29%                       0.00%

(8) The average loan balances include loans held-for-sale and non-accrual
    loans.
(9) The yield for investment securities is based on historical amortized
    cost balances.
(10) Includes savings, NOW, money market, and time certificate of deposit
     accounts.
(11) Net interest spread represents the average yield earned on
     interest-earning assets less the average rate paid on interest-bearing
     liabilities.
(12) Net interest margin is computed by dividing net interest income by
     total average earning assets.
(13) 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.
(14) 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)


                                      Three Months Ended,
                    ------------------------------------------------------
                          March 31, 2008            December 31, 2007
                    --------------------------  --------------------------
                                        Average                     Average
                     Average             Yield/  Average             Yield/
                     Balance    Interest Cost    Balance    Interest Cost
                    ----------  -------- -----  ----------  -------- -----
Assets
 Gross loans (8)    $2,129,067  $ 40,473  7.65% $2,149,838  $ 45,496  8.40%
 Investment
  securities (9)       181,536     1,679  3.70%    229,046     2,619  4.57%
                    ----------  --------        ----------  --------
   Total interest-
    earning assets   2,310,603    42,152  7.34%  2,378,884    48,115  8.03%
 Other assets          144,326                     153,233
 Less: allowance
  for loan losses      (51,775)                    (22,402)
                    ----------                  ----------
   Total average
    assets          $2,403,154                  $2,509,715
                    ==========                  ==========

Liabilities and
 Stockholders'
 Equity
 Interest-bearing
  deposits (10)     $1,574,445    17,107  4.37% $1,599,551    18,787  4.66%
 FHLB advances         193,150     2,272  4.67%    247,274     3,048  4.85%
 Other borrowings       44,631       771  6.84%     26,301       530  7.89%
 Subordinated debt       5,000       101  7.98%      5,000       108  8.44%
 Junior
  subordinated
  debentures           115,470     2,019  6.92%    115,470     2,311  7.83%
                    ----------  --------        ----------  --------
   Total interest-
    bearing
    liabilities      1,932,696    22,270  4.62%  1,993,596    24,784  4.92%
                                --------                    --------
 Demand deposits       288,669                     299,532
 Exchange balances      33,679                      10,261
 Other liabilities      42,758                      40,555
                    ----------                  ----------
   Total average
    liabilities      2,297,802                   2,343,944
 Preferred stock
  equity                31,615                      31,622
 Common stock
  equity, net of
  cumulative other
  comprehensive
  loss                  73,737                     134,149
                    ----------                  ----------
    Stockholders'
     equity            105,352                     165,771
                    ----------                  ----------
    Total
     liabilities
     and
     stockholders'
     equity         $2,403,154                  $2,509,715
                    ==========                  ==========

Net interest spread
 (11)                                     2.72%                       3.11%
                                         =====                       =====
Net interest margin
 (12)                           $ 19,882  3.47%             $ 23,331  3.91%
                                ======== =====              ======== =====


Return on Average
 Assets                                  -2.78%                      -9.01%
Return on Average
 Tangible Assets
 (13)                                    -2.76%                      -9.15%
Return on Average
 Common Equity                          -94.04%                     -
170.60%
Return on Average
 Tangible Common
 Equity (14)                            -99.47%                     -
250.56%
Net Charge-off's/
 Average Gross
  Loans                                   1.29%                       0.43%

(8) The average loan balances include loans held-for-sale and non-accrual
    loans.
(9) The yield for investment securities is based on historical amortized
    cost balances.
(10) Includes savings, NOW, money market, and time certificate of deposit
     accounts.
(11) Net interest spread represents the average yield earned on
     interest-earning assets less the average rate paid on interest-bearing
     liabilities.
(12) Net interest margin is computed by dividing net interest income by
     total average earning assets.
(13) 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.
(14) 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)



                  March      December   September      June       March
                 31, 2008    31, 2007    30, 2007    30, 2007    31, 2007
                ----------  ----------  ----------  ----------  ----------
Earning Assets
Loans
 Commercial and
  industrial    $  165,300  $  156,966  $  147,799  $  133,255  $  127,164
 Real estate
  construction
  and land:
   Single-family
    luxury          573,104     582,962     577,155     497,494     553,333
  Single-family
   tract           130,003     146,627     163,396     183,395     160,270
  Commercial       218,499     198,186     163,573     162,514     136,465
  Land:
   Single-family
   luxury           24,560      22,931      16,648      19,946      17,382
   Single-family
    tract           59,647      64,405      61,760      38,878      70,761
   Commercial       14,766      15,439      19,444      30,686      23,046
   Other               906         909         795      25,099       6,284
 Real estate
  mortgage:
  Commercial       525,198     553,531     569,167     604,157     565,199
  Multi-family
   residential      88,370      93,662      97,971     185,450     213,877
  All other
   residential      68,584      56,257      60,944      53,533      43,954
 Consumer loans    108,736     115,702     112,064      97,752      80,306
 All other
  loans
  (including
  overdrafts)           71         264          54         194          70
                ----------  ----------  ----------  ----------  ----------
                 1,977,744   2,007,841   1,990,770   2,032,353   1,998,111
 Unearned
  premium on
  acquired
  loans              2,863       3,272       3,110       2,627       2,050
 Deferred loan
  fees              (2,083)     (3,042)     (3,235)     (3,108)     (3,842)
                ----------  ----------  ----------  ----------  ----------
   Loans, net
    of unearned
    income       1,978,524   2,008,071   1,990,645   2,031,872   1,996,319
                ----------  ----------  ----------  ----------  ----------

Loans
 held-for-sale     103,061     119,427     143,737         296         441
Investment
 securities        158,418     202,387     216,556     223,793     232,504
                ----------  ----------  ----------  ----------  ----------
    Total
     Earning
     Assets     $2,240,003  $2,329,885  $2,350,938  $2,255,961  $2,229,264
                ==========  ==========  ==========  ==========  ==========

Unfunded Loan
 Commitments
 Commercial and
  industrial    $  138,613  $  151,584  $  125,431  $  109,696  $  110,649
 Real estate
  construction
  and land:
  Single-family
   luxury          208,835     243,739     269,863     261,299     281,842
  Single-family
   tract            32,355      57,239      59,035     108,898     126,463
  Commercial        94,193     115,919     101,719     118,851     102,308
  Land               6,617       8,930      10,236      12,928      13,495
 Real estate
  mortgage:
  Commercial         8,841       8,780      14,005      14,736      13,388
  Multi-family
   residential       1,376       1,662       1,901         709         961
  All other
   residential      16,455      20,684      23,683      19,569      19,388
 Consumer loans     12,192       9,799       9,305       5,948       5,663
                ----------  ----------  ----------  ----------  ----------
   Total
    Unfunded
    Loan
    Commitments $  519,477  $  618,336  $  615,178  $  652,634  $  674,157
                ==========  ==========  ==========  ==========  ==========

Funding
 Liabilities
Deposits
 Non-interest
  bearing       $  302,886  $  316,905  $  292,172  $  301,281  $  287,866
 Money market      444,989     568,713     597,620     575,867     618,954
 Savings and
  NOW              145,276     136,982      63,582      69,471      69,947
 Time deposits     905,707     913,052     897,497     915,873     790,965
                ----------  ----------  ----------  ----------  ----------
   Total
    Deposits     1,798,858   1,935,652   1,850,871   1,862,492   1,767,732
                ----------  ----------  ----------  ----------  ----------

Exchange
 balances           18,135      47,515           -           -           -
FHLB advances      227,000     175,000     271,000     210,000     244,000
Other
 borrowings         54,300      45,250      33,100      26,000      45,400
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 $2,218,763  $2,323,887  $2,275,441  $2,218,962  $2,177,602
                ==========  ==========  ==========  ==========  ==========

Quarterly
 Operating
 Expenses
 Salary and
  benefits      $    8,389  $    7,623  $    8,132  $    7,856  $    7,594
 Occupancy and
  equipment          2,704       2,513       2,554       2,475       2,458
 Professional
  services           3,040       1,120         763         832         647
 Office
  supplies,
  postage and
  telephone            541         562         567         572         627
 Business
  development          583         564         500         594         566
 Write-down of
  assets             3,868       2,274         397           -           -
 Write-down of
  goodwill               -      40,771           -           -           -
 Other
  operating
  expenses           2,050       2,323       1,802       1,845       1,235
                ----------  ----------  ----------  ----------  ----------
   Total
    Operating
    Expenses    $   21,175  $   57,750  $   14,715  $   14,174  $   13,127
                ==========  ==========  ==========  ==========  ==========