**UNITED      STATES**

**SECURITIES      AND EXCHANGE COMMISSION**

**FORM      10-K**

**VINEYARD      NATIONAL BANCORP**

|  California(State                of other jurisdiction ofincorporation                or organization)                              |   |  33-0309110(IRS                EmployerIdentification                Number)  |
|-----------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------|
|                                                                                                                                          |   |                                                                                    |
|  1260                Corona Pointe Court, Corona,                California(Address                of principal executive offices)  |   |  92879(Zip                Code)                                               |

**Common      Stock, no par value**

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**TABLE      OF CONTENTS**

| PART                I   |                                                                                            | PAGE   |
|-------------------------|-------------------------------------------------------------------------------------------------|--------|
|                    |                                                                                            |   |
| ITEM                1.  | Business                                                                                        | 5      |
|                    |                                                                                            |   |
| ITEM                1A. | Risk                Factors                                                                     | 33     |
|                    |                                                                                            |   |
| ITEM                1B. | Unresolved                Staff Comments                                                        | 39     |
|                    |                                                                                            |   |
| ITEM                2.  | Properties                                                                                      | 39     |
|                    |                                                                                            |   |
| ITEM                3.  | Legal                Proceedings                                                                | 40     |
|                    |                                                                                            |   |
| ITEM                4.  | Submission                of Matters to a Vote of Security                Holders               | 41     |
|                    |                                                                                            |   |
| PART                II  |                                                                                            |   |
|                    |                                                                                            |   |
| ITEM                5.  | Market                for Registrant’s Common Equity, Related Stockholder                 |   |
|                    | Matters                and Issuer Purchases of Equity                Securities                 | 41     |
|                    |                                                                                            |   |
| ITEM                6.  | Selected                Financial Data                                                          | 43     |
|                    |                                                                                            |   |
| ITEM                7.  | Management’s                Discussion and Analysis of Financial                Condition |   |
|                    | and                Results of Operations                                                        | 44     |
|                    |                                                                                            |   |
| ITEM7A.                 | Quantitative                and Qualitative Disclosures About Market                Risk        | 61     |
|                    |                                                                                            |   |
| ITEM                8.  | Financial                Statements and Supplementary                Data                       | 62     |
|                    |                                                                                            |   |
| ITEM                9.  | Changes                in and Disagreements With Accountants on                Accounting       |   |
|                    | and                Financial Disclosure                                                         | 104    |
|                    |                                                                                            |   |
| ITEM                9A. | Controls                and Procedures                                                          | 105    |
|                    |                                                                                            |   |
| ITEM                9B. | Other                Information                                                                | 108    |
|                    |                                                                                            |   |
| PART                III |                                                                                            |   |
|                    |                                                                                            |   |
| ITEM                10. | Directors                and Executive Officers and Corporate                Governance         | 108    |
|                    |                                                                                            |   |
| ITEM                11. | Executive                Compensation                                                           | 108    |
|                    |                                                                                            |   |
| ITEM                12. | Security                Ownership of Certain Beneficial Owners and                Management    |   |
|                    | and                Related Stockholder Matters                                                  | 108    |
|                    |                                                                                            |   |
| ITEM                13. | Certain                Relationships and Related Transactions, and                Director      |   |
|                    | Independence                                                                                    | 108    |
|                    |                                                                                            |   |
| ITEM                14. | Principal                Accountant Fees and Services                                           | 108    |
|                    |                                                                                            |   |
| PART                IV  |                                                                                            |   |
|                    |                                                                                            |   |
| ITEM                15. | Exhibits                and Financial Statement                Schedules                        | 108    |
|                    |                                                                                            |   |
| Signatures              |                                                                                            |   |

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*Table          of Contents*

**Forward-looking      Statements**

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*Table          of Contents*

**PART      I**

**ITEM      1. B****usiness**

***Vineyard      National Bancorp***

** **

***Vineyard      Bank, National Association***

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*Table          of Contents*

***Banking      Services***

***Specialty      Lending Product Offerings***

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*Table          of Contents*

| ·   | ***Luxury                Home Construction Lending:**** *                We                originate high-end single-family residential luxury construction                loans                primarily within Los Angeles’ “south bay” coastal communities (including                Manhattan Beach, Hermosa Beach, El Segundo and Redondo Beach, as                well as                the Palos Verdes Peninsula area), Los Angeles’ “west side” (including                Beverly Hills, Brentwood, Bel Air and Malibu) and Orange County regions                where we believe we have a competitive advantage based on established                builder and customer relationships and expertise in the construction                market.  Although the general California real estate market has shown                signs of slowing, we continue to believe there is relative strength                in the                demand for this loan product within the luxury housing market (consisting                of homes $2.0 million and above) along the California coast and in                other                established affluent regions of California. We believe the high employment                level, strong incomes and wealth accumulation, stable interest rates                and                good schools in these luxury regions allow continued confidence in                the                stability of these markets. These types of construction loans typically                range from $1.0 million to $5.0 million. In addition to the establishment                of the Palo Alto LPO in February 2007, we plan to expand this group                in new                geographic areas similar in demographics to our existing market area.                During the years ended December 31, 2006 and 2005, gross commitments                generated for this loan product amounted to $434.1 million and $497.3                million, respectively. Our single-family residential luxury construction                loans outstanding amounted to $514.4 million and $392.2 million at                December 31, 2006 and 2005, respectively, net of participations sold                of                $86.7 million and $114.7 million, respectively. As of December 31,                2006,                we had $265.0 million in undisbursed single-family luxury home                construction loan commitments. As of December 31, 2006, 90% of such                loans                that we originated will contractually mature within one year and                10% will                mature within one to two years. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | ***Tract                Construction Lending:***                We                originate single-family residential tract construction loans, primarily                secured by newly-constructed, entry to mid-level detached and attached                homes.  Although these loans are predominantly originated within the                Inland Empire of Southern California, we have financed projects throughout                California.  During 2006, we originated less tract construction loans                than 2005, primarily due to the softening housing market conditions                in                southern California. Despite changing real estate market factors,                we                believe the Inland Empire continues to provide reasonably priced                housing                alternatives, particularly when compared to the higher priced coastal                regions of Los Angeles, Orange, and San Diego counties. These types                of                construction loans typically range from $5.0 million to                $20.0 million. We plan to expand this group in new geographic areas                similar in demographics to our existing areas. During the years ended                December 31, 2006 and 2005, gross commitments generated for this                loan                product amounted to $211.3 million and $260.7 million, respectively.                Our                single-family residential tract construction loans outstanding amounted                to                $152.1 million and $129.7 million at December 31, 2006 and 2005,                respectively, net of participations sold of $3.2 million and $11.6                million, respectively. As of December 31, 2006, we had $150.7 million                in                undisbursed single-family residential tract construction loan commitments.                Single family tract construction loans typically have shorter terms                than                our other loan products. As of December 31, 2006, 100% of such loans                which                we originated will mature within one                year. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | ***SBA                Lending:***                We                offer SBA 7(a) and 504 loans to small businesses throughout our market                area, and our SBA lending division has received national preferred                lending                status. SBA loans are a complement to our focus on strengthening                and                supporting local communities. SBA loans are generally made pursuant                to a                federal government program designed to assist small businesses in                obtaining financing. The federal government guarantees 75% to 85%                of the                SBA loan balances as an incentive for financial institutions to make                loans                to small businesses. In 2006, we funded $36.7 million of SBA loans.                We                generally sell the guaranteed portion of the SBA loan which is                approximately 75% to 85% of the originated balance at a premium sale                price                between 105% and 110%. We had $12.4 million and $12.8 million of                outstanding SBA loans at December 31, 2006 and 2005, respectively,                net of                participations sold of $50.4 million and $42.0 million, respectively.                In                2006, we sold $22.9 million of the guaranteed and unguaranteed portions                of                SBA loans, resulting in gain on sale and broker fee income of $2.8                million. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | ***Non-Profit                Services Group*****:**                We                provide loan and deposit services to non-profit organizations, including                churches and private schools throughout our market area. These activities                are also a complement to our focus on strengthening and supporting                local                communities. Loans to non-profit organizations amounted to $45.6                million                and $30.3 million at December 31, 2006 and 2005, respectively. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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*Table          of Contents*

| ·   | ***Income                Property Lending:***                We                have an income property lending division to service the growing markets                for commercial real estate and residential real estate in Southern                California. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

*Commercial      Real Estate*

*Residential      Real Estate*

***Specialty      Deposit Product Offerings***

| ·   | ***Branching                System:***The                majority of our full-service banking centers have recently been redesigned                to offer a high-tech, high-service environment. Each of our client                service                desks, which have replaced the traditional teller lines, incorporate                both                new account and traditional teller operations with state-of-the-art                circulating cash machines present at each desk. In order to further                the                reach of each of our banking centers, we may open deposit production                offices (“DPOs”) or LPOs, which are satellite offices of the existing                banking centers that will exist exclusively to generate deposits                and                loans, respectively. We also offer courier services, internet based                banking, and ATMs and kiosks to make banking more convenient to each                of                our customers. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ***·  *** | ***Cash                Management:***In                order to offer expedient banking with new and emerging technologies,                we                offer various cash management services to our customers. These services                facilitate business customers’ cash flow and aid in maximizing their                investment potential by bundling products and services including                the                following: |
|--------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ***o  *** | ***Remote                Item Capture:***This                technology, also termed ‘electronic deposit’, allows clients to scan items                for deposit and electronically send images of the items securely                to our                processor. This service allows customers the convenience to perform                banking activities from within their place of                business. |
|---------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ***o  *** | ***Online                Banking:***Our                online banking includes services such as automated wire processing,                electronic tax payments, electronic transfers, loan payments, bill                payments, and account reconciliation. |
|---------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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*Table          of Contents*

| ***o  *** | ***Lockbox                Processing:***Our                lockbox services aid customers in expediting their deposits and increasing                their float value for investment purposes. This product also provides                same-day reporting of deposits. |
|---------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ***o  *** | ***Positive                Pay:***This                service allows business customers increased efficiency and security                by                allowing them to review checks presented against their accounts prior                to                disbursing funds. This product also helps clients to identify potentially                fraudulent activity in their                account. |
|---------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

***Our      Strategic Plan***

*Organic      Growth Initiatives*

| ·   | Commercial                customers with annual revenues typically from $10 million to $75                million; |
|--------------------|--------------------------------------------------------------------------------------------------------------------|

| ·   | Entrepreneurs                and individuals with a focus on their unique objectives, operations                and                activities; and |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Non-profit                organizations, such as religious institutions, schools, and government                and                quasi-government agencies. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|

*Inorganic      Growth Initiatives*

| ·   | Mergers                or acquisitions of businesses which are synergistic to our current                business or our strategic goals; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Acquisitions                of banking centers in locations complementary to our existing network                or                which expands our presence into new markets;                and |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Asset                and liability acquisitions, such as deposit relationships, loan portfolios                or facilities. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------|

***Market      Area and Competition***

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*Table          of Contents*

| (i)   | the                Inland Empire region, which primarily includes San Bernardino and                Riverside counties; |
|-----------------|-------------------------------------------------------------------------------------------------------------------------|

| (ii)   | the                coastal communities of Los Angeles county; |
|------------------|---------------------------------------------------------------|

| (iii)   | the                San Gabriel Valley region of Los Angeles                county; |
|-------------------|------------------------------------------------------------------------------------|

| (iv)   | the                southern coastal communities of Orange and San Diego counties; |
|------------------|-----------------------------------------------------------------------------------|

| (v)   | the                northern communities of Marin, Monterey, and Santa Clara counties;                and |
|-----------------|----------------------------------------------------------------------------------------------------------|

| (vi)   | the                central coastal communities of Ventura                county. |
|------------------|----------------------------------------------------------------------------------|

***Employees***

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*Table          of Contents*

**Loan      Portfolio**

| **(Dollars                in thousands)**                 |   | **December                31,** |
|-----------------------------------------------------------|--------|---------------------------------|
|                                                      |   | **2006**                        | **2005** | **2004** | **2003** | **2002** |
| **Amount**                                                |   |                            | **Amount**  |   |   | **Percent** |   |   | **Amount** |   |   | **Percent** |   |   | **Amount** |   |   | **Percent** |   |   | **Amount** |   |   | **Percent** |   |   | **Amount** |   |   | **Percent** |   |
| Commercial                and industrial                  |   | $                               | 122,257 |   |   | 6.4 | % | $ | 54,757 |   |   | 4.0 | % | $ | 36,095 |   | $ | 3.5 | % | $ | 26,827 |   |   | 4.5 | % | $ | 19,232 |   |   | 7.6 | % |
| Real                estate construction and land:         |   |                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Single-family                luxury                       |   |                            | 514,385 |   |   | 27.0 | % |   | 392,183 |   |   | 28.5 | % |   | 298,984 |   |   | 29.1 | % |   | 212,727 |   |   | 35.5 | % |   | 89,547 |   |   | 35.3 | % |
| Single-family                tract                        |   |                            | 152,060 |   |   | 8.0 | % |   | 129,706 |   |   | 9.4 | % |   | 129,900 |   |   | 12.6 | % |   | 104,511 |   |   | 17.4 | % |   | 14,171 |   |   | 5.6 | % |
| Commercial                                                |   |                            | 134,404 |   |   | 7.0 | % |   | 61,392 |   |   | 4.4 | % |   | 36,215 |   |   | 3.5 | % |   | 20,947 |   |   | 3.5 | % |   | 6,494 |   |   | 2.5 | % |
| Land                                                      |   |                            | 112,418 |   |   | 5.9 | % |   | 91,035 |   |   | 6.6 | % |   | 61,979 |   |   | 6.0 | % |   | 15,030 |   |   | 2.5 | % |   | - |   |   | 0.0 | % |
| Real                estate mortgage:                      |   |                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial                                                |   |                            | 531,159 |   |   | 27.9 | % |   | 321,821 |   |   | 23.4 | % |   | 216,609 |   |   | 21.0 | % |   | 153,632 |   |   | 25.6 | % |   | 93,122 |   |   | 36.7 | % |
| Multifamily                residential                    |   |                            | 222,470 |   |   | 11.7 | % |   | 246,597 |   |   | 17.9 | % |   | 189,912 |   |   | 18.4 | % |   | 27,986 |   |   | 4.7 | % |   | 1,131 |   |   | 0.5 | % |
| Other                residential                          |   |                            | 49,353 |   |   | 2.6 | % |   | 64,426 |   |   | 4.7 | % |   | 56,983 |   |   | 5.6 | % |   | 32,856 |   |   | 5.5 | % |   | 22,349 |   |   | 8.8 | % |
| Consumer                loans                             |   |                            | 65,914 |   |   | 3.5 | % |   | 15,205 |   |   | 1.1 | % |   | 2,905 |   |   | 0.3 | % |   | 4,887 |   |   | 0.8 | % |   | 5,659 |   |   | 2.2 | % |
| Loans                held for sale                        |   |                            | - |   |   | 0.0 | % |   | - |   |   | 0.0 | % |   | - |   |   | 0.0 | % |   | - |   |   | 0.0 | % |   | 2,112 |   |   | 0.8 | % |
| All                other loans (including overdrafts)     |   |                            | 98 |   |   | 0.0 | % |   | 207 |   |   | 0.0 | % |   | 137 |   |   | 0.0 | % |   | 29 |   |   | 0.0 | % |   | 60 |   |   | 0.0 | % |
|                                                      |   |                            | 1,904,518 |   |   | 100.0 | % |   | 1,377,329 |   |   | 100.0 | % |   | 1,029,719 |   |   | 100.0 | % |   | 599,432 |   |   | 100.0 | % |   | 253,877 |   |   | 100.0 | % |
| Less:                                                     |   |                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                unearned income and deferred loan fees |   |                            | (2,274 | ) |   |   |   |   | (4,230 | ) |   |   |   |   | (2,682 | ) |   |   |   |   | (2,425 | ) |   |   |   |   | (626 | ) |   |   |   |
| Allowance                for loan losses                  |   |                            | (19,689 | ) |   |   |   |   | (13,762 | ) |   |   |   |   | (11,969 | ) |   |   |   |   | (7,358 | ) |   |   |   |   | (2,937 | ) |   |   |   |
| Total                Net Loans                            |   | $                               | 1,882,555 |   |   |   |   | $ | 1,359,337 |   |   |   |   | $ | 1,015,068 |   |   |   |   | $ | 589,649 |   |   |   |   | $ | 250,314 |   |   |   |   |

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*Table          of Contents*

**Potential      Problem Loans**

**Other      Interest-Earning Assets**

**Loan      Concentrations**

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*Table          of Contents*

**Estimating      Loan Losses**

*Accounting      for Contingencies”*
*Accounting      by Creditors for Impairment of a Loan”*

| ·   | Trends                in past due and impaired loans; |
|--------------------|-------------------------------------------------------|

| ·   | Trends                in charge-offs and recoveries; |
|--------------------|------------------------------------------------------|

| ·   | Trends                in loan volume and loan terms; |
|--------------------|------------------------------------------------------|

| ·   | Changes                in credit policies and                underwriting; |
|--------------------|----------------------------------------------------------------------------|

| ·   | Experience                and ability of lending management and staff; |
|--------------------|------------------------------------------------------------------------|

| ·   | External                factors including national and local economic trends and conditions,                duration of the current business cycle, competition, legal and regulatory                requirements, as well as reasonably foreseeable events that may affect                collectibility of loans; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Industry                conditions; and |
|--------------------|-----------------------------------------|

| ·   | Concentration                of credit risk. |
|--------------------|----------------------------------------------|

*.      *

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*Table          of Contents*

| **(Dollars                in Thousands)**                              |   | **December                31,** |
|------------------------------------------------------------------------|--------|---------------------------------|
|                                                                   |   |                            | **2006** |   |   | **2005** |   |   | **2004** |   |   | **2003** |   |   | **2002** |   |
| Allowance                for loan losses balance, beginning of year    |   | $                               | 13,762 |   | $ | 11,969 |   | $ | 7,358 |   | $ | 2,937 |   | $ | 1,417 |   |
| Charge-offs                                                            |   |                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial                and industrial                               |   |                            | 333 |   |   | 123 |   |   | 67 |   |   | 123 |   |   | 117 |   |
| Real                estate-mortgage                                    |   |                            | - |   |   | - |   |   | - |   |   | - |   |   | - |   |
| Consumer                loans                                          |   |                            | 33 |   |   | 37 |   |   | 325 |   |   | 20 |   |   | 124 |   |
|                                                                   |   |                            | 366 |   |   | 160 |   |   | 392 |   |   | 143 |   |   | 241 |   |
| Recoveries                                                             |   |                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial                and industrial                               |   |                            | 8 |   |   | 56 |   |   | 95 |   |   | 44 |   |   | 78 |   |
| Real                estate-mortgage                                    |   |                            | - |   |   | - |   |   | - |   |   | - |   |   | - |   |
| Consumer                loans                                          |   |                            | 63 |   |   | 11 |   |   | 27 |   |   | 28 |   |   | 89 |   |
|                                                                   |   |                            | 71 |   |   | 67 |   |   | 122 |   |   | 72 |   |   | 167 |   |
| Net                charge-offs                                         |   |                            | 295 |   |   | 93 |   |   | 270 |   |   | 71 |   |   | 74 |   |
| Provision                for loan losses                               |   |                            | 4,125 |   |   | 1,886 |   |   | 4,881 |   |   | 3,597 |   |   | 1,397 |   |
| Allowance                relating to acquired loan portfolio           |   |                            | 2,097 |   |   | - |   |   | - |   |   | 895 |   |   | 197 |   |
| Allowance                for loan losses, end of year                  |   | $                               | 19,689 |   | $ | 13,762 |   | $ | 11,969 |   | $ | 7,358 |   | $ | 2,937 |   |
|                                                                   |   |                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Ratio                of net charge-offs during the year to average     |   |                            | 0.0 | % |   | 0.0 | % |   | 0.0 | % |   | 0.0 | % |   | 0.0 | % |
| loans                outstanding during the year                       |   |                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Ratio                of allowance for loan losses to loans at year-end |   |                            | 1.0 | % |   | 1.0 | % |   | 1.2 | % |   | 1.2 | % |   | 1.2 | % |

**Non-Accrual,      Past Due and Restructured Loans and Other Real Estate      Owned**

| **(Dollars                in Thousands)**                    |   | **As                of December 31,** |   |
|--------------------------------------------------------------|--------|---------------------------------------|--------|
|                                                         |   | **2006**                              |   | **2005** |   | **2004** |   | **2003** |   | **2002** |   |
|                                                         |   |                                  |   |   |   |   |   |   |   |   |   |
| **Accruing                Loans More than 90 Days Past Due** |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Aggregate                loan amounts                        |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial                and industrial                     |   | $                                     | 2,315  |   | $ | - |   | $ | - |   | $ | - |   | $ | - |   |
| Real                estate-mortgage                          |   |                                  | -      |   |   | - |   |   | - |   |   | - |   |   | - |   |
| Consumer                loans                                |   |                                  | -      |   |   | - |   |   | - |   |   | - |   |   | - |   |
| Total                loans past due more than 90 days        |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| and                still accruing                            |   |                                  | 2,315  |   |   | - |   |   | - |   |   | - |   |   | - |   |
|                                                         |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Renegotiated                loans**                   |   |                                  | -      |   |   | - |   |   | - |   |   | - |   |   | - |   |
|                                                         |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Non-accrual                loans**                         |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Aggregate                loan amounts                        |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial                and industrial                     |   |                                  | -      |   |   | 477 |   |   | - |   |   | 173 |   |   | - |   |
| Real                estate-mortgage                          |   |                                  | 14,400 |   |   | 480 |   |   | - |   |   | - |   |   | - |   |
| Consumer                loans                                |   |                                  | -      |   |   | 7 |   |   | - |   |   | - |   |   | - |   |
| Total                non-accrual loans                       |   |                                  | 14,400 |   |   | 964 |   |   | - |   |   | 173 |   |   | - |   |
|                                                         |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                non-performing loans                    |   | $                                     | 16,715 |   | $ | 964 |   | $ | - |   | $ | 173 |   | $ | - |   |
|                                                         |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Other                Real Estate Owned**                   |   | $                                     | -      |   | $ | - |   | $ | - |   | $ | 111 |   | $ | - |   |

*Past      Due Loans*

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*Table          of Contents*

*Non-accrual      Loans*

*Renegotiated      Loans*

**Allowance      for Credit Losses by Category**

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*Table          of Contents*

| **(Dollars                in Thousands)**         |   | **As                of December 31,** |                 |
|---------------------------------------------------|--------|--------------------------------------------|----------------------|
|                                              |   | **2006**                                   |                 | **2005** |   | **2004** |   | **2003** |   | **2002** |   |
|                                              |   |                                       |                      |   |   | **Percent                of** |   |   |   |   |   | **Percent                of** |   |   |   |   |   | **Percent                of** |   |   |   |   |   | **Percent                of** |   |   |   |   |   | **Percent                of** |   |
|                                              |   |                                       |                 |   |   |                  **Loans in** |   |   |   |   |   | **Loans                in** |   |   |   |   |   | **Loans                in** |   |   |   |   |   | **Loans                in** |   |   |   |   |   | **Loans                in** |   |
|                                              |   |                                       | **Allowance**        |   |   | **Each** |   |   | **Allowance** |   |   | **Each** |   |   | **Allowance** |   |   | **Each** |   |   | **Allowance** |   |   | **Each** |   |   | **Allowance** |   |   | **Each** |   |
|                                              |   |                                       | **for**         |   |   | **Category                to** |   |   | **for** |   |   | **Category                to** |   |   | **for** |   |   | **Category                  to** |   |   | **for** |   |   | **Category                to** |   |   | **for** |   |   | **Category                to** |   |
|                                              |   |                                       | **Loan Losses** |   |   | **Total                Loans** |   |   | **Loan Losses** |   |   | **Total                Loans** |   |   | **Loan Losses** |   |   | **Total                Loans** |   |   | **Loan Losses** |   |   | **Total                Loans** |   |   | **Loan Losses** |   |   | **Total                Loans** |   |
| Commercial                and industrial          |   | $                                          | 1,352                |   |   | 6.4 | % | $ | 717 |   |   | 4.0 | % | $ | 919 |   |   | 3.5 | % |  $ | 791 |   |   | 4.5 | % |  $ | 506 |   |   | 8.4 | % |
| Real                estate construction and land: |   |                                       |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Single-family                luxury               |   |                                       | 7,044                |   |   | 27.0 | % |   | 5,190 |   |   | 28.5 | % |   | 4,079 |   |   | 29.1 | % |   | 2,479 |   |   | 35.5 | % |   | 1,053 |   |   | 35.3 | % |
| Single-family                tract                |   |                                       | 1,596                |   |   | 8.0 | % |   | 1,656 |   |   | 9.4 | % |   | 1,838 |   |   | 12.6 | % |   | 1,407 |   |   | 17.4 | % |   | 245 |   |   | 5.6 | % |
| Commercial                                        |   |                                       | 1,198                |   |   | 7.0 | % |   | 497 |   |   | 4.4 | % |   | 367 |   |   | 3.5 | % |   | 255 |   |   | 3.5 | % |   | 74 |   |   | 2.5 | % |
| Land                                              |   |                                       | 2,998                |   |   | 5.9 | % |   | 2,234 |   |   | 6.6 | % |   | 854 |   |   | 6.0 | % |   | - |   |   | 2.5 | % |   | - |   |   | 0.0 | % |
| Real                estate mortgage:              |   |                                       |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial                                        |   |                                       | 3,105                |   |   | 27.9 | % |   | 1,987 |   |   | 23.4 | % |   | 1,275 |   |   | 21.0 | % |   | 964 |   |   | 25.6 | % |   | 602 |   |   | 36.7 | % |
| Residential                                       |   |                                       | 1,185                |   |   | 14.3 | % |   | 1,076 |   |   | 22.6 | % |   | 1,286 |   |   | 24.0 | % |   | 490 |   |   | 10.2 | % |   | 141 |   |   | 9.3 | % |
| Consumer                and other loans           |   |                                       | 1,153                |   |   | 3.5 | % |   | 292 |   |   | 1.1 | % |   | 127 |   |   | 0.3 | % |   | 33 |   |   | 0.8 | % |   | 32 |   |   | 2.2 | % |
| Other                risks                        |   |                                       | 58                   |   |   | - |   |   | 113 |   |   | - |   |   | 1,224 |   |   | - |   |   | 939 |   |   | - |   |   | 284 |   |   | - |   |
| Total                                             |   | $                                          | 19,689               |   |   | 100.0 | % | $ | 13,762 |   |   | 100.0 | % | $ | 11,969 |   |   | 100.0 | % | $ | 7,358 |   |   | 100.0 | % | $ | 2,937 |   |   | 100.0 | % |

----

*Table            of            Contents*

**Maturities      and Sensitivities to Interest Rates**

| (Dollars                in Thousands)                           |   | **Maturing** |                                |   |   |
|-----------------------------------------------------------------|--------|--------------|-------------------------------------|--------|--------|
|                                                            |   |         | **Within                One**  |   |   | **One                to Five** |   |   | **After                Five** |   |   |   |   |
|                                                            |   |         | **Year**                       |   |   | **Years** |   |   | **Years** |   |   | **Total** |   |
| Commercial                and industrial                        |   | $            | 81,058                              |   | $      | 30,817 |   | $ | 10,382 |   | $ | 122,257 |   |
| Real                estate construction and land:               |   |         |                                |   |   |   |   |   |   |   |   |   |   |
| Single-family                luxury                             |   |         | 463,618                             |   |   | 50,767 |   |   | - |   |   | 514,385 |   |
| Single-family                tract                              |   |         | 152,060                             |   |   | - |   |   | - |   |   | 152,060 |   |
| Commercial                                                      |   |         | 89,330                              |   |   | 44,052 |   |   | 1,022 |   |   | 134,404 |   |
| Land                                                            |   |         | 106,617                             |   |   | 5,284 |   |   | 517 |   |   | 112,418 |   |
| Real                estate mortgage:                            |   |         |                                |   |   |   |   |   |   |   |   |   |   |
| Commercial                                                      |   |         | 24,410                              |   |   | 92,149 |   |   | 414,600 |   |   | 531,159 |   |
| Residential                                                     |   |         | 44,900                              |   |   | 10,090 |   |   | 216,833 |   |   | 271,823 |   |
| Consumer                loans                                   |   |         | 4,773                               |   |   | 2,859 |   |   | 58,282 |   |   | 65,914 |   |
| All                other loans (including overdrafts)           |   |         | 98                                  |   |   | - |   |   | - |   |   | 98 |   |
| Total                                                           |   | $            | 966,864                             |   | $      | 236,018 |   | $ | 701,636 |   | $ | 1,904,518 |   |
|                                                            |   |         |                                |   |   |   |   |   |   |   |   |   |   |
| Loans                with predetermined interest rates          |   | $            | 16,742                              |   | $      | 95,085 |   | $ | 164,887 |   | $ | 276,714 |   |
| Loans                with floating or adjustable interest rates |   |         | 950,122                             |   |   | 140,933 |   |   | 536,749 |   |   | 1,627,804 |   |
| Total                                                           |   | $            | 966,864                             |   | $      | 236,018 |   | $ | 701,636 |   | $ | 1,904,518 |   |

**Investment      Portfolio**

| **(Dollars                  in Thousands)** |   | **December                  31,**   |    |
|---------------------------------------------|--------|-------------------------------------|---------|
|                                        |   | **2006**                            |    | **2005** |   | **2004** |   |
|                                        |   | **Amortized                  Cost** |    | **Fair                  Value** |   | **Amortized                  Cost** |   | **Fair                  Value** |   | **Amortized                  Cost** |   | **Fair                  Value** |   |
| Available-for-sale:                         |   |                                |    |   |   |   |   |   |   |   |   |   |   |
| U.S.                  agency securities     |   | $                                   | 12,515  |   | $ | 12,334 |   | $ | 11,751 |   | $ | 11,625 |   | $ | 11,033 |   | $ | 10,501 |   |
| Mortgage-backed                  securities |   |                                | 205,139 |   |   | 198,702 |   |   | 243,786 |   |   | 234,980 |   |   | 215,045 |   |   | 210,933 |   |
| Mutual                  funds               |   |                                | 2,213   |   |   | 2,164 |   |   | 2,121 |   |   | 2,089 |   |   | 2,042 |   |   | 2,046 |   |
| Total                                       |   | $                                   | 219,867 |   | $ | 213,200 |   | $ | 257,658 |   | $ | 248,694 |   | $ | 228,120 |   | $ | 223,480 |   |

| **(Dollars                in Thousands)** |   | **Maturing** |                                       |   |   |
|-------------------------------------------|--------|--------------|--------------------------------------------|--------|--------|
|                                      |   |         | **After                Five Years**   |   |   | **Weighted** |   |   | **After** |   |   | **Weighted** |   |   | **Total                Balance as of** |   |
|                                      |   |         | **Through                Ten Years**  |   |   | **AverageYield** |   |   | **Ten                Years** |   |   | **AverageYield** |   |   | **December                31, 2006** |   |
| U.S                agency securities      |   | $            | -                                          |   |   | - |   | $ | 12,334 |   |   | 6.49 | % | $ | 12,334 |   |
| Mortgage-backed                securities |   |         | 11,643                                     |   |   | 4.29 | % |   | 187,059 |   |   | 4.53 | % |   | 198,702 |   |
| Total                                     |   | $            | 11,643                                     |   |   | 4.29 | % | $ | 199,393 |   |   | 4.65 | % | $ | 211,036 |   |

----

*Table          of Contents*

| **(Dollars                  in Thousands)** |       | **Less                  than 12 months** | ** ** | **12                  months or Longer** | ** ** | **Total**                       | ** ** |
|---------------------------------------------|------------|------------------------------------------|------------|------------------------------------------|------------|---------------------------------|------------|
| ** **                                  | ** ** | ** **                               | ** ** | **Gross**                                | ** ** | ** **                      | ** ** | **Gross** | ** ** | ** ** | ** ** | **Gross** | ** ** |
| ** **                                  | ** ** | ** **                               | ** ** | **Unrealized**                           | ** ** | ** **                      | ** ** | **Unrealized** | ** ** | ** ** | ** ** | **Unrealized** | ** ** |
| ** **                                  | ** ** | ** **                               | ** ** | **Holding**                              | ** ** | ** **                      | ** ** | **Holding** | ** ** | ** ** | ** ** | **Holding** | ** ** |
| ** **                                  | ** ** | **Fair                  Value**          | ** ** | **Losses**                               | ** ** | **Fair                  Value** | ** ** | **Losses** | ** ** | **Fair                  Value** | ** ** | **Losses** |   |
|                                        |       |                                     |       |                                     |       |                            |       |   |   |   |   |   |   |
| U.S.                  agency securities     |       | $                                        | -          |                                     | $          | -                               |       | $ | 12,334 |   | $ | (181 | ) | $ | 12,334 |   | $ | (181 | ) |
| Mortgage-backed                  securities |       |                                     | -          |                                     |       | -                               |       |   | 198,702 |   |   | (6,437 | ) |   | 198,702 |   |   | (6,437 | ) |
| Mutual                  funds               |       |                                     | 2,164      |                                     |       | (49                             | )          |   | - |   |   | - |   |   | 2,164 |   |   | (49 | ) |
| Total                                       |       | $                                        | 2,164      |                                     | $          | (49                             | )          | $ | 211,036 |   | $ | (6,618 | ) | $ | 213,200 |   | $ | (6,667 | ) |

*Accounting      for Certain Investments in Debt and Equity Securities*

**Asset/Liability      Management**

----

*Table          of Contents*

| **(Dollars                in Thousands)**                 |   |                            |      | **Over                Three** |   |                            |   |                         |     |         |   |      |   |
|-----------------------------------------------------------|--------|---------------------------------|-----------|-------------------------------|--------|---------------------------------|--------|------------------------------|----------|--------------|--------|-----------|--------|
|                                                      |   |                            |      | **Through**                   |   | **Over                One**     |   |                         |     | **Non-**     |   |      |   |
|                                                      |   | **Three                Months** |      | **Twelve**                    |   | **Through                Five** |   | **Over                Five** |     | **interest** |   |      |   |
|                                                      |   | **or                Less**      |      | **Months**                    |   | **Years**                       |   | **Years**                    |     | **Bearing**  |   | **Total** |   |
| Assets                                                    |   |                            |      |                          |   |                            |   |                         |     |         |   |      |   |
| Investment                securities                      |   | $                               | 2,164     |                          |   |                            |   | $                            | 32,274   |         | $      | 178,762   |   |   |   |   | $ | 213,200 |   |
| Other                investments                          |   |                            |      |                          |   |                            |   |                         |     |         |   | 15,693    |   |   |   |   |   | 15,693 |   |
| Gross                loans                                |   |                            | 983,840   |                          | $      | 110,436                         |   |                         | 242,020  |         |   | 568,222   |   |   |   |   |   | 1,904,518 |   |
| Non                interest-earning assets                |   |                            |      |                          |   |                            |   |                         |     |         |   |      |   | $ | 124,328 |   |   | 124,328 |   |
| Total                assets                               |   | $                               | 986,004   |                          | $      | 110,436                         |   | $                            | 274,294  |         | $      | 762,677   |   | $ | 124,328 |   | $ | 2,257,739 |   |
|                                                      |   |                            |      |                          |   |                            |   |                         |     |         |   |      |   |   |   |   |   |   |   |
| Liabilities                and stockholders' equity       |   |                            |      |                          |   |                            |   |                         |     |         |   |      |   |   |   |   |   |   |   |
| Non                interest-bearing deposits              |   |                            |      |                          |   |                            |   |                         |     |         |   |      |   | $ | 293,572 |   | $ | 293,572 |   |
| Interest-bearing                deposits                  |   | $                               | 1,001,536 |                          | $      | 505,086                         |   | $                            | 6,874    |         |   |      |   |   |   |   |   | 1,513,496 |   |
| FHLB                advances and other borrowings         |   |                            | 81,000    |                          |   | 25,000                          |   |                         | 60,000   |         |   |      |   |   |   |   |   | 166,000 |   |
| Subordinated                debt                          |   |                            | 5,000     |                          |   |                            |   |                         |     |         |   |      |   |   |   |   |   | 5,000 |   |
| Junior                subordinated debentures             |   |                            | 115,470   |                          |   |                            |   |                         |     |         |   |      |   |   |   |   |   | 115,470 |   |
| Other                liabilities                          |   |                            |      |                          |   |                            |   |                         |     |         |   |      |   |   | 21,141 |   |   | 21,141 |   |
| Stockholders'                equity                       |   |                            |      |                          |   |                            |   |                         |     |         |   |      |   |   | 143,060 |   |   | 143,060 |   |
| Total                liabilities and stockholders' equity |   | $                               | 1,203,006 |                          | $      | 530,086                         |   | $                            | 66,874   |         | $      | -         |   | $ | 457,773 |   | $ | 2,257,739 |   |
| Interest                rate sensitivity gap              |   | $                               | (217,002  | )                             | $      | (419,650                        | )      | $                            | 207,420  |         | $      | 762,677   |   | $ | (333,445 | ) |   |   |   |
| Cumulative                interest rate sensitivity gap   |   | $                               | (217,002  | )                             | $      | (636,652                        | )      | $                            | (429,232 | )            | $      | 333,445   |   | $ | - |   |   |   |   |

----

*Table          of Contents*

| **(Dollars                in Thousands)** |   |                                        |    |                                |   |           |   |           |   |
|-------------------------------------------|--------|---------------------------------------------|---------|-------------------------------------|--------|----------------|--------|----------------|--------|
|                                      |   | **Economic                Value of Equity** |    | **Earnings                at Risk** |   |
|                                      |   | **Cumulative**                              |    | **Cumulative**                      |   | **Cumulative** |   | **Cumulative** |   |
|                                      |   | **Dollar**                                  |    | **Percentage**                      |   | **Dollar**     |   | **Percentage** |   |
| **Simulated                Rate Changes** |   | **Change**                                  |    | **Change**                          |   | **Change**     |   | **Change**     |   |
| +200                Basis Points          |   | $                                           | (20,147 | )                                   |   | -10.6          | %      | $              | 2,644  |   |   | 3.0 | % |
| +100                Basis Points          |   | $                                           | (10,232 | )                                   |   | -5.4           | %      | $              | 1,323  |   |   | 1.5 | % |
| -100                Basis Points          |   | $                                           | 12,255  |                                |   | 6.4            | %      | $              | (448   | ) |   | -0.5 | % |
| -200                Basis Points          |   | $                                           | 19,430  |                                |   | 10.2           | %      | $              | (631   | ) |   | -0.7 | % |

**Sources      of Funds**

**General**

**Deposits**

| **(Dollars                in Thousands)**           |   | **Years                Ended December 31,** |      |
|-----------------------------------------------------|--------|--------------------------------------------------|-----------|
|                                                |   | **2006**                                         |      | **2005** |   | **2004** |   |
|                                                |   | **Average**                                      |      | **Average** |   | **Average** |   | **Average** |   | **Average** |   | **Average** |   |
|                                                |   | **Balance**                                      |      | **Rate** |   | **Balance** |   | **Rate** |   | **Balance** |   | **Rate** |   |
| Non-interest                bearing demand deposits |   | $                                                | 206,782   |   |   | 0.0 | % | $ | 141,380 |   |   | 0.0 | % | $ | 115,045 |   |   | 0.0 | % |
| Savings                deposits (1)            |   |                                             | 540,654   |   |   | 3.7 | % |   | 447,424 |   |   | 2.7 | % |   | 385,001 |   |   | 2.0 | % |
| Time                deposits                        |   |                                             | 801,113   |   |   | 4.7 | % |   | 486,938 |   |   | 3.2 | % |   | 323,996 |   |   | 2.5 | % |
| Total                Deposits                       |   | $                                                | 1,548,549 |   |   | 3.7 | % | $ | 1,075,742 |   |   | 2.6 | % | $ | 824,042 |   |   | 1.9 | % |

| (1)   | Includes                savings, NOW and money market deposit                accounts. |
|-----------------|----------------------------------------------------------------------------------------|

----

*Table            of            Contents*

| **(Dollars                in Thousands)**    |   | **As                of December 31, 2006** |    |
|----------------------------------------------|--------|--------------------------------------------|---------|
|                                         |   |                                       |    |
| Three                months or less          |   | $                                          | 222,565 |   |
| Over                three through six months |   |                                       | 117,538 |   |
| Over                six through 12 months    |   |                                       | 174,356 |   |
| Over                one through five years   |   |                                       | 3,309   |   |
|                                         |   | $                                          | 517,768 |   |

**Short-Term      Borrowings**

| **(Dollars                in Thousands)**  |   | **December                31,** |    |
|--------------------------------------------|--------|---------------------------------|---------|
|                                       |   | **2006**                        |    | **2005** |   | **2004** |   |
| Federal                funds purchased     |   | $                               | -       |   | $ | - |   | $ | - |   |
| FHLB                advances               |   |                            | 66,000  |   |   | 164,000 |   |   | 162,000 |   |
| Line                of credit              |   |                            | 40,000  |   |   | 10,000 |   |   | - |   |
| Total                Short-term Borrowings |   | $                               | 106,000 |   | $ | 174,000 |   | $ | 162,000 |   |

----

*Table          of Contents*

| **(Dollars                in Thousands)**            |   | **For                the year ended December 31,** |    |
|------------------------------------------------------|--------|----------------------------------------------------|---------|
|                                                 |   | **2006**                                           |    | **2005** |   | **2004** |   |
| FHLB                Advances                         |   |                                               |    |   |   |   |   |
| Average                balance during the year       |   | $                                                  | 156,430 |   | $ | 290,731 |   | $ | 201,419 |   |
| Maximum                balance outstanding           |   | $                                                  | 241,000 |   | $ | 395,000 |   | $ | 237,000 |   |
| Balance                at December 31,               |   | $                                                  | 66,000  |   | $ | 164,000 |   | $ | 162,000 |   |
| Interest                rate, end of year            |   |                                               | 5.12    | % |   | 4.04 | % |   | 1.89 | % |
| Weighted                average rate during the year |   |                                               | 4.70    | % |   | 3.31 | % |   | 1.49 | % |
| Line                of Credit                        |   |                                               |    |   |   |   |   |   |   |   |
| Average                balance during the year       |   | $                                                  | 14,696  |   | $ | 356 |   | $ | 5,221 |   |
| Maximum                balance outstanding           |   | $                                                  | 40,000  |   | $ | 10,000 |   | $ | 19,000 |   |
| Balance                at December 31,               |   | $                                                  | 40,000  |   | $ | 10,000 |   | $ | - |   |
| Interest                rate, end of year            |   |                                               | 7.60    | % |   | 6.75 | % |   | 0.00 | % |
| Weighted                average rate during the year |   |                                               | 7.47    | % |   | 6.75 | % |   | 4.23 | % |

**Capital      Issuances **

*Common      Stock*

*Preferred      Stock*

----

*Table          of Contents*

*Trust      Preferred Securities*

**Return      on Equity and Assets**

|                                                                                  |   | **2006** |   | **2005** |   | **2004** |   |
|---------------------------------------------------------------------------------------|--------|----------|--------|----------|--------|----------|--------|
| Return                on average assets                                               |   |     | 1.00   | %        |   | 1.21     | %      |   | 1.20 | % |
| Return                on tangible average assets                                      |   |     | 1.01   | %        |   | 1.21     | %      |   | 1.21 | % |
| Return                on average total equity                                         |   |     | 16.18  | %        |   | 19.60    | %      |   | 23.47 | % |
| Return                on average common equity                (1)                     |   |     | 17.57  | %        |   | 21.10    | %      |   | 28.61 | % |
| Return                on average common tangible equity                (2)            |   |     | 21.43  | %        |   | 21.55    | %      |   | 29.55 | % |
| Cash                dividend payout ratio                                             |   |     | 16.41  | %        |   | 13.20    | %      |   | 6.70 | % |
| Total                stockholders' equity to asset ratio                              |   |     | 6.18   | %        |   | 6.18     | %      |   | 5.13 | % |
| Common                stockholders' equity to asset ratio                (3)          |   |     | 5.69   | %        |   | 5.74     | %      |   | 4.21 | % |
| Common                tangible stockholders' equity to asset ratio                (4) |   |     | 4.66   | %        |   | 5.62     | %      |   | 4.08 | % |

| (1)   | Return                on average common equity is computed by dividing net income applicable                to                common stock for the period by average common equity. Average common                equity can be derived by subtracting average preferred equity from                average                total stockholders’ equity. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

*Table          of Contents*

| (2)   | Return                on average common tangible equity is computed by dividing net income                applicable to common stock for the period by average common tangible                equity. Average common tangible equity can be derived by subtracting                average preferred equity and average identifiable intangible assets                and                goodwill from average total stockholders’                equity. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3)   | Common                stockholders’ equity to asset ratio is calculated by dividing average                common stockholder’s equity, which equals average total stockholders’                equity less average preferred equity, by average                assets. |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4)   | Common                tangible stockholders’ equity to asset ratio is calculated by dividing                average common tangible stockholder’s equity, which equals average total                stockholders’ equity less average preferred equity and average                identifiable intangible assets and goodwill, by average                assets. |
|-----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Effect      of Governmental Policies and Recent Legislation**

**Supervision      and Regulation**

**General**

**The        Company**

----

*Table            of Contents*

**The      Bank**

----

*Table          of Contents*

**Dividends      and Other Transfer of Funds**

| ·   | any                extensions of credit; |
|--------------------|------------------------------------------|

| ·   | the                issuance of a guarantee or letter of                credit; |
|--------------------|--------------------------------------------------------------------------------|

| ·   | the                purchase of, or investments in, stock or other securities; |
|--------------------|-------------------------------------------------------------------------------|

| ·   | the                taking of such securities as collateral for loans; and |
|--------------------|---------------------------------------------------------------------------|

| ·   | the                purchase of assets. |
|--------------------|----------------------------------------|

----

*Table          of Contents*

**Capital      Requirements**

**Prompt      Corrective Action**

----

*Table          of Contents*

**Safety      and Soundness Standards**

**Premiums      for Deposit Insurance**

** **

----

*Table          of Contents*

**The      Community Reinvestment Act (“CRA”)**

**Financial      Services Modernization Legislation**

----

*Table          of Contents*

**Regulation      W**

| ·   | to                an amount equal to 10% of the bank’s capital and surplus, in the case of                covered transactions with any one affiliate; and |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | to                an amount equal to 20% of the bank’s capital and surplus, in the case of                covered transactions with all affiliates. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------|

**USA      Patriot Act of 2001**

**Sarbanes-Oxley      Act of 2002**

----

*Table          of Contents*

**Accounting      Changes**

*Share-Based      Payment*
*Accounting      for Stock-Based Compensation*
*Employers’      Accounting for Employee Stock Ownership Plans”*

*"Accounting      Changes and Error Corrections"*

*Accounting      for Certain Hybrid Instruments*

*Accounting      for Servicing of Financial Assets — An Amendment of FASB Statement      No. 140*

----

*Table          of Contents*

*Accounting      for Uncertainty in Income Taxes,”*
*Accounting      for Income Taxes”*

*Fair      Value Measurement*

*Employers’      Accounting for Defined Benefit Pension and Other Postretirement      Plans*

----

*Table          of Contents*

*The      Fair Value Option for Financial Assets and Financial      Liabilities*

**Item      1A. Risk Factors**

**We      are implementing a business strategy that may result in increased volatility      of      earnings. **

**Our      growth may not be managed successfully.**

**Potential      acquisitions may disrupt our business, dilute shareholder value and adversely      affect our operating results.**

----

*Table          of Contents*

| ·   | potential                exposure to unknown or contingent liabilities of banks, businesses                or                banking centers we acquire; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | exposure                to potential asset quality issues of the acquired banks, businesses                or                banking centers; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | difficulty                and expense of integrating the operations and personnel of banks,                businesses or banking centers we                acquire; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | potential                disruption to our business; |
|--------------------|------------------------------------------------------|

| ·   | potential                diversion of management’s time and                attention; |
|--------------------|---------------------------------------------------------------------------------------------|

| ·   | the                possible loss of key employees and customers of the banks, businesses                or                banking centers we acquire; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | difficulty                in estimating the value of the banks, businesses or banking centers                to be                acquired; and |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | potential                changes in banking, tax laws, and/or regulations that may affect                the banks                or businesses to be acquired. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Our      continued pace of growth may require us to raise additional capital in the      future, but that capital may not be available or may not be on terms acceptable      to us when it is needed. **

**Our      business strategy relies upon our Chief Executive Officer and other key      employees.**

**Our      business is subject to various lending risks which could adversely impact our      results of operations and financial condition.**

*Residential      Real Estate Construction Loans. *

----

*Table          of Contents*

*Commercial      Real Estate Loans. *

*Multifamily      Residential Real Estate Loans.*

*Commercial      Business Loans. *

----

*Table          of Contents*

**Our      allowance for credit losses may prove to be insufficient to absorb possible      losses inherent in our loan portfolio. **

| ·   | cash                flow of the borrower and/or the project being                financed; |
|--------------------|--------------------------------------------------------------------------------------------|

| ·   | in                the case of a collateralized loan, the changes and uncertainties                as to the                future value of the collateral; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | the                credit history of a particular                borrower; |
|--------------------|----------------------------------------------------------------------------|

| ·   | changes                in economic and industry conditions;                and |
|--------------------|--------------------------------------------------------------------------------|

| ·   | the                duration of the loan. |
|--------------------|------------------------------------------|

**Our      business is subject to general economic risks that could adversely impact our      results of operations and financial condition.**

*Changes      in economic conditions, particularly an economic slowdown in California, could      hurt our business. *

* *

| ·   | loan                delinquencies may increase; |
|--------------------|-------------------------------------------------|

| ·   | problem                assets and foreclosures may                increase; |
|--------------------|-----------------------------------------------------------------------------|

| ·   | demand                for our products and services may decline;                and |
|--------------------|-------------------------------------------------------------------------------------|

| ·   | collateral                for loans made by us, especially real estate, may decline in value,                in                turn reducing a client’s borrowing power, and reducing the value of assets                and collateral associated with our                loans. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

*A      downturn in the California real estate market could hurt our      business.*

*We      may suffer losses in our loan portfolio despite our underwriting      practices*

----

*Table          of Contents*

**Our      business is subject to interest rate risk and variations in interest rates      may      negatively affect our financial performance.**

| ·   | inflation; |
|--------------------|------------|

| ·   | slow                or stagnant economic growth or                recession; |
|--------------------|------------------------------------------------------------------------------|

| ·   | unemployment; |
|--------------------|---------------|

| ·   | money                supply and the monetary policies of the                FRB; |
|--------------------|----------------------------------------------------------------------------------|

| ·   | international                disorders; and |
|--------------------|---------------------------------------------|

| ·   | instability                in domestic and foreign financial                markets. |
|--------------------|--------------------------------------------------------------------------------------|

**Our      ability to service our debt, pay dividends, and otherwise pay our obligations      as      they come due is substantially dependent on capital distributions from the      Bank,      and these distributions are subject to regulatory limits and other      restrictions.**

**We      face strong competition from other financial institutions, financial service      companies and other organizations offering services similar to those we offer,      which could hurt our business.**

----

*Table          of Contents*

**We      continually encounter technological change, and we may have fewer resources      than      many of our competitors to continue to invest in technological      improvements.**

**We      are subject to extensive regulation which could adversely affect our      business.**

**Distribution      of Assets, Liabilities, and Stockholders’ Equity; Interest Rates and Interest      Differential**

----

*Table          of Contents*

**Item      1B. Unresolved Staff Comments**

**ITEM      2. Properties**

| **Office                Location**                                              |   | **Leased/Owned** |   | **Lease                Expiration Date** |
|---------------------------------------------------------------------------------|--------|------------------|--------|------------------------------------------|
|                                                                            |   |             |   |                                     |
| 9590                Foothill Boulevard (1)                (6)                   |   | Owned            |   | N/A                                      |
| Rancho                Cucamonga, California 91730                               |   |             |   |                                     |
|                                                                            |   |             |   |                                     |
| 5455                Riverside Drive (1)                                         |   | Owned            |   | N/A                                      |
| Chino,                California 91710                                          |   |             |   |                                     |
|                                                                            |   |             |   |                                     |
| 23840                Lake Drive                (1)                              |   | Owned            |   | N/A                                      |
| Crestline,                California 92325                                      |   |             |   |                                     |
|                                                                            |   |             |   |                                     |
| 2009                West Foothill Boulevard                (1)                  |   | Owned            |   | N/A                                      |
| Upland,                California 91786                                         |   |             |   |                                     |
|                                                                            |   |             |   |                                     |
| 8105                Irvine Center Drive, Suite 600 (4)                (8)  |   | Leased           |   | March                2007                |
| Irvine,                California 92618                                         |   |             |   |                                     |
|                                                                            |   |             |   |                                     |
| 27177                Highway 189, Suite G (7)                                   |   | Leased           |   | March                2007                |
| Blue                Jay, California 92317                                       |   |             |   |                                     |
|                                                                            |   |             |   |                                     |
| 701                Palomar Airport Road, Suite 300 (3)                          |   | Leased           |   | August                2007               |
| Carlsbad,                California 92011                                       |   |             |   |                                     |
|                                                                            |   |             |   |                                     |
| 303                Webster Street (3)                                           |   | Leased           |   | July                2008                 |
| Monterey,                California 93940                                       |   |             |   |                                     |
|                                                                            |   |             |   |                                     |
| 2659                Townsgate Road, Suite 102 (3)                          |   | Leased           |   | February                2009             |
| Westlake                Village, California 91361                               |   |             |   |                                     |
|                                                                            |   |             |   |                                     |
| 2100                East Foothill Boulevard (1)                                 |   | Leased           |   | October                2009              |
| La                Verne, California 91750                                       |   |             |   |                                     |
|                                                                            |   |             |   |                                     |
| 16008                Foothill Boulevard (1)                                     |   | Leased           |   | December                2009             |
| Irwindale,                California 91706                                      |   |             |   |                                     |
|                                                                            |   |             |   |                                     |
| 500                North State College Boulevard, Suite 530                (3)  |   | Leased           |   | January                2010              |
| Orange,                California 92868                                         |   |             |   |                                     |

----

*Table          of Contents*

|                                              |   |   |   |                      |
|---------------------------------------------------|--------|--------|--------|---------------------------|
| 8748                Industrial Lane (5)           |   | Leased |   | March                2010 |
| Rancho                Cucamonga, California 91731 |   |   |   |                      |

|                                                                                                         |   |   |   |                          |
|--------------------------------------------------------------------------------------------------------------|--------|--------|--------|-------------------------------|
| 8105                Irvine Center Drive, Suite 650 (1)                                                       |   | Leased |   | April                2010     |
| Irvine,                California 92618                                                                      |   |   |   |                          |
|                                                                                                         |   |   |   |                          |
| 1200                South Diamond Bar Boulevard                (1)                                           |   | Leased |   | April                2010     |
| Diamond                Bar, California 91765                                                                 |   |   |   |                          |
|                                                                                                         |   |   |   |                          |
| 28200                State Highway 189, Suite K-100                (1)                                       |   | Leased |   | July                2013      |
| Lake                Arrowhead, California 92352                                                              |   |   |   |                          |
|                                                                                                         |   |   |   |                          |
| 1230                Rosecrans Avenue, Suites 120 (1),                600 (4),                and 660 (4)     |   | Leased |   | August                2013    |
| Manhattan                Beach, California 90266                                                             |   |   |   |                          |
|                                                                                                         |   |   |   |                          |
| 1016                Irwin Street                (1)                                                          |   | Leased |   | January                2014   |
| San                Rafael, California 94901                                                                  |   |   |   |                          |
|                                                                                                         |   |   |   |                          |
| 1260                Corona Pointe Court (6)                (2)                                               |   | Leased |   | September                2014 |
| Corona,                California 92879                                                                      |   |   |   |                          |
|                                                                                                         |   |   |   |                          |
| 7676                Hazard Center Drive, Suites 200 (1),                201 (6),                and 1540 (6) |   | Leased |   | November                2014  |
| San                Diego, California 92108                                                                   |   |   |   |                          |
|                                                                                                         |   |   |   |                          |
| 576                South Grand Avenue (1)                                                                    |   | Leased |   | August                2016    |
| Covina,                California 91724                                                                      |   |   |   |                          |
|                                                                                                         |   |   |   |                          |
| 200                South Main Street, Suite 150 (1)                                                     |   | Leased |   | December                2018  |
| Corona,                California 92882                                                                      |   |   |   |                          |
|                                                                                                         |   |   |   |                          |
| 20401                East Valley Boulevard (1)                                                          |   | Leased |   | March                2020     |
| Walnut,                California 91789                                                                      |   |   |   |                          |
|                                                                                                         |   |   |   |                          |
| 530                West Bonita Avenue (1)                                                               |   | Leased |   | May                2020       |
| San                Dimas, California 91773                                                                   |   |   |   |                          |

**ITEM      3. Legal Proceedings**

----

*Table          of Contents*

**ITEM      4. Submission of Matters to Vote of Security      Holders**

**PART      II**

**         ITEM 5. Market for the Registrant’s Common Stock, Related      Stockholder Matters**
**,      and Issuer Purchases of Equity Securities**

|                          |   | **Sales                Prices of** |   |
|-------------------------------|--------|------------------------------------|--------|
|                          |   | **Common                Stock**    |   |
|                          |   | **High**                           |   | **Low** |   |
| 2006                          |   |                               |   |   |   |
| First                Quarter  |   | $                                  | 30.79  |   | $ | 28.22 |   |
| Second                Quarter |   | $                                  | 30.03  |   | $ | 24.36 |   |
| Third                Quarter  |   | $                                  | 28.06  |   | $ | 25.96 |   |
| Fourth                Quarter |   | $                                  | 25.01  |   | $ | 21.18 |   |
|                          |
| 2005                          |   |                               |   |   |   |   |   |
| First                Quarter  |   | $                                  | 33.28  |   | $ | 26.60 |   |
| Second                Quarter |   | $                                  | 34.47  |   | $ | 26.78 |   |
| Third                Quarter  |   | $                                  | 34.27  |   | $ | 28.52 |   |
| Fourth                Quarter |   | $                                  | 31.82  |   | $ | 27.42 |   |

**Stock      Price Performance**

----

*Table          of Contents*

|                                     | ***Period                Ended*** |
|------------------------------------------|-----------------------------------|
| ***Index***                              | **12/31/02**                      | **12/31/03** | **12/31/04** | **12/31/05** | **12/31/06** |
| Vineyard                National Bancorp | 262.50                            | 606.77 | 1130.33 | 1062.22 | 802.87 |
| NASDAQ                Composite          | 68.76                             | 103.67 | 113.16 | 115.57 | 127.58 |
| SNL                $1B-$5B Bank Index    | 115.44                            | 156.98 | 193.74 | 190.43 | 220.36 |

----

*Table          of Contents*

| **(Dollars                in thousands)** |   |                                                |   |                                            |   |                                                                                                                      |   |                                                                                                                                      |   |
|-------------------------------------------|--------|-----------------------------------------------------|--------|-------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------|--------|
| **Period**                                |   | **Total                Number of Shares Purchased** |   | **Average                Price Paid Per Share** |   | **Total                Number of Shares Purchased as Part of Publicly Announced Plans or                Programs****(1)** |   | **Approximate                Dollar Value of Shares that May Yet Be Purchased Under the Plans                or                Programs** |   |
|                                      |   |                                                |   |                                            |   |                                                                                                                      |   |                                                                                                                                      |   |
| October                1 - 31, 2006       |   |                                                | 6,579  |                                            | $      | 24.38                                                                                                                     |   |                                                                                                                                      | 6,579  |   | $ | 11,123 |   |
| November                1 - 30, 2006      |   |                                                | 10,000 |                                            |   | 22.05                                                                                                                     |   |                                                                                                                                      | 10,000 |   | $ | 10,903 |   |
| December                1 - 31, 2006      |   |                                                | -      |                                            |   | -                                                                                                                         |   |                                                                                                                                      | -      |   | $ | 10,903 |   |
| Total                                     |   |                                                | 16,579 |                                            | $      | 22.97                                                                                                                     |   |                                                                                                                                      | 16,579 |   |   |   |   |

| (1)   | In                July 2002, we adopted a stock repurchase program in the initial amount                of                $2.0 million. In December 2003, January 2005 and May 2005, we approved                increases to our stock repurchase program of $5.0 million each, and                in                October 2005, we announced an additional increase of $20.0 million                in our                stock repurchase program for a total amount of $37.0 million. Under                our                stock repurchase program, we have been acquiring our common stock                in the                open market from time to time to be held as treasury shares or restricted                stock. Our stock repurchase program does not have an expiration date. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Recent      Sales of Unregistered Securities**

**ITEM      6. Selected Financial Data**

----

*Table          of Contents*

| **(Dollars                in Thousands, except per share data)**         |   | **Years                Ended December 31,** |      |
|--------------------------------------------------------------------------|--------|--------------------------------------------------|-----------|
|                                                                     |   | **2006**                                         |      | **2005** |   | **2004** |   | **2003** |   | **2002** |   |
| **Income                Statement Data**                                 |   |                                             |      |   |   |   |   |   |   |   |   |
| Interest                Income                                           |   | $                                                | 158,320   |   | $ | 110,859 |   | $ | 75,056 |   | $ | 39,537 |   | $ | 19,170 |   |
| Interest                Expense                                          |   |                                             | 75,230    |   |   | 43,345 |   |   | 22,054 |   |   | 11,383 |   |   | 5,837 |   |
| Net                Interest Income                                       |   |                                             | 83,090    |   |   | 67,514 |   |   | 53,002 |   |   | 28,154 |   |   | 13,333 |   |
| Provision                for Loan Losses                                 |   |                                             | (4,125    | ) |   | (1,886 | ) |   | (4,881 | ) |   | (3,597 | ) |   | (1,397 | ) |
| Other                Income                                              |   |                                             | 5,622     |   |   | 5,305 |   |   | 5,457 |   |   | 5,828 |   |   | 3,928 |   |
| Other                Expenses                                            |   |                                             | 51,017    |   |   | 38,746 |   |   | 29,922 |   |   | 16,853 |   |   | 10,775 |   |
| Income                Before Taxes                                       |   |                                             | 33,570    |   |   | 32,187 |   |   | 23,656 |   |   | 13,532 |   |   | 5,089 |   |
| Income                Tax (Provision)                                    |   |                                             | (13,825   | ) |   | (13,276 | ) |   | (9,669 | ) |   | (5,540 | ) |   | (2,081 | ) |
| Net                Income                                                |   | $                                                | 19,745    |   | $ | 18,911 |   | $ | 13,987 |   | $ | 7,992 |   | $ | 3,008 |   |
| Earnings                Per Share of Common Stock (1)               |   |                                             |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                                    |   | $                                                | 1.95      |   | $ | 1.97 |   | $ | 1.72 |   | $ | 1.21 |   | $ | 0.63 |   |
| Diluted                                                                  |   | $                                                | 1.89      |   | $ | 1.89 |   | $ | 1.55 |   | $ | 1.09 |   | $ | 0.52 |   |
| Weighted                Average Number of Shares (1)                |   |                                             |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                                    |   |                                             | 9,670,418 |   |   | 9,311,252 |   |   | 7,692,057 |   |   | 6,097,036 |   |   | 4,779,253 |   |
| Diluted                                                                  |   |                                             | 9,997,120 |   |   | 9,744,474 |   |   | 8,929,760 |   |   | 7,193,604 |   |   | 6,033,591 |   |
| Ratio                of net charge-offs during the year to               |   |                                             |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| average                loans outstanding during the year                 |   |                                             | 0.02      | % |   | 0.01 | % |   | 0.03 | % |   | 0.02 | % |   | 0.04 | % |
| Return                on average assets                                  |   |                                             | 1.00      | % |   | 1.21 | % |   | 1.20 | % |   | 1.29 | % |   | 1.12 | % |
| Return                on tangible average assets                         |   |                                             | 1.01      | % |   | 1.21 | % |   | 1.21 | % |   | 1.29 | % |   | 1.12 | % |
| Return                on average equity                                  |   |                                             | 16.18     | % |   | 19.60 | % |   | 23.47 | % |   | 28.06 | % |   | 22.19 | % |
| Cash                dividend declared per common share (2)               |   | $                                                | 0.32      |   | $ | 0.26 |   | $ | 0.12 |   | $ | 0.03 |   | $ | - |   |
| Average                stockholders’ equity to average asset ratio |   |                                             | 6.18      | % |   | 6.18 | % |   | 5.13 | % |   | 4.58 | % |   | 5.03 | % |
|                                                                     |   |                                             |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Balance                Sheet Data**                                    |   |                                             |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Assets                                                                   |   | $                                                | 2,257,739 |   | $ | 1,713,638 |   | $ | 1,312,529 |   | $ | 887,979 |   | $ | 385,918 |   |
| Deposits                                                                 |   | $                                                | 1,807,068 |   | $ | 1,277,012 |   | $ | 965,546 |   | $ | 603,326 |   | $ | 287,533 |   |
| Net                Loans                                                 |   | $                                                | 1,882,555 |   | $ | 1,359,337 |   | $ | 1,015,068 |   | $ | 589,649 |   | $ | 250,314 |   |
| Long                Term Obligations                                     |   | $                                                | 180,470   |   | $ | 151,913 |   | $ | 91,139 |   | $ | 58,147 |   | $ | 47,527 |   |
| Redeemable                Preferred Stock                                |   | $                                                | 9,665     |   | $ | 9,665 |   | $ | - |   | $ | 28,999 |   | $ | 2,450 |   |
| Stockholders'                Equity                                      |   | $                                                | 143,060   |   | $ | 99,985 |   | $ | 85,227 |   | $ | 52,175 |   | $ | 19,958 |   |
| Ratio                of allowance for loan losses                        |   |                                             |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| to                loans at year-end                                      |   |                                             | 1.04      | % |   | 1.00 | % |   | 1.17 | % |   | 1.23 | % |   | 1.16 | % |

**___________________**

| (1)   | Basic                earnings per share excludes dilution and is computed by dividing                income                available to common stockholders by the weighted-average number of                common                shares outstanding for the period. Diluted earnings per share reflects                the                potential dilution that could occur if securities or other contracts                to                issue common stock were exercised or converted into common stock                or                resulted in the issuance of common stock that then shared in the                earnings                of the entity. The weighted average number of shares and the earnings                per                share were adjusted to reflect our two-for-one stock split in August                2004                and 5% stock dividends in January 2004 and January                2003. |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2)   | Cash                dividends declared per common share have been adjusted to reflect                the 5%                stock dividends paid in January 2004 and January 2003 and the two-for-one                stock split in August 2004. |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**ITEM      7. Management’s Discussion and Analysis of Financial Condition      and Results of Operations**

**Executive      Overview and Highlights**

----

*Table          of Contents*

*Merger      Completion*

----

*Table          of Contents*

*Bank      Charter Conversion*

*Financial      Holding Company Designation*

*Registered      Direct Offering*

*Junior      Subordinated Debentures*

----

*Table          of Contents*

*New      Banking Center and Loan Production Offices*

**Critical      Accounting Policies and Estimates**

**Investment      Securities**

*“Accounting      for Certain Investments in Debt and Equity Securities,” *

**Allowance      for Credit Losses**

----

*Table          of Contents*

**Goodwill      and Intangible Assets**

**Income      Taxes**

**Results      of Operations**

*Overview*

----

*Table          of Contents*

**Net      Interest Income**

----

*Table          of Contents*

----

*Table          of Contents*

** **

----

*Table        of Contents*

|                                                |       | **For                the years ended December 31,** | ** ** |
|-----------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                                          | ** ** | **2006**                                            | ** ** | **2005** | ** ** |
| **(Dollars                in Thousands)**           | ** ** | **Average**                                         | ** ** | ** ** | ** ** | **Average** | ** ** | **Average** | ** ** | ** ** | ** ** | **Average** | ** ** |
| ** **                                          | ** ** | **Balance**                                         | ** ** | **Interest** | ** ** | **Yield/Cost** | ** ** | **Balance** | ** ** | **Interest** | ** ** | **Yield/Cost** |   |
| Assets                                              |       |                                                |       |   |   |   |   |   |   |   |   |   |   |
| Loans                (1)                            |       | $                                                   | 1,632,995  |   | $ | 146,183 |   |   | 8.95 | % | $ | 1,210,673 |   | $ | 98,303 |   |   | 8.12 | % |
| Investment                securities (2)            |       |                                                | 239,327    |   |   | 10,886 |   |   | 4.55 | % |   | 281,604 |   |   | 11,838 |   |   | 4.20 | % |
| Federal                funds sold                   |       |                                                | 7,594      |   |   | 386 |   |   | 5.09 | % |   | 144 |   |   | 4 |   |   | 3.07 | % |
| Other                investments                    |       |                                                | 16,293     |   |   | 865 |   |   | 5.31 | % |   | 16,547 |   |   | 714 |   |   | 4.32 | % |
| Total                Interest-earning assets        |       |                                                | 1,896,209  |   |   | 158,320 |   |   | 8.35 | % |   | 1,508,968 |   |   | 110,859 |   |   | 7.35 | % |
| Other                assets                         |       |                                                | 95,471     |   |   |   |   |   |   |   |   | 66,376 |   |   |   |   |   |   |   |
| Less:                allowance for loan losses      |       |                                                | (16,390    | ) |   |   |   |   |   |   |   | (13,737 | ) |   |   |   |   |   |   |
| Total                average assets                 |       | $                                                   | 1,975,290  |   |   |   |   |   |   |   | $ | 1,561,607 |   |   |   |   |   |   |   |
|                                                |       |                                                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities                and Stockholders' Equity |       |                                                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Savings                deposits                (3)  |       | $                                                   | 540,654    |   |   | 20,053 |   |   | 3.71 | % | $ | 447,424 |   |   | 12,289 |   |   | 2.75 | % |
| Time                deposits                        |       |                                                | 801,113    |   |   | 37,805 |   |   | 4.72 | % |   | 486,938 |   |   | 15,719 |   |   | 3.23 | % |
| Subordinated                debt                    |       |                                                | 5,000      |   |   | 423 |   |   | 8.34 | % |   | 5,000 |   |   | 333 |   |   | 6.66 | % |
| Junior                subordinated debentures       |       |                                                | 108,606    |   |   | 8,477 |   |   | 7.70 | % |   | 84,089 |   |   | 5,352 |   |   | 6.36 | % |
| FHLB                advances                        |       |                                                | 156,430    |   |   | 7,353 |   |   | 4.70 | % |   | 290,731 |   |   | 9,624 |   |   | 3.31 | % |
| Other                borrowings                     |       |                                                | 14,799     |   |   | 1,119 |   |   | 7.45 | % |   | 447 |   |   | 28 |   |   | 6.26 | % |
| Total                interest-bearing liabilities   |       |                                                | 1,626,602  |   |   | 75,230 |   |   | 4.62 | % |   | 1,314,629 |   |   | 43,345 |   |   | 3.30 | % |
| Demand                deposits                      |       |                                                | 206,782    |   |   |   |   |   |   |   |   | 141,380 |   |   |   |   |   |   |   |
| Other                liabilities                    |       |                                                | 19,868     |   |   |   |   |   |   |   |   | 9,122 |   |   |   |   |   |   |   |
| Total                average liabilities            |       |                                                | 1,853,252  |   |   |   |   |   |   |   |   | 1,465,131 |   |   |   |   |   |   |   |
| Stockholders'                equity                 |       |                                                | 122,038    |   |   |   |   |   |   |   |   | 96,476 |   |   |   |   |   |   |   |
| Total                liabilities and                |       |                                                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| stockholders'                equity                 |       | $                                                   | 1,975,290  |   |   |   |   |   |   |   | $ | 1,561,607 |   |   |   |   |   |   |   |
|                                                |       |                                                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                interest spread (4)              |       |                                                |       |   |   |   |   |   | 3.73 | % |   |   |   |   |   |   |   | 4.05 | % |
| Net                interest income                  |       |                                                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| and                net interest margin (5)          |       |                                                |       |   | $ | 83,090 |   |   | 4.38 | % |   |   |   | $ | 67,514 |   |   | 4.47 | % |

* *

*(Footnotes      on the following page)*

----

*Table        of Contents*

|                                                  |   | **For                the year ended December 31,** |      |
|-------------------------------------------------------|--------|----------------------------------------------------|-----------|
| ** **                                            |   | **2004**                                           |      |
| **(Dollars                in Thousands)**             |   | **Average**                                        |      | ** ** |   | **Average** |   |
| ** **                                            |   | **Balance**                                        |      | **Interest** |   | **Yield/Cost** |   |
| Assets                                                |   |                                               |      |   |   |   |   |
| Loans                (1)                              |   | $                                                  | 908,829   |   | $ | 66,374 |   |   | 7.30 | % |
| Investment                securities (2)              |   |                                               | 197,958   |   |   | 8,187 |   |   | 4.14 | % |
| Federal                funds sold                     |   |                                               | 5,428     |   |   | 53 |   |   | 0.98 | % |
| Other                investments                      |   |                                               | 11,667    |   |   | 442 |   |   | 3.79 | % |
| Total                Interest-earning assets          |   |                                               | 1,123,882 |   |   | 75,056 |   |   | 6.68 | % |
| Other                assets                           |   |                                               | 47,747    |   |   |   |   |   |   |   |
| Less:                allowance for loan losses        |   |                                               | (10,472   | ) |   |   |   |   |   |   |
| Total                average assets                   |   | $                                                  | 1,161,157 |   |   |   |   |   |   |   |
|                                                  |   |                                               |      |   |   |   |   |   |   |   |
| Liabilities                and Stockholders' Equity   |   |                                               |      |   |   |   |   |   |   |   |
| Savings                deposits (3)                   |   |                                               | 385,001   |   |   | 7,789 |   |   | 2.02 | % |
| Time                deposits                          |   |                                               | 323,996   |   |   | 7,953 |   |   | 2.45 | % |
| Subordinated                debt                      |   |                                               | 5,000     |   |   | 241 |   |   | 4.81 | % |
| Junior                subordinated debentures         |   |                                               | 54,080    |   |   | 2,630 |   |   | 4.86 | % |
| FHLB                advances                          |   |                                               | 201,419   |   |   | 3,000 |   |   | 1.49 | % |
| Other                borrowings                       |   |                                               | 10,271    |   |   | 441 |   |   | 4.29 | % |
| Total                interest-bearing liabilities     |   |                                               | 979,767   |   |   | 22,054 |   |   | 2.25 | % |
| Demand                deposits                        |   |                                               | 115,045   |   |   |   |   |   |   |   |
| Other                liabilities                      |   |                                               | 6,749     |   |   |   |   |   |   |   |
| Total                average liabilities              |   |                                               | 1,101,561 |   |   |   |   |   |   |   |
| Stockholders'                equity                   |   |                                               | 59,596    |   |   |   |   |   |   |   |
| Total                liabilities and                  |   |                                               |      |   |   |   |   |   |   |   |
| stockholders'                equity                   |   | $                                                  | 1,161,157 |   |   |   |   |   |   |   |
|                                                  |   |                                               |      |   |   |   |   |   |   |   |
| Net                interest spread                (4) |   |                                               |      |   |   |   |   |   | 4.43 | % |
| Net                interest income                    |   |                                               |      |   |   |   |   |   |  |   |
| and                net interest margin (5)            |   |                                               |      |   | $ | 53,002 |   |   | 4.72 | % |

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*Table        of Contents*

| **(Dollars                in Thousands)**     |   | **2006-2005** |   | **2005-2004** |   |
|-----------------------------------------------|--------|---------------|--------|---------------|--------|
|                                          |   | **Volume**    |   | **Rate**      |   | **Total** |   | **Volume** |   | **Rate** |   | **Total** |   |
| Increase                (Decrease) in:        |   |          |   |          |   |   |   |   |   |   |   |   |   |
| Interest                income:               |   |          |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans                (1)                      |   | $             | 34,031 |          | $      | 13,849 |   | $ | 47,880 |   | $ | 20,040 |   | $ | 11,889 |   | $ | 31,929 |   |
| Investment                securities          |   |          | (1,725 | )             |   | 773 |   |   | (952 | ) |   | 3,375 |   |   | 276 |   |   | 3,651 |   |
| Federal                funds sold             |   |          | 229    |          |   | 153 |   |   | 382 |   |   | (52 | ) |   | 3 |   |   | (49 | ) |
| Other                investments              |   |          | (11    | )             |   | 162 |   |   | 151 |   |   | 184 |   |   | 88 |   |   | 272 |   |
|                                          |   |          | 32,524 |          |   | 14,937 |   |   | 47,461 |   |   | 23,547 |   |   | 12,256 |   |   | 35,803 |   |
| Increase                (Decrease) in:        |   |          |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest                expense:              |   |          |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Savings                deposits (2)           |   |          | 2,511  |          |   | 5,253 |   |   | 7,764 |   |   | 1,316 |   |   | 3,184 |   |   | 4,500 |   |
| Time                deposits                  |   |          | 10,142 |          |   | 11,944 |   |   | 22,086 |   |   | 3,999 |   |   | 3,767 |   |   | 7,766 |   |
| Subordinated                debt              |   |          | -      |          |   | 90 |   |   | 90 |   |   |   |   |   | 93 |   |   | 93 |   |
| Junior                subordinated debentures |   |          | 1,560  |          |   | 1,565 |   |   | 3,125 |   |   | 1,460 |   |   | 1,261 |   |   | 2,721 |   |
| FHLB                advances                  |   |          | (4,446 | )             |   | 2,175 |   |   | (2,271 | ) |   | 1,330 |   |   | 5,294 |   |   | 6,624 |   |
| Other                borrowings               |   |          | 982    |          |   | 109 |   |   | 1,091 |   |   | (424 | ) |   | 11 |   |   | (413 | ) |
|                                          |   |          | 10,749 |          |   | 21,136 |   |   | 31,885 |   |   | 7,681 |   |   | 13,610 |   |   | 21,291 |   |
| Increase                (Decrease)            |   |          |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| in                Net interest income         |   | $             | 21,775 |          | $      | (6,199 | ) | $ | 15,576 |   | $ | 15,866 |   | $ | (1,354 | ) | $ | 14,512 |   |

| (1)   | Interest                on loans includes loan fees, which totaled $11.9 million, $11.2 million                and $9.6 million for the year ended December 31, 2006, 2005 and 2004,                respectively. |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2)   | Includes                savings, NOW, and money market deposit                accounts. |
|-----------------|-----------------------------------------------------------------------------------------|

**Provision      for Loan Losses & Unfunded Commitments**

**Non-Interest      Income**

----

*Table          of Contents*

**Non-Interest      Expenses**

----

*Table          of Contents*

**Income      Tax**

**Financial      Condition**

**Assets**

----

*Table          of Contents*

**Liabilities**

----

*Table          of Contents*

|                                      | ** ** | **As                of December 31,** | ** ** |
|-------------------------------------------|------------|---------------------------------------|------------|
| **(Dollars                in thousands)** | ** ** | **2006**                              | ** ** | **2005** | ** ** |
| **Deposit                Accounts:**      | ** ** | **Aggregate                Balance**  | ** ** | **Average                Account Balance** | ** ** | **Number                of Accounts** | ** ** | **Aggregate                Balance** | ** ** | **Average                Account Balance** | ** ** | **Number                of Accounts** |   |
| Demand                                    |       | $                                     | 306,394    |   | $ | 23.7 |   |   | 12,923 |   | $ | 167,380 |   | $ | 18.6 |   |   | 8,981 |   |
| NOW                                       |       | $                                     | 47,759     |   | $ | 14.9 |   |   | 3,213 |   | $ | 29,192 |   | $ | 12.7 |   |   | 2,294 |   |
| Money                Market               |       | $                                     | 562,622    |   | $ | 144.2 |   |   | 3,901 |   | $ | 414,216 |   | $ | 109.8 |   |   | 3,773 |   |
| Savings                                   |       | $                                     | 22,982     |   | $ | 5.4 |   |   | 4,285 |   | $ | 16,031 |   | $ | 4.8 |   |   | 3,341 |   |
| Time                                      |       | $                                     | 880,133    |   | $ | 66.9 |   |   | 13,165 |   | $ | 662,909 |   | $ | 67.3 |   |   | 9,845 |   |

**Stockholders’      Equity **

----

*Table          of Contents*

**Liquidity**

| **(Dollars                in Thousands)**  | ** ** | **Payment                due by period** | ** ** |
|--------------------------------------------|------------|------------------------------------------|------------|
| **Contractual                Obligations** | ** ** | **Total**                                | ** ** | **Less                than 1 year** | ** ** | **1-3                years** | ** ** | **3-5                years** | ** ** | **More                than 5 years** |   |
| Time                Deposits               |       | $                                        | 880,133    |   | $ | 873,259 |   | $ | 6,874 |   | $ | - |   | $ | - |   |
| Long-Term                Debt Obligations  |       |                                     | 246,470    |   |   | 66,000 |   |   | 60,000 |   |   | - |   |   | 120,470 |   |
| Capital                Lease Obligations   |       |                                     | -          |   |   | - |   |   | - |   |   | - |   |   | - |   |
| Operating                Lease Obligations |       |                                     | 29,973     |   |   | 3,649 |   |   | 7,534 |   |   | 6,217 |   |   | 12,573 |   |
| Purchase                Obligations        |       |                                     | -          |   |   | - |   |   | - |   |   | - |   |   | - |   |
| Total                                      |       | $                                        | 1,156,576  |   | $ | 942,908 |   | $ | 74,408 |   | $ | 6,217 |   | $ | 133,043 |   |

**Capital      Resources**

----

*Table          of Contents*

| (**Dollars                in Thousands)**              | ** ** | ** **                           | ** ** | ** **                           | ** ** | **Capital                Needed**    | ** ** |
|--------------------------------------------------------|------------|--------------------------------------|------------|--------------------------------------|------------|--------------------------------------|------------|
| ** **                                             | ** ** | ** **                           | ** ** | ** **                           | ** ** | ** **                           | ** ** | ** ** | ** ** | **To                Be Well** | ** ** |
| ** **                                             | ** ** | ** **                           | ** ** | ** **                           | ** ** | ** **                           | ** ** | ** ** | ** ** | **Capitalized                Under** | ** ** |
| ** **                                             | ** ** | ** **                           | ** ** | ** **                           | ** ** | **For                Capital**       | ** ** | **Prompt                Corrective** | ** ** |
| ** **                                             | ** ** | **Actual                Regulatory** | ** ** | **Adequacy                Purposes** | ** ** | **Action                Provisions** | ** ** |
| ** **                                             | ** ** | **Capital**                          | ** ** | ** **                           | ** ** | **Capital**                          | ** ** | ** ** | ** ** | **Capital** | ** ** | ** ** | ** ** |
| ** **                                             | ** ** | **Amount**                           | ** ** | **Ratio**                            | ** ** | **Amount**                           | ** ** | **Ratio** | ** ** | **Amount** | ** ** | **Ratio** |   |
| **As                of December 31, 2006**             |       |                                 |       |                                 |       |                                 |       |   |   |   |   |   |   |
| Total                capital to risk-weighted assets:  |       |                                 |       |                                 |       |                                 |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Bank                                                   |       | $                                    | 266,813    |                                 |       | 12.17                                | %          | $ | 175,400 |   |   | 8.00 | % | $ | 219,200 |   |   | 10.00 | % |
| Consolidated                                           |       | $                                    | 227,164    |                                 |       | 10.34                                | %          | $ | 175,800 |   |   | 8.00 | % |   | N/A |   |   | N/A |   |
|                                                   |       |                                 |       |                                 |       |                                 |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Tier                1 capital to risk-weighted assets: |       |                                 |       |                                 |       |                                 |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Bank                                                   |       | $                                    | 245,728    |                                 |       | 11.20                                | %          | $ | 87,800 |   |   | 4.00 | % | $ | 131,600 |   |   | 6.00 | % |
| Consolidated                                           |       | $                                    | 137,386    |                                 |       | 6.25                                 | %          | $ | 87,900 |   |   | 4.00 | % |   | N/A |   |   | N/A |   |
|                                                   |       |                                 |       |                                 |       |                                 |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Tier                1 capital to average assets:       |       |                                 |       |                                 |       |                                 |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Bank                                                   |       | $                                    | 245,728    |                                 |       | 11.41                                | %          | $ | 86,100 |   |   | 4.00 | % | $ | 107,700 |   |   | 5.00 | % |
| Consolidated                                           |       | $                                    | 137,386    |                                 |       | 6.36                                 | %          | $ | 86,400 |   |   | 4.00 | % |   | N/A |   |   | N/A |   |
|                                                   |       |                                 |       |                                 |       |                                 |       |   |   |   |   |   |   |   |   |   |   |   |   |
| **As                of December 31, 2005**             |       |                                 |       |                                 |       |                                 |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                capital to risk-weighted assets:  |       |                                 |       |                                 |       |                                 |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Bank                                                   |       | $                                    | 211,871    |                                 |       | 13.13                                | %          | $ | 129,100 |   |   | 8.00 | % | $ | 161,400 |   |   | 10.00 | % |
| Consolidated                                           |       | $                                    | 218,894    |                                 |       | 13.52                                | %          | $ | 129,500 |   |   | 8.00 | % |   | N/A |   |   | N/A |   |
|                                                   |       |                                 |       |                                 |       |                                 |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Tier                1 capital to risk-weighted assets: |       |                                 |       |                                 |       |                                 |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Bank                                                   |       | $                                    | 196,762    |                                 |       | 12.20                                | %          | $ | 64,500 |   |   | 4.00 | % | $ | 96,800 |   |   | 6.00 | % |
| Consolidated                                           |       | $                                    | 139,715    |                                 |       | 8.63                                 | %          | $ | 64,800 |   |   | 4.00 | % |   | N/A |   |   | N/A |   |
|                                                   |       |                                 |       |                                 |       |                                 |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Tier                1 capital to average assets:       |       |                                 |       |                                 |       |                                 |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Bank                                                   |       | $                                    | 196,762    |                                 |       | 11.70                                | %          | $ | 67,300 |   |   | 4.00 | % | $ | 84,100 |   |   | 5.00 | % |
| Consolidated                                           |       | $                                    | 139,715    |                                 |       | 8.26                                 | %          | $ | 67,700 |   |   | 4.00 | % |   | N/A |   |   | N/A |   |

----

*Table          of Contents*

**Off-Balance      Sheet Arrangements**

| **(Dollars                in thousands)**   | ** ** | **As                of December 31,** | ** ** |
|---------------------------------------------|------------|---------------------------------------|------------|
| ** **                                  | ** ** | **2006**                              | ** ** | **2005** |   |
| Commitments                to extend credit |       | $                                     | 684,794    |   | $ | 595,301 |   |
| Commitments                to extend credit |       |                                  |       |   |   |   |   |
| to                directors and officers    |       | $                                     | 1,411      |   | $ | 1,576 |   |
| Standby                letters of credit    |       | $                                     | 10,547     |   | $ | 4,994 |   |
| Commercial                letters of credit |       | $                                     | -          |   | $ | - |   |

**ITEM      7A. Quantitative and Qualitative Disclosures About Market      Risk**

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*Table          of Contents*

**ITEM      8.** **Financial      Statements and Supplementary Data**

**INDEX      TO CONSOLIDATED FINANCIAL STATEMENTS OF**

**VINEYARD      NATIONAL BANCORP AND SUBSIDIARY**

|                                                                                                                   |   |
|------------------------------------------------------------------------------------------------------------------------|--------|
| **Independent                Auditors’                Reports**                                                  | 63     |
|                                                                                                                   |   |
|                                                                                                                   |   |
| **Financial                Statements**                                                                                |   |
|                                                                                                                   |   |
| Consolidated                Balance Sheets                                                                             |   |
| December                31, 2006 and 2005                                                                              | 65     |
|                                                                                                                   |   |
| Consolidated                Statements of Income                                                                       |   |
| For                the Years Ended December 31, 2006, 2005 and                2004                                     | 66     |
|                                                                                                                   |   |
| Consolidated                Statement of Changes in Stockholders’ Equity and                Comprehensive Income |   |
| For                the Years Ended December 31, 2006, 2005 and                2004                                     | 67     |
|                                                                                                                   |   |
| Consolidated                Statements of Cash Flows                                                                   |   |
| For                the Years Ended December 31, 2006, 2005 and                2004                                     | 70     |
|                                                                                                                   |   |
| **Notes                to Consolidated Financial                Statements**                                           | 72     |

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*Table        of Contents*

**Report      of Independent Registered Public Accounting      Firm**

* *

----

*Table          of Contents*

**Report      of Independent Registered Public Accounting Firm**

----

*Table          of Contents*

**VINEYARD      NATIONAL BANCORP AND SUBSIDIARY**

**CONSOLIDATED      BALANCE SHEETS**

**DECEMBER      31, 2006 AND 2005**

| **(Dollars                in Thousands)**                                 | ** ** | **December                31,** | ** ** |
|---------------------------------------------------------------------------|------------|---------------------------------|------------|
| ** **                                                                | ** ** | **2006**                        | ** ** | **2005** |   |
| **ASSETS**                                                                |       |                            |       |   |   |
| Cash                and cash equivalents                                  |       | $                               | 35,129     |   | $ | 28,630 |   |
| Investment                securities, available-for-sale                  |       |                            | 213,200    |   |   | 248,694 |   |
| Loans,                net of unearned income                              |       |                            | 1,902,244  |   |   | 1,373,099 |   |
| Less:                Allowance for loan losses                            |       |                            | (19,689    | ) |   | (13,762 | ) |
| Net                Loans                                                  |       |                            | 1,882,555  |   |   | 1,359,337 |   |
| Bank                premises and equipment, net                           |       |                            | 20,402     |   |   | 19,192 |   |
| Accrued                interest                                           |       |                            | 11,577     |   |   | 8,276 |   |
| FHLB                and other stock, at cost                              |       |                            | 15,693     |   |   | 19,155 |   |
| Deferred                income tax asset                                  |       |                            | 15,475     |   |   | 11,646 |   |
| Goodwill                and other intangibles                             |       |                            | 44,198     |   |   | 1,670 |   |
| Other                assets                                               |       |                            | 19,510     |   |   | 17,038 |   |
| **TOTAL                ASSETS**                                           |       | $                               | 2,257,739  |   | $ | 1,713,638 |   |
|                                                                      |       |                            |       |   |   |   |   |
| **LIABILITIES                AND STOCKHOLDERS' EQUITY**                   |       |                            |       |   |   |   |   |
| Liabilities                                                               |       |                            |       |   |   |   |   |
| Deposits                                                                  |       |                            |       |   |   |   |   |
| Non-interest                bearing                                       |       | $                               | 293,572    |   | $ | 154,664 |   |
| Interest-bearing                                                          |       |                            | 1,513,496  |   |   | 1,122,348 |   |
| Total                Deposits                                             |       |                            | 1,807,068  |   |   | 1,277,012 |   |
|                                                                      |       |                            |       |   |   |   |   |
| FHLB                advances                                              |       |                            | 126,000    |   |   | 214,000 |   |
| Other                borrowings                                           |       |                            | 40,000     |   |   | 10,000 |   |
| Subordinated                debentures                                    |       |                            | 5,000      |   |   | 5,000 |   |
| Junior                subordinated debentures                             |       |                            | 115,470    |   |   | 96,913 |   |
| Accrued                interest and other liabilities                     |       |                            | 21,141     |   |   | 10,728 |   |
| **TOTAL                LIABILITIES**                                      |       |                            | 2,114,679  |   |   | 1,613,653 |   |
|                                                                      |       |                            |       |   |   |   |   |
| **COMMITMENTS                AND CONTINGENCIES**                          |       |                            |       |   |   |   |   |
|                                                                      |       |                            |       |   |   |   |   |
| Stockholders'                Equity                                       |       |                            |       |   |   |   |   |
| Contributed                capital                                        |       |                            |       |   |   |   |   |
| Perpetual                preferred stock - authorized 10,000,000 shares   |       |                            |       |   |   |   |   |
| Series                C - no par value, issued and outstanding 10,000     |       |                            |            |   |   |  |   |
| in                2006 and 2005                                           |       |                            | 9,665      |   |   | 9,665 |   |
| Common                stock - no par value, authorized 50,000,000 shares; |       |                            |       |   |   |   |   |
| issued                11,140,395 and 10,046,978 shares                    |       |                            |       |   |   |   |   |
| in                2006 and 2005, respectively                             |       |                            | 109,458    |   |   | 78,832 |   |
| Additional                paid-in capital                                 |       |                            | 2,149      |   |   | 4,443 |   |
| Retained                earnings                                          |       |                            | 52,105     |   |   | 36,454 |   |
| Unallocated                ESOP shares                                    |       |                            | (5,765     | ) |   | (6,304 | ) |
| Accumulated                other comprehensive loss, net of income taxes  |       |                            | (3,913     | ) |   | (5,245 | ) |
| Treasury                stock, 721,959 and 619,288 shares, at cost        |       |                            |       |   |   |   |   |
| in                2006 and 2005, respectively                             |       |                            | (20,639    | ) |   | (17,860 | ) |
| **TOTAL                STOCKHOLDERS' EQUITY**                             |       |                            | 143,060    |   |   | 99,985 |   |
| **TOTAL                LIABILITIES AND STOCKHOLDERS' EQUITY**             |       | $                               | 2,257,739  |   | $ | 1,713,638 |   |

----

*Table          of Contents*

**VINEYARD      NATIONAL BANCORP AND SUBSIDIARY**

**CONSOLIDATED      STATEMENTS OF INCOME**

**FOR      THE YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004**

| **(Dollars                in thousands, except per share amounts)**           | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** |   |
|-------------------------------------------------------------------------------|------------|----------|------------|----------|------------|----------|--------|
|                                                                          |       |     |       |
| **Interest                Income**                                            |       |     |       |     |       |     |   |
| Interest                and fees on loans                                     |       | $        | 146,183    |     | $          | 98,303   |   | $ | 66,374 |   |
| Interest                on investment securities                              |       |     | 11,751     |     |       | 12,552   |   |   | 8,629 |   |
| Interest                on federal funds sold                                 |       |     | 386        |     |       | 4        |   |   | 53 |   |
| **TOTAL                INTEREST INCOME**                                      |       |     | 158,320    |     |       | 110,859  |   |   | 75,056 |   |
|                                                                          |       |     |       |     |       |     |   |   |   |   |
| **Interest                Expense**                                           |       |     |       |     |       |     |   |   |   |   |
| Interest                on savings deposits                                   |       |     | 20,053     |     |       | 12,289   |   |   | 7,789 |   |
| Interest                on time deposits in denominations of $100,000 or more |       |     | 21,330     |     |       | 6,766    |   |   | 4,246 |   |
| Interest                on other time deposits                                |       |     | 16,475     |     |       | 8,953    |   |   | 3,707 |   |
| Interest                on federal funds purchased and other borrowings       |       |     | 17,372     |     |       | 15,337   |   |   | 6,312 |   |
| **TOTAL                INTEREST EXPENSE**                                     |       |     | 75,230     |     |       | 43,345   |   |   | 22,054 |   |
| **NET                INTEREST INCOME**                                        |       |     | 83,090     |     |       | 67,514   |   |   | 53,002 |   |
|                                                                          |       |     |       |     |       |     |   |   |   |   |
| **Provision                for Loan Losses**                                  |       |     | (4,125     | )        |       | (1,886   | )      |   | (4,881 | ) |
| **NET                INTEREST INCOME AFTER**                                  |       |     |       |     |       |     |   |   |   |   |
| **PROVISION                FOR LOAN LOSSES**                                  |       |     | 78,965     |     |       | 65,628   |   |   | 48,121 |   |
|                                                                          |       |     |       |     |       |     |   |   |   |   |
| **Other                Income**                                               |       |     |       |     |       |     |   |   |   |   |
| Fees                and service charges                                       |       |     | 1,825      |     |       | 1,413    |   |   | 1,783 |   |
| Gain                on sale of SBA loans and SBA broker fee income            |       |     | 2,839      |     |       | 2,903    |   |   | 2,973 |   |
| Net                gain on sale of investment securities and non-SBA loans    |       |     | 456        |     |       | 660      |   |   | 388 |   |
| Other                income                                                   |       |     | 502        |     |       | 329      |   |   | 313 |   |
| **TOTAL                OTHER INCOME**                                         |       |     | 5,622      |     |       | 5,305    |   |   | 5,457 |   |
|                                                                          |       |     |       |     |       |     |   |   |   |   |
| **Other                Expenses**                                             |       |     |       |     |       |     |   |   |   |   |
| Salaries                and employee benefits                                 |       |     | 28,764     |     |       | 21,802   |   |   | 16,712 |   |
| Occupancy                expense of premises                                  |       |     | 4,875      |     |       | 3,875    |   |   | 2,419 |   |
| Furniture                and equipment expense                                |       |     | 4,372      |     |       | 3,391    |   |   | 2,391 |   |
| Other                expenses                                                 |       |     | 13,006     |     |       | 9,678    |   |   | 8,400 |   |
| **TOTAL                OTHER EXPENSES**                                       |       |     | 51,017     |     |       | 38,746   |   |   | 29,922 |   |
| **INCOME                BEFORE INCOME TAXES**                                 |       |     | 33,570     |     |       | 32,187   |   |   | 23,656 |   |
| **INCOME                TAX PROVISION**                                       |       |     | 13,825     |     |       | 13,276   |   |   | 9,669 |   |
| **NET                INCOME**                                                 |       | $        | 19,745     |     | $          | 18,911   |   | $ | 13,987 |   |
|                                                                          |       |     |       |     |       |     |   |   |   |   |
| **EARNINGS                PER SHARE**                                         |       |     |       |     |       |     |   |   |   |   |
| **BASIC**                                                                     |       | $        | 1.95       |     | $          | 1.97     |   | $ | 1.72 |   |
| **DILUTED**                                                                   |       | $        | 1.89       |     | $          | 1.89     |   | $ | 1.55 |   |

----

*Table          of Contents*

**VINEYARD      NATIONAL BANCORP AND SUBSIDIARY**

**CONSOLIDATED      STATEMENTS OF CHANGES IN **

**STOCKHOLDERS’EQUITY      AND COMPREHENSIVE INCOME**

**FOR      THE YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004**

| **(Dollars                in Thousands)**                 | ** ** | ** **    | ** ** | ** **                      | ** ** | ** **     | ** ** | ** **   | ** ** | **Stock**                | ** ** | ** **        | ** ** | ** **   | ** ** | ** **      | ** ** | **Accumulated**                   | ** ** | ** **                       | ** ** | ** ** | ** ** | ** ** | ** ** |
|-----------------------------------------------------------|------------|---------------|------------|---------------------------------|------------|----------------|------------|--------------|------------|--------------------------|------------|-------------------|------------|--------------|------------|-----------------|------------|-----------------------------------|------------|----------------------------------|------------|------------|------------|------------|------------|
| ** **                                                | ** ** | **Perpetual** | ** ** | **Common                Stock** | ** ** | **Additional** | ** ** | **Dividend** | ** ** | ** **               | ** ** | ** **        | ** ** | ** **   | ** ** | **Other**       | ** ** | **Treasury                Stock** | ** ** | ** **                       | ** ** |
| ** **                                                | ** ** | **Preferred** | ** ** | **Number                of**    | ** ** | ** **     | ** ** | **Paid-in**  | ** ** | **To                Be** | ** ** | **Comprehensive** | ** ** | **Retained** | ** ** | **Unallocated** | ** ** | **Comprehensive**                 | ** ** | **Number                    of** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                                                | ** ** | **Stock**     | ** ** | **Shares**                      | ** ** | **Amount**     | ** ** | **Capital**  | ** ** | **Distributed**          | ** ** | **Income**        | ** ** | **Earnings** | ** ** | **ESOP**        | ** ** | **Loss**                          | ** ** | **Shares**                       | ** ** | **Amount** | ** ** | **Total**  |       |
| **Balance,                December 31, 2003**             |       | $             | 28,999     |                            |       | 6,340,532      |       | $            | 11,623     |                     | $          | 3,307             |       | $            | 4,981      |            |       |                              |       | $                                | 8,237      |       |       |       |       | $ | (3,088 | ) |   | (89,902 | ) | $ | (1,884 | )  | $ | 52,175 |   |
| Issuance                of common stock                   |       |          |       |                            |       | 1,283,100      |       |         | 29,200     |                     |       |              |       |         |       |            |       |                              |       |                             |       |       |       |       |       |   |   |   |   |   |   |   |   |   |   | 29,200 |   |
| Stock                options exercised                    |       |          |       |                            |       | 214,329        |       |         | 745        |                     |       |              |       |         |       |            |       |                              |       |                             |       |       |       |       |       |   |   |   |   |   |   |   |   |   |   | 745 |   |
| Warrants                exercised                         |       |          |       |                            |       | 148,100        |       |         | 1,007      |                     |       |              |       |         |       |            |       |                              |       |                             |       |       |       |       |       |   |   |   |   |   |   |   |   |   |   | 1,007 |   |
| Tax                benefit from exercise of               |       |          |       |                            |       |           |       |         |       |                     |       |              |       |         |       |            |       |                              |       |                             |       |       |       |       |       |   |   |   |   |   |   |   |   |   |   |   |   |
| non-qualified                stock options                |       |          |       |                            |       |           |       |         |       |                     |       | 473               |       |         |       |            |       |                              |       |                             |       |       |       |       |       |   |   |   |   |   |   |   |   |   |   | 473 |   |
| Purchase                of treasury stock                 |       |          |       |                            |       |           |       |         |       |                     |       |              |       |         |       |            |       |                              |       |                             |       |       |       |       |       |   |   |   |   | (41,400 | ) |   | (1,612 | ) |   | (1,612 | ) |
| Purchase                of common stock                   |       |          |       |                            |       |           |       |         |       |                     |       |              |       |         |       |            |       |                              |       |                             |       |       |       |       |       |   |   |   |   |   |   |   |   |   |   |   |   |
| to                pre-fund ESOP                           |       |          |       |                            |       |           |       |         |       |                     |       |              |       |         |       |            |       |                              |       |                             |       |       | $          | (6,997     | )          |   |   |   |   |   |   |   |   |   |   | (6,997 | ) |
| Allocation                of ESOP shares                  |       |          |       |                            |       |           |       |         |       |                     |       | (8                | )          |         |       |            |       |                              |       |                             |       |       |       | 141        |       |   |   |   |   |   |   |   |   |   |   | 133 |   |
| Redemption                of Series A                     |       |          |       |                            |       |           |       |         |       |                     |       |              |       |         |       |            |       |                              |       |                             |       |       |       |       |       |   |   |   |   |   |   |   |   |   |   |   |   |
| preferred                stock                            |       |          | (2,450     | )                               |       |           |       |         |       |                     |       |              |       |         |       |            |       |                              |       |                             |       |       |       |       |       |   |   |   |   |   |   |   |   |   |   | (2,450 | ) |
| Redemption                and conversion of               |       |          |       |                            |       |           |       |         |       |                     |       |              |       |         |       |            |       |                              |       |                             |       |       |       |       |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Series                B preferred stock                   |       |          |       |                            |       |           |       |         |       |                     |       |              |       |         |       |            |       |                              |       |                             |       |       |       |       |       |   |   |   |   |   |   |   |   |   |   |   |   |
| to                common stock                            |       |          | (26,547    | )                               |       | 1,727,182      |       |         | 26,491     |                     |       |              |       |         |       |            |       |                              |       |                             |       |       |       |       |       |   |   |   |   |   |   |   |   |   |   | (56 | ) |
| Cash                paid for fractional shares for        |       |          |       |                            |       |           |       |         |       |                     |       |              |       |         |       |            |       |                              |       |                             |       |       |       |       |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Series                B stock conversion                  |       |          | (2         | )                               |       |           |       |         |       |                     |       |              |       |         |       |            |       |                              |       |                             |       |       |       |       |       |   |   |   |   |   |   |   |   |   |   | (2 | ) |
| Stock                dividends distributed                |       |          |       |                            |       |           |       |         | 4,966      |                     |       |              |       |         | (4,966     | )               |       |                              |       |                             |       |       |       |       |       |   |   |   |   |   |   |   |   |   |   | - |   |
| Cash                paid for fractional shares for        |       |          |       |                            |       |           |       |         |       |                     |       |              |       |         |       |            |       |                              |       |                             |       |       |       |       |       |   |   |   |   |   |   |   |   |   |   |   |   |
| stock                dividend distribution                |       |          |       |                            |       |           |       |         |       |                     |       |              |       |         | (15        | )               |       |                              |       |                             |       |       |       |       |       |   |   |   |   |   |   |   |   |   |   | (15 | ) |
| Cash                paid in excess of cost to redeem      |       |          |       |                            |       |           |       |         |       |                     |       |              |       |         |       |            |       |                              |       |                             |       |       |       |       |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Series                A preferred stock                   |       |          |       |                            |       |           |       |         |       |                     |       |              |       |         |       |            |       |                              |       |                             | (51        | )          |       |       |       |   |   |   |   |   |   |   |   |   |   | (51 | ) |
| Cash                paid in excess of cost to redeem      |       |          |       |                            |       |           |       |         |       |                     |       |              |       |         |       |            |       |                              |       |                             |       |       |       |       |       |   |   |   |   |   |   |   |   |   |   |   |   |
| and                convert Series B preferred stock       |       |          |       |                            |       |           |       |         |       |                     |       |              |       |         |       |            |       |                              |       |                             | (20        | )          |       |       |       |   |   |   |   |   |   |   |   |   |   | (20 | ) |
| Cash                dividends declared on common stock    |       |          |       |                            |       |           |       |         |       |                     |       |              |       |         |       |            | (938       | )                                 |       |                             |       |       |       |       |       |   |   |   |   |   |   | (938 | ) |
| Cash                dividends declared on preferred stock |       |          |       |                            |       |           |       |         |       |                     |       |              |       |         |       |            | (702       | )                                 |       |                             |       |       |       |       |       |   |   |   |   |   |   | (702 | ) |
| Comprehensive                income                       |       |          |       |                            |       |           |       |         |       |                     |       |              |       |         |       |            |       |                              |       |                             |       |       |       |       |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                Income                                 |       |          |       |                            |       |           |       |         |       |                     |       |              |       |         |       |            | $          | 13,987                            |       |                             | 13,987     |       |       |       |       |   |   |   |   |   |   |   |   |   |   | 13,987 |   |
| Unrealized                security holding gains          |       |          |       |                            |       |           |       |         |       |                     |       |              |       |         |       |            |       |                              |       |                             |       |       |       |       |       |   |   |   |   |   |   |   |   |   |   |   |   |
| (net                of $85 tax provision)                 |       |          |       |                            |       |           |       |         |       |                     |       |              |       |         |       |            |       | 121                               |       |                             |       |       |       |       |       |   | 121 |   |   |   |   |   |   |   |   | 121 |   |
| Less                reclassification adjustment           |       |          |       |                            |       |           |       |         |       |                     |       |              |       |         |       |            |       |                              |       |                             |       |       |       |       |       |   |   |   |   |   |   |   |   |   |   |   |   |
| for                realized gains                         |       |          |       |                            |       |           |       |         |       |                     |       |              |       |         |       |            |       |                              |       |                             |       |       |       |       |       |   |   |   |   |   |   |   |   |   |   |   |   |
| (net                of $159 tax provision)                |       |          |       |                            |       |           |       |         |       |                     |       |              |       |         |       |            |       | 229                               |       |                             |       |       |       |       |       |   | 229 |   |   |   |   |   |   |   |   | 229 |   |
| Total                comprehensive income                 |       |          |       |                            |       |           |       |         |       |                     |       |              |       |         |       |            | $          | 14,337                            |       |                             |       |       |       |       |       |   |   |   |   |   |   |   |   |   |   |   |   |
| **Balance                December 31, 2004**              |       | $             | -          |                            |       | 9,713,243      |       | $            | 74,032     |                     | $          | 3,772             |       | $            | -          |            |       |                              |       | $                                | 20,513     |       | $          | (6,856     | )          | $ | (2,738 | ) |   | (131,302 | ) | $ | (3,496 | ) | $ | 85,227 |   |

** **
** **

----

*Table          of Contents*

**VINEYARD      NATIONAL BANCORP AND SUBSIDIARY**

**CONSOLIDATED      STATEMENTS OF CHANGES IN **

**STOCKHOLDERS’      EQUITY AND COMPREHENSIVE INCOME**

**FOR      THE YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004**

**(continued)**

|  **(Dollars              in Thousands)**            | ** ** | ** **    | ** ** | ** **                      | ** ** | ** **     | ** ** | ** **  | ** ** | ** **        | ** ** | ** **   | ** ** | ** **      | ** ** | **Accumulated**                   | ** ** | ** **                       | ** ** | ** ** | ** ** | ** ** | ** ** |
|----------------------------------------------------------|------------|---------------|------------|---------------------------------|------------|----------------|------------|-------------|------------|-------------------|------------|--------------|------------|-----------------|------------|-----------------------------------|------------|----------------------------------|------------|------------|------------|------------|------------|
| ** **                                               | ** ** | **Perpetual** | ** ** | **Common                Stock** | ** ** | **Additional** | ** ** | ** **  | ** ** | ** **        | ** ** | ** **   | ** ** | **Other**       | ** ** | **Treasury                Stock** | ** ** | ** **                       | ** ** |
| ** **                                               | ** ** | **Preferred** | ** ** | **Number                of**    | ** ** | ** **     | ** ** | **Paid-in** | ** ** | **Comprehensive** | ** ** | **Retained** | ** ** | **Unallocated** | ** ** | **Comprehensive**                 | ** ** | **Number                    of** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                                               | ** ** | **Stock**     | ** ** | **Shares**                      | ** ** | **Amount**     | ** ** | **Capital** | ** ** | **Income**        | ** ** | **Earnings** | ** ** | **ESOP**        | ** ** | **Loss**                          | ** ** | **Shares**                       | ** ** | **Amount** | ** ** | **Total**  |       |
| **Balance                December 31, 2004**             |       | $             | -          |                            |       | 9,713,243      |       | $           | 74,032     |              | $          | 3,772        |       |            |       |                              | $          | 20,513                           |       | $          | (6,856     | )          | $          | (2,738 | ) |   | (131,302 | ) | $ | (3,496 | ) | $ | 85,227 |   |
| Issuance                of Series C preferred stock, net |       |          | 9,665      |                            |       |           |       |        |       |              |       |         |       |            |       |                              |       |                             |       |       |       |       |       |   |   |   |   |   |   |   |   |   | 9,665 |   |
| Stock                options exercised                   |       |          |       |                            |       | 144,970        |       |        | 807        |              |       |         |       |            |       |                              |       |                             |       |       |       |       |       |   |   |   |   |   |   |   |   |   | 807 |   |
| Warrants                exercised                        |       |          |       |                            |       | 67,990         |       |        | 463        |              |       |         |       |            |       |                              |       |                             |       |       |       |       |       |   |   |   |   |   |   |   |   |   | 463 |   |
| Additional                investment rights exercised    |       |          |       |                            |       | 120,775        |       |        | 3,530      |              |       |         |       |            |       |                              |       |                             |       |       |       |       |       |   |   |   |   |   |   |   |   |   | 3,530 |   |
| Purchase                of treasury stock                |       |          |       |                            |       |           |       |        |       |              |       |         |       |            |       |                              |       |                             |       |       |       |       |       |   |   |   | (487,986 | ) |   | (14,364 | ) |   | (14,364 | ) |
| Tax                benefit from exercise of              |       |          |       |                            |       |           |       |        |       |              |       |         |       |            |       |                              |       |                             |       |       |       |       |       |   |   |   |   |   |   |   |   |   |   |   |
| non-qualified                stock options               |       |          |       |                            |       |           |       |        |       |              |       | 499          |       |            |       |                              |       |                             |       |       |       |       |       |   |   |   |   |   |   |   |   |   | 499 |   |
| Release                of ESOP shares                    |       |          |       |                            |       |           |       |        |       |              |       | 172          |       |            |       |                              |       |                             |       |       | 552        |       |       |   |   |   |   |   |   |   |   |   | 724 |   |
| Cash                dividends declared on preferred      |       |          |       |                            |       |           |       |        |       |              |       |         |       |            |       |                              |       |                             |       |       |       |       |       |   |   |   |   |   |   |   |   |   |   |   |
| stock                                                    |       |          |       |                            |       |           |       |        |       |              |       |         |       |            |       |                              |       | (540                             | )          |       |       |       |       |   |   |   |   |   |   |   |   |   | (540 | ) |
| Cash                dividends declared on common         |       |          |       |                            |       |           |       |        |       |              |       |         |       |            |       |                              |       |                             |       |       |       |       |       |   |   |   |   |   |   |   |   |   |   |   |
| stock                                                    |       |          |       |                            |       |           |       |        |       |              |       |         |       |            |       |                              |       | (2,430                           | )          |       |       |       |       |   |   |   |   |   |   |   |   |   | (2,430 | ) |
| Comprehensive                income                      |       |          |       |                            |       |           |       |        |       |              |       |         |       |            |       |                              |       |                             |       |       |       |       |       |   |   |   |   |   |   |   |   |   |   |   |
| Net                Income                                |       |          |       |                            |       |           |       |        |       |              |       |         |       | $               | 18,911     |                              |       | 18,911                           |       |       |       |       |       |   |   |   |   |   |   |   |   |   | 18,911 |   |
| Unrealized                security holding               |       |          |       |                            |       |           |       |        |       |              |       |         |       |            |       |                              |       |                             |       |       |       |       |       |   |   |   |   |   |   |   |   |   |   |   |
| losses                (net of $1,815                     |       |          |       |                            |       |           |       |        |       |              |       |         |       |            |       |                              |       |                             |       |       |       |       |       |   |   |   |   |   |   |   |   |   |   |   |
| tax                benefit)                              |       |          |       |                            |       |           |       |        |       |              |       |         |       |            | (2,507     | )                                 |       |                             |       |       |       |       |       | (2,507 | ) |   |   |   |   |   |   |   | (2,507 | ) |
| Total                comprehensive income                |       |          |       |                            |       |           |       |        |       |              |       |         |       | $               | 16,404     |                              |       |                             |       |       |       |       |       |   |   |   |   |   |   |   |   |   |   |   |
| **Balance,                December 31, 2005**            |       | $             | 9,665      |                            |       | 10,046,978     |       | $           | 78,832     |              | $          | 4,443        |       |            |       |                              | $          | 36,454                           |       | $          | (6,304     | )          | $          | (5,245 | ) |   | (619,288 | ) | $ | (17,860 | ) | $ | 99,985 |   |

----

*Table          of Contents*

**VINEYARD      NATIONAL BANCORP AND SUBSIDIARY**

**CONSOLIDATED      STATEMENTS OF CHANGES IN**

**STOCKHOLDERS’      EQUITY AND COMPREHENSIVE INCOME**

**FOR      THE YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004**

**(continued)**

| **(Dollars                in Thousands)**                  | ** ** | ** **    | ** ** | ** **                      | ** ** | ** **     | ** ** | ** **  | ** ** | ** **        | ** ** | ** **   | ** ** | ** **      | ** ** | **Accumulated**                   | ** ** | ** **                   | ** ** | ** ** | ** ** | ** ** | ** ** |
|------------------------------------------------------------|------------|---------------|------------|---------------------------------|------------|----------------|------------|-------------|------------|-------------------|------------|--------------|------------|-----------------|------------|-----------------------------------|------------|------------------------------|------------|------------|------------|------------|------------|
| ** **                                                 | ** ** | **Perpetual** | ** ** | **Common                Stock** | ** ** | **Additional** | ** ** | ** **  | ** ** | ** **        | ** ** | ** **   | ** ** | **Other**       | ** ** | **Treasury                Stock** | ** ** | ** **                   | ** ** |
| ** **                                                 | ** ** | **Preferred** | ** ** | **Number                of**    | ** ** | ** **     | ** ** | **Paid-in** | ** ** | **Comprehensive** | ** ** | **Retained** | ** ** | **Unallocated** | ** ** | **Comprehensive**                 | ** ** | **Number                of** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                                                 | ** ** | **Stock**     | ** ** | **Shares**                      | ** ** | **Amount**     | ** ** | **Capital** | ** ** | **Income**        | ** ** | **Earnings** | ** ** | **ESOP**        | ** ** | **Loss**                          | ** ** | **Shares**                   | ** ** | **Amount** | ** ** | **Total**  |       |
| **Balance                December 31, 2005**               |       | $             | 9,665      |                            |       | 10,046,978     |       | $           | 78,832     |              | $          | 4,443        |       |            |       |                              | $          | 36,454                       |       | $          | (6,304     | )          | $          | (5,245 | ) |   | (619,288 | ) | $ | (17,860 | ) | $ | 99,985 |   |
| Common                stock issued                         |       |          |       |                            |       | 1,200,000      |       |        | 30,287     |              |       |         |       |            |       |                              |       |                         |       |       |       |       |       |   |   |   |   |   |   |   |   |   | 30,287 |   |
| Stock                options exercised                     |       |          |       |                            |       | 107,078        |       |        | 339        |              |       |         |       |            |       |                              |       |                         |       |       |       |       |       |   |   |   |   |   |   |   |   |   | 339 |   |
| Purchase                of treasury stock                  |       |          |       |                            |       |           |       |        |       |              |       |         |       |            |       |                              |       |                         |       |       |       |       |       |   |   |   | (102,671 | ) |   | (2,779 | ) |   | (2,779 | ) |
| Purchase                of restricted stock                |       |          |       |                            |       | (45,250        | )          |        |       |              |       | (1,310       | )          |            |       |                              |       |                         |       |       |       |       |       |   |   |   |   |   |   |   |   |   | (1,310 | ) |
| Vesting                of restricted stock                 |       |          |       |                            |       | 48,642         |       |        |       |              |       |         |       |            |       |                              |       |                         |       |       |       |       |       |   |   |   |   |   |   |   |   |   | - |   |
| Reclassification                of restricted stock awards |       |          |       |                            |       | (217,053       | )          |        |       |              |       | (3,134       | )          |            |       |                              |       |                         |       |       |       |       |       |   |   |   |   |   |   |   |   |   | (3,134 | ) |
| Restricted                stock granted                    |       |          |       |                            |       |           |       |        |       |              |       |         |       |            |       |                              |       |                         |       |       |       |       |       |   |   |   |   |   |   |   |   |   | - |   |
| Amortization                of restricted stock            |       |          |       |                            |       |           |       |        |       |              |       | 962          |       |            |       |                              |       |                         |       |       |       |       |       |   |   |   |   |   |   |   |   |   | 962 |   |
| Share-based                compensation expense            |       |          |       |                            |       |           |       |        |       |              |       | 27           |       |            |       |                              |       |                         |       |       |       |       |       |   |   |   |   |   |   |   |   |   | 27 |   |
| Release                of ESOP shares                      |       |          |       |                            |       |           |       |        |       |              |       | 108          |       |            |       |                              |       |                         |       |       | 539        |       |       |   |   |   |   |   |   |   |   |   | 647 |   |
| Tax                benefit from exercise of                |       |          |       |                            |       |           |       |        |       |              |       |         |       |            |       |                              |       |                         |       |       |       |       |       |   |   |   |   |   |   |   |   |   |   |   |
| non-qualified                stock options                 |       |          |       |                            |       |           |       |        |       |              |       | 1,053        |       |            |       |                              |       |                         |       |       |       |       |       |   |   |   |   |   |   |   |   |   | 1,053 |   |
| Cash                dividends declared on preferred        |       |          |       |                            |       |           |       |        |       |              |       |         |       |            |       |                              |       |                         |       |       |       |       |       |   |   |   |   |   |   |   |   |   |   |   |
| stock                                                      |       |          |       |                            |       |           |       |        |       |              |       |         |       |            |       |                              |       | (900                         | )          |       |       |       |       |   |   |   |   |   |   |   |   |   | (900 | ) |
| Cash                dividends declared on common           |       |          |       |                            |       |           |       |        |       |              |       |         |       |            |       |                              |       |                         |       |       |       |       |       |   |   |   |   |   |   |   |   |   |   |   |
| stock                                                      |       |          |       |                            |       |           |       |        |       |              |       |         |       |            |       |                              |       | (3,194                       | )          |       |       |       |       |   |   |   |   |   |   |   |   |   | (3,194 | ) |
| Comprehensive                income                        |       |          |       |                            |       |           |       |        |       |              |       |         |       |            |       |                              |       |                         |       |       |       |       |       |   |   |   |   |   |   |   |   |   |   |   |
| Net                Income                                  |       |          |       |                            |       |           |       |        |       |              |       |         |       | $               | 19,745     |                              |       | 19,745                       |       |       |       |       |       |   |   |   |   |   |   |   |   |   | 19,745 |   |
| Unrealized                security holding                 |       |          |       |                            |       |           |       |        |       |              |       |         |       |            |       |                              |       |                         |       |       |       |       |       |   |   |   |   |   |   |   |   |   |   |   |
| gains                (net of $965                          |       |          |       |                            |       |           |       |        |       |              |       |         |       |            |       |                              |       |                         |       |       |       |       |       |   |   |   |   |   |   |   |   |   |   |   |
| tax                provision)                              |       |          |       |                            |       |           |       |        |       |              |       |         |       |            | 1,332      |                              |       |                         |       |       |       |       |       | 1,332 |   |   |   |   |   |   |   |   | 1,332 |   |
| Total                comprehensive income                  |       |          |       |                            |       |           |       |        |       |              |       |         |       | $               | 21,077     |                              |       |                         |       |       |       |       |       |   |   |   |   |   |   |   |   |   |   |   |
| **Balance,                December 31, 2006**              |       | $             | 9,665      |                            |       | 11,140,395     |       | $           | 109,458    |              | $          | 2,149        |       |            |       |                              | $          | 52,105                       |       | $          | (5,765     | )          | $          | (3,913 | ) |   | (721,959 | ) | $ | (20,639 | ) | $ | 143,060 |   |

----

*Table          of Contents*

**VINEYARD      NATIONAL BANCORP AND SUBSIDIARY**

**CONSOLIDATED      STATEMENTS OF CASH FLOWS**

**FOR      THE YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004**

| **(Dollars                in Thousands)**                                   | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** |   |
|-----------------------------------------------------------------------------|------------|----------|------------|----------|------------|----------|--------|
|                                                                        |       |     |       |     |       |     |   |
| **Cash                Flows from Operating Activities**                     |       |     |       |     |       |     |   |
| Net                Income                                                   |       | $        | 19,745     |     | $          | 18,911   |   | $ | 13,987 |   |
| Adjustments                to Reconcile Net Income to Net                   |       |     |       |     |       |     |   |   |   |   |
| Cash                Provided by Operating Activities                        |       |     |       |     |       |     |   |   |   |   |
|                                                                        |       |     |       |     |       |     |   |   |   |   |
| Depreciation                and amortization                                |       |     | 5,791      |     |       | 3,662    |   |   | 2,322 |   |
| Investment                securities accretion/amortization                 |       |     | 430        |     |       | 1,479    |   |   | 781 |   |
| Allocation                of ESOP shares                                    |       |     | 647        |     |       | 724      |   |   | 133 |   |
| FHLB                stock dividends                                         |       |     | (731       | )        |       | (607     | )      |   | (426 | ) |
| Share-based                compensation                                     |       |     | 27         |     |       |     |   |   |   |   |
| Provision                for credit losses                                  |       |     | 4,175      |     |       | 2,200    |   |   | 5,734 |   |
| Deferred                income taxes                                        |       |     | (3,815     | )        |       | (1,635   | )      |   | 31 |   |
| Changes                in assets and liabilities, net effects from          |       |     |       |     |       |     |   |   |   |   |
| merger                with Rancho Bank                                      |       |     |       |     |       |     |   |   |   |   |
| Decrease                in taxes payable                                    |       |     | (806       | )        |       | (79      | )      |   | (2,273 | ) |
| Increase                in other assets                                     |       |     | (4,789     | )        |       | (5,517   | )      |   | (3,036 | ) |
| (Increase)                / decrease in unearned loan fees                  |       |     | (1,956     | )        |       | 1,548    |   |   | 257 |   |
| Increase                in interest receivable                              |       |     | (2,651     | )        |       | (2,853   | )      |   | (2,316 | ) |
| Increase                / (decrease) in interest payable                    |       |     | 1,459      |     |       | 525      |   |   | (154 | ) |
| Increase                in accrued expense and other liabilities            |       |     | 8,195      |     |       | 1,151    |   |   | 1,320 |   |
| Gain                on sale of loans                                        |       |     | (1,722     | )        |       | (2,141   | )      |   | (1,614 | ) |
| Gain                on sale of premise and equipment                        |       |     | (1         | )        |       | -        |   |   | - |   |
| Gain                on sale of other real estate owned                      |       |     | -          |     |       | -        |   |   | (56 | ) |
| Gain                on sale of investment securities, net                   |       |     | -          |     |       | -        |   |   | (388 | ) |
| Total                Adjustments                                            |       |     | 4,253      |     |       | (1,543   | )      |   | 315 |   |
| **Net                Cash Provided By Operating Activities**                |       |     | 23,998     |     |       | 17,368   |   |   | 14,302 |   |
|                                                                        |       |     |       |     |       |     |   |   |   |   |
| **Cash                Flows From Investing Activities**                     |       |     |       |     |       |     |   |   |   |   |
| Proceeds                from sales of mortgage-backed                       |       |     |       |     |       |     |   |   |   |   |
| securities                available-for-sale                                |       |     | -          |     |       | -        |   |   | 60,843 |   |
| Purchase                of investment securities, net of effects from       |       |     |       |     |       |     |   |   |   |   |
| merger                with Rancho Bank                                      |       |     | 1,648      |     |       | (95,653  | )      |   | (112,458 | ) |
| Proceeds                from principal reductions and maturities            |       |     |       |     |       |     |   |   |   |   |
| of                mortgage-backed securities available-for-sale             |       |     | 37,453     |     |       | 64,716   |   |   | 30,446 |   |
| Purchase                of FHLB and other stock, net                        |       |     | (9,945     | )        |       | (8,755   | )      |   | (3,670 | ) |
| Policy                additions to life insurance                           |       |     | -          |     |       | -        |   |   | (230 | ) |
| Redemption                of FHLB stock                                     |       |     | 14,138     |     |       | 2,442    |   |   | 1,056 |   |
| Net                cash acquired in merger with Rancho Bank                 |       |     | 34,165     |     |       | -        |   |   | - |   |
| Recoveries                on loans previously written off                   |       |     | 71         |     |       | 67       |   |   | 122 |   |
| Origination                and purchase of loans, net of principal payments |       |     |       |     |       |     |   |   |   |   |
| and                net of effects from merger with Rancho Bank              |       |     | (505,637   | )        |       | (514,557 | )      |   | (551,197 | ) |
| Proceeds                from sale of loans                                  |       |     | 98,597     |     |       | 168,928  |   |   | 122,132 |   |
| Capital                expenditures, net of effects from merger             |       |     |       |     |       |     |   |   |   |   |
| with                Rancho Bank                                             |       |     | (3,392     | )        |       | (9,773   | )      |   | (5,014 | ) |
| Proceeds                from sale of other real estate owned                |       |     | -          |     |       | -        |   |   | 167 |   |
| Proceeds                from sale of premise and equipment                  |       |     | 4          |     |       | -        |   |   | 8 |   |
| **Net                Cash Used in Investing Activities**                    |       |     | (332,898   | )        |       | (392,585 | )      |   | (457,795 | ) |

** **

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*Table        of Contents*

**VINEYARD      NATIONAL BANCORP AND SUBSIDIARY**

**CONSOLIDATED      STATEMENTS OF CASH FLOWS**

**FOR      THE YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004**

**(continued)**

| **(Dollars                in Thousands)**                                                | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** |   |
|------------------------------------------------------------------------------------------|------------|----------|------------|----------|------------|----------|--------|
|                                                                                     |       |     |       |     |       |     |   |
| **Cash                Flows From Financing Activities**                                  |       |     |       |     |       |     |   |
| Net                increase in demand deposit, NOW, savings, and money                   |       |     |       |     |       |     |   |   |   |   |
| market                accounts, net of effects from merger with Rancho Bank              |       |     | 227,089    |     |       | 35,618   |   |   | 205,162 |   |
| Net                increase in time deposits, net of effects from merger with            |       |     |       |     |       |     |   |   |   |   |
| Rancho                Bank                                                               |       |     | 104,781    |     |       | 275,848  |   |   | 157,058 |   |
| Proceeds                from issuance of preferred stock                                 |       |     | -          |     |       | 9,665    |   |   | - |   |
| Proceeds                from issuance of common stock                                    |       |     | 30,287     |     |       | -        |   |   | 29,200 |   |
| Proceeds                from issuance of junior subordinated debentures                  |       |     | 18,000     |     |       | 25,000   |   |   | 32,000 |   |
| Increase                in other borrowings                                              |       |     | 30,000     |     |       | 10,000   |   |   | - |   |
| Purchase                of common stock to pre-fund ESOP                                 |       |     | -          |     |       | -        |   |   | (6,997 | ) |
| Purchase                of treasury stock                                                |       |     | (2,779     | )        |       | (14,364  | )      |   | (1,612 | ) |
| Purchase                of restricted stock                                              |       |     | (1,310     | )        |       | -        |   |   | - |   |
| Net                change in FHLB advances                                               |       |     | (88,000    | )        |       | 37,000   |   |   | (5,000 | ) |
| Proceeds                from exercise of Series A warrants                               |       |     | -          |     |       | 463      |   |   | 1,007 |   |
| Redemption                of Series A preferred stock (including                         |       |     |       |     |       |     |   |   |   |   |
| cash                paid in excess of cost)                                              |       |     | -          |     |       | -        |   |   | (2,501 | ) |
| Redemption                and conversion of Series B preferred stock                     |       |     |       |     |       |     |   |   |   |   |
| (including                cash paid in excess of cost)                                   |       |     | -          |     |       | -        |   |   | (76 | ) |
| Cash                paid in lieu of fractional shares                                    |       |     |       |     |       |     |   |   |   |   |
| of                stock dividend                                                         |       |     | -          |     |       | -        |   |   | (15 | ) |
| Cash                paid in lieu of fractional shares                                    |       |     |       |     |       |     |   |   |   |   |
| of                Series B conversion                                                    |       |     | -          |     |       | -        |   |   | (2 | ) |
| Dividends                paid on preferred stock                                         |       |     | (867       | )        |       | (340     | )      |   | (702 | ) |
| Dividends                paid on common stock                                            |       |     | (3,194     | )        |       | (2,430   | )      |   | (938 | ) |
| Proceeds                from exercise of additional investment rights                    |       |     | -          |     |       | 3,530    |   |   | - |   |
| Tax                benefit for exercise of non-qualified stock options                   |       |     | 1,053      |     |       | 499      |   |   | 473 |   |
| Proceeds                from exercise of stock options                                   |       |     | 339        |     |       | 807      |   |   | 745 |   |
| **Net                Cash Provided by Financing Activities**                             |       |     | 315,399    |     |       | 381,296  |   |   | 407,802 |   |
|                                                                                     |       |     |       |     |       |     |   |   |   |   |
| **Net                Increase / (Decrease) in Cash and Cash                Equivalents** |       |     | 6,499      |     |       | 6,079    |   |   | (35,691 | ) |
|                                                                                     |       |     |       |     |       |     |   |   |   |   |
| **Cash                and Cash Equivalents**,                Beginning of Year           |       |     | 28,630     |     |       | 22,551   |   |   | 58,242 |   |
|                                                                                     |       |     |       |     |       |     |   |   |   |   |
| **Cash                and Cash Equivalents**,                End of Year                 |       | $        | 35,129     |     | $          | 28,630   |   | $ | 22,551 |   |
|                                                                                     |       |     |       |     |       |     |   |   |   |   |
|                                                                                     |       |     |       |     |       |     |   |   |   |   |
| **Supplementary                Information**                                             |       |     |       |     |       |     |   |   |   |   |
| Conversion                of Series B preferred stock                                    |       | $        | -          |     | $          | -        |   | $ | 26,491 |   |
| Income                taxes paid                                                         |       | $        | 17,460     |     | $          | 13,075   |   | $ | 11,910 |   |
| Interest                paid                                                             |       | $        | 73,771     |     | $          | 42,620   |   | $ | 21,900 |   |

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*Table          of Contents*

**VINEYARD      NATIONAL BANCORP AND SUBSIDIARY**

**NOTES      TO CONSOLIDATED FINANCIAL      STATEMENTS**

**Note      #1 - Summary of Significant Accounting Policies**

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*Table          of Contents*

*“Accounting      for Certain Investments in Debt and Equity Securities,” *

----

*Table          of Contents*

*Disclosures      About Fair Value of Financial Instruments*

----

*Table          of Contents*

*“Accounting      for Income Taxes.”*

*Goodwill      and Other Intangible Assets”.*

*Earnings      Per Share*

----

*Table          of Contents*

| **(Dollars                in Thousands)**                             | ** ** | **Years                Ended December 31,** | ** ** |
|-----------------------------------------------------------------------|------------|---------------------------------------------|------------|
| ** **                                                            | ** ** | **2005**                                    | ** ** | **2004** |   |
| Net                income:                                            |       |                                        |       |   |   |   |   |
| As                reported                                            |       | $                                           | 18,911     |   | $ | 13,987 |   |
| Stock-based                compensation that would have been reported |       |                                        |       |
| using                the fair value method of SFAS No. 123            |       |                                        | (110       | ) |   | (339 | ) |
| Pro                forma net income                                   |       | $                                           | 18,801     |   | $ | 13,648 |   |
|                                                                  |       |                                        |       |   |   |   |   |
| Basic                Shares                                           |       |                                        | 9,311,252  |   |   | 7,692,057 |   |
| Diluted                Shares                                         |       |                                        | 9,744,474  |   |   | 8,929,760 |   |
|                                                                  |       |                                        |       |   |   |   |   |
| Basic                earnings per share:                              |       |                                        |       |   |   |   |   |
| As                reported                                            |       | $                                           | 1.97       |   | $ | 1.72 |   |
| Pro                forma                                              |       | $                                           | 1.96       |   | $ | 1.67 |   |
|                                                                  |       |                                        |       |   |   |   |   |
| Diluted                earnings per share:                            |       |                                        |       |   |   |   |   |
| As                reported                                            |       | $                                           | 1.89       |   | $ | 1.55 |   |
| Pro                forma                                              |       | $                                           | 1.87       |   | $ | 1.52 |   |

*“Reporting      Comprehensive Income,*

----

*Table          of Contents*

*Accounting      for Income Taxes*

----

*Table          of Contents*

*Materiality*

**Note      #2 - Business Combinations**

----

*Table          of Contents*

| **(Dollars                in Thousands)**                                |   |   |    |
|--------------------------------------------------------------------------|--------|--------|---------|
|                                                                     |   |   |    |
| Assets                Acquired:                                          |   |   |    |
| Cash                and cash equivalents                                 |   | $      | 90,281  |   |
| Investment                securities                                     |   |   | 1,648   |   |
| Net                loans                                                 |   |   | 116,696 |   |
| Goodwill                                                                 |   |   | 40,533  |   |
| Intangibles                                                              |   |   | 2,744   |   |
| Other                assets                                              |   |   | 7,616   |   |
| Total                assets acquired                                     |   |   | 259,518 |   |
|                                                                     |   |   |    |   |
| Liabilities                Assumed:                                      |   |   |    |   |
| Non-interest                bearing deposits                             |   |   | 85,743  |   |
| Interest                bearing deposits                                 |   |   | 112,443 |   |
| Other                liabilities                                         |   |   | 5,216   |   |
| Total                liabilities assumed                                 |   |   | 203,402 |   |
| Total                cash consideration paid to Rancho Bank shareholders |   | $      | 56,116  |   |

**Note      #3 - Acquired Intangible Assets and Goodwill**

| **(Dollars                in thousands)**        | ** ** | **As                of December 31** | ** ** |
|--------------------------------------------------|------------|--------------------------------------|------------|
| ** **                                       | ** ** | **2006**                             | ** ** | **2005** |   |
| Balance,                beginning of year        |       | $                                    | 238        |   | $ | 238 |   |
| Goodwill                acquired during the year |       |                                 | 40,533     |   |   | - |   |
| Balance,                end of year              |       | $                                    | 40,771     |   | $ | 238 |   |

| **(Dollars                in thousands)**         | ** ** | **As                of December 31** | ** **                               |
|---------------------------------------------------|------------|--------------------------------------|------------------------------------------|
| ** **                                        | ** ** | **2006**                             | ** **                               | **2005** |   |
| **Amortizable                intangible assets:** | ** ** | ** **                           | **Gross                Carrying Amount** |   |   | **Accumulated                Amortization** |   |   | **Gross                Carrying Amount** |   |   | **Accumulated                Amortization** |   |
| Core                deposit intangibles           |       | $                                    | 2,494                                    |   | $ | 324 |   | $ | 74 |   | $ | 11 |   |

----

*Table        of Contents*

| **(Dollars                in thousands)**         | ** ** | **Core                deposit intangibles** |   |
|---------------------------------------------------|------------|---------------------------------------------|--------|
|                                              |       |                                        |   |   |
| Estimated                amortization expense for |       |                                        |   |   |
| the                year ending December 31:       |       |                                        |   |   |
| 2007                                              |       | $                                           | 579    |   |
| 2008                                              |       | $                                           | 498    |   |
| 2009                                              |       | $                                           | 416    |   |
| 2010                                              |       | $                                           | 334    |   |
| 2011                                              |       | $                                           | 252    |   |

**Note      #4 - Investment Securities**

| **(Dollars                in Thousands)** | ** ** | ** **    | ** ** | **Gross**      | ** ** | **Gross**      | ** ** | ** **                    | ** ** |
|-------------------------------------------|------------|---------------|------------|----------------|------------|----------------|------------|-------------------------------|------------|
| ** **                                | ** ** | **Amortized** | ** ** | **Unrealized** | ** ** | **Unrealized** | ** ** | ** **                    | ** ** |
| ** **                                | ** ** | **Cost**      | ** ** | **Gains**      | ** ** | **Losses**     | ** ** | **Fair                Value** |       |
| U.S.                agency securities     |       | $             | 12,515     |           | $          | -              |       | $                             | (181       | ) | $ | 12,334 |   |
| Mortgage                backed securities |       |          | 205,139    |           |       | -              |       |                          | (6,437     | ) |   | 198,702 |   |
| Mutual                funds               |       |          | 2,213      |           |       | -              |       |                          | (49        | ) |   | 2,164 |   |
| Total                                     |       | $             | 219,867    |           | $          | -              |       | $                             | (6,667     | ) | $ | 213,200 |   |

| **(Dollars                in Thousands)** |   | ** **    |    | **Gross**      |   | **Gross**      |   | ** **                    |   |
|-------------------------------------------|--------|---------------|---------|----------------|--------|----------------|--------|-------------------------------|--------|
| ** **                                |   | **Amortized** |    | **Unrealized** |   | **Unrealized** |   | ** **                    |   |
| ** **                                |   | **Cost**      |    | **Gains**      |   | **Losses**     |   | **Fair                Value** |   |
| U.S.                agency securities     |   | $             | 11,751  |           | $      | -              |   | $                             | (126   | ) | $ | 11,625 |   |
| Mortgage                backed securities |   |          | 243,786 |           |   | -              |   |                          | (8,806 | ) |   | 234,980 |   |
| Mutual                funds               |   |          | 2,121   |           |   | -              |   |                          | (32    | ) |   | 2,089 |   |
| Total                                     |   | $             | 257,658 |           | $      | -              |   | $                             | (8,964 | ) | $ | 248,694 |   |

----

*Table          of Contents*

| **(Dollars                in Thousands)** | ** ** | **Securities                Available-for-Sale** | ** ** |
|-------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                | ** ** | **Maturing                5-10 years**           | ** ** | **Maturing                after 10 years** | ** ** |
| ** **                                | ** ** | **Amortized**                                    | ** ** | ** ** | ** ** | **Amortized** | ** ** | ** ** | ** ** |
| ** **                                | ** ** | **Cost**                                         | ** ** | **Fair                Value** | ** ** | **Cost** | ** ** | **Fair                Value** |   |
| U.S.                agency securities     |       | $                                                | -          |   | $ | - |   | $ | 12,515 |   | $ | 12,334 |   |
| Mortgage-backed                securities |       |                                             | 11,767     |   |   | 11,643 |   |   | 193,372 |   |   | 187,059 |   |
| Total                                     |       | $                                                | 11,767     |   | $ | 11,643 |   | $ | 205,887 |   | $ | 199,393 |   |

| **(Dollars                in Thousands)** | ** ** | **Less                than 12 months** | ** ** | **12                months or Longer** | ** ** | **Total**                     | ** ** |
|-------------------------------------------|------------|----------------------------------------|------------|----------------------------------------|------------|-------------------------------|------------|
| ** **                                | ** ** | ** **                             | ** ** | **Gross**                              | ** ** | ** **                    | ** ** | **Gross** | ** ** | ** ** | ** ** | **Gross** | ** ** |
| ** **                                | ** ** | ** **                             | ** ** | **Unrealized**                         | ** ** | ** **                    | ** ** | **Unrealized** | ** ** | ** ** | ** ** | **Unrealized** | ** ** |
| ** **                                | ** ** | ** **                             | ** ** | **Holding**                            | ** ** | ** **                    | ** ** | **Holding** | ** ** | ** ** | ** ** | **Holding** | ** ** |
|                                      |       | **Fair                Value**          |       | **Losses**                             |       | **Fair                Value** |       | **Losses** |   | **Fair                Value** |   | **Losses** |   |
|                                      |       |                                   |       |                                   |       |                          |       |   |   |   |   |   |   |
| U.S.                agency securities     |       | $                                      | -          |                                   | $          | -                             |       | $ | 12,334 |   | $ | (181 | ) | $ | 12,334 |   | $ | (181 | ) |
| Mortgage-backed                securities |       |                                   | -          |                                   |       | -                             |       |   | 198,702 |   |   | (6,437 | ) |   | 198,702 |   |   | (6,437 | ) |
| Mutual                funds               |       |                                   | 2,164      |                                   |       | (49                           | )          |   | - |   |   | - |   |   | 2,164 |   |   | (49 | ) |
| Total                                     |       | $                                      | 2,164      |                                   | $          | (49                           | )          | $ | 211,036 |   | $ | (6,618 | ) | $ | 213,200 |   | $ | (6,667 | ) |

| **(Dollars                in Thousands)** | ** ** | **Less                than 12 months** | ** ** | **12                months or Longer** | ** ** | **Total**                     | ** ** |
|-------------------------------------------|------------|----------------------------------------|------------|----------------------------------------|------------|-------------------------------|------------|
| ** **                                | ** ** | ** **                             | ** ** | **Gross**                              | ** ** | ** **                    | ** ** | **Gross** | ** ** | ** ** | ** ** | **Gross** | ** ** |
| ** **                                | ** ** | ** **                             | ** ** | **Unrealized**                         | ** ** | ** **                    | ** ** | **Unrealized** | ** ** | ** ** | ** ** | **Unrealized** | ** ** |
| ** **                                | ** ** | ** **                             | ** ** | **Holding**                            | ** ** | ** **                    | ** ** | **Holding** | ** ** | ** ** | ** ** | **Holding** | ** ** |
| ** **                                | ** ** | **Fair                Value**          |       | **Losses**                             |       | **Fair                Value** |       | **Losses** |   | **Fair                Value** |   | **Losses** |   |
|                                      |       |                                   |       |                                   |       |                          |       |   |   |   |   |   |   |
| U.S.                agency securities     |       | $                                      | -          |                                   | $          | -                             |       | $ | 11,625 |   | $ | (126 | ) | $ | 11,625 |   | $ | (126 | ) |
| Mortgage-backed                securities |       |                                   | 81,636     |                                   |       | (1,592                        | )          |   | 153,344 |   |   | (7,214 | ) |   | 234,980 |   |   | (8,806 | ) |
| Mutual                funds               |       |                                   | 2,089      |                                   |       | (32                           | )          |   | - |   |   | - |   |   | 2,089 |   |   | (32 | ) |
| Total                                     |       | $                                      | 83,725     |                                   | $          | (1,624                        | )          | $ | 164,969 |   | $ | (7,340 | ) | $ | 248,694 |   | $ | (8,964 | ) |

----

*Table          of Contents*

**Note      #**
**5      - Loans**

| **(Dollars                in Thousands)**             | ** ** | **As                of**             | ** ** |
|-------------------------------------------------------|------------|--------------------------------------|------------|
| ** **                                            | ** ** | **December                31, 2006** | ** ** | **December                31, 2005** |   |
|                                                  |       |                                 |       |   |   |
| Commercial                and industrial              |       | $                                    | 122,257    |   | $ | 54,757 |   |
| Real                estate construction and land:     |       |                                 |       |   |   |   |   |
| Single-family                luxury                   |       |                                 | 514,385    |   |   | 392,183 |   |
| Single-family                tract                    |       |                                 | 152,060    |   |   | 129,706 |   |
| Commercial                                            |       |                                 | 134,404    |   |   | 61,392 |   |
| Land                                                  |       |                                 | 112,418    |   |   | 91,035 |   |
| Real                estate mortgage:                  |       |                                 |       |   |   |   |   |
| Commercial                                            |       |                                 | 531,159    |   |   | 321,821 |   |
| Multi-family                residential               |       |                                 | 222,470    |   |   | 246,597 |   |
| All                other residential                  |       |                                 | 49,353     |   |   | 64,426 |   |
| Consumer                loans                         |       |                                 | 65,914     |   |   | 15,205 |   |
| All                other loans (including overdrafts) |       |                                 | 98         |   |   | 207 |   |
|                                                  |       |                                 | 1,904,518  |   |   | 1,377,329 |   |
| Unearned                premium (discount) on loans   |       |                                 | 1,696      |   |   | 484 |   |
| Deferred                loan fees                     |       |                                 | (3,970     | ) |   | (4,714 | ) |
| Loans,                Net of Unearned Income          |       | $                                    | 1,902,244  |   | $ | 1,373,099 |   |

| **(Dollars                in Thousands)**                    | ** ** | **At                December 31,** | ** ** |
|--------------------------------------------------------------|------------|------------------------------------|------------|
| ** **                                                   | ** ** | **2006**                           | ** ** | **2005** | ** ** | **2004** |   |
| Impaired                loans with a valuation allowance     |       | $                                  | -          |   | $ | - |   | $ | - |   |
| Impaired                loans without a valuation allowance  |       |                               | 16,715     |   |   | 964 |   |   | - |   |
| Total                impaired loans                          |       | $                                  | 16,715     |   | $ | 964 |   | $ | - |   |
|                                                         |       |                               |       |   |   |   |   |   |   |   |
| Valuation                allowance related to impaired loans |       | $                                  | -          |   | $ | - |   | $ | - |   |

| **(Dollars                in Thousands)**                        | ** ** | **Years                Ended December 31,** | ** ** |
|------------------------------------------------------------------|------------|---------------------------------------------|------------|
| ** **                                                       | ** ** | **2006**                                    | ** ** | **2005** | ** ** | **2004** |   |
| Average                recorded investment in impaired loans     |       | $                                           | 9,285      |   | $ | 3,472 |   | $ | 238 |   |
| Cash                receipts applied to reduce principal balance |       | $                                           | 1,093      |   | $ | 4,705 |   | $ | 671 |   |
| Interest                income recognized for cash payments      |       | $                                           | 185        |   | $ | 338 |   | $ | 21 |   |

----

*Table          of Contents*

**Note      #**
**6      - Loan Servicing Rights**

| **(Dollars                in Thousands)**          |   | **Years                Ended December 31,** |   |
|----------------------------------------------------|--------|---------------------------------------------|--------|
| ** **                                         |   | **2006**                                    |   | **2005** |   | **2004** |   |
| Servicing                rights, beginning of year |   | $                                           | 1,358  |   | $ | 1,705 |   | $ | 831 |   |
| Servicing                rights added in year, net |   |                                        | 318    |   |   | 324 |   |   | 1,143 |   |
| Servicing                rights amortized          |   |                                        | (743   | ) |   | (671 | ) |   | (269 | ) |
| Servicing                rights, end of year       |   | $                                           | 933    |   | $ | 1,358 |   | $ | 1,705 |   |

| **Assumption**                        | ** ** | **Range** |                          |
|---------------------------------------|------------|-----------|-------------------------------|
| Discount                Rate          |       |      | 8.25%                to 11.00 | % |
| Prepayment                Speed (CPR) |       |      | 8.89                to 43.90  |   |

| (**Dollars                in Thousands)**            | ** ** | **Years                Ended December 31,** | ** ** |
|------------------------------------------------------|------------|---------------------------------------------|------------|
| ** **                                           | ** ** | **2006**                                    | ** ** | **2005** | ** ** | **2004** |   |
| Mortgage                servicing rights capitalized |       | $                                           | 318        |   | $ | 324 |   | $ | 1,143 |   |
| Mortgage                servicing rights amortized   |       | $                                           | 743        |   | $ | 671 |   | $ | 269 |   |
| Valuation                allowances                  |       | $                                           | -          |   | $ | - |   | $ | - |   |

----

*Table          of Contents*

**Note      #**
**7      - Allowance for Credit Losses**

| **(Dollars                in Thousands)**                 | ** ** | **Years                ended December 31,** | ** ** |
|-----------------------------------------------------------|------------|---------------------------------------------|------------|
| ** **                                                | ** ** | **2006**                                    | ** ** | **2005** | ** ** | **2004** |   |
| **Allowance                for Loan Losses**              |       |                                        |       |   |   |   |   |
| Balance,                beginning of period               |       | $                                           | 13,762     |   | $ | 11,969 |   | $ | 7,358 |   |
| Additions                due to acquisitions              |       |                                        | 2,097      |   |   | - |   |   | - |   |
| Recoveries                on loans previously charged off |       |                                        | 71         |   |   | 67 |   |   | 122 |   |
| Loans                charged off                          |       |                                        | (366       | ) |   | (160 | ) |   | (392 | ) |
| Provision                charged to operating expense     |       |                                        | 4,125      |   |   | 1,886 |   |   | 4,881 |   |
| Balance,                end of period                     |       | $                                           | 19,689     |   | $ | 13,762 |   | $ | 11,969 |   |
|                                                      |       |                                        |       |   |   |   |   |   |   |   |
| **Reserve                for Unfunded Commitments**       |       |                                        |       |   |   |   |   |   |   |   |
| Balance,                beginning of period               |       | $                                           | 1,346      |   | $ | 1,032 |   | $ | 179 |   |
| Net                increase charged to other expenses     |       |                                        | 50         |   |   | 314 |   |   | 853 |   |
| Balance,                end of period                     |       | $                                           | 1,396      |   | $ | 1,346 |   | $ | 1,032 |   |
|                                                      |       |                                        |       |   |   |   |   |   |   |   |
| **Allowance                for Credit Losses**            |       |                                        |       |   |   |   |   |   |   |   |
| Allowance                for loan losses                  |       | $                                           | 19,689     |   | $ | 13,762 |   | $ | 11,969 |   |
| Reserve                for unfunded commitments           |       |                                        | 1,396      |   |   | 1,346 |   |   | 1,032 |   |
| Allowance                for credit losses                |       | $                                           | 21,085     |   | $ | 15,108 |   | $ | 13,001 |   |

**Note      #**
**8      - Related Party Transactions**

| **(Dollars                in thousands)**         | ** ** | **As                of December 31,** | ** ** |
|---------------------------------------------------|------------|---------------------------------------|------------|
| ** **                                        | ** ** | **2006**                              | ** ** | **2005** |   |
| Balance,                Beginning of year         |       | $                                     | 458        |   | $ | 347 |   |
| Credit                granted, including renewals |       |                                  | 684        |   |   | 356 |   |
| Repayments                                        |       |                                  | (652       | ) |   | (245 | ) |
| Balance,                End of year               |       | $                                     | 490        |   | $ | 458 |   |

----

*Table          of Contents*

**Note      #**
**9      - Premises and Equipment**

| **(Dollars                in Thousands)**                      | ** ** | **December                31,** | ** ** |
|----------------------------------------------------------------|------------|---------------------------------|------------|
| ** **                                                     | ** ** | **2006**                        | ** ** | **2005** |   |
| Buildings                                                      |       | $                               | 5,349      |   | $ | 4,971 |   |
| Furniture                and equipment                         |       |                            | 16,770     |   |   | 14,541 |   |
| Leasehold                improvements                          |       |                            | 9,359      |   |   | 7,990 |   |
| Bank                owned autos                                |       |                            | 797        |   |   | 786 |   |
|                                                           |       |                            | 32,275     |   |   | 28,288 |   |
| Less:                Accumulated depreciation and amortization |       |                            | (14,628    | ) |   | (10,998 | ) |
| Construction                in progress                        |       |                            | 860        |   |   | 617 |   |
| Land                                                           |       |                            | 1,895      |   |   | 1,285 |   |
| Total                                                          |       | $                               | 20,402     |   | $ | 19,192 |   |

| **(Dollars                in Thousands)**   | ** ** | ** ** | ** ** |
|---------------------------------------------|------------|------------|------------|
| ** **                                  | ** ** | ** ** | ** ** |
| **Year                Ending December 31,** |       |       |       |
| 2007                                        |       | $          | 3,649      |   |
| 2008                                        |       |       | 3,736      |   |
| 2009                                        |       |       | 3,798      |   |
| 2010                                        |       |       | 3,196      |   |
| 2011                                        |       |       | 3,021      |   |
| Thereafter                                  |       |       | 12,573     |   |
| Total                                       |       | $          | 29,973     |   |

**Note      #10 - Interest Bearing Deposit Liabilities**

----

*Table          of Contents*

| **(Dollars                in thousands)**        | ** ** | **As                of December 31,** | ** ** |
|--------------------------------------------------|------------|---------------------------------------|------------|
| ** **                                       | ** ** | **2006**                              | ** ** | **2005** |   |
|                                             |       |                                  |       |   |   |
| Money                market deposits             |       | $                                     | 562,622    |   | $ | 414,216 |   |
| Savings                and NOW deposits          |       |                                  | 70,741     |   |   | 45,223 |   |
| Time                deposits under $100,000      |       |                                  | 362,365    |   |   | 298,719 |   |
| Time                deposits of $100,000 or more |       |                                  | 517,768    |   |   | 364,190 |   |
| Total                                            |       | $                                     | 1,513,496  |   | $ | 1,122,348 |   |

| **(Dollars                in Thousands)** | ** ** | ** ** | ** ** |
|-------------------------------------------|------------|------------|------------|
| ** **                                | ** ** | ** ** | ** ** |
| **Maturity**                              |       |       |       |
| 2007                                      |       | $          | 873,259    |   |
| 2008                                      |       |       | 5,561      |   |
| 2009                                      |       |       | 1,313      |   |
| 2010                                      |       |       | -          |   |
|                                      |       | $          | 880,133    |   |

**Note      #**
**11      - Borrowings**

*Lines      of Credit*

*FHLB      Advances*

----

*Table          of Contents*

| **(Dollars                in Thousands)** |   | **Weighted** |   | ** **   |   | ** **  |   |
|-------------------------------------------|--------|--------------|--------|--------------|--------|-------------|--------|
| ** **                                |   | **Average**  |   | **Maturity** |   | **Putable** |   |
| **Maturity**                              |   | **Rate**     |   | **Amount**   |   | **Amount**  |   |
| 2007                                      |   |         | 5.12   | %            | $      | 66,000      |   | $ | - |   |
| 2008                                      |   |         | 4.83   | %            |   | 20,000      |   |   | 20,000 |   |
| 2009                                      |   |         | 4.80   | %            |   | 40,000      |   |   | 40,000 |   |
|                                      |   |         | 4.97   | %            | $      | 126,000     |   | $ | 60,000 |   |

*Subordinated      Debentures*

**Note      #**
**12      - Junior Subordinated Debentures**

| **(Dollars                in Thousands)**    |   |                             |                                |                        |   |                             |   | **As                of December 31, 2006** |   |
|----------------------------------------------|--------|----------------------------------|-------------------------------------|-----------------------------|--------|----------------------------------|--------|--------------------------------------------|--------|
|                                         |   | **Interest                Rate** |                                | **Due                Date** |   | **Common                Stock**  |   | **Effective                Interest Rate** |   | **Balance** |   |
| Vineyard                Statutory Trust I    |   |                             | 3-month                LIBOR + 3.60 | %                           |   | December                18, 2031 |   | $                                          | 372    |   |   | 8.96 | % | $ | 12,372 |   |
| Vineyard                Statutory Trust II   |   |                             | 3-month                LIBOR + 3.35 | %                           |   | December                26, 2032 |   |                                       | 155    |   |   | 8.72 | % |   | 5,155 |   |
| Vineyard                Statutory Trust III  |   |                             | 3-month                LIBOR + 3.05 | %                           |   | October                8, 2033   |   |                                       | 310    |   |   | 8.42 | % |   | 10,310 |   |
| Vineyard                Statutory Trust IV   |   |                             | 3-month                LIBOR + 2.85 | %                           |   | January                23, 2034  |   |                                       | 310    |   |   | 8.23 | % |   | 10,310 |   |
| Vineyard                Statutory Trust V    |   |                             | 3-month                LIBOR + 2.85 | %                           |   | April                23, 2034    |   |                                       | 310    |   |   | 8.22 | % |   | 10,310 |   |
| Vineyard                Statutory Trust VI   |   |                             | 3-month                LIBOR + 2.85 | %                           |   | July                23, 2034     |   |                                       | 372    |   |   | 8.22 | % |   | 12,372 |   |
| Vineyard                Statutory Trust VII  |   |                             | 3-month                LIBOR + 2.00 | %                           |   | December                16, 2034 |   |                                       | 310    |   |   | 7.37 | % |   | 10,310 |   |
| Vineyard                Statutory Trust VIII |   |                             | 3-month                LIBOR + 2.25 | %                           |   | May                23, 2035      |   |                                       | 310    |   |   | 7.62 | % |   | 10,310 |   |
| Vineyard                Statutory Trust IX   |   |                             | 3-month                LIBOR + 1.70 | %                           |   | November                23, 2035 |   |                                       | 464    |   |   | 7.07 | % |   | 15,464 |   |
| Vineyard                Statutory Trust XI   |   |                             | 3-month                LIBOR + 1.60 | %                           |   | June                23, 2036     |   |                                       | 557    |   |   | 6.97 | % |   | 18,557 |   |
|                                         |   |                             |                                |                        |   |                             |   | $                                          | 3,470  |   |   | 7.86 | % | $ | 115,470 |   |

*Consolidation*
*of      Variable Interest Entities”*

----

*Table          of Contents*

**Note      #13 - Income Taxes**

| **(Dollars                in Thousands)**    | ** ** | **Year                Ended December 31,** | ** ** |
|----------------------------------------------|------------|--------------------------------------------|------------|
| ** **                                   | ** ** | **2006**                                   | ** ** | **2005** | ** ** | **2004** |   |
| Federal                Income Tax            |       |                                       |       |   |   |   |   |   |   |   |
| Current                                      |       | $                                          | 13,831     |   | $ | 11,255 |   | $ | 6,889 |   |
| Deferred                / (credit)           |       |                                       | (3,359     | ) |   | (1,353 | ) |   | 25 |   |
| Total                Federal Income Tax      |       |                                       | 10,472     |   |   | 9,902 |   |   | 6,914 |   |
|                                         |       |                                       |       |   |   |   |   |   |   |   |
| State                Franchise Tax           |       |                                       |       |   |   |   |   |   |   |   |
| Current                                      |       |                                       | 4,787      |   |   | 3,656 |   |   | 2,748 |   |
| Deferred                / (credit)           |       |                                       | (1,434     | ) |   | (282 | ) |   | 7 |   |
| Total                State Franchise Tax     |       |                                       | 3,353      |   |   | 3,374 |   |   | 2,755 |   |
|                                         |       |                                       |       |   |   |   |   |   |   |   |
| Change                in valuation allowance |       |                                       | -          |   |   | - |   |   | - |   |
| Total                Income Taxes            |       | $                                          | 13,825     |   | $ | 13,276 |   | $ | 9,669 |   |

| **(Dollars                in Thousands)**      | ** ** | **2006**   | ** ** | **2005**                     | ** ** | **2004**   | ** ** |
|------------------------------------------------|------------|------------|------------|------------------------------|------------|------------|------------|
| ** **                                     | ** ** | ** ** | ** ** | **Percent**                  | ** ** | ** ** | ** ** | **Percent** | ** ** | ** ** | ** ** | **Percent** | ** ** |
| ** **                                     | ** ** | ** ** | ** ** | **of                Pretax** | ** ** | ** ** | ** ** | **of                Pretax** | ** ** | ** ** | ** ** | **of                Pretax** | ** ** |
| ** **                                     | ** ** | **Amount** | ** ** | **Income**                   | ** ** | **Amount** | ** ** | **Income** | ** ** | **Amount** | ** ** | **Income** |   |
| Federal                rate                    |       | $          | 11,749     |                         |       | 35.0       | %          | $ | 11,265 |   |   | 35.0 | % | $ | 8,280 |   |   | 35.0 | % |
| Changes                due to state income     |       |       |       |                         |       |       |       |   |   |   |   |   |   |   |   |   |   |   |   |
| tax,                net of federal tax benefit |       |       | 2,365      |                         |       | 7.0        | %          |   | 2,268 |   |   | 7.0 | % |   | 1,680 |   |   | 7.1 | % |
| Change                in valuation allowance   |       |       | -          |                         |       | 0.0        | %          |   | - |   |   | 0.0 | % |   | - |   |   | 0.0 | % |
| Other                                          |       |       | (289       | )                            |       | -0.8       | %          |   | (257 | ) |   | -0.8 | % |   | (291 | ) |   | -1.2 | % |
| Total                                          |       | $          | 13,825     |                         |       | 41.2       | %          | $ | 13,276 |   |   | 41.2 | % | $ | 9,669 |   |   | 40.9 | % |

----

*Table          of Contents*

| **(Dollars                in Thousands)**          | ** ** | **December                31,** | ** ** |
|----------------------------------------------------|------------|---------------------------------|------------|
| ** **                                         | ** ** | **2006**                        | ** ** | **2005** |   |
| Deferred                Tax Assets                 |       |                            |       |   |   |   |   |
| Reserve                for loan losses             |       | $                               | 7,382      |   | $ | 5,730 |   |
| Deferred                compensation               |       |                            | 1,979      |   |   | 1,468 |   |
| Non-deductible                reserves             |       |                            | 1,767      |   |   | 1,307 |   |
| Net                operating loss                  |       |                            | 1,030      |   |   | 838 |   |
| Deferred                income                     |       |                            | 1,946      |   |   | - |   |
| Fixed                assets                        |       |                            | 36         |   |   | (385 | ) |
| Other                assets and liabilities        |       |                            | 2,310      |   |   | 1,505 |   |
| Other                unrealized loss on securities |       |                            | 2,753      |   |   | 3,718 |   |
|                                               |       |                            | 19,203     |   |   | 14,181 |   |
| Deferred                Tax Liabilities            |       |                            |       |   |   |   |   |
| Other                assets and liabilities        |       |                            | (1,393     | ) |   | (829 | ) |
| Deferred                costs                      |       |                            | (2,335     | ) |   | (1,706 | ) |
|                                               |       |                            | (3,728     | ) |   | (2,535 | ) |
| Net                Deferred Tax Assets             |       | $                               | 15,475     |   | $ | 11,646 |   |

**Note      #1**
**4      - Commitments and Contingencies**

----

*Table          of Contents*

**Note      #15 - Share Based Compensation Plans**

***Incentive      Stock Plans***

***Restricted      Stock Plans***

**Note      #16**
**Share-Based      Compensation**

----

*Table          of Contents*

***Stock      Option Awards***

|                                                                     |       | **Year                ended**        | ** ** |
|--------------------------------------------------------------------------|------------|--------------------------------------|------------|
| ** **                                                               | ** ** | **December                31, 2006** |       |
| Dividend                yield                                            |       |                                 | 1.45       | % |
| Expected                life (in years)                                  |       |                                 | 3.25       |   |
| Expected                volatility                                       |       |                                 | 27.24      | % |
| Risk-free                rate                                            |       |                                 | 4.69       | % |
| Weighted                average grant date fair value of options granted |       | $                                    | 5.00       |   |

| **(Dollars                in Thousands)** | ** ** | ** **                            | ** ** |
|-------------------------------------------|------------|---------------------------------------|------------|
| ** **                                | ** ** | ** **                            | ** ** |
| **Year                ended**             | ** ** | ** **                            | ** ** |
| **December                31,**           | ** ** | **Compensation                Costs** |       |
| 2007                                      |       | $                                     | 83         |   |
| 2008                                      |       | $                                     | 83         |   |
| 2009                                      |       | $                                     | 69         |   |

----

*Table          of Contents*

| **(Dollars                in Thousands, except per share amounts)** |   |       |     |          |   | **Weighted-**   |   |          |                      |
|---------------------------------------------------------------------|--------|------------|----------|---------------|--------|-----------------|--------|---------------|---------------------------|
|                                                                |   |       |     | **Weighted-** |   | **Average**     |   |          |                      |
|                                                                |   |       |     | **Average**   |   | **Remaining**   |   | **Aggregate** |                      |
|                                                                |   |       |     | **Exercise**  |   | **Contractual** |   | **Intrinsic** |                      |
|                                                                |   | **Shares** |     | **Price**     |   | **Term**        |   | **Value**     |                      |
| Outstanding                at December 31, 2003                     |   |       | 786,454  |          | $      | 4.06            |   |          | 8.16                years |   |   |   |   |
| Granted                                                             |   |       | -        |          |   | -               |   |          |                      |   |   |   |   |
| Exercised                                                           |   |       | (214,329 | )             |   | 3.48            |   |          |                      |   |   |   |   |
| Forfeited                or expired                                 |   |       | -        |          |   | -               |   |          |                      |   |   |   |   |
| Outstanding                at December 31, 2004                     |   |       | 572,125  |          | $      | 4.25            |   |          | 7.22                years |   | $ | 16,111 |   |
| Exercisable                at December 31, 2004                     |   |       | 478,376  |          | $      | 4.23            |   |          | 7.24                years |   | $ | 13,481 |   |

| **(Dollars                in Thousands, except per share amounts)** |   |       |     |          |   | **Weighted-**   |   |          |                      |
|---------------------------------------------------------------------|--------|------------|----------|---------------|--------|-----------------|--------|---------------|---------------------------|
|                                                                |   |       |     | **Weighted-** |   | **Average**     |   |          |                      |
|                                                                |   |       |     | **Average**   |   | **Remaining**   |   | **Aggregate** |                      |
|                                                                |   |       |     | **Exercise**  |   | **Contractual** |   | **Intrinsic** |                      |
|                                                                |   | **Shares** |     | **Price**     |   | **Term**        |   | **Value**     |                      |
| Outstanding                at December 31, 2004                     |   |       | 572,125  |          | $      | 4.25            |   |          | 7.22                years |   |   |   |   |
| Granted                                                             |   |       | -        |          |   | -               |   |          |                      |   |   |   |   |
| Exercised                                                           |   |       | (144,970 | )             |   | 5.57            |   |          |                      |   |   |   |   |
| Forfeited                or expired                                 |   |       | -        |          |   | -               |   |          |                      |   |   |   |   |
| Outstanding                at December 31, 2005                     |   |       | 427,155  |          | $      | 3.84            |   |          | 6.15                years |   | $ | 11,371 |   |
| Exercisable                at December 31, 2005                     |   |       | 419,158  |          | $      | 3.84            |   |          | 6.17                years |   | $ | 11,158 |   |

| **(Dollars                in Thousands, except per share amounts)** |   |       |     |          |   | **Weighted-**   |   |          |                      |
|---------------------------------------------------------------------|--------|------------|----------|---------------|--------|-----------------|--------|---------------|---------------------------|
|                                                                |   |       |     | **Weighted-** |   | **Average**     |   |          |                      |
|                                                                |   |       |     | **Average**   |   | **Remaining**   |   | **Aggregate** |                      |
|                                                                |   |       |     | **Exercise**  |   | **Contractual** |   | **Intrinsic** |                      |
|                                                                |   | **Shares** |     | **Price**     |   | **Term**        |   | **Value**     |                      |
| Outstanding                at December 31, 2005                     |   |       | 427,155  |          | $      | 3.84            |   |          | 6.15                years |   |   |   |   |
| Granted                                                             |   |       | 50,000   |          |   | 22.11           |   |          | 3.83                years |   |   |   |   |
| Exercised                                                           |   |       | (107,078 | )             |   | 3.16            |   |          |                      |   |   |   |   |
| Forfeited                or expired                                 |   |       | -        |          |   | -               |   |          |                      |   |   |   |   |
| Outstanding                at December 31, 2006                     |   |       | 370,077  |          | $      | 6.50            |   |          | 5.03                years |   | $ | 6,114 |   |
| Exercisable                at December 31, 2006                     |   |       | 320,077  |          | $      | 4.06            |   |          | 5.21                years |   | $ | 6,069 |   |

----

*Table        of Contents*

|                                          |   |           |     | **Weighted-**                 |   |
|-----------------------------------------------|--------|----------------|----------|-------------------------------|--------|
|                                          |   |           |     | **Average**                   |   |
|                                          |   | **Non-vested** |     | **Grant-Date**                |   |
|                                          |   | **Shares**     |     | **Fair                Value** |   |
| Nonvested                at December 31, 2003 |   |           | 387,706  |                          | $      | 4.86 |   |
| Granted                                       |   |           | -        |                          |   | - |   |
| Vested                                        |   |           | (293,957 | )                             |   | 5.72 |   |
| Forfeited                or expired           |   |           | -        |                          |   | - |   |
| Nonvested                at December 31, 2004 |   |           | 93,749   |                          | $      | 2.15 |   |
| Granted                                       |   |           | -        |                          |   | - |   |
| Vested                                        |   |           | (85,752  | )                             |   | 2.20 |   |
| Forfeited                or expired           |   |           | -        |                          |   | - |   |
| Nonvested                at December 31, 2005 |   |           | 7,997    |                          | $      | 1.62 |   |
| Granted                                       |   |           | 50,000   |                          |   | 5.00 |   |
| Vested                                        |   |           | (7,997   | )                             |   | 1.62 |   |
| Forfeited                or expired           |   |           | -        |                          |   | - |   |
| Nonvested                at December 31, 2006 |   |           | 50,000   |                          | $      | 5.00 |   |

| **Options                Outstanding** | ** ** | **Options                Exercisable** | ** ** |
|----------------------------------------|------------|----------------------------------------|------------|
| ** **                             | ** ** | ** **                             | ** ** | **Weighted-** | ** ** | **Weighted-** | ** ** |   | ** ** | **Weighted-** | ** ** |
| ** **                             | ** ** |                                   | ** ** | **Average** | ** ** | **Average** | ** ** |   | ** ** | **Average** | ** ** |
| **Exercise**                           | ** ** | **Number**                             | ** ** | **Remaining** | ** ** | **Exercise** | ** ** | **Number** | ** ** | **Exercise** | ** ** |
| **Price**                              | ** ** | **Outstanding**                        | ** ** | **Contractual                Life** | ** ** | **Price** | ** ** | **Exercisable** | ** ** | **Price** |   |
|                                   |       |                                   |       |   |   |   |   |   |   |   |   |
| $1.36                - $2.27           |       |                                   | 66,151     |   |   | 4.13                Years |   | $ | 1.74 |   |   | 66,151 |   | $ | 1.74 |   |
| $2.95                - $4.08           |       |                                   | 227,676    |   |   | 5.37                Years |   | $ | 3.80 |   |   | 227,676 |   | $ | 3.80 |   |
| $7.62                - $13.33          |       |                                   | 26,250     |   |   | 6.56                Years |   | $ | 12.19 |   |   | 26,250 |   | $ | 12.19 |   |
| $22.11                                 |       |                                   | 50,000     |   |   | 3.83                Years |   | $ | 22.11 |   |   | - |   | $ | - |   |
|                                   |       |                                   | 370,077    |   |   | 5.03                Years |   | $ | 6.50 |   |   | 320,077 |   | $ | 4.06 |   |

***Restricted      Share Awards***

|                                            |       |                                 | ** ** | **Weighted-Average**          | ** ** |
|-------------------------------------------------|------------|--------------------------------------|------------|-------------------------------|------------|
| ** **                                      | ** ** | **Restricted                Shares** | ** ** | **Fair                Value** |       |
| Outstanding                at December 31, 2005 |       |                                 | 217,103    |                          | $          | 18.84 |   |
| Granted                                         |       |                                 | 102,087    |                          |       | 26.50 |   |
| Forfeited                                       |       |                                 | (56,887    | )                             |       | 25.10 |   |
| Vested                                          |       |                                 | (48,642    | )                             |       | 6.99 |   |
| Outstanding                at December 31, 2006 |       |                                 | 213,661    |                          | $          | 25.01 |   |

----

*Table          of Contents*

**Note      #17 - Employee Stock Ownership Plan**

**Note      #18 - Registration Statements**

----

*Table          of Contents*

**Note      #19 - Sale of Capital Stock in Private Placement**

**Note      #20 - Perpetual Preferred Stock**

----

*Table          of Contents*

**Note      #21 - Dividends and Stock Splits**

**Note      #22**
**      - Regulatory Matters**

----

*Table        of Contents*

| **(Dollars                in Thousands)**              |   | ** **                           |    | ** **                           |   | **Capital                Needed**    |   |
|--------------------------------------------------------|--------|--------------------------------------|---------|--------------------------------------|--------|--------------------------------------|--------|
| ** **                                             |   | ** **                           |    | ** **                           |   | ** **                           |   | ** ** |   | **To                Be Well** |   |
| ** **                                             |   | ** **                           |    | ** **                           |   | ** **                           |   | ** ** |   | **Capitalized                Under** |   |
| ** **                                             |   | ** **                           |    | ** **                           |   | **For                Capital**       |   | **Prompt                Corrective** |   |
| ** **                                             |   | **Actual                Regulatory** |    | **Adequacy                Purposes** |   | **Action                Provisions** |   |
| ** **                                             |   | **Capital**                          |    | ** **                           |   | **Capital**                          |   | ** ** |   | **Capital** |   | ** ** |   |
| ** **                                             |   | **Amount**                           |    | **Ratio**                            |   | **Amount**                           |   | **Ratio** |   | **Amount** |   | **Ratio** |   |
| **As                of December 31, 2006**             |   |                                 |    |                                 |   |                                 |   |   |   |   |   |   |   |
| Total                capital to risk-weighted assets:  |   |                                 |    |                                 |   |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Bank                                                   |   | $                                    | 266,813 |                                 |   | 12.17                                | %      | $ | 175,400 |   |   | 8.00 | % | $ | 219,200 |   |   | 10.00 | % |
| Consolidated                                           |   | $                                    | 227,164 |                                 |   | 10.34                                | %      | $ | 175,800 |   |   | 8.00 | % |   | N/A |   |   | N/A |   |
|                                                   |   |                                 |    |                                 |   |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Tier                1 capital to risk-weighted assets: |   |                                 |    |                                 |   |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Bank                                                   |   | $                                    | 245,728 |                                 |   | 11.20                                | %      | $ | 87,800 |   |   | 4.00 | % | $ | 131,600 |   |   | 6.00 | % |
| Consolidated                                           |   | $                                    | 137,386 |                                 |   | 6.25                                 | %      | $ | 87,900 |   |   | 4.00 | % |   | N/A |   |   | N/A |   |
|                                                   |   |                                 |    |                                 |   |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Tier                1 capital to average assets:       |   |                                 |    |                                 |   |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Bank                                                   |   | $                                    | 245,728 |                                 |   | 11.41                                | %      | $ | 86,100 |   |   | 4.00 | % | $ | 107,700 |   |   | 5.00 | % |
| Consolidated                                           |   | $                                    | 137,386 |                                 |   | 6.36                                 | %      | $ | 86,400 |   |   | 4.00 | % |   | N/A |   |   | N/A |   |
|                                                   |   |                                 |    |                                 |   |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **As                of December 31, 2005**             |   |                                 |    |                                 |   |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                capital to risk-weighted assets:  |   |                                 |    |                                 |   |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Bank                                                   |   | $                                    | 211,871 |                                 |   | 13.13                                | %      | $ | 129,100 |   |   | 8.00 | % | $ | 161,400 |   |   | 10.00 | % |
| Consolidated                                           |   | $                                    | 218,894 |                                 |   | 13.52                                | %      | $ | 129,500 |   |   | 8.00 | % |   | N/A |   |   | N/A |   |
|                                                   |   |                                 |    |                                 |   |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Tier                1 capital to risk-weighted assets: |   |                                 |    |                                 |   |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Bank                                                   |   | $                                    | 196,762 |                                 |   | 12.20                                | %      | $ | 64,500 |   |   | 4.00 | % | $ | 96,800 |   |   | 6.00 | % |
| Consolidated                                           |   | $                                    | 139,715 |                                 |   | 8.63                                 | %      | $ | 64,800 |   |   | 4.00 | % |   | N/A |   |   | N/A |   |
|                                                   |   |                                 |    |                                 |   |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Tier                1 capital to average assets:       |   |                                 |    |                                 |   |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Bank                                                   |   | $                                    | 196,762 |                                 |   | 11.70                                | %      | $ | 67,300 |   |   | 4.00 | % | $ | 84,100 |   |   | 5.00 | % |
| Consolidated                                           |   | $                                    | 139,715 |                                 |   | 8.26                                 | %      | $ | 67,700 |   |   | 4.00 | % |   | N/A |   |   | N/A |   |

**Note      #23 - Employee and Director Benefit Plans**

**A.**
**Deferred      Compensation Plan**

----

*Table          of Contents*

**B.**
**Defined      Contribution Plan**

**C.**
**Directors’      Deferred Compensation Plan**

**D.**
**Supplemental      Executive Retirement Plan**

**Note      # 24 - Stock Repurchase Program**

**Note      #25 - Restriction on Subsidiary Transactions**

----

*Table            of Contents*

**Note      #26 - Other Expenses**

| **(Dollars                in Thousands)**             |   | **2006** |   | **2005** |   | **2004** |   |
|-------------------------------------------------------|--------|----------|--------|----------|--------|----------|--------|
| Other                non-interest expense:            |   |     |   |     |   |     |   |   |   |   |
| Data                processing                        |   | $        | 1,064  |     | $      | 819      |   | $ | 740 |   |
| Marketing                                             |   |     | 1,253  |     |   | 1,103    |   |   | 855 |   |
| Professional                services                  |   |     | 2,766  |     |   | 1,342    |   |   | 1,309 |   |
| Office                supplies, postage and telephone |   |     | 2,097  |     |   | 1,577    |   |   | 1,423 |   |
| Insurance                and assessments              |   |     | 905    |     |   | 793      |   |   | 558 |   |
| Administrative                                        |   |     | 602    |     |   | 535      |   |   | 507 |   |
| Business                development                   |   |     | 2,216  |     |   | 1,785    |   |   | 1,103 |   |
| Other                                                 |   |     | 2,103  |     |   | 1,724    |   |   | 1,905 |   |
| Total                other non-interest expense       |   | $        | 13,006 |     | $      | 9,678    |   | $ | 8,400 |   |

**Note      #27 - Income per Common and Common Equivalent Share**

| **(Dollars                in Thousands)**                  | ** ** | **2006**   | ** ** | **2005**   | ** ** | **2004**   | ** ** |
|------------------------------------------------------------|------------|------------|------------|------------|------------|------------|------------|
| ** **                                                 | ** ** | **Income** | ** ** | **Shares** | ** ** | **Income** | ** ** | **Shares** | ** ** | **Income** | ** ** | **Shares** |   |
| Net                income, as reported                     |       | $          | 19,745     |       |       |       |       | $ | 18,911 |   |   |   |   | $ | 13,987 |   |   |   |   |
| Less:                Preferred stock dividends declared    |       |       | (900       | )          |       |       |       |   | (540 | ) |   |   |   |   | (702 | ) |   |   |   |
| Less:                Excess cost to redeem preferred stock |       |       | -          |       |       |       |       |   | - |   |   |   |   |   | (71 | ) |   |   |   |
| Shares                outstanding at year-end              |       |       |       |       |       | 10,418,436 |       |   |   |   |   | 9,427,690 |   |   |   |   |   | 9,581,941 |   |
| Unreleased                and unallocated ESOP shares      |       |       |       |       |       | (245,547   | )          |   |   |   |   | (268,487 | ) |   |   |   |   | (291,994 | ) |
| Impact                of weighting shares                  |       |       |       |       |       |       |       |   |   |   |   |   |   |   |   |   |   |   |   |
| issued                during the year                      |       |       |       |       |       | (502,471   | )          |   |   |   |   | 152,049 |   |   |   |   |   | (1,597,890 | ) |
| Used                in basic EPS                           |       |       | 18,845     |       |       | 9,670,418  |       |   | 18,371 |   |   | 9,311,252 |   |   | 13,214 |   |   | 7,692,057 |   |
| Add:                Anti-dilutive effects of Series B      |       |       |       |       |       |       |       |   |   |   |   |   |   |   |   |   |   |   |   |
| convertible                preferred stock dividends       |       |       | -          |       |       |       |       |   | - |   |   |   |   |   | 634 |   |   |   |   |
| Add:                Anti-dilutive effects of Series B      |       |       |       |       |       |       |       |   |   |   |   |   |   |   |   |   |   |   |   |
| convertible                preferred stock redemption      |       |       | -          |       |       |       |       |   | - |   |   |   |   |   | 20 |   |   |   |   |
| Dilutive                effect of outstanding              |       |       |       |       |       |       |       |   |   |   |   |   |   |   |   |   |   |   |   |
| stock                options and warrants                  |       |       |       |       |       | 326,702    |       |   |   |   |   | 433,222 |   |   |   |   |   | 1,237,703 |   |
| Used                in diluted EPS                         |       | $          | 18,845     |       |       | 9,997,120  |       | $ | 18,371 |   |   | 9,744,474 |   | $ | 13,868 |   |   | 8,929,760 |   |

----

*Table          of Contents*

**Note      #28 - Fair Value of Financial Instruments**

* *

| **(Dollars                in Thousands)**     | ** ** | **December                31, 2006** | ** ** | **December                31, 2005** | ** ** |
|-----------------------------------------------|------------|--------------------------------------|------------|--------------------------------------|------------|
| ** **                                    | ** ** | **Carrying**                         | ** ** | ** **                           | ** ** | **Carrying** | ** ** | ** ** | ** ** |
| ** **                                    | ** ** | **Amount**                           | ** ** | **Fair                Value**        | ** ** | **Amount** | ** ** | **Fair                Value** |   |
| Assets                                        |       |                                 |       |                                 |       |   |   |   |   |   |   |   |   |
| Cash                and cash equivalents      |       | $                                    | 35,129     |                                 | $          | 35,129 |   | $ | 28,630 |   | $ | 28,630 |   |
| Investment                securities          |       |                                 | 213,200    |                                 |       | 213,200 |   |   | 248,694 |   |   | 248,694 |   |
| FHLB                and other stock           |       |                                 | 15,693     |                                 |       | 15,693 |   |   | 19,155 |   |   | 19,155 |   |
| Loans,                net of unearned income  |       |                                 | 1,902,244  |                                 |       | 1,896,692 |   |   | 1,373,099 |   |   | 1,368,773 |   |
| Accrued                interest receivable    |       |                                 | 11,577     |                                 |       | 11,577 |   |   | 8,276 |   |   | 8,276 |   |
|                                          |       |                                 |       |                                 |       |   |   |   |   |   |   |   |   |
| Liabilities                                   |       |                                 |       |                                 |       |   |   |   |   |   |   |   |   |
| Non-interest                bearing deposits  |       | $                                    | 293,572    |                                 | $          | 211,511 |   | $ | 154,664 |   | $ | 107,909 |   |
| Interest                bearing deposits      |       |                                 | 1,513,496  |                                 |       | 1,496,526 |   |   | 1,122,348 |   |   | 1,103,199 |   |
| FHLB                advances                  |       |                                 | 126,000    |                                 |       | 125,827 |   |   | 214,000 |   |   | 214,792 |   |
| Other                borrowings               |       |                                 | 40,000     |                                 |       | 40,008 |   |   | 10,000 |   |   | 10,022 |   |
| Subordinated                debentures        |       |                                 | 5,000      |                                 |       | 5,000 |   |   | 5,000 |   |   | 5,075 |   |
| Junior                subordinated debentures |       |                                 | 115,470    |                                 |       | 116,968 |   |   | 96,913 |   |   | 98,350 |   |
| Accrued                interest payable       |       |                                 | 4,121      |                                 |       | 4,121 |   |   | 2,662 |   |   | 2,662 |   |
|                                          |       |                                 |       |                                 |       |   |   |   |   |   |   |   |   |

|                                            |   |   | **Notional ** | ** ** | ** ** | **Cost                to Cede** | ** ** | ** ** | **Notional** |   |       | **Cost                to Cede** |   |
|-------------------------------------------------|--------|--------|--------------------|------------|------------|---------------------------------|------------|------------|--------------|--------|------------|---------------------------------|--------|
|                                            |   |   | **Amount **   | ** ** | ** ** | **or                Assume**    | ** ** | ** ** | **Amount**   |   | ** ** | **or                Assume**    |   |
| Off-Balance                Sheet Instruments    |   |   |               |       |       |                            |       |       |         |   |       |                            |   |
| Commitments                to extend credit and |   |   |               |       |       |                            |       |       |         |   |       |                            |   |
| standby                letters of credit        |   | $      | 695,341            |       | $          | 6,953                           |       | $          | 600,295      |   | $          | 6,003                           |   |

| ·   | Cash                and Cash Equivalents |
|--------------------|------------------------------------------|

| ·   | Investment                Securities |
|--------------------|--------------------------------------|

----

*Table          of Contents*

| ·   | Loans |
|--------------------|-------|

| ·   | Deposits |
|--------------------|----------|

| ·   | FHLB                Advances |
|--------------------|------------------------------|

| ·   | Junior                Subordinated Debentures and Subordinated                Debt |
|--------------------|------------------------------------------------------------------------------------|

| ·   | Off-Balance                Sheet Instruments |
|--------------------|----------------------------------------------|

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*Table        of Contents*

**Note      #29 - Condensed Financial Information of Vineyard National Bancorp (Parent      Company)**

| **Condensed                Balance Sheets**                   |   |
|---------------------------------------------------------------|--------|
|                                                          |   |   |   |   |   |   |   |
| **(Dollars                in thousands)**                     |   | **December                31,** |   |
| ** **                                                    |   | **2006** |   | **2005** |   | **2004** |   |
| **Assets**                                                    |   |   |   |   |   |   |   |
| Cash                and cash equivalents                      |   | $ | 12,822 |   | $ | 12,716 |   | $ | 11,072 |   |
| Investment                in subsidiary                       |   |   | 285,748 |   |   | 191,961 |   |   | 145,524 |   |
| Prepaid                expenses                               |   |   | 2,236 |   |   | 2,360 |   |   | 2,287 |   |
| Other                assets                                   |   |   | 5,637 |   |   | 7,526 |   |   | 3,997 |   |
| **Total                Assets**                               |   | $ | 306,443 |   | $ | 214,563 |   | $ | 162,880 |   |
|                                                          |   |   |   |   |   |   |   |   |   |   |
| **Liabilities**                                               |   |   |   |   |   |   |   |   |   |   |
| Accrued                interest and other liabilities         |   | $ | 2,913 |   | $ | 2,665 |   | $ | 1,514 |   |
| Debt                payable                                   |   |   | 40,000 |   |   | 10,000 |   |   | - |   |
| Subordinated                debentures                        |   |   | 5,000 |   |   | 5,000 |   |   | 5,000 |   |
| Junior                subordinated debentures                 |   |   | 115,470 |   |   | 96,913 |   |   | 71,139 |   |
| **Total                Liabilities**                          |   |   | 163,383 |   |   | 114,578 |   |   | 77,653 |   |
|                                                          |   |   |   |   |   |   |   |   |   |   |
| **Stockholders'                Equity**                       |   |   |   |   |   |   |   |   |   |   |
| Preferred                stock                                |   |   | 9,665 |   |   | 9,665 |   |   | - |   |
| Common                stock                                   |   |   | 109,458 |   |   | 78,832 |   |   | 74,032 |   |
| Additional                paid-in capital                     |   |   | 2,149 |   |   | 4,443 |   |   | 3,772 |   |
| Retained                earnings                              |   |   | 52,105 |   |   | 36,454 |   |   | 20,513 |   |
| Unallocated                ESOP shares                        |   |   | (5,765 | ) |   | (6,304 | ) |   | (6,856 | ) |
| Accumulated                other comprehensive income         |   |   | (3,913 | ) |   | (5,245 | ) |   | (2,738 | ) |
| Treasury                stock                                 |   |   | (20,639 | ) |   | (17,860 | ) |   | (3,496 | ) |
| **Total                Stockholders' Equity**                 |   |   | 143,060 |   |   | 99,985 |   |   | 85,227 |   |
| **Total                Liabilities and Stockholders' Equity** |   | $ | 306,443 |   | $ | 214,563 |   | $ | 162,880 |   |

| **Condensed                Statements of Income**               |       |
|-----------------------------------------------------------------|------------|
|                                                            |       |   |   |   |   |   |   |
| **(Dollars                in thousands)**                       | ** ** | **For                the years ended December 31,** | ** ** |
| ** **                                                      | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** |   |
| **Income**                                                      |       |   |   |   |   |   |   |
| Other                income                                     |       | $ | 253 |   | $ | 159 |   | $ | 76 |   |
| **Total                Income**                                 |       |   | 253 |   |   | 159 |   |   | 76 |   |
|                                                            |       |   |   |   |   |   |   |   |   |   |
| **Expenses**                                                    |       |   |   |   |   |   |   |   |   |   |
| Interest                expense                                 |       |   | 10,013 |   |   | 5,709 |   |   | 3,304 |   |
| Salaries                and benefits                            |       |   | 2,441 |   |   | 2,111 |   |   | 706 |   |
| Other                                                           |       |   | 1,242 |   |   | 1,132 |   |   | 1,189 |   |
| Allocated                income tax benefit                     |       |   | (5,733 | ) |   | (3,760 | ) |   | (2,131 | ) |
| **Total                Expenses**                               |       |   | 7,963 |   |   | 5,192 |   |   | 3,068 |   |
|                                                            |       |   |   |   |   |   |   |   |   |   |
| **Loss                Before Equity in Undistributed**          |       |   |   |   |   |   |   |   |   |   |
| **Income                of Subsidiary**                         |       |   | (7,710 | ) |   | (5,033 | ) |   | (2,992 | ) |
|                                                            |       |   |   |   |   |   |   |   |   |   |
| **Equity                in Undistributed Income of Subsidiary** |       |   | 27,455 |   |   | 23,944 |   |   | 16,979 |   |
| **Net                Income**                                   |       | $ | 19,745 |   | $ | 18,911 |   | $ | 13,987 |   |

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*Table        of Contents*

| **Condensed                Statements of Cash Flows**                          |   |
|--------------------------------------------------------------------------------|--------|
|                                                                           |   |   |   |   |   |   |   |
| **(Dollars                in thousands)**                                      |   | **For                the years ended December 31,** |   |
| ** **                                                                     |   | **2006** |   | **2005** |   | **2004** |   |
| **Cash                Flows From Operating Activities**                        |   |   |   |   |   |   |   |
| Net                Income                                                      |   | $ | 19,745 |   | $ | 18,911 |   | $ | 13,987 |   |
| Adjustments                to Reconcile Net Income                             |   |   |   |   |   |   |   |   |   |   |
| to                Net Cash Used In Operating Activities                        |   |   |   |   |   |   |   |   |   |   |
| Restricted                stock amortization                                   |   |   | 962 |   |   | 814 |   |   | 324 |   |
| Share                based compensation expense                                |   |   | 27 |   |   | - |   |   | - |   |
| Increase                in other assets                                        |   |   | (564 | ) |   | (3,642 | ) |   | (2,227 | ) |
| Allocation                of ESOP shares                                       |   |   | 647 |   |   | 724 |   |   | 133 |   |
| Undistributed                earnings of subsidiary                            |   |   | (27,455 | ) |   | (23,944 | ) |   | (16,979 | ) |
| Increase                in other liabilities                                   |   |   | 215 |   |   | 951 |   |   | 507 |   |
| Net                Cash Used In Operating Activities                           |   |   | (6,423 | ) |   | (6,186 | ) |   | (4,255 | ) |
|                                                                           |   |   |   |   |   |   |   |   |   |   |
| **Cash                Flows From Investing Activities**                        |   |   |   |   |   |   |   |   |   |   |
| Investment                in subsidiary                                        |   |   | (80,000 | ) |   | (36,000 | ) |   | (49,000 | ) |
| Dividends                received from subsidiary                              |   |   | 15,000 |   |   | 11,000 |   |   | 4,000 |   |
| Net                Cash Used In Investing Activities                           |   |   | (65,000 | ) |   | (25,000 | ) |   | (45,000 | ) |
|                                                                           |   |   |   |   |   |   |   |   |   |   |
| **Cash                Flows From Financing Activities**                        |   |   |   |   |   |   |   |   |   |   |
| Proceeds                from issuance of junior subordinated debentures        |   |   | 18,000 |   |   | 25,000 |   |   | 32,000 |   |
| Proceeds                from issuance of common stock                          |   |   | 30,287 |   |   | - |   |   | 29,200 |   |
| Increase                in other borrowings                                    |   |   | 30,000 |   |   | 10,000 |   |   | - |   |
| Redemption                and conversion of preferred stock                    |   |   | - |   |   | - |   |   | (2,579 | ) |
| Purchase                of common stock to pre-fund ESOP                       |   |   | - |   |   | - |   |   | (6,997 | ) |
| Proceeds                from issuance of preferred stock                       |   |   | - |   |   | 9,665 |   |   | - |   |
| Purchase                of treasury stock                                      |   |   | (2,779 | ) |   | (14,364 | ) |   | (1,612 | ) |
| Tax                benefit from exercise of non-qualified                      |   |   |   |   |   |   |   |   |   |   |
| stock                options                                                   |   |   | 1,053 |   |   | 499 |   |   | 473 |   |
| Purchase                of restricted stock                                    |   |   | (1,310 | ) |   | - |   |   | - |   |
| Cash                dividends paid                                             |   |   | (4,061 | ) |   | (2,770 | ) |   | (1,640 | ) |
| Cash                paid in lieu of fractional shares                          |   |   | - |   |   | - |   |   | (15 | ) |
| Proceeds                from exercise of additional investment rights          |   |   | - |   |   | 3,530 |   |   | - |   |
| Proceeds                from exercise of warrants                              |   |   | - |   |   | 463 |   |   | 1,007 |   |
| Proceeds                from exercise of stock options                         |   |   | 339 |   |   | 807 |   |   | 745 |   |
| Net                Cash Provided By Financing Activities                       |   |   | 71,529 |   |   | 32,830 |   |   | 50,582 |   |
|                                                                           |   |   |   |   |   |   |   |   |   |   |
| **Net                Increase in Cash and Cash Equivalents**                   |   |   | 106 |   |   | 1,644 |   |   | 1,327 |   |
|                                                                           |   |   |   |   |   |   |   |   |   |   |
| **Cash                and Cash Equivalents**,                Beginning of Year |   |   | 12,716 |   |   | 11,072 |   |   | 9,745 |   |
|                                                                           |   |   |   |   |   |   |   |   |  |   |
| **Cash                and Cash Equivalents**,                End of Year       |   | $ | 12,822 |   | $ | 12,716 |   | $ | 11,072 |   |
|                                                                           |   |   |   |   |   |   |   |   |   |   |
| **Supplemental                Information**                                    |   |   |   |   |   |   |   |   |   |   |
| Conversion                of Series B preferred stock                          |   | $ | - |   | $ | - |   | $ | 26,491 |   |

**Note      #30 - Subsequent Events**

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*Table          of Contents*

**SELECTED      QUARTERLY FINANCIAL DATA**

|                                                                |   | **For                the Year Ended December 31, 2006** |   |
|---------------------------------------------------------------------|--------|---------------------------------------------------------|--------|
| **(Dollars                in thousands, except per share amounts)** |   | **First**                                               |   | **Second** |   | **Third** |   | **Fourth** |   |   |   |
|                                                                |   | **Quarter**                                             |   | **Quarter** |   | **Quarter** |   | **Quarter** |   | **Annual** |   |
|                                                                |   |                                                    |   |   |   |   |   |   |   |   |   |
| Interest                income                                      |   | $                                                       | 34,247 |   | $ | 38,294 |   | $ | 40,926 |   | $ | 44,853 |   | $ | 158,320 |   |
| Interest                expense                                     |   |                                                    | 15,496 |   |   | 17,948 |   |   | 19,733 |   |   | 22,053 |   |   | 75,230 |   |
| Net                interest income                                  |   |                                                    | 18,751 |   |   | 20,346 |   |   | 21,193 |   |   | 22,800 |   |   | 83,090 |   |
| Provision                for loan losses                            |   |                                                    | (1,200 | ) |   | (700 | ) |   | (1,175 | ) |   | (1,050 | ) |   | (4,125 | ) |
| Net                interest income after provision for              |   |                                                    |        |   |   |  |   |   |  |   |   |  |   |   |  |   |
| loan                losses                                          |   |                                                    | 17,551 |   |   | 19,646 |   |   | 20,018 |   |   | 21,750 |   |   | 78,965 |   |
| Non-interest                income                                  |   |                                                    | 931    |   |   | 1,797 |   |   | 1,360 |   |   | 1,534 |   |   | 5,622 |   |
| Non-interest                expense                                 |   |                                                    | 11,349 |   |   | 12,146 |   |   | 13,510 |   |   | 14,012 |   |   | 51,017 |   |
| Income                before income taxes                           |   |                                                    | 7,133  |   |   | 9,297 |   |   | 7,868 |   |   | 9,272 |   |   | 33,570 |   |
| Income                tax provision                                 |   |                                                    | 2,972  |   |   | 3,857 |   |   | 3,214 |   |   | 3,782 |   |   | 13,825 |   |
| Net                income                                           |   | $                                                       | 4,161  |   | $ | 5,440 |   | $ | 4,654 |   | $ | 5,490 |   | $ | 19,745 |   |
| Net                income per common share:                         |   |                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                               |   | $                                                       | 0.45   |   | $ | 0.54 |   | $ | 0.44 |   | $ | 0.52 |   | $ | 1.95 |   |
| Fully                diluted                                        |   | $                                                       | 0.43   |   | $ | 0.52 |   | $ | 0.42 |   | $ | 0.51 |   | $ | 1.89 |   |

|                                                                |   | **For                the Year Ended December 31, 2005** |   |
|---------------------------------------------------------------------|--------|---------------------------------------------------------|--------|
| **(Dollars                in thousands, except per share amounts)** |   | **First**                                               |   | **Second** |   | **Third** |   | **Fourth** |   |   |   |
|                                                                |   | **Quarter**                                             |   | **Quarter** |   | **Quarter** |   | **Quarter** |   | **Annual** |   |
|                                                                |   |                                                    |   |   |   |   |   |   |   |   |   |
| Interest                income                                      |   | $                                                       | 22,694 |   | $ | 26,058 |   | $ | 29,806 |   | $ | 32,301 |   | $ | 110,859 |   |
| Interest                expense                                     |   |                                                    | 7,692  |   |   | 9,950 |   |   | 12,170 |   |   | 13,533 |   | $ | 43,345 |   |
| Net                interest income                                  |   |                                                    | 15,002 |   |   | 16,108 |   |   | 17,636 |   |   | 18,768 |   |   | 67,514 |   |
| Provision                for loan losses                            |   |                                                    | -      |   |   | (705 | ) |   | (481 | ) |   | (700 | ) |   | (1,886 | ) |
| Net                interest income after provision for              |   |                                                    |        |   |   |  |   |   |  |   |   |  |   |   |  |   |
| loan                losses                                          |   |                                                    | 15,002 |   |   | 15,403 |   |   | 17,155 |   |   | 18,068 |   |   | 65,628 |   |
| Non-interest                income                                  |   |                                                    | 1,113  |   |   | 1,325 |   |   | 1,744 |   |   | 1,123 |   |   | 5,305 |   |
| Non-interest                expense                                 |   |                                                    | 8,521  |   |   | 8,551 |   |   | 9,826 |   |   | 11,848 |   |   | 38,746 |   |
| Income                before income taxes                           |   |                                                    | 7,594  |   |   | 8,177 |   |   | 9,073 |   |   | 7,343 |   |   | 32,187 |   |
| Income                tax provision                                 |   |                                                    | 3,177  |   |   | 3,419 |   |   | 3,794 |   |   | 2,886 |   |   | 13,276 |   |
| Net                income                                           |   | $                                                       | 4,417  |   | $ | 4,758 |   | $ | 5,279 |   | $ | 4,457 |   | $ | 18,911 |   |
| Net                income per common share:                         |   |                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                               |   | $                                                       | 0.47   |   | $ | 0.50 |   | $ | 0.54 |   | $ | 0.46 |   | $ | 1.97 |   |
| Fully                diluted                                        |   | $                                                       | 0.45   |   | $ | 0.48 |   | $ | 0.52 |   | $ | 0.44 |   | $ | 1.89 |   |

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

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*Table          of Contents*

**ITEM      9A.** **Controls      and Procedures**

**Management’s      Report on Internal Control Over Financial Reporting**

----

*Table          of Contents*

----

*Table        of Contents*

**Report      of Independent Registered Public Accounting Firm**

* *
* *

* *

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*Table        of Contents*

**ITEM      9B. Other Information**

**PART**
**      III**

**ITEM      10. Directors and Executive****Officer****s      and Corporate Governance**

**ITEM      11. Executive Compensation**

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

**ITEM      13. Certain Relationships and Related Transactions****,      and Director Independence**

**ITEM      14.****Principal Accountant Fees and Services**

**PART      IV**

**ITEM      15.****Exhibits      and Financial Statement Schedules**

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*Table          of Contents*

| EXHIBIT                NO. | DESCRIPTION |
|----------------------------|-------------|
| 2.1                        |        | Agreement                and Plan of Reorganization among Vineyard National Bancorp, Vineyard                Bank,                and Rancho Bank (16)* |
| 3.1                        |        | Articles                of Incorporation of Vineyard National Bancorp, as amended (6) |
| 3.2                        |        | Bylaws                of Vineyard National Bancorp                (1) |
| 4                          |        | Specimen                Common Stock Certificate of Vineyard National Bancorp (2) |
| 4.1                        |        | Registration                Rights Agreement (8) |
| 4.2                        |        | Form                of Warrant to Purchase Shares of Common Stock                (3) |
| 4.3                        |        | Debenture                Subscription Agreement, dated as of December 19, 2002, between Vineyard                National Bancorp and Vineyard Statutory Trust II (6) |
| 4.4                        |        | Additional                Investment Right (11) |
| 4.5                        |        | Registration                Rights Agreement (11) |
| 10.1                       |        | Vineyard                National Bancorp Nonqualified Deferred Compensation Plan (6)* |
| 10.2                       |        | Vineyard                National Bancorp Directors’ Deferred Compensation Plan                (6)* |
| 10.3                       |        | Vineyard                National Bancorp 1997 Incentive Stock Option Plan                (6)* |
| 10.4                       |        | Form                of Vineyard National Bancorp 1997 Incentive Stock Option Plan Notice                of                Stock Option Grant* |
| 10.5                       |        | Vineyard                National Bancorp 2006 Incentive Stock Plan (18)* |
| 10.6                       |        | Form                of 2006 Incentive Stock Plan Award Agreement * |
| 10.7                       |        | Vineyard                National Bancorp 2002 Restricted Share Plan                (6)* |
| 10.8                       |        | Form                of 2002 Restricted Share Award Agreement (13)* |
| 10.9                       |        | Vineyard                National Bancorp 2003 Restricted Share Plan (11)* |
| 10.10                      |        | Form                of 2003 Restricted Share Award Agreement (13)* |
| 10.11                      |        | Vineyard                National Bancorp 2004 Restricted Share Plan (9)* |
| 10.12                      |        | Form                of 2004 Restricted Share Award Agreement (13)* |
| 10.13                      |        | Vineyard                National Bancorp 2005 Restricted Share Plan (14)* |
| 10.14                      |        | Form                of 2005 Restricted Share Award Agreement (15)* |
| 10.15                      |        | Employment                Agreement among Vineyard National Bancorp, Vineyard Bank and Norman                A.                Morales (5)* |
| 10.16                      |        | Amendment                to Employment Agreement among Vineyard National Bancorp, Vineyard                Bank and                Norman A. Morales (17)* |
| 10.17                      |        | Form                of Change of Control Agreement (19)* |
| 10.18                      |        | Loan                Agreement between Vineyard National Bancorp and First Tennessee Bank                National Association (20)* |

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*Table          of Contents*

| 10.19 |   | Indenture,                dated as of December 19, 2002, between Vineyard National Bancorp,                as                Issuer, and Wilmington Trust Company, as Trustee, relating to the                floating                rate junior subordinated debt securities due 2033 (6)                                                          |
|-------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.20 |   | Amended                and Restated Declaration of Trust by and among State Street Bank                and Trust                Company of Connecticut, National Association, as Institutional Trustee                and                Vineyard National Bancorp, as Sponsor, dated as of December 18,                2001                (6)      |
| 10.21 |   | Guarantee                Agreement by and between Vineyard National Bancorp and State Street                Bank                and Trust Company of Connecticut and National Association, dated                as of                December 18, 2001                (6)                                                                            |
| 10.22 |   | Amended                and Restated Declaration of Trust, dated as of December 19, 2002,                of                Vineyard Statutory Trust II (6)                                                                                                                                                                                            |
| 10.23 |   | Guarantee                Agreement, dated as of December 19, 2002 (6)                                                                                                                                                                                                                                                                                |
| 10.24 |   | Indenture                dated as of December 19, 2002, between Vineyard National Bancorp,                as                Issuer, and State Street Bank and Trust Company of Connecticut, National                Association, as Trustee, relating to the floating rate junior subordinated                debentures due 2017                (6) |
| 10.25 |   | Indenture                dated as of September 25, 2003, between Vineyard National Bancorp,                as                Issuer, and Wilmington Trust Company, as Trustee, relating to the                floating                rate junior subordinated debentures due 2033 (4)                                                               |
| 10.26 |   | Amended                and Restated Declaration of Trust, dated as of September 25, 2003,                of                Vineyard Statutory Trust III (4)                                                                                                                                                                                          |
| 10.27 |   | Guarantee                Agreement, dated as of September 25, 2003 (4)                                                                                                                                                                                                                                                                               |
| 10.28 |   | Indenture                dated as of December 19, 2003, between Vineyard National Bancorp,                as                Issuer, and Wilmington Trust Company, as Trustee, relating to the                floating                rate junior subordinated debentures due 2034 (10)                                                               |
| 10.29 |   | Amended                and Restated Declaration of Trust, dated as of December 19, 2003,                of                Vineyard Statutory Trust IV                (10)                                                                                                                                                                            |
| 10.30 |   | Guarantee                Agreement, dated as of December 19, 2003 (10)                                                                                                                                                                                                                                                                               |
| 10.31 |   | Indenture                dated as of March 25, 2004, between Vineyard National Bancorp, as                Issuer,                and Wilmington Trust Company, as Trustee, relating to the floating                rate                junior subordinated debentures due 2034 (13)                                                                  |
| 10.32 |   | Amended                and Restated Declaration of Trust, dated as of March 25, 2004, of                Vineyard                Statutory Trust V (13)                                                                                                                                                                                               |
| 10.33 |   | Guarantee                Agreement, dated as of March 25, 2004 (13)                                                                                                                                                                                                                                                                                  |
| 10.34 |   | Indenture                dated as of May 18, 2004, between Vineyard National Bancorp, as Issuer,                and Wilmington Trust Company, as Trustee, relating to the floating                rate                junior subordinated debentures due 2034 (13)                                                                                   |
| 10.35 |   | Amended                and Restated Declaration of Trust, dated as of May 18, 2004, of Vineyard                Statutory Trust VI (13)                                                                                                                                                                                                               |
| 10.36 |   | Guarantee                Agreement, dated as of May 18, 2004 (13)                                                                                                                                                                                                                                                                                    |
| 10.37 |   | Indenture                dated as of December 22, 2004, between Vineyard National Bancorp,                as                Issuer, and Wilmington Trust Company, as Trustee, relating to the                floating                rate junior subordinated debentures due 2034 (13)                                                               |
| 10.38 |   | Amended                and Restated Declaration of Trust, dated as of December 22, 2004,                of                Vineyard Statutory Trust VII                (13)                                                                                                                                                                           |
| 10.39 |   | Guarantee                Agreement, dated as of December 22, 2004 (13)                                                                                                                                                                                                                                                                               |
| 10.40 |   | Indenture                dated as of April 15, 2005, between Vineyard National Bancorp, as                Issuer,                and Wilmington Trust Company, as Trustee, relating to the floating                rate                junior subordinated debentures due 2035                (21)                                                   |
| 10.41 |   | Amended                and Restated Declaration of Trust, dated as of April 15, 2005, of                Vineyard                Statutory Trust VIII (21)                                                                                                                                                                                            |
| 10.42 |   | Guarantee                Agreement, dated as of April 15, 2005 (21)                                                                                                                                                                                                                                                                                  |
| 10.43 |   | Indenture                dated as of August 19, 2005, between Vineyard National Bancorp, as                Issuer,                and Wilmington Trust Company, as Trustee, relating to the floating                rate                junior subordinated debentures due 2035                (21)                                                  |
| 10.44 |   | Amended                and Restated Declaration of Trust, dated as of August 19, 2005, of                Vineyard Statutory Trust IX (21)                                                                                                                                                                                                            |
| 10.45 |   | Guarantee                Agreement, dated as of August 19, 2005 (21)                                                                                                                                                                                                                                                                                 |
| 10.46 |   | Indenture                dated as of May 16, 2006, between Vineyard National Bancorp, as Issuer,                and Wilmington Trust Company, as Trustee, relating to the floating                rate                junior subordinated debentures due 2036                                                                                        |
| 10.47 |   | Amended                and Restated Declaration of Trust, dated as of May 16, 2006, of Vineyard                Statutory Trust XI                                                                                                                                                                                                               |

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*Table          of Contents*

| 10.48 |   | Guarantee                Agreement, dated as of May 16, 2006                                                                                                                               |
|-------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 11    |   | Statement                regarding computation of per share earnings. See Note 26 to the                Consolidated Financial Statements included in Item 8                hereof         |
| 14    |   | Code                of Ethics (10)                                                                                                                                                         |
| 21    |   | Subsidiary                of the Registrant (See “Business” in Item 1 hereof for the required                information)                                                      |
| 23.1  |   | Consent                of KPMG LLP                                                                                                                                                         |
| 23.2  |   | Consent                of Vavrinek, Trine, Day and Company LLP                                                                                                                             |
| 31.1  |   | Certification                of Chief Executive Officer under Section 302 of the Sarbanes-Oxley                Act of                2002                                                  |
| 31.2  |   | Certification                of Chief Financial Officer under Section 302 of the Sarbanes-Oxley                Act of                2002                                                  |
| 32    |   | Certification                of Chief Executive Officer and Chief Financial Officer pursuant to                Section                906 of the Sarbanes-Oxley Act 0f                2002 |

| (1) | Incorporated                by reference from the Registrant’s Registration Statement on Form S-8                (File No. 333-18217) filed by the Registrant with the SEC on December                19,                1996. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Incorporated                by reference from the Registrant’s Annual Report on Form 10-K for the year                ended December 31, 1988 filed by the Registrant with the                SEC. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | Incorporated                by reference from the Registrant’s Proxy Statement for a special meeting                held on December 18, 2002 filed by the Registrant with the SEC on                November                25, 2002. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4) | Incorporated                by reference from the Registrant’s Quarterly Report on Form 10-Q for the                quarter ended September 30, 2003 filed by the Registrant with the                SEC on                November 7, 2003. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (5) | Incorporated                by reference from the Registrant’s Annual Report on Form 10-K for the year                ended December 31, 2000 filed by the Registrant with the SEC on March                30,                2001. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (6) | Incorporated                by reference from the Registrant’s Annual Report on Form 10-K for the year                ended December 31, 2002 filed by the Registrant with the SEC on March                28,                2003. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (7) | Incorporated                by reference from the Registrant’s Registration Statement on Form S-2                (File No. 333-107493) filed by the Registrant with the SEC on July                30,                2003. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (8) | Incorporated                by reference from the Registrant’s Form 8-K filed with the SEC on June 21,                2004. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------|

| (9) | Incorporated                by reference from the Registrant’s Proxy Statement for an annual meeting                held on May 22, 2003 filed with the SEC on April 14,                2003. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (10) | Incorporated                by reference from the Registrant’s Annual Report on Form 10-K for the year                ended December 31, 2003 filed by the Registrant with the SEC on March                22,                2004. |
|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (11) | Incorporated                by reference from the Registrant’s Quarterly Report on Form 10-Q for the                quarter ended September 30, 2004 filed by the Registrant with the                SEC on                November 10, 2004. |
|------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (12) | Incorporated                by reference from the Registrant’s Form 8-K filed with the SEC on December                10, 2004. |
|------|---------------------------------------------------------------------------------------------------------------------------------------|

| (13) | Incorporated                by reference from the Registrant’s Annual Report on Form 10-K for the year                ended December 31, 2004 filed by the Registrant with the SEC on March                10,                2005. |
|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (14) | Incorporated                by reference from the Registrant’s Proxy Statement for an annual meeting                held on May 25, 2005 filed with the SEC on April 18,                2005. |
|------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (15) | Incorporated                by reference from the Registrant’s Quarterly Report on Form 10-Q for the                quarter ended September 30, 2005 filed by the Registrant with the                SEC on                November 4, 2005. |
|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (16) | Incorporated                by reference from the Registrant’s Form 8-K filed with the SEC on April                20, 2006. |
|------|------------------------------------------------------------------------------------------------------------------------------------|

| (18)          | Incorporated                by reference from the Registrant’s Proxy Statement for an annual meeting                held on May 24, 2006 filed with the SEC on April 17,                2006. |
|------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (19)                       | Incorporated                by reference from the Registrant’s Form 8-K filed with the Commission on                April 17, 2006. |
|--------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------|

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*Table          of Contents*

| (20)                       | Incorporated                by reference from the Registrant’s Quarterly Report on Form 10-Q for the                quarter ended June 30, 2006 filed by the Registrant with the SEC                on August                4, 2006 |
|--------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (21)                       | Incorporated                by reference from the Registrant’s Annual Report on Form 10-K for the year                ended December 31, 2005 filed by the Registrant with the SEC on March                14,                2006. |
|--------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| * | Management                contract or compensatory plan or                arrangement. |
|---|----------------------------------------------------------------------------------------|

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*Table          of Contents*

**SIGNATURES**

|   | **VINEYARD                NATIONAL BANCORP** |
|--------|----------------------------------------------|
|   |                                         |
|   | By:                                          | */s/                Norman A. Morales* |
|   |                                         | Norman                A. Morales |
|   |                                         | President                and Chief Executive Officer |
|   |                                         |
|   |                                         |
|   | By:                                          | */s/                Gordon Fong* |
|   |                                         | Gordon                Fong |
|   |                                         | Executive                Vice President and Chief Financial Officer |
|   |                                         |   |

| **NAME**                                  |   | **TITLE**                                                                                                                                         | **DATE**                                                      |
|-------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------|
|                                      |   |                                                                                                                                              |                                                          |
| */s/                Norman A. Morales*    |   |                                                                                                                                              |  March                7,                2007             |
| Norman                A. Morales          |   | President,                Chief Executive Officer and Director (Principal Executive                Officer)                                       |
|                                      |   |                                                                                                                                              |                                                          |
| */s/                James G. LeSieur III* |   |                                                                                                                                              |  March                7,                2007             |
| James                G. LeSieur III       |   | Chairman                of the Board                                                                                                              |
|                                      |   |                                                                                                                                              |                                                          |
|                                      |   |                                                                                                                                              |                                                          |
| */s/                Charles L. Keagle*    |   |                                                                                                                                              |  March                7,                2007             |
| Charles                L. Keagle          |   | Director                                                                                                                                          |
|                                      |   |                                                                                                                                              |                                                          |
|                                      |   |                                                                                                                                              |                                                          |
| */s/                Frank S. Alvarez*     |   |                                                                                                                                              |                                                          |
| Frank                S. Alvarez           |   | Director                                                                                                                                          | March                7,                2007                   |
|                                      |   |                                                                                                                                              |                                                          |
|                                      |   |                                                                                                                                              |                                                          |
| */s/                Joel H. Ravitz*       |   |                                                                                                                                              |
| Joel                H. Ravitz             |   | Director                                                                                                                                          | March                7,                2007                   |
|                                      |   |                                                                                                                                              |                                                          |
|                                      |   |                                                                                                                                              |                                                          |
| */s/Robb                D. Quincey*       |   |                                                                                                                                              |                                                          |
| Robb                D. Quincey            |   | Director                                                                                                                                          | March                7,                2007                   |
|                                      |   |                                                                                                                                              |    March                7,                2007 |
|                                      |   |                                                                                                                                              |
| */s/                David A. Buxbaum*     |   |                                                                                                                                              |
| David                A. Buxbaum           |   | Director                                                                                                                                          |
|                                      |   |                                                                                                                                              |                                                          |
|                                      |   |                                                                                                                                              |
| */s/                Gordon Fong*          |   |                                                                                                                                              |
| Gordon                Fong                |   | Executive                Vice President and Chief Financial Officer (Principal Financial Officer                and Principal Accounting Officer) | March                7,                2007                   |

----