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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549





FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTER ENDED JUNE 30, 2003

[   ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the transition period from        to

Commission File No. 0-20862

VINEYARD NATIONAL BANCORP

(Exact Name of Registrant as Specified in its Charter)


|                                         |  |                       
|---------------------------------------- |  | ----------------------
|California                               |  | 33-0309110            
|(State or other jurisdiction of          |  | (IRS employer         
|incorporation or organization)           |  | identification number)
|                                         |  |                       
|9590 Foothill Boulevard                  |  | 91730                 
|Rancho Cucamonga, California             |  | (Zip Code)            
|(Address of principal executive offices) |  |                       

Registrants telephone number, including area code: (909) 987-0177

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [x] No [   ]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [   ] No [x]

APPLICABLE TO CORPORATE ISSUER

Indicate the number of shares outstanding of the issuers common stock on the
latest practicable date: 2,966,790 shares of common stock as of
July 24, 2003.

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TABLE OF CONTENTS



|                          |                                                                                               |                                                                                                            |  |  |  |  |  | 
|------------------------- | --------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------- |  |  |  |  |  | 
|PART I                   
|                          | ITEM I. FINANCIAL STATEMENTS                                                                 
|                          |                                                                                               | CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION AT JUNE 30, 2003 AND DECEMBER 31, 2002                     
|                          |                                                                                               | CONSOLIDATED STATEMENTS OF INCOME FOR THE SIX AND THREE MONTHS ENDED JUNE 30, 2003 AND 2002               
|                          |                                                                                               | CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY FOR THE SIX MONTHS ENDED JUNE 30, 2003 AND 2002
|                          |                                                                                               | CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2003 AND 2002                     
|                          |                                                                                               | Notes to Consolidated Financial Statements                                                                
|                          | ITEM 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|                          | ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                           
|                          | ITEM 4. CONTROLS AND PROCEDURES                                                              
|PART II OTHER INFORMATION
|                          | ITEM 1. LEGAL PROCEEDINGS                                                                    
|                          | ITEM 2. CHANGES IN SECURITIES                                                                
|                          | ITEM 3. DEFAULTS UPON SENIOR SECURITIES                                                      
|                          | ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                  
|                          | ITEM 5. OTHER INFORMATION                                                                    
|                          | ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K                                                     
|SIGNATURES               
|EXHIBIT 31.1             
|EXHIBIT 31.2             
|EXHIBIT 32               



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VINEYARD NATIONAL BANCORP
FORM 10-Q INDEX
FOR THE PERIODS ENDED JUNE 30, 2003 AND 2002,
AND DECEMBER 31, 2002

|             |  |                                                                                                                                |  |   
|------------ |  | ------------------------------------------------------------------------------------------------------------------------------ |  | --
|             |  | PART I  FINANCIAL INFORMATION                                                                                                 |  |   
|ITEM 1.      |  | Financial Statements                                                                                                           |  |   
|             |  | Consolidated Statements of Financial Condition
at June 30, 2003 and December 31, 2002                                          |  | 3 
|             |  | Consolidated Statements of Income
for the Six Months and Three Months Ended June 30, 2003 and 2002                             |  | 4 
|             |  | Consolidated Statements of Changes in Stockholders Equity
for the Six Months Ended June 30, 2003 and 2002                     |  | 5 
|             |  | Consolidated Statements of Cash Flows
for the Six Months Ended June 30, 2003 and 2002                                          |  | 6 
|             |  | Notes to Consolidated Financial Statements                                                                                     |  | 7 
|ITEM 2.      |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                          |  | 12
|ITEM 3.      |  | Quantitative and Qualitative Disclosures About Market Risk                                                                     |  | 27
|ITEM 4.      |  | Controls and Procedures                                                                                                        |  | 30
|             |  | PART II  OTHER INFORMATION                                                                                                    |  |   
|ITEM 1.      |  | Legal Proceedings                                                                                                              |  | 31
|ITEM 2.      |  | Changes in Securities                                                                                                          |  | 31
|ITEM 3.      |  | Defaults upon Senior Securities                                                                                                |  | 31
|ITEM 4.      |  | Submission of Matters to a Vote of Security Holders                                                                            |  | 31
|ITEM 5.      |  | Other Information                                                                                                              |  | 32
|ITEM 6.      |  | Exhibits and Reports on Form 8-K                                                                                               |  | 32
|Signatures   |  |                                                                                                                                |  | 33
|Exhibits     |  |                                                                                                                                |  |   
|Exhibit 31.1 |  | Certification of Chief Executive Officer under Section 302 of
the Sarbanes-Oxley Act of 2002                                   |  | 34
|Exhibit 31.2 |  | Certification of Chief Financial Officer under Section 302 of
the Sarbanes-Oxley Act of 2002                                   |  | 35
|Exhibit 32   |  | Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the
Sarbanes-Oxley Act Of 2002 |  | 36



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

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PART I




ITEM I. FINANCIAL STATEMENTS




VINEYARD NATIONAL BANCORP
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
AT JUNE 30, 2003 AND DECEMBER 31, 2002
(Unaudited except for December 31, 2002)

|                                                                                                                                    |          |                                               |                                          |                                                                                                                                         |       |                      |         |              |       |         |         | 
|----------------------------------------------------------------------------------------------------------------------------------- | -------- | --------------------------------------------- | ---------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------- | ----- | -------------------- | ------- | ------------ | ----- | ------- | ------- | 
|                                                                                                                                    |          |                                               |                                          |                                                                                                                                         |       | Dollars in Thousands
|                                                                                                                                   
|                                                                                                                                    |          |                                               |                                          |                                                                                                                                         |       | June 30,             |         | December 31,
|                                                                                                                                    |          |                                               |                                          |                                                                                                                                         |       | 2003                 |         | 2002        
|                                                                                                                                    |          |                                               |                                          |                                                                                                                                         |       |                      |         |             
|                                                                                                                                    |          |                                               |                                          | Assets                                                                                                                                  |       |                      |         |              |       |         |         | 
|Cash and due from banks                                                                                                             |          | $                                             | 13,226                                   |                                                                                                                                         |       | $                    | 17,533  |             
|Federal funds sold                                                                                                                  |          |                                               | 11,000                                   |                                                                                                                                         |       |                      | 15,829  |             
|                                                                                                                                    |          |                                               |                                          |                                                                                                                                         |       |                      |         |             
|                                                                                                                                    |          |                                               |                                          | Total Cash and Cash Equivalents                                                                                                         |       |                      | 24,226  |              |       |         | 33,362  | 
|                                                                                                                                    |          |                                               |                                          |                                                                                                                                         |       |                      |         |             
|Investment securities, available-for-sale                                                                                           |          |                                               | 179,054                                  |                                                                                                                                         |       |                      | 87,553  |             
|Loans, net of unearned income                                                                                                       |          |                                               | 390,577                                  |                                                                                                                                         |       |                      | 251,139 |             
|Loans held for sale                                                                                                                 |          |                                               | 1,135                                    |                                                                                                                                         |       |                      | 2,112   |             
|                                                                                                                                    |          |                                               | Less: Allowance for possible loan losses |                                                                                                                                         |       | (4,766               | )       |              |       | (3,003  | )      
|                                                                                                                                    |          |                                               |                                          |                                                                                                                                         |       |                      |         |             
|                                                                                                                                    |          |                                               |                                          | Net Loans                                                                                                                               |       |                      | 386,946 |              |       |         | 250,248 | 
|Bank premises and equipment, net                                                                                                    |          |                                               | 6,385                                    |                                                                                                                                         |       |                      | 5,600   |             
|Accrued interest                                                                                                                    |          |                                               | 2,322                                    |                                                                                                                                         |       |                      | 1,487   |             
|Federal Home Loan Bank and other stock, at cost                                                                                     |          |                                               | 6,520                                    |                                                                                                                                         |       |                      | 2,270   |             
|Deferred income tax asset                                                                                                           |          |                                               | 2,433                                    |                                                                                                                                         |       |                      | 2,328   |             
|Other assets                                                                                                                        |          |                                               | 3,408                                    |                                                                                                                                         |       |                      | 2,454   |             
|                                                                                                                                    |          |                                               |                                          |                                                                                                                                         |       |                      |         |             
|                                                                                                                                    |          |                                               |                                          | Total Assets                                                                                                                            |       | $                    | 611,294 |              |       | $       | 385,302 | 
|                                                                                                                                    |          |                                               |                                          |                                                                                                                                         |       |                      |         |             
|                                                                                                                                    |          |                                               |                                          | Liabilities and Stockholders Equity                                                                                                    |       |                      |         |              |       |         |         | 
|Liabilities                                                                                                                         |          |                                               |                                          |                                                                                                                                         |       |                      |         |             
|                                                                                                                                    | Deposits |                                               |                                          |                                                                                                                                         |       |                      |         |              |      
|                                                                                                                                    |          |                                               | Non-interest bearing                     |                                                                                                                                         | $     | 78,496               |         |              | $     | 61,906  |        
|                                                                                                                                    |          |                                               | Interest-bearing                         |                                                                                                                                         |       | 355,257              |         |              |       | 225,606 |        
|                                                                                                                                    |          |                                               |                                          |                                                                                                                                         |       |                      |         |             
|                                                                                                                                    |          |                                               |                                          | Total Deposits                                                                                                                          |       |                      | 433,753 |              |       |         | 287,512 | 
|Federal Home Loan Bank advances                                                                                                     |          |                                               | 125,000                                  |                                                                                                                                         |       |                      | 45,000  |             
|Other borrowings                                                                                                                    |          |                                               | 5,000                                    |                                                                                                                                         |       |                      | 5,000   |             
|Subordinated debentures                                                                                                             |          |                                               | 5,000                                    |                                                                                                                                         |       |                      | 5,000   |             
|Company obligated preferred securities of subsidiary trust holding
floating rate junior subordinated deferrable interest debentures |          |                                               | 17,000                                   |                                                                                                                                         |       |                      | 17,000  |             
|Accrued interest and other liabilities                                                                                              |          |                                               | 4,017                                    |                                                                                                                                         |       |                      | 5,832   |             
|                                                                                                                                    |          |                                               |                                          |                                                                                                                                         |       |                      |         |             
|                                                                                                                                    |          |                                               |                                          | Total Liabilities                                                                                                                       |       |                      | 589,770 |              |       |         | 365,344 | 
|Stockholders Equity                                                                                                                |          |                                               |                                          |                                                                                                                                         |       |                      |         |             
|                                                                                                                                    |          | Contributed capital                           |                                          |                                                                                                                                         |       |                      |         |              |       |        
|                                                                                                                                    |          |                                               |                                          | Perpetual preferred stock  no par value, authorized 10,000,000
shares; issued and outstanding, 50 shares in 2003 and 2002              |       |                      | 2,450   |              |       |         | 2,450   | 
|                                                                                                                                    |          |                                               |                                          | Common stock- no par value, authorized 25,000,000 shares;
issued and outstanding 2,800,578 and 2,849,680 in 2003
and 2002, respectively |       |                      | 6,796   |              |       |         | 6,052   | 
|                                                                                                                                    |          | Additional paid-in capital                    |                                          |                                                                                                                                         | 3,307 |                      |         |              | 3,307 |        
|                                                                                                                                    |          | Stock dividends to be distributed             |                                          |                                                                                                                                         |      |                      |         |              | 2,026 |        
|                                                                                                                                    |          | Retained earnings                             |                                          |                                                                                                                                         | 9,010 |                      |         |              | 6,014 |        
|                                                                                                                                    |          | Accumulated other comprehensive (loss) income |                                          |                                                                                                                                         | (39   | )                    |         |              | 109   |        
|                                                                                                                                    |          |                                               |                                          |                                                                                                                                         |       |                      |         |             
|                                                                                                                                    |          |                                               |                                          | Total Stockholders Equity                                                                                                              |       |                      | 21,524  |              |       |         | 19,958  | 
|                                                                                                                                    |          |                                               |                                          |                                                                                                                                         |       |                      |         |             
|                                                                                                                                    |          |                                               |                                          | Total Liabilities and Stockholders Equity                                                                                              |       | $                    | 611,294 |              |       | $       | 385,302 | 
|                                                                                                                                    |          |                                               |                                          |                                                                                                                                         |       |                      |         |             

See accompanying notes to financial statements.

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VINEYARD NATIONAL BANCORP
CONSOLIDATED STATEMENTS OF INCOME
FOR THE SIX AND THREE MONTHS ENDED JUNE 30, 2003 AND 2002
(Unaudited)

|                                   |                                                                |                                |                                                              |                     |       |                           |       |                             |       |       |        |       |       |       |       |       |     |       |       | 
|---------------------------------- | -------------------------------------------------------------- | ------------------------------ | ------------------------------------------------------------ | ------------------- | ----- | ------------------------- | ----- | --------------------------- | ----- | ----- | ------ | ----- | ----- | ----- | ----- | ----- | --- | ----- | ----- | 
|                                   |                                                                |                                |                                                              |                     |       | Dollars in Thousands     
|                                   |                                                                |                                |                                                              |                     |       |                          
|                                   |                                                                |                                |                                                              |                     |       | Six Months Ended June 30, |       | Three Months Ended June 30,
|                                   |                                                                |                                |                                                              |                     |       |                           |       |                            
|                                   |                                                                |                                |                                                              |                     |       | 2003                      |       | 2002                        |       | 2003  |        | 2002 
|                                   |                                                                |                                |                                                              |                     |       |                           |       |                             |       |       |        |      
|Interest Income                    |                                                                |                                |                                                              |                     |       |                           |       |                             |       |       |        |       |       |       |       |      
|                                   | Interest and fees on loans                                     |                                | $                                                            | 12,058              |       |                           | $     | 7,116                       |       |       | $      | 6,772 |       |       | $     | 3,806 |    
|                                   | Interest on investment securities                              |                                |                                                              | 3,084               |       |                           |       | 1,085                       |       |       |        | 1,764 |       |       |       | 633   |    
|                                   | Interest on federal funds sold                                 |                                |                                                              | 69                  |       |                           |       | 39                          |       |       |        | 45    |       |       |       | 29    |    
|                                   |                                                                |                                |                                                              |                     |       |                           |       |                             |       |       |        |       |       |       |       |      
|                                   |                                                                |                                | Total Interest Income                                        |                     |       | 15,211                    |       |                             |       | 8,240 |        |       |       | 8,581 |       |       |     | 4,468 |      
|                                   |                                                                |                                |                                                              |                     |       |                           |       |                             |       |       |        |       |       |       |       |      
|Interest Expense                   |                                                                |                                |                                                              |                     |       |                           |       |                             |       |       |        |       |       |       |       |      
|                                   | Interest on savings deposits                                   |                                |                                                              | 33                  |       |                           |       | 68                          |       |       |        | 17    |       |       |       | 33    |    
|                                   | Interest on NOW and money market deposits                      |                                |                                                              | 1,561               |       |                           |       | 528                         |       |       |        | 859   |       |       |       | 351   |    
|                                   | Interest on time deposits in denominations of $100,000 or more |                                |                                                              | 957                 |       |                           |       | 601                         |       |       |        | 532   |       |       |       | 302   |    
|                                   | Interest on other time deposits                                |                                |                                                              | 843                 |       |                           |       | 618                         |       |       |        | 465   |       |       |       | 295   |    
|                                   | Interest on other borrowings                                   |                                |                                                              | 1,270               |       |                           |       | 664                         |       |       |        | 705   |       |       |       | 347   |    
|                                   |                                                                |                                |                                                              |                     |       |                           |       |                             |       |       |        |       |       |       |       |      
|                                   |                                                                |                                | Total Interest Expense                                       |                     |       | 4,664                     |       |                             |       | 2,479 |        |       |       | 2,578 |       |       |     | 1,328 |      
|                                   |                                                                |                                |                                                              |                     |       |                           |       |                             |       |       |        |       |       |       |       |      
|                                   |                                                                |                                | Net Interest Income                                          |                     |       | 10,547                    |       |                             |       | 5,761 |        |       |       | 6,003 |       |       |     | 3,140 |      
|Provision for Possible Loan Losses |                                                                |                                | (1,750                                                       | )                   |       |                           | (535  | )                           |       |       | (1,250 | )     |       |       | (335  | )    
|                                   |                                                                |                                |                                                              |                     |       |                           |       |                             |       |       |        |       |       |       |       |      
|                                   |                                                                |                                | Net Interest Income After Provision
for Possible Loan Losses |                     |       | 8,797                     |       |                             |       | 5,226 |        |       |       | 4,753 |       |       |     | 2,805 |      
|                                   |                                                                |                                |                                                              |                     |       |                           |       |                             |       |       |        |       |       |       |       |      
|Other Income                       |                                                                |                                |                                                              |                     |       |                           |       |                             |       |       |        |       |       |       |       |      
|                                   | Fees and service charges                                       |                                |                                                              | 1,148               |       |                           |       | 740                         |       |       |        | 652   |       |       |       | 353   |    
|                                   | Gain on sale of SBA loans                                      |                                |                                                              | 495                 |       |                           |       |                            |       |       |        | 317   |       |       |       |      |    
|                                   | Net gain on sale of investment securities                      |                                |                                                              | 1,571               |       |                           |       | 179                         |       |       |        | 972   |       |       |       | 101   |    
|                                   | Litigation recovery                                            |                                |                                                              |                    |       |                           |       | 180                         |       |       |        |      |       |       |       | 180   |    
|                                   | Other income                                                   |                                |                                                              | 100                 |       |                           |       | 102                         |       |       |        | 46    |       |       |       | 39    |    
|                                   |                                                                |                                |                                                              |                     |       |                           |       |                             |       |       |        |       |       |       |       |      
|                                   |                                                                |                                |                                                              | Total Other Income  |       |                           | 3,314 |                             |       |       | 1,201  |       |       |       | 1,987 |       |     |       | 673   | 
|                                   |                                                                |                                |                                                              |                     |       |                           |       |                             |       |       |        |       |       |       |       |      
|Other Expense                      |                                                                |                                |                                                              |                     |       |                           |       |                             |       |       |        |       |       |       |       |      
|                                   |                                                                | Salaries and employee benefits |                                                              |                     | 3,498 |                           |       |                             | 2,275 |       |        |       | 1,751 |       |       |       | 954 |      
|                                   |                                                                | Occupancy expense of premises  |                                                              |                     | 542   |                           |       |                             | 390   |       |        |       | 296   |       |       |       | 198 |      
|                                   |                                                                | Furniture and equipment        |                                                              |                     | 457   |                           |       |                             | 359   |       |        |       | 263   |       |       |       | 211 |      
|                                   |                                                                | Other                          |                                                              |                     | 2,389 |                           |       |                             | 1,569 |       |        |       | 1,323 |       |       |       | 861 |      
|                                   |                                                                |                                |                                                              |                     |       |                           |       |                             |       |       |        |       |       |       |       |      
|                                   |                                                                |                                |                                                              | Total Other Expense |       |                           | 6,886 |                             |       |       | 4,593  |       |       |       | 3,633 |       |     |       | 2,224 | 
|                                   |                                                                |                                |                                                              |                     |       |                           |       |                             |       |       |        |       |       |       |       |      
|Income Before Income Taxes         |                                                                |                                | 5,225                                                        |                     |       |                           | 1,834 |                             |       |       | 3,107  |       |       |       | 1,254 |      
|Income Tax Provision               |                                                                |                                | 2,136                                                        |                     |       |                           | 726   |                             |       |       | 1,272  |       |       |       | 500   |      
|                                   |                                                                |                                |                                                              |                     |       |                           |       |                             |       |       |        |       |       |       |       |      
|Net Income                         |                                                                | $                              | 3,089                                                        |                     |       | $                         | 1,108 |                             |       | $     | 1,835  |       |       | $     | 754   |      
|                                   |                                                                |                                |                                                              |                     |       |                           |       |                             |       |       |        |       |       |       |       |      
|Basic Earnings Per Share           |                                                                | $                              | 1.06                                                         |                     |       | $                         | 0.56  |                             |       | $     | 0.64   |       |       | $     | 0.38  |      
|                                   |                                                                |                                |                                                              |                     |       |                           |       |                             |       |       |        |       |       |       |       |      
|Diluted Earnings Per Share         |                                                                | $                              | 0.97                                                         |                     |       | $                         | 0.42  |                             |       | $     | 0.58   |       |       | $     | 0.28  |      
|                                   |                                                                |                                |                                                              |                     |       |                           |       |                             |       |       |        |       |       |       |       |      

See accompanying notes to financial statements.

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VINEYARD NATIONAL BANCORP
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 2003 AND 2002
(Unaudited)

|                                     |                      |                                                                      |                                                     |  |                      |  |           |  |              |   |          |  |             |   |        |  |               |   |          |  |               |  |  |  |             |       |       |  |  |       |     |   |      |     |        |  |      |       | 
|------------------------------------ | -------------------- | -------------------------------------------------------------------- | --------------------------------------------------- |  | -------------------- |  | --------- |  | ------------ | - | -------- |  | ----------- | - | ------ |  | ------------- | - | -------- |  | ------------- |  |  |  | ----------- | ----- | ----- |  |  | ----- | --- | - | ---- | --- | ------ |  | ---- | ----- | 
|                                     |                      |                                                                      |                                                     |  | Dollars in Thousands | 
|                                     |                      |                                                                      |                                                     |  |                      | 
|                                     |                      |                                                                      |                                                     |  |                      |  |           |  | Common Stock |   |          |  |             |   | Stock  |  |               |   |          |  |               |  |  |  | Accumulated |       |       |  | 
|                                     |                      |                                                                      |                                                     |  | Perpetual            |  |           |  | Additional   |   | Dividend |  |             |   |        |  |               |   |          |  | Other         |  |  |  |            
|                                     |                      |                                                                      |                                                     |  | Preferred            |  | Number of |  |              |   |          |  | Paid-in     |   | To Be  |  | Comprehensive |   | Retained |  | Comprehensive |  |  |  |            
|                                     |                      |                                                                      |                                                     |  | Stock                |  | Shares    |  | Amount       |   | Capital  |  | Distributed |   | Income |  | Earnings      |   | Income   |  | Total        
|                                     |                      |                                                                      |                                                     |  |                      |  |           |  |              |   |          |  |             |   |        |  |               |   |          |  |              
|Balance December 31, 2001            |                      | $                                                                    |                                                    |  |                      |  | 1,969,932 |  |              | $ | 2,151    |  |             | $ | 3,307  |  |               | $ |         |  |               |  |  |  |             | $     | 5,032 |  |  | $     | (35 | ) |      | $   | 10,455 | 
|Stock options exercised              |                      |                                                                      |                                                     |  |                      |  | 31,149    |  |              |   | 119      |  |             |   |        |  |               |   |          |  |               |  |  |  |             |       |       |  |  |       |     |   |      |     | 119    | 
|Conversion of convertible debentures |                      |                                                                      |                                                     |  |                      |  | 21,000    |  |              |   | 100      |  |             |   |        |  |               |   |          |  |               |  |  |  |             |       |       |  |  |       |     |   |      |     | 100    | 
|                                     | Comprehensive income |                                                                      |                                                     |  |                      |  |           |  |              |   |          |  |             |   |        |  |               |   |          |  |               |  |  |  |             |       |       |  |  |       |     |   |      |     |        |  |     
|                                     |                      |                                                                      | Net income                                          |  |                      |  |           |  |              |   |          |  |             |   |        |  |               |   |          |  |               |  |  |  | $           | 1,108 |       |  |  | 1,108 |     |   |      |     |        |  |      | 1,108 | 
|                                     |                      |                                                                      | Unrealized security holding
gains (net of $162 tax) |  |                      |  |           |  |              |   |          |  |             |   |        |  |               |   |          |  |               |  |  |  |             | 432   |       |  |  |       |     |   |      | 432 |        |  |      | 432   | 
|                                     |                      | Less reclassification adjustment
for realized gains (net of $75 tax) |                                                     |  |                      |  |           |  |              |   |          |  |             |   |        |  |               |   |          |  |               |  |  |  | (104        | )     |       |  |  |       |     |   | (104 | )   |        |  | (104 | )    
|                                     |                      |                                                                      |                                                     |  |                      |  |           |  |              |   |          |  |             |   |        |  |               |   |          |  |               |  |  |  |             |       |       |  |  |       |     |   |      |     |        | 
|                                     |                      |                                                                      | Total comprehensive income                          |  |                      |  |           |  |              |   |          |  |             |   |        |  |               |   |          |  |               |  |  |  | $           | 1,436 |       |  |  |       |     |   |      |     |        |  |      |       | 
|                                     |                      |                                                                      |                                                     |  |                      |  |           |  |              |   |          |  |             |   |        |  |               |   |          |  |               |  |  |  |             |       |       |  |  |       |     |   |      |     |        | 
|                                     |                      |                                                                      |                                                     |  |                      |  |           |  |              |   |          |  |             |   |        |  |               |   |          |  |               |  |  |  |             |       |       |  |  |       |     |   |      |     |        | 
|Balance, June 30, 2002               |                      | $                                                                    |                                                    |  |                      |  | 2,022,081 |  |              | $ | 2,370    |  |             | $ | 3,307  |  |               | $ |         |  |               |  |  |  |             | $     | 6,140 |  |  | $     | 293 |   |      | $   | 12,110 | 
|                                     |                      |                                                                      |                                                     |  |                      |  |           |  |              |   |          |  |             |   |        |  |               |   |          |  |               |  |  |  |             |       |       |  |  |       |     |   |      |     |        | 

|                                                                |                      |                                                                       |                                                     |  |           |  |           |   |              |   |          |   |             |   |        |  |               |   |          |   |               |  |  |  |             |       |       |   |  |       |     |   |      |     |        |   |      |       | 
|--------------------------------------------------------------- | -------------------- | --------------------------------------------------------------------- | --------------------------------------------------- |  | --------- |  | --------- | - | ------------ | - | -------- | - | ----------- | - | ------ |  | ------------- | - | -------- | - | ------------- |  |  |  | ----------- | ----- | ----- | - |  | ----- | --- | - | ---- | --- | ------ | - | ---- | ----- | 
|                                                                |                      |                                                                       |                                                     |  |           |  |           |   | Common Stock |   |          |   |             |   | Stock  |  |               |   |          |   |               |  |  |  | Accumulated |       |       |   | 
|                                                                |                      |                                                                       |                                                     |  | Perpetual |  |           |   | Additional   |   | Dividend |   |             |   |        |  |               |   |          |   | Other         |  |  |  |            
|                                                                |                      |                                                                       |                                                     |  | Preferred |  | Number of |   |              |   |          |   | Paid-in     |   | To Be  |  | Comprehensive |   | Retained |   | Comprehensive |  |  |  |            
|                                                                |                      |                                                                       |                                                     |  | Stock     |  | Shares    |   | Amount       |   | Capital  |   | Distributed |   | Income |  | Earnings      |   | Income   |   | Total        
|                                                                |                      |                                                                       |                                                     |  |           |  |           |   |              |   |          |   |             |   |        |  |               |   |          |   |              
|Balance December 31, 2002                                       |                      | $                                                                     | 2,450                                               |  |           |  | 2,849,680 |   |              | $ | 6,052    |   |             | $ | 3,307  |  |               | $ | 2,026    |   |               |  |  |  |             | $     | 6,014 |   |  | $     | 109 |   |      | $   | 19,958 |  
|Stock options exercised                                         |                      |                                                                       |                                                     |  |           |  | 27,500    |   |              |   | 140      |   |             |   |        |  |               |   |          |   |               |  |  |  |             |       |       |   |  |       |     |   |      |     | 140    |  
|Purchase of treasury stock                                      |                      |                                                                       |                                                     |  |           |  | (76,602   | ) |              |   | (1,420   | ) |             |   |        |  |               |   |          |   |               |  |  |  |             |       |       |   |  |       |     |   |      |     | (1,420 | )
|Stock dividends distributed                                     |                      |                                                                       |                                                     |  |           |  |           |   |              |   | 2,024    |   |             |   |        |  |               |   | (2,024   | ) |               |  |  |  |             |       |       |   |  |       |     |   |      |     |       |  
|Cash paid for fractional shares for stock
dividend distribution |                      |                                                                       |                                                     |  |           |  |           |   |              |   |          |   |             |   |        |  |               |   | (2       | ) |               |  |  |  |             |       |       |   |  |       |     |   |      |     | (2     | )
|Cash dividends paid on preferred stock                          |                      |                                                                       |                                                     |  |           |  |           |   |              |   |          |   |             |   |        |  |               |   |          |   |               |  |  |  |             |       | (93   | ) |  |       |     |   |      |     | (93    | )
|                                                                | Comprehensive income |                                                                       |                                                     |  |           |  |           |   |              |   |          |   |             |   |        |  |               |   |          |   |               |  |  |  |             |       |       |   |  |       |     |   |      |     |        |   |     
|                                                                |                      |                                                                       | Net income                                          |  |           |  |           |   |              |   |          |   |             |   |        |  |               |   |          |   |               |  |  |  | $           | 3,089 |       |   |  | 3,089 |     |   |      |     |        |   |      | 3,089 | 
|                                                                |                      |                                                                       | Unrealized security holding gains
(net of $546 tax) |  |           |  |           |   |              |   |          |   |             |   |        |  |               |   |          |   |               |  |  |  |             | 779   |       |   |  |       |     |   |      | 779 |        |   |      | 779   | 
|                                                                |                      | Less reclassification adjustment
for realized gains (net of $644
tax) |                                                     |  |           |  |           |   |              |   |          |   |             |   |        |  |               |   |          |   |               |  |  |  | ( 927       | )     |       |   |  |       |     |   | (927 | )   |        |   | (927 | )    
|                                                                |                      |                                                                       |                                                     |  |           |  |           |   |              |   |          |   |             |   |        |  |               |   |          |   |               |  |  |  |             |       |       |   |  |       |     |   |      |     |        |  
|                                                                |                      |                                                                       | Total comprehensive income                          |  |           |  |           |   |              |   |          |   |             |   |        |  |               |   |          |   |               |  |  |  | $           | 2,941 |       |   |  |       |     |   |      |     |        |   |      |       | 
|                                                                |                      |                                                                       |                                                     |  |           |  |           |   |              |   |          |   |             |   |        |  |               |   |          |   |               |  |  |  |             |       |       |   |  |       |     |   |      |     |        |  
|                                                                |                      |                                                                       |                                                     |  |           |  |           |   |              |   |          |   |             |   |        |  |               |   |          |   |               |  |  |  |             |       |       |   |  |       |     |   |      |     |        |  
|Balance, June 30, 2003                                          |                      | $                                                                     | 2,450                                               |  |           |  | 2,800,578 |   |              | $ | 6,796    |   |             | $ | 3,307  |  |               | $ |         |   |               |  |  |  |             | $     | 9,010 |   |  | $     | (39 | ) |      | $   | 21,524 |  
|                                                                |                      |                                                                       |                                                     |  |           |  |           |   |              |   |          |   |             |   |        |  |               |   |          |   |               |  |  |  |             |       |       |   |  |       |     |   |      |     |        |  

See accompanying notes to financial statements.

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VINEYARD NATIONAL BANCORP
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2003 AND 2002
(Unaudited)

|                                                     |                                                                                            |                                                                                            |                                                         |                                                                             |          |                      |          |          |         |       |         |  
|---------------------------------------------------- | ------------------------------------------------------------------------------------------ | ------------------------------------------------------------------------------------------ | ------------------------------------------------------- | --------------------------------------------------------------------------- | -------- | -------------------- | -------- | -------- | ------- | ----- | ------- | -
|                                                     |                                                                                            |                                                                                            |                                                         |                                                                             |          | Dollars in Thousands
|                                                     |                                                                                            |                                                                                            |                                                         |                                                                             |          | June 30,             |          | June 30,
|                                                     |                                                                                            |                                                                                            |                                                         |                                                                             |          | 2003                 |          | 2002    
|                                                     |                                                                                            |                                                                                            |                                                         |                                                                             |          |                      |          |         
|Reconciliation of Net Income to                      |                                                                                            |                                                                                            |                                                         |                                                                             |          |                      |          |         
|Net
Cash Provided by Operating Activities            |                                                                                            |                                                                                            |                                                         |                                                                             |          |                      |          |         
|                                                     |                                                                                            | Net Income                                                                                 |                                                         | $                                                                           | 3,089    |                      |          | $        | 1,108   |      
|                                                     |                                                                                            | Adjustments to Reconcile Net Income
to Net Cash Provided by Operating Activities           |                                                         |                                                                             |          |                      |          |          |         |      
|                                                     |                                                                                            |                                                                                            |                                                         | Depreciation                                                                |          |                      | 354      |          |         |       | 402     |  
|                                                     |                                                                                            |                                                                                            |                                                         | Loss on disposal of property, plant & equipment                             |          |                      | 27       |          |         |       |        |  
|                                                     |                                                                                            |                                                                                            |                                                         | Investment securities accretion/amortization                                |          |                      | 223      |          |         |       | 219     |  
|                                                     |                                                                                            |                                                                                            |                                                         | Provision for possible loan losses                                          |          |                      | 1,750    |          |         |       | 535     |  
|                                                     |                                                                                            |                                                                                            |                                                         | Adjustment to allowance for possible loan losses relating to acquired
loans |          |                      |         |          |         |       | 198     |  
|                                                     |                                                                                            |                                                                                            |                                                         | Increase in deferred taxes                                                  |          |                      | (80      | )        |         |       |        |  
|                                                     |                                                                                            |                                                                                            |                                                         | (Decrease)/increase in taxes payable                                        |          |                      | (1,134   | )        |         |       | 770     |  
|                                                     |                                                                                            |                                                                                            |                                                         | Increase in other assets                                                    |          |                      | (961     | )        |         |       | (333    | )
|                                                     |                                                                                            |                                                                                            |                                                         | Decrease in cash surrender value of life insurance policies                 |          |                      | 8        |          |         |       |        |  
|                                                     |                                                                                            |                                                                                            |                                                         | Gain on sale of investment securities                                       |          |                      | (1,571   | )        |         |       | (179    | )
|                                                     |                                                                                            |                                                                                            |                                                         | Decrease in loans held for sale                                             |          |                      | 977      |          |         |       | 3,828   |  
|                                                     |                                                                                            |                                                                                            |                                                         | Increase/(decrease) in unearned loan fees                                   |          |                      | 853      |          |         |       | (224    | )
|                                                     |                                                                                            |                                                                                            |                                                         | Increase in interest receivable                                             |          |                      | (835     | )        |         |       | (469    | )
|                                                     |                                                                                            |                                                                                            |                                                         | Decrease in interest payable                                                |          |                      | (49      | )        |         |       | (282    | )
|                                                     |                                                                                            |                                                                                            |                                                         | Decrease in accrued expense and other liabilities                           |          |                      | (632     | )        |         |       | (174    | )
|                                                     |                                                                                            |                                                                                            |                                                         |                                                                             |          |                      |          |         
|                                                     |                                                                                            |                                                                                            |                                                         | Total Adjustment                                                            |          |                      | (1,070   | )        |         |       | 4,291   |  
|                                                     |                                                                                            |                                                                                            |                                                         |                                                                             |          |                      |          |         
|                                                     |                                                                                            |                                                                                            |                                                         | Net Cash Provided By Operating Activities                                   |          |                      | 2,019    |          |         |       | 5,399   |  
|Cash Flows From Investing Activities                 |                                                                                            |                                                                                            |                                                         |                                                                             |          |                      |          |         
|                                                     |                                                                                            | Proceeds from sales of investment securities/mortgage-backed securities
available-for-sale |                                                         |                                                                             | 176,843  |                      |          |          | 15,854  |      
|                                                     |                                                                                            | Proceeds from maturities/calls of investment securities available-for-sale                 |                                                         |                                                                             | 10,000   |                      |          |          | 3,500   |      
|                                                     |                                                                                            | Proceeds from principal reductions and maturities of mortgage-backed
securities            |                                                         |                                                                             | 6,574    |                      |          |          | 3,735   |      
|                                                     |                                                                                            | Purchase of investment securities available-for-sale                                       |                                                         |                                                                             | (30,002  | )                    |          |          | (20,004 | )    
|                                                     |                                                                                            | Purchase of mortgage-backed securities available-for-sale                                  |                                                         |                                                                             | (253,823 | )                    |          |          | (21,552 | )    
|                                                     |                                                                                            | Purchase of Federal Home Loan Bank and other stock                                         |                                                         |                                                                             | (4,196   | )                    |          |          | (1,418  | )    
|                                                     | Recoveries on loans previously written off                                                 |                                                                                            |                                                         | 13                                                                          |          |                      |          | 109      |        
|                                                     | Net loans made to customers and principal collection of loans                              |                                                                                            |                                                         | (140,291                                                                    | )        |                      |          | (60,206  | )      
|                                                     | Capital expenditures                                                                       |                                                                                            |                                                         | (1,139                                                                      | )        |                      |          | (377     | )      
|                                                     |                                                                                            |                                                                                            |                                                         |                                                                             |          |                      |          |         
|                                                     |                                                                                            |                                                                                            |                                                         | Net Cash Used By Investing Activities                                       |          |                      | (236,021 | )        |         |       | (80,359 | )
|Cash Flows From Financing Activities                 |                                                                                            |                                                                                            |                                                         |                                                                             |          |                      |          |         
|                                                     | Net increase in demand deposits, NOW
accounts, savings accounts, and money market deposits |                                                                                            |                                                         | 76,403                                                                      |          |                      |          | 5,506    |        
|                                                     | Net increase in certificates of deposits                                                   |                                                                                            |                                                         | 69,838                                                                      |          |                      |          | 40,897   |        
|                                                     | Net change in Federal Home Loan Bank advances                                              |                                                                                            |                                                         | 80,000                                                                      |          |                      |          | 28,500   |        
|                                                     | Purchase of treasury stock                                                                 |                                                                                            |                                                         | (1,420                                                                      | )        |                      |          |         |        
|                                                     | Dividends paid on perpetual preferred stock                                                |                                                                                            |                                                         | (93                                                                         | )        |                      |          |         |        
|                                                     | Cash paid on fractional shares of common stock dividend                                    |                                                                                            |                                                         | (2                                                                          | )        |                      |          |         |        
|                                                     | Stock options exercised                                                                    |                                                                                            |                                                         | 140                                                                         |          |                      |          | 119      |        
|                                                     |                                                                                            |                                                                                            |                                                         |                                                                             |          |                      |          |         
|                                                     |                                                                                            |                                                                                            |                                                         | Net Cash Provided By Financing Activities                                   |          |                      | 224,866  |          |         |       | 75,022  |  
|                                                     |                                                                                            |                                                                                            |                                                         |                                                                             |          |                      |          |         
|Net (Decrease)/increase in Cash and Cash Equivalents |                                                                                            |                                                                                            | (9,136                                                  | )                                                                           |          |                      | 62       |         
|Cash and Cash Equivalents, Beginning of year         |                                                                                            |                                                                                            | 33,362                                                  |                                                                             |          |                      | 14,710   |         
|                                                     |                                                                                            |                                                                                            |                                                         |                                                                             |          |                      |          |         
|Cash and Cash Equivalents, End of quarter            |                                                                                            | $                                                                                          | 24,226                                                  |                                                                             |          | $                    | 14,772   |         
|                                                     |                                                                                            |                                                                                            |                                                         |                                                                             |          |                      |          |         
|Supplemental Information                             |                                                                                            |                                                                                            |                                                         |                                                                             |          |                      |          |         
|                                                     |                                                                                            |                                                                                            | Change in valuation allowance for investment securities |                                                                             | $        | 254                  |          |          | $       | 566   |        
|                                                     |                                                                                            |                                                                                            | Interest paid                                           |                                                                             | $        | 4,086                |          |          | $       | 2,761 |        
|                                                     |                                                                                            |                                                                                            | Income tax paid                                         |                                                                             | $        | 4,420                |          |          | $       | 46    |        
|                                                     |                                                                                            |                                                                                            | Conversion of convertible debentures                    |                                                                             | $        |                     |          |          | $       | 100   |        

See accompanying notes to financial statements.

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Note #1  Nature of Business and Summary of Significant Accounting Policies

The accounting and reporting policies of Vineyard National Bancorp (the
Company) and its subsidiaries conform to accounting principles generally
accepted in the United States of America and to general practices within the
banking industry. In the opinion of Management, the unaudited consolidated
financial statements contain all (consisting of only normal recurring
adjustments) adjustments necessary to present fairly the Companys consolidated
financial position at June 30, 2003 and results of cash flows for the six
months ended June 30, 2003 and 2002 and the results of operation for the six
and three months ended June 30, 2003 and 2002.

Certain information and footnote disclosures normally presented in financial
statements prepared in accordance with generally accepted accounting principles
have been omitted. These interim consolidated financial statements should be
read in conjunction with the consolidated financial statements and notes
thereto included in the Companys 2002 Annual Report to shareholders. The
results for the six months ended June 30, 2003 and 2002 may not necessarily be
indicative of the operating results for the full year.

A summary of the Companys significant accounting and reporting policies
consistently applied in the preparation of the accompanying financial
statements follows:

Principles of Consolidation

The consolidated financial statements include the Company and its wholly owned
subsidiaries, Vineyard Bank (the Bank), Vineyard Statutory Trust I, and
Vineyard Statutory Trust II. Intercompany balances and transactions have been
eliminated.

Nature of Operations

The Company is organized as a single reporting segment and operates several
full-service branches and loan production offices within San Bernardino,
Riverside, Orange, San Diego and Los Angeles counties in California. The
Company provides a variety of financial services to individuals and
small-to-medium sized businesses and offers a full range of commercial banking
services including the acceptance of checking and savings deposits, and
originating various types of installment, commercial and real estate loans.

Use of Estimates

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from
those estimates.

Estimates that are particularly susceptible to significant change relate to the
determination of the allowance for losses on loans and the valuation of real
estate acquired in connection with foreclosures or in satisfaction of loans.

While management uses available information to recognize losses on loans,
future additions to the allowances may be necessary based on changes in local
economic conditions. In addition, bank regulatory agencies, as an integral
part of their examination process, periodically review the Banks allowances
for losses on loans and foreclosed real estate. Such agencies may require the
Bank to recognize additions to the allowances based on their judgments about
information available to them at the time of their examination. Because of
these factors, it is reasonably possible that the allowances for losses on
loans may change.

Comprehensive Income

The Company follows Statement of Financial Accounting Standards (SFAS) No.
130, Reporting Comprehensive Income, which requires the disclosure of
comprehensive income and its components. Changes in unrealized gains/ (losses)
on available-for-sale securities, net of income taxes, is the only component of
accumulated other comprehensive income for the Company.

Reclassifications

Certain reclassifications have been made to the 2002 financial statements to
conform to 2003 classifications.

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Current Accounting Pronouncements

In June 2002, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standard (SFAS) No. 146, Accounting for
Costs Associated with Exit or Disposal Activities. This statement requires
that a liability for the cost associated with an exit or disposal activity be
recognized when the liability is incurred and nullifies the guidance of
Emerging Issues Task Force (EITF) No. 94-3, Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in Restructuring), which recognized a
liability for an exit cost at the date of an entitys commitment to an exit
plan. SFAS No. 146 requires that the initial measurement of a liability be at
fair value. SFAS No. 146 is effective for exit and disposal activities that
are initiated after December 31, 2002. The adoption of SFAS No. 146 did not
have a material impact on the financial position or operating results of the
Company.

In October 2002, the FASB issued SFAS No. 147, Acquisitions of Certain
Financial Institutions, which requires that most financial services companies
subject their intangible assets to an annual impairment test instead of being
amortized. SFAS No. 147 applies to all new and past financial institution
acquisitions, including branch acquisitions that qualify as acquisitions of a
business, but excluding acquisitions between mutual institutions. All
acquisitions within the scope of the new statement will now be governed by the
requirements of SFAS Nos. 141 and 142. Certain provisions of SFAS No. 147 were
effective on October 1, 2002, while other provisions are effective for
acquisitions on or after October 1, 2002. The adoption of SFAS No. 147 did not
have a material impact on the financial condition or operating results of the
Company.

In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-based
CompensationTransition and Disclosure, an amendment of FASB Statement No.
123, Accounting for Stock-Based Compensation, to provide alternative methods
of transition for a voluntary change to the fair value based method of
accounting for stock-based employee compensation. SFAS No. 148 also amends the
disclosure provisions of SFAS No. 123 and Accounting Pronouncement Board
(APB) Opinion No. 28, Interim Financial Reporting, to require disclosure in
the summary of significant accounting policies of the effects of an entitys
accounting policy with respect to stock-based employee compensation on reported
net income and earnings per share in annual and interim financial statements.
While SFAS No. 148 does not amend SFAS No. 123 to require companies to account
for employee stock options using the fair value method, the disclosure
provisions of SFAS No. 148 are applicable to all companies with stock-based
employee compensation, regardless of whether they account for that compensation
using the fair value method of SFAS No. 123 or the intrinsic value method of
APB Opinion No. 25. The provisions of SFAS No. 148 are effective for annual
financial statements for fiscal years ending after December 15, 2002, and for
financial reports containing condensed financial statements for interim period
beginning after December 15, 2002. The adoption of SFAS No. 148 did not have a
material impact on the financial condition or operating results of the Company.

In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities. SFAS No. 149 amends and
clarifies accounting for derivative instruments, including certain derivative
instruments embedded in other contracts and loan commitments that relate to the
origination of mortgage loans held for sale, and for hedging activities under
SFAS No. 133. SFAS No. 149 is generally effective for contracts entered into
or modified after June 30, 2003. The adoption of SFAS No. 149 will not have a
material impact on the financial condition or operating results of the Company.

In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity. SFAS No. 150
establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and equity. It
requires that an issuer classify a financial instrument that is within its
scope as a liability (or an asset in some circumstances.) Many of those
instruments were previously classified as equity. SFAS No. 150 is generally
effective for financial instruments entered into or modified after May 31,
2003, and otherwise is effective at the beginning of the first interim period
beginning after June 15, 2003. The adoption of SFAS No. 150 did not have a
material impact on the financial condition or operating results of the Company.

Note #2  Trust Preferred Securities

On December 18, 2001, Vineyard Statutory Trust I (Trust), a wholly owned
subsidiary of the Company, issued $12.0 million of Floating Rate Trust
Securities (Trust Securities). The Trust invested the gross proceeds from
the offering in Floating Rate Junior Subordinated Deferrable Interest
Debentures (Subordinated Debentures) issued by the Company. The Subordinated
Debentures were issued concurrent with the issuance of the Trust Securities.
The Company will pay the interest on the Subordinated Debentures to the Trust,
which represents the sole revenue and sole source of dividend distributions by
the Trust to the holders of the Trust Securities. The Company has guaranteed,
on a subordinated basis, payment of the Trusts obligation. The Company has
the right, assuming no default has occurred, to defer payments of interest on
the Subordinated Debentures at any time for a period not to exceed 20
consecutive quarters. The Trust Securities will mature on December 18, 2031
but can be called at any time commencing on December 18, 2006, at par.

On December 19, 2002, Vineyard Statutory Trust II (Trust II), a wholly owned
subsidiary of the Company, issued $5.0 million of Floating Rate Capital
Securities (Capital Securities). The Trust II invested the gross proceeds
from the offering

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in Floating Rate Junior Subordinated Deferrable Interest Debentures (Floating
Rate Subordinated Debentures) issued by the Company. The Floating Rate
Subordinated Debentures were issued concurrent with the issuance of the Capital
Securities. The Company will pay the interest on the Floating Rate
Subordinated Debentures to the Trust II, which represents the sole revenue and
sole source of dividend distributions by the Trust II to the holders of the
Capital Securities. The Company has guaranteed, on a subordinated basis,
payment of Trust IIs obligation. The Company has the right, assuming no
default has occurred, to defer payments of interest on the Subordinated
Debentures at any time for a period not to exceed 20 consecutive quarters. The
Capital Securities will mature on December 26, 2032, but can be called at any
time commencing on December 26, 2007, at par.

Note #3 - Convertible Debentures

On April 30, 2001, the Company issued $3.8 million in 10% convertible
debentures which were convertible into shares of the Companys common stock at
any time before maturity or redemption, at a conversion price of $5.00 per
share. The debentures could be redeemed at the Companys option, in whole or
in part at any time after July 1, 2003 and were due June 30, 2008. Interest on
the debentures was due quarterly at an annual rate of 10%. During 2002, the
Company offered the holders of the convertible debentures an incentive to
convert. This incentive totaled $0.3 million and is included in other
expenses. All debentures were converted in the third quarter of 2002. Total
interest expense for such debentures recorded for the three months ended June
30, 2003 and 2002 was $0 and $0.1 million, respectively. Total interest
expense for such debentures recorded for the six months ended June 30, 2003 and
2002 was $0 and $0.2 million, respectively.

Note #4 - Perpetual Preferred Stock

On December 18, 2002, the Company issued 50 shares of 7.0% Series A Preferred
Stock (Series A Preferred) at $50,000 per share to eight individual investors
for aggregate proceeds of $2.5 million. Each share of Series A Preferred is
entitled to a noncumulative, annual dividend of 7.0%, payable quarterly. The
Series A Preferred is not convertible into common stock and is redeemable at
the option of the Company at face value, plus any unpaid dividends declared.
The Series A Preferred qualifies as Tier I capital under the regulations of the
Federal Reserve Board. With each share of Series A Preferred, the Company
issued a warrant to purchase 2,000 shares of the Companys common stock at
$15.00 per share. The total number of shares issuable pursuant to the warrants
was increased to 105,000 shares and the per share exercise price has been
adjusted to $14.29 to reflect the 5% stock dividend declared by the Company on
December 23, 2002. Each warrant must be exercised prior to December 18, 2005
or it will expire pursuant to its terms. The Series A Preferred were offered
and sold pursuant to an exemption from the registration requirements under
Section 4(2) of the Securities Act of 1933, as amended.

Note #5 - Commitments and Contingencies

In the normal course of business, the Company is a party to financial
instruments with off-balance-sheet risk. These financial instruments include
commitments to extend credit and letters of credit. To varying degrees, these
instruments involve elements of credit and interest rate risk in excess of the
amount recognized in the Companys consolidated financial statements. The
Companys exposure to credit loss in the event of non-performance by the other
party to the financial instruments for commitments to extend credit and letters
of credit is represented by the contractual amount of those instruments. At
June 30, 2003 and December 31, 2002, the Company had commitments to extend
credit of approximately $108.0 million and $97.2 million, respectively, and
obligations under standby and commercial letters of credit of approximately
$0.5 million and $0.4 million, respectively. Commitments to extend credit are
agreements to lend to a customer as long as there is no violation of any
condition established in the contract. Commitments generally have fixed
expiration dates or other termination clauses and may require payment of a fee.
Since many of the commitments are expected to expire without being drawn upon,
the total commitment amounts do not necessarily represent future cash
requirements. The Company evaluates each customers creditworthiness on a
case-by-case basis. The amount of collateral obtained, if deemed necessary by
the Company upon extension of credit, is based on managements credit
evaluation. Collateral held varies but may include accounts receivable,
inventory, property, plant and equipment, income-producing commercial
properties, residential properties and properties under construction.

Standby letters of credit are conditional commitments issued by the Company to
guarantee the performance of a customer to a third party. Commercial letters
of credit are conditional commitments issued by the Company to facilitate trade
or commerce. The credit risk involved in issuing letters of credit is
essentially the same as that involved in extending loans to customers.

The Company is involved in various litigation matters. In the opinion of
management and the Companys legal counsel, the disposition of all such other
litigation pending will not have a material effect on the Companys financial
statements.

Note #6 - Dividends

On December 23, 2002, the Company declared a 5% stock dividend to be paid on
January 15, 2003 to stockholders of record as of December 23, 2002. All share
and per share data has been retroactively adjusted to reflect the stock
dividend.

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Note #7 - Earnings Per Share and Book Value

Basic earnings per share (EPS) 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 EPS 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 EPS was adjusted to reflect a 5% stock dividend declared in December 2002.

The following is a reconciliation of net income and shares outstanding to the
income and number of shares used to compute EPS (dollar amounts in thousands):

|                                                                         |  |                                   |       |                                     |  |        |           |        |  |        |       |        |  |        |           |        |  |   |       |   |  |  |           |  |  |   |     |  |  |  |           |  
|------------------------------------------------------------------------ |  | --------------------------------- | ----- | ----------------------------------- |  | ------ | --------- | ------ |  | ------ | ----- | ------ |  | ------ | --------- | ------ |  | - | ----- | - |  |  | --------- |  |  | - | --- |  |  |  | --------- | -
|                                                                         |  | For the Six Months Ended June 30, |       | For the Three Months Ended June 30,
|                                                                         |  |                                   |       |                                    
|                                                                         |  | 2003                              |       | 2002                                |  | 2003   |           | 2002  
|                                                                         |  |                                   |       |                                     |  |        |           |       
|                                                                         |  | Income                            |       | Shares                              |  | Income |           | Shares |  | Income |       | Shares |  | Income |           | Shares
|                                                                         |  |                                   |       |                                     |  |        |           |        |  |        |       |        |  |        |           |       
|Net income as reported                                                   |  | $                                 | 3,089 |                                     |  |        |           |        |  | $      | 1,108 |        |  |        |           |        |  | $ | 1,835 |   |  |  |           |  |  | $ | 754 |  |  |  |           |  
|Less: preferred stock dividend                                           |  |                                   | (93   | )                                   |  |        |           |        |  |        |       |        |  |        |           |        |  |   | (43   | ) |  |  |           |  |  |   |     |  |  |  |           |  
|Shares outstanding at end of period                                      |  |                                   |       |                                     |  |        | 2,800,578 |        |  |        |       |        |  |        | 2,021,927 |        |  |   |       |   |  |  | 2,800,578 |  |  |   |     |  |  |  | 2,021,927 |  
|Impact of weighting shares issued/(purchased) during the period          |  |                                   |       |                                     |  |        | 24,369    |        |  |        |       |        |  |        | (32,270   | )      |  |   |       |   |  |  | 7,314     |  |  |   |     |  |  |  | (19,847   | )
|                                                                         |  |                                   |       |                                     |  |        |           |        |  |        |       |        |  |        |           |        |  |   |       |   |  |  |           |  |  |   |     |  |  |  |           |  
|Used in Basic EPS                                                        |  | $                                 | 2,996 |                                     |  |        | 2,824,947 |        |  | $      | 1,108 |        |  |        | 1,989,657 |        |  | $ | 1,792 |   |  |  | 2,807,892 |  |  | $ | 754 |  |  |  | 2,002,080 |  
|Plus: Interest on Convertible Debentures
assuming conversion (after tax) |  |                                   |       |                                     |  |        |           |        |  |        | 111   |        |  |        |           |        |  |   |       |   |  |  |           |  |  |   | 55  |  |  |  |           |  
|Dilutive effect of outstanding
stock options and warrants                |  |                                   |       |                                     |  |        | 261,715   |        |  |        |       |        |  |        | 125,871   |        |  |   |       |   |  |  | 275,639   |  |  |   |     |  |  |  | 126,836   |  
|Dilutive effect of convertible
debentures                                |  |                                   |       |                                     |  |        |           |        |  |        |       |        |  |        | 775,781   |        |  |   |       |   |  |  |           |  |  |   |     |  |  |  | 766,500   |  
|                                                                         |  |                                   |       |                                     |  |        |           |        |  |        |       |        |  |        |           |        |  |   |       |   |  |  |           |  |  |   |     |  |  |  |           |  
|Used in diluted EPS                                                      |  | $                                 | 2,996 |                                     |  |        | 3,086,662 |        |  | $      | 1,219 |        |  |        | 2,891,309 |        |  | $ | 1,792 |   |  |  | 3,083,531 |  |  | $ | 809 |  |  |  | 2,895,416 |  
|                                                                         |  |                                   |       |                                     |  |        |           |        |  |        |       |        |  |        |           |        |  |   |       |   |  |  |           |  |  |   |     |  |  |  |           |  

The following table illustrates the effect on net income and earnings per share
if the Company had applied the fair value recognition of SFAS No. 123,
Accounting for Stock Based Compensation, to stock based employee compensation
(dollar amounts in thousands, except per share data):

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|                                              |                                                                                                |  |                          |           |                            |  |           |           |           |  |           |           |   |  |           |          |  
|--------------------------------------------- | ---------------------------------------------------------------------------------------------- |  | ------------------------ | --------- | -------------------------- |  | --------- | --------- | --------- |  | --------- | --------- | - |  | --------- | -------- | -
|                                              |                                                                                                |  | For the Six Months Ended |           | For the Three Months Ended
|                                              |                                                                                                |  |                          |           |                           
|                                              |                                                                                                |  | 6/30/2003                |           | 6/30/2002                  |  | 6/30/2003 |           | 6/30/2002
|                                              |                                                                                                |  |                          |           |                            |  |           |           |          
|Net income:                                   |                                                                                                |  |                          |           |                            |  |           |           |           |  |           |           |   |  |           |         
|                                              | As reported                                                                                    |  | $                        | 3,088,728 |                            |  | $         | 1,107,107 |           |  | $         | 1,834,746 |   |  | $         | 753,285  |  
|                                              | Less: Preferred stock dividend                                                                 |  |                          | (93,819   | )                          |  |           |          |           |  |           | (43,750   | ) |  |           |         |  
|                                              | Stock-based compensation using the intrinsic value method                                      |  |                          |          |                            |  |           |          |           |  |           |          |   |  |           |         |  
|                                              | Stock-based compensation that would have been reported
using the fair value method of SFAS 123 |  |                          | (168,202  | )                          |  |           | (262,542  | )         |  |           | (79,584   | ) |  |           | (223,229 | )
|                                              |                                                                                                |  |                          |           |                            |  |           |           |           |  |           |           |   |  |           |         
|                                              | Pro Forma Net Income - Used in Basic Earnings Per Share                                        |  |                          | 2,826,707 |                            |  |           | 844,565   |           |  |           | 1,711,412 |   |  |           | 530,056  |  
|                                              | Add: interest expense on convertible debt                                                      |  |                          |          |                            |  |           | 111,000   |           |  |           |          |   |  |           | 54,750   |  
|                                              |                                                                                                |  |                          |           |                            |  |           |           |           |  |           |           |   |  |           |         
|                                              | Pro Forma Net Income - Used in Diluted Earnings Per Share                                      |  | $                        | 2,826,707 |                            |  | $         | 955,565   |           |  | $         | 1,711,412 |   |  | $         | 584,806  |  
|                                              |                                                                                                |  |                          |           |                            |  |           |           |           |  |           |           |   |  |           |         
|Weighted Average Shares Outstanding - Basic   |                                                                                                |  | 2,824,947                |           |                            |  | 1,989,657 |           |           |  | 2,807,892 |           |   |  | 2,002,080 |         
|Weighted Average Shares Outstanding - Diluted |                                                                                                |  | 3,086,662                |           |                            |  | 2,891,309 |           |           |  | 3,083,531 |           |   |  | 2,895,416 |         
|Basic Earnings per share                      |                                                                                                |  |                          |           |                            |  |           |           |           |  |           |           |   |  |           |         
|                                              | As reported                                                                                    |  | $                        | 1.06      |                            |  | $         | 0.56      |           |  | $         | 0.64      |   |  | $         | 0.38     |  
|                                              | Pro forma                                                                                      |  | $                        | 1.00      |                            |  | $         | 0.42      |           |  | $         | 0.61      |   |  | $         | 0.26     |  
|Earnings per share - assuming dilution        |                                                                                                |  |                          |           |                            |  |           |           |           |  |           |           |   |  |           |         
|                                              | As reported                                                                                    |  | $                        | 0.97      |                            |  | $         | 0.42      |           |  | $         | 0.58      |   |  | $         | 0.28     |  
|                                              | Pro forma                                                                                      |  | $                        | 0.92      |                            |  | $         | 0.33      |           |  | $         | 0.56      |   |  | $         | 0.20     |  

The following table sets forth the information that was used in calculating the
Companys book value per common share as of June 30, 2003 and December 31, 2002
(dollar amounts in thousands):

|                                    |                   |   |           |           |              |   |           |           | 
|----------------------------------- | ----------------- | - | --------- | --------- | ------------ | - | --------- | --------- | 
|                                    |                   |   | June 30,  |           | December 31,
|                                    |                   |   | 2003      |           | 2002        
|                                    |                   |   |           |           |             
|Period-end shares outstanding       |                   |   |           |           |              |   |           |          
|                                    | Basic             |   |           | 2,800,578 |              |   |           | 2,849,680 | 
|                                    | Dilutive Warrants |   |           | 0         |              |   |           | 0         | 
|                                    | Dilutive Options  |   |           | 0         |              |   |           | 0         | 
|                                    |                   |   |           |           |              |   |           |          
|Used in book value per
common share |                   |   | 2,800,578 |           |              |   | 2,849,680 |          
|Book value per common share         |                   | $ | 6.82      |           |              | $ | 6.11      |          
|                                    |                   |   |           |           |              |   |           |          

Note #8  Subsequent Events

On April 9, 2003, the Company announced the signing of a definitive merger
agreement pursuant to which the Companys wholly-owned subsidiary, Vineyard
Bank, was to acquire Southland Business Bank, a California-chartered commercial
bank. The merger was completed on July 4, 2003. Under the terms of the merger
agreement, shareholders of Southland Business Bank received total consideration
of $3.2 million for the 527,906 shares currently outstanding which was paid in
approximately 166,000 newly issued shares of common stock of the Company.
Southland Business Bank was headquartered in Irwindale, California, and had
total assets of $33.7 million, total deposits of $31.3 million and total
stockholders equity of $2.4 million as of June 30, 2003.

Concurrent with the filing of this Form 10-Q, the Company filed a Registration
Statement on Form S-2 with the Securities and Exchange Commission to register
up to 1,150,000 shares of the Companys      % Series B Noncumulative Convertible
Preferred Stock (Series B Preferred Stock) and a number of shares of the
Companys common stock issuable upon conversion of the Series B Preferred
Stock. Each share of Series B Preferred Stock will be convertible into shares
of the Companys common stock at a to-be-determined conversion price, which is
subject to certain adjustments.

In July 2003, the Company announced the initiation of a quarterly cash dividend
program. The Company also announced the declaration of a cash dividend of
$0.02 per share payable on August 26, 2003 to shareholders of record as of
August 11, 2003.

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ITEM 2. Managements Discussion and Analysis of Financial Condition and Results of Operations

Managements discussion and analysis of financial condition and results of
operations is intended to provide a better understanding of the significant
changes in trends relating to the Companys business, financial condition,
results of operations, liquidity and interest rate sensitivity. The following
discussion and analysis should be read in conjunction with the Companys
quarterly unaudited Consolidated Financial Statements, and notes thereto,
contained earlier in this Report.

Our discussion and analysis of our financial condition and results of
operations are based upon our Consolidated Financial Statements, which have
been prepared in accordance with accounting principals generally accepted in
the United States. The preparation of these financial statements requires us
to make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses, and related disclosure of contingent assets
and liabilities. On an on-going basis, we evaluate our estimates including
those related to allowance for loan losses and the value of carried securities.
We base our estimates on historical experience and on various other
assumptions that are believed to be reasonable under the circumstances, the
results of which form the basis for making judgments about the carrying values
of assets and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates.

Business and Organization

Vineyard National Bancorp

The Company is a California-chartered bank holding company that commenced
business in December 1988 when it acquired all of the voting stock of Vineyard
Bank, a California-chartered commercial bank. The Bank commenced business in
September 1981 as a national banking association and converted to a California
bank charter and took its present name in August 2001. The Bank operates under
the supervision of the California Department of Financial Institutions and the
Federal Deposit Insurance Corporation. At June 30, 2003, the Company had
consolidated total assets of $611.3 million, total deposits of $433.8 million
and consolidated stockholders equity of $21.5 million. The Companys common
stock is publicly traded on the Nasdaq National Market under the symbol VNBC.
In July 2003, the Company completed the acquisition of Southland Business
Bank, a California-chartered commercial bank, located in Irwindale, California.
At June 30, 2003, Southland Business Bank had total assets of $33.7 million,
total deposits of $31.3 million and total stockholders equity of $2.4 million.

The Bank, which is the Companys primary asset, is primarily involved in
attracting deposits from individuals and businesses and using those deposits,
together with borrowed funds, to originate and invest in various types of loans
and investment securities. The Bank operates eight full-service branch offices
located in each of the communities of Rancho Cucamonga, Chino, Diamond Bar, La
Verne, Crestline, Blue Jay, Irwindale and Corona, all of which are located
within Los Angeles and San Bernardino counties, California, and currently has
three loan production offices located in Manhattan Beach, San Diego and Beverly
Hills, California. The Bank anticipates opening an additional loan production
office in Irvine, California and converting its loan production office located
in Manhattan Beach, California into a full-service branch office in the third
quarter of 2003.

The Companys Strategic Plan

Since the hiring of the Companys president and chief executive officer in
October 2000, the Company has experienced significant growth pursuant to the
execution of the Companys strategic business plan, which emphasizes growth
through the expansion of the Companys lending products and deposit services.
As the Company has implemented its growth strategy, it has added additional
executive management personnel with developed business banking and service
skills, concentrating on a sales and service approach to its banking business.
The Companys new management team has focused its efforts into developing a
customer-oriented service philosophy, while expanding the Companys lending
products by creating various specialty lending groups. The Company is focused
on providing relationship banking services to the following markets: (i) the
Inland Empire region of Southern California, which primarily includes San
Bernardino and Riverside Counties, (ii) the coastal communities surrounding Los
Angeles, California and (iii) the San Gabriel Valley region of Los Angeles.
The Company has targeted these markets because of the Companys experience and
knowledge of, as well as the anticipated continued growth and potential for
development in, these markets.

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Expanded Product Offering.During the last two years, the Bank has emphasized
the growth of its commercial loan portfolio and has augmented its traditional
commercial and residential loans and services with several specialty lending
and depository services.

| |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |  | In 2001, the Bank began originating higher-end market
single-family construction loans within the coastal community of Los
Angeles County, California (primarily Manhattan Beach, Hermosa
Beach, Palos Verdes and Redondo Beach) where the Company believes it
has significant market share. These types of construction loans
typically range from $0.8 million to $2.5 million. The Banks
single-family residential coastal construction loans amounted to
$144.4 million at June 30, 2003 and $89.5 million at December 31,
2002.                                                                                                                                                                                                                        
|
| |  |  | In 2002, the Bank began originating single-family residential
tract construction loans secured by newly constructed entry level
homes. These loans are primarily originated within the Inland
Empire of Southern California. These types of construction loans
typically range from $3.0 million to $7.5 million. The Banks
single-family residential tract construction loans amounted to
$63.7 million at June 30, 2003 and $14.2 million at December 31, 2002.                                                                                                                                                                                                                                                                                           
|
| |  |  | In 2002, the Bank also began originating Small Business
Administration (SBA) loans and religious loans, which are
compromised of loans to churches and private schools, throughout its
market area. SBA loans amounted to $5.4 million at June 30, 2003
and $3.5 million at December 31, 2002. Religious loans amounted to
$6.0 million at June 30, 2003. The Company did not have any
outstanding religious loans at December 31, 2002. The Company
anticipates significantly increasing the origination of these types
of loans.                                                                                                                                                                                                                         
|
| |  |  | In 2003, the Bank began offering private banking services
targeted to high-income individuals in the coastal communities
surrounding Los Angeles.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| |  |  | In the third quarter of 2003, the Bank intends to establish a
new income property lending division to service the growing
commercial and apartment building market in Southern California.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| |  |  | In order to expand the Banks core deposit franchise, the
Bank has focused on introducing additional products and services to
obtain money market and time deposits by bundling them with other
consumer services. Business deposits have been pursued by offering
an expanded courier network, by introduction of cash management
products and by specific targeting of small business customers. The
Banks core deposit franchise has been built around the community
banking system, which has resulted in deposit growth of 50.9% for
the six months ended June 30, 2003 and 80.4% for the year ended
December 31, 2002. At June 30, 2003, total deposits amounted to
$434.1 million and non-interest bearing demand deposits amounted to
$78.9 million.

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Each of the foregoing specialty lending groups and depository services bring
diversity to the Banks existing product lines, offering its customers greater
flexibility while providing additional opportunities for the Bank to serve new
customers within its primary market areas. The Banks total loan growth
amounted to 54.7% for the six months ended June 30, 2003 and 84.1% for the year
ended December 31, 2002.

Relationship Banking.The Company continues to emphasize the relationship
banking focus that was initiated in 2001. The Company continues to seek and
retain experienced banking professionals with developed banking and service
skills who share its customer-oriented service philosophy. The Company
believes that relationship banking is best delivered in well-appointed and
efficient banking centers that provide the appropriate tools and environment
for the Companys customers. To that end, the Banks facilities are being
redesigned to incorporate user-friendly technology and personal service to
facilitate the Companys focus on relationship banking.

Strategic Expansion.The Company has experienced significant growth over the
last three years in its branch network and its asset size. The Company will
continue to expand its branch network through new offices in selected markets
and opportunistic acquisitions. The Company opened a new branch office in
Corona, California in the second quarter of 2003 and intends to convert its
loan production office in Manhattan Beach, California into a full-service
branch office during the third quarter of 2003. In addition, the Bank
anticipates opening an additional loan production office in Irvine, California
during the third quarter of 2003. The Companys acquisition of Southland
Business Bank was consummated in July 2003. As a result of the acquisition,
the Company acquired a branch office in Irwindale, California.

Asset Growth.The Companys total assets as of June 30, 2003 were $611.3
million as compared to $110.8 million as of December 31, 2000. The Company
believes it can grow its assets while maintaining its asset quality. The
Companys lending professionals are well experienced and follow policies and
procedures that the Company believes provide for a rigorous underwriting of all
loans originated by the Bank. At June 30, 2003, the Bank had $0.1 million of
non-performing loans and no real estate owned.

Results of Operations

Net income for the three months ending June 30, 2003 and 2002, was $1.8 million
and $0.8 million, respectively, representing an increase of 143% for the three
months ended June 30, 2003 as compared to the same period in 2002. On a per
diluted share basis, net income was $0.58 and $0.28 for the three months ended
June 30, 2003 and 2002, respectively. Prior period earnings per share were
adjusted for the 5% stock dividend declared in December 2002.

Net income for the six months ending June 30, 2003 and 2002, was $3.1 million
and $1.1 million, respectively, representing an increase of 179% for the six
months ended June 30, 2003 as compared to the same period in 2002. On a per
diluted share basis, net income was $0.97 and $0.42 for the six months ended
June 30, 2003 and 2002, respectively. Prior period earnings per share were
adjusted for the 5% stock dividend declared in December 2002.

Operating results demonstrated a significant increase in the first six months
of 2003 over the same period in 2002 as the volume of earning assets increased.
The growth in earning assets was primarily funded by the growth in deposits
and other borrowings. The catalyst for the Companys growth continues to be
its efforts to attract stable, core deposits from within the Banks community
markets.

The Companys net interest income before its provision for possible loan losses
increased by $2.9 million or 91% for the three months ended June 30, 2003 as
compared with the second quarter of 2002. Non-interest income increased by
$1.3 million or 195% in the second quarter of 2003 as compared to the same
period in 2002. Thus, total net revenue (net interest income and non-interest
income) for the three months ended June 30, 2003 increased by $4.2 million or
110% as compared to the same period in 2002.

The Companys net interest income before its provision for possible loan losses
increased by $4.8 million or 83% for the six months ended June 30, 2003 as
compared with the first six months of 2002. Non-interest income increased by
$2.1 million or 176% in the first six months of 2003 as compared to the same
period in 2002. Thus, total net revenue for the six months ended June 30, 2003
increased by $6.9 million or 99% as compared to the same period in 2002.

Total non-interest expense was $3.6 million and $2.2 million for the three
months ended June 30, 2003 and 2002, respectively. This
represents an increase of
$1.4 million or 63%. The largest item contributing to non-interest expense was
salaries and benefits which represents approximately 50% of total non-interest
expense for each of those periods. In

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order to support its growth, the Company hired additional employees for
business development and several experienced managers in fiscal 2002. The
Companys efficiency ratio, however, which is a measure of non-interest expense
divided by net interest income plus non-interest income, improved from 58% for
the three months ended June 30, 2002 to 45% for the three months ended June 30,
2003 due to the Company achieving efficiencies of scale as it continues to
grow.

Total non-interest expense was $6.9 million and $4.6 million for the six months
ended June 30, 2003 and 2002, respectively. This was an increase of $2.3
million or 50%. The majority of this increase was in salaries and benefits
expense and occupancy expense as the Company continues to open new branch
locations and add new business lines. The Companys efficiency ratio improved
from 66% for the six months ended June 30, 2002 to 50% for the six months ended
June 30, 2003.

The quality of the Companys loan portfolio continued to perform well as
compared to peer group standards, producing net recoveries of $3,000 and
$13,000 in the three and six months ended June 30, 2003 as compared to $89,000
and $102,000 in net loan charge-offs for the same periods in 2002. The
provision for possible loan losses was $1.3 million and $1.8 million for the
three and six months ended June 30, 2003, respectively. This compares to a provision for
possible loan losses in the amount of $0.3 million and $0.5 million for the
three and six months ended June 30, 2002, respectively. The provision for
possible loan losses was increased to support the increasing loan balances for
each of the periods presented as well as to reflect the increased risk of
construction and commercial loans. The allowance for possible loan losses at
June 30, 2003 was $4.8 million or 1.21% of total loans as compared to $2.1
million or 1.07% of total loans at June 30, 2002. At June 30, 2003, the
Company reported $0.1 million of impaired or non-performing loans and $0 of
other real estate owned through foreclosure as compared to $0.1 million and $0
at June 30, 2002.

Beginning in early 2001, the Company began to implement an asset/liability
management strategy that was built around the risk elements of interest rate,
asset duration and funding risks. A component of this strategy was to deploy
excess liquidity previously invested in federal funds into higher yielding
mortgage-backed securities with relatively short duration and high cash flow
components. The Company increased the investment portfolio accordingly, which
enhanced the Companys overall yields and better addressed the risk elements
identified above. Due to declines in market rates of interest, the Company began to realize prepayments on
call options on certain of its mortgage-backed security investments and
liquidated those securities prior to market premium erosion while generating
gains on sale of investment securities of $1.0 million and $1.6 million for the
quarter and six months ended June 30, 2003, respectively. This compares to
gains on sale of investment securities of $0.1 million and $0.2 million for the
quarter and six months ended June 30, 2002. The Companys investment
securities increased by $129.6 million to $179.1 million at June 30, 2003 as
compared to $49.5 million at June 30, 2002. The increase in investment
securities provided an increase of $1.1 million and $1.9 million in interest
income for the three and six month periods ended June 30, 2003,
respectively, as compared to
the same periods in 2002. Interest income from investment
securities for the three months ended June 30, 2003 and 2002 was $1.7 million
and $0.6 million, respectively. Interest income from investment securities for
the six months ended June 30, 2003 and 2002 was $3.0 million and $1.1 million,
respectively.

At June 30, 2003, the Banks equity was $47.5 million. As a result, the Bank
exceeded the required capital levels to be considered well capitalized.
Pursuant to regulatory guidelines under prompt corrective action rules, a bank
must have total risk-based capital of 10% or greater, Tier 1 capital of 6% or
greater and a leverage ratio of 5% or greater to be considered well
capitalized. At June 30, 2003, the Banks total risk-based capital, Tier 1
capital and leverage ratios were 12.0%, 10.9% and 9.0%, respectively. On a
consolidated basis, the Company has similar ratios. The minimum ratios that
the Company must meet are total risk-based capital of 8%, Tier 1 capital of 4%
and a leverage ratio of 4%. At June 30, 2003, the Companys total risk-based
capital, Tier 1 capital and leverage ratios were 11.1%, 6.6%, and 5.4%,
respectively.

Net Interest Income

The Companys earnings are derived predominately from net interest income,
which is the difference between the interest earned on loans and securities and
the interest paid on deposits and borrowings. The net interest margin is the
net interest income divided by the average interest earning assets. Net
interest income and net interest margin are affected by several factors
including (1) the level of, and the relationship between, the dollar amount of
interest earning assets and interest bearing liabilities, (2) the relationship
between repricing or maturity of the Companys variable rate and fixed rate
loans and securities, and its deposits and borrowings, and (3) the magnitude of
the Companys non-interest earning assets, including non-accrual loans and
other real estate loans.

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Total interest income for the three months ended June 30, 2003 and 2002 was
$8.6 million and $4.5 million, respectively, while total interest expense was
$2.6 million and $1.3 million, respectively. Therefore, the net interest
income was $6.0 million and $3.2 million for the quarters ended June 30, 2003
and 2002, respectively.

Total interest income for the six months ended June 30, 2003 and 2002 was $15.2
million and $8.2 million, respectively, while total interest expense was $4.7
million and $2.5 million, respectively. Therefore, the net interest income was
$10.5 million and $5.7 million for the six months ended June 30, 2003 and 2002,
respectively.

The net interest margin for the three month period ended June 30, 2003 was 4.7%
as compared to 5.6% for the second quarter of 2002 which is a decrease of 90
basis points. At January 31, 2002, the national prime rate was 4.75%. During
the fourth quarter of 2002, the Federal Reserve Bank decreased the overnight
borrowing rate by 50 basis points, thus bringing the national prime rate down
to 4.25%, where it remained until June 24, 2003, when it was lowered to 4.00%.
Consequently, the Company has experienced some compression in its net interest
margin as new loans are generated, or existing loans are repriced, at a lower
rate. Interest yield on loans decreased from 9.1% for the quarter ended June
30, 2002 to 7.7% for the quarter ended June 30, 2003. Although the Bank has
many loans that have reached their floor rates and have not continued to adjust
downwards as interest rates declined, certain higher rate loans that paid off
were replaced with new loans originated at lower market rates. Loan fees, which
are included in interest income, also contributed to interest income.
Construction loans and commercial real estate loans generate the bulk of all
loan fee income. As the Company continues its emphasis in single-family
coastal and tract home construction loans, the volume of construction fees have
increased since the later part of 2002. Those fees are deferred and amortized
over the life of the loans. Construction loans generally have a duration of 12
months and as the level of construction loans continue to grow, the yield on
loans will increase as a result and will reach a greater constant level over a
twelve month cycle. For the three months ended June 30, 2003, loan fee income
represented $1.0 million or 14% of the $6.8 million in interest and fees on
loans. For the three months ended June 30, 2002, loan fee income was $0.7
million or 19% of the $3.8 million in interest and fees on loans.

The net interest margin for the six month period ended June 30, 2003 was 4.7%
as compared to 5.6% for the six months ended June 30, 2002 which is a decrease
of 90 basis points. Interest yield on loans decreased from 9.2% for the six
months ended June 30, 2002 to 7.7% for the same period in 2003. For the six
months ended June 30, 2003, loan fee income represented $1.6 million or 13% of
the $12.1 million in interest and fees on loans. For the six months ended June
30, 2002, loan fee income was $1.3 million or 18% of the $7.1 million in
interest and fees on loans.

Total interest expense was $2.6 million and $1.3 million for the three
months ended June 30, 2003 and 2002, respectively, for a total increase of $1.3
million. Interest expense on deposits totaled $1.9 million during the three
months ended June 30, 2003 compared to $1.0 million during the three months
ended June 30, 2002 representing an increase of $0.9 million. Although
interest-bearing deposits increased in 2003 compared to 2002, the Company
continues to offer competitive rates and has maintained the cost of funds on
its deposits at 2.0% for each of the quarters ended June 30, 2003 and 2002.
The cost of funds of deposits includes non-interest bearing deposits. Average
non-interest bearing deposits increased from $51.4 million for the quarter
ended June 30, 2002 to $63.4 million for the quarter ended June 30, 2003.

The average interest rate on FHLB and overnight borrowings has decreased from
1.7% for the quarter ended June 30, 2002 to 1.6% for the quarter ended June 30,
2003 as market rates have decreased as discussed above. The average interest
rate on these borrowings decreased from 1.9% for the six months ended June 30,
2002 to 1.8% for the six months ended June 30, 2003.

An additional form of funding for the Banks growth was debt issued by the
Company which resulted in a higher consolidated cost of funds beyond that of
deposits and FHLB borrowings. In December 2002, the Company issued $5.0
million in Trust Preferred Securities and $5.0 million in subordinated debt.
The Company also borrowed $5.0 million on a line of credit with a financial
institution, which the Company intends to pay off with a portion of
the proceeds from the Series B Preferred Stock offering. Those instruments bear variable interest rates indexed to LIBOR
and adjust on a quarterly basis. The consolidated cost of funds for the
Company for the three months ended June 30, 2003 was 2.3%, down from 3.0% for
the same period ended June 30, 2002. As market rates have decreased, the
interest on these variable notes has decreased. The consolidated cost of funds
for the Company for the six months ended June 30, 2003 was 2.4%, down from 3.1%
for the same period ended June 30, 2002. The Company anticipates
issuing up to an additional $20.0 million of trust preferred
securities during the third or fourth quarter of 2003.

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The following tables present the distribution of the Companys average
assets, liabilities, and stockholders equity in combination with the total
dollar amounts of interest income from average interest earning assets and the
resultant yields without giving effect for any tax exemption, and the dollar
amounts of interest expense and average interest bearing liabilities, expressed
both in dollars and rates for the three and six months ended June 30, 2003.

|                                             |                            |                                            |         |                                     |         |          |       |            |       |         |     |          |     |            |         |         |         |         |       |       |       |  |     |      |     |  
|-------------------------------------------- | -------------------------- | ------------------------------------------ | ------- | ----------------------------------- | ------- | -------- | ----- | ---------- | ----- | ------- | --- | -------- | --- | ---------- | ------- | ------- | ------- | ------- | ----- | ----- | ----- |  | --- | ---- | --- | -
|                                             |                            |                                            |         | Dollars in Thousands               
|                                             |                            |                                            |         | For the Three Months Ended June 30,
|                                             |                            |                                            |         |                                    
|                                             |                            |                                            |         | 2003                                |         | 2002    
|                                             |                            |                                            |         |                                     |         |         
|                                             |                            |                                            |         | Average                             |         |          |       |            |       | Average |     | Average  |     |            |         |         |         | Average
|                                             |                            |                                            |         | Balance                             |         | Interest |       | Yield/Cost |       | Balance |     | Interest |     | Yield/Cost
|                                             |                            |                                            |         |                                     |         |          |       |            |       |         |     |          |     |           
|Assets                                       |                            |                                            |         |                                     |         |          |       |            |       |         |     |          |     |            |         |         |         |         |       |       |       |  |     |     
|                                             | Loans                      |                                            | $       | 351,252                             |         |          | $     | 6,772      |       |         |     | 7.7      | %   |            | $       | 167,217 |         |         | $     | 3,806 |       |  |     | 9.1  | %  
|                                             | Investment securities1     |                                            |         | 138,988                             |         |          |       | 1,701      |       |         |     | 4.9      | %   |            |         | 49,812  |         |         |       | 627   |       |  |     | 5.0  | %  
|                                             | Federal funds sold         |                                            |         | 15,867                              |         |          |       | 45         |       |         |     | 1.1      | %   |            |         | 7,329   |         |         |       | 29    |       |  |     | 1.6  | %  
|                                             | Other investments          |                                            |         | 5,170                               |         |          |       | 63         |       |         |     | 4.9      | %   |            |         | 1,054   |         |         |       | 6     |       |  |     | 2.3  | %  
|                                             |                            |                                            |         |                                     |         |          |       |            |       |         |     |          |     |            |         |         |         |         |       |       |       |  |     |     
|                                             |                            | Total Interest-earning assets              |         |                                     | 511,277 |          |       |            | 8,581 |         |     |          | 6.7 | %          |         |         | 225,412 |         |       |       | 4,468 |  |     |      | 7.9 | %
|                                             |                            |                                            |         |                                     |         |          |       |            |       |         |     |          |     |            |         |         |         |         |       |       |       |  |     |     
|Other assets                                 |                            |                                            | 24,804  |                                     |         |          |       |            |       |         |     |          |     |            | 19,743  |         |         |         |       |       |       |  |     |     
|                                             |                            | Less: allowance for possible loan
losses   |         |                                     | (4,036  | )        |       |            |       |         |     |          |     |            |         |         | (1,723  | )       |       |       |       |  |     |      |     |  
|                                             |                            |                                            |         |                                     |         |          |       |            |       |         |     |          |     |            |         |         |         |         |       |       |       |  |     |     
|                                             |                            | Total average assets                       |         | $                                   | 532,045 |          |       |            |       |         |     |          |     |            |         | $       | 243,432 |         |       |       |       |  |     |      |     |  
|                                             |                            |                                            |         |                                     |         |          |       |            |       |         |     |          |     |            |         |         |         |         |       |       |       |  |     |     
|Liabilities and Stockholders Equity         |                            |                                            |         |                                     |         |          |       |            |       |         |     |          |     |            |         |         |         |         |       |       |       |  |     |     
|                                             | Savings deposits           |                                            | $       | 175,846                             |         |          |       | 876        |       |         |     | 2.0      | %   |            | $       | 76,163  |         |         |       | 384   |       |  |     | 2.0  | %  
|                                             | Time deposits              |                                            |         | 137,192                             |         |          |       | 997        |       |         |     | 2.9      | %   |            |         | 66,480  |         |         |       | 597   |       |  |     | 3.6  | %  
|                                             | Subordinated debt          |                                            |         | 5,000                               |         |          |       | 55         |       |         |     | 4.4      | %   |            |         |        |         |         |       |      |       |  |     |     |    
|                                             | Convertible debentures     |                                            |         |                                    |         |          |       |           |       |         |     | 0.0      | %   |            |         | 3,650   |         |         |       | 94    |       |  |     | 10.3 | %  
|                                             | Trust Preferred Securities |                                            |         | 17,000                              |         |          |       | 213        |       |         |     |          |     |            |         | 12,000  |         |         |       | 168   |       |  |     | 5.6  | %  
|                                             | FHLB and other borrowings  |                                            |         | 109,146                             |         |          |       | 437        |       |         |     | 1.6      | %   |            |         | 20,643  |         |         |       | 85    |       |  |     | 1.7  | %  
|                                             |                            |                                            |         |                                     |         |          |       |            |       |         |     |          |     |            |         |         |         |         |       |       |       |  |     |     
|                                             |                            | Total interest-bearing liabilities         |         |                                     | 444,184 |          |       |            | 2,578 |         |     |          | 2.3 | %          |         |         | 178,936 |         |       |       | 1,328 |  |     |      | 3.0 | %
|                                             |                            |                                            |         |                                     |         |          |       |            |       |         |     |          |     |            |         |         |         |         |       |       |       |  |     |     
|                                             | Demand deposits            |                                            |         | 63,370                              |         |          |       |            |       |         |     |          |     |            |         | 51,424  |         |         |       |       |       |  |     |      |    
|                                             | Other liabilities          |                                            |         | 3,668                               |         |          |       |            |       |         |     |          |     |            |         | 1,628   |         |         |       |       |       |  |     |      |    
|                                             |                            |                                            |         |                                     |         |          |       |            |       |         |     |          |     |            |         |         |         |         |       |       |       |  |     |     
|Total average liabilities                    |                            |                                            | 511,222 |                                     |         |          |       |            |       |         |     |          |     |            | 231,988 |         |         |         |       |       |       |  |     |     
|Stockholders equity                         |                            |                                            | 20,823  |                                     |         |          |       |            |       |         |     |          |     |            | 11,444  |         |         |         |       |       |       |  |     |     
|                                             |                            |                                            |         |                                     |         |          |       |            |       |         |     |          |     |            |         |         |         |         |       |       |       |  |     |     
|                                             |                            | Total liabilities and
Stockholders equity |         | $                                   | 532,045 |          |       |            |       |         |     |          |     |            |         | $       | 243,432 |         |       |       |       |  |     |      |     |  
|                                             |                            |                                            |         |                                     |         |          |       |            |       |         |     |          |     |            |         |         |         |         |       |       |       |  |     |     
|Net interest spread2                         |                            |                                            |         |                                     |         |          |       |            |       |         | 4.4 | %        |     |            |         |         |         |         |       |       |       |  | 5.0 | %   
|                                             |                            |                                            |         |                                     |         |          |       |            |       |         |     |          |     |            |         |         |         |         |       |       |       |  |     |     
|Net interest income
and net interest margin3 |                            |                                            |         |                                     |         | $        | 6,003 |            |       |         | 4.7 | %        |     |            |         |         |         | $       | 3,140 |       |       |  | 5.6 | %   
|                                             |                            |                                            |         |                                     |         |          |       |            |       |         |     |          |     |            |         |         |         |         |       |       |       |  |     |     

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|                                             |                            |                                            |        |         |         |          |        |            |        |         |     |                                   |     |            |        |         |         |         |       |       |       |  |     |      |     |  
|-------------------------------------------- | -------------------------- | ------------------------------------------ | ------ | ------- | ------- | -------- | ------ | ---------- | ------ | ------- | --- | --------------------------------- | --- | ---------- | ------ | ------- | ------- | ------- | ----- | ----- | ----- |  | --- | ---- | --- | -
|                                             |                            |                                            |        |         |         |          |        |            |        |         |     | For the Six Months Ended June 30, |     |            |        |         |         |         |       |      
|                                             |                            |                                            |        |        
|                                             |                            |                                            |        |         |         |          |        | 2003       |        |         |     |                                   |     |            |        |         |         | 2002    |       |       |       | 
|                                             |                            |                                            |        |         |         |         
|                                             |                            |                                            |        | Average |         |          |        |            |        | Average |     | Average                           |     |            |        |         |         | Average
|                                             |                            |                                            |        | Balance |         | Interest |        | Yield/Cost |        | Balance |     | Interest                          |     | Yield/Cost
|                                             |                            |                                            |        |         |         |          |        |            |        |         |     |                                   |     |           
|Assets                                       |                            |                                            |        |         |         |          |        |            |        |         |     |                                   |     |            |        |         |         |         |       |       |       |  |     |     
|                                             | Loans                      |                                            | $      | 315,767 |         |          | $      | 12,058     |        |         |     | 7.7                               | %   |            | $      | 156,728 |         |         | $     | 7,116 |       |  |     | 9.2  | %  
|                                             | Investment securities1     |                                            |        | 121,981 |         |          |        | 2,986      |        |         |     | 4.9                               | %   |            |        | 44,670  |         |         |       | 1,077 |       |  |     | 4.9  | %  
|                                             | Federal funds sold         |                                            |        | 11,942  |         |          |        | 68         |        |         |     | 1.1                               | %   |            |        | 4,846   |         |         |       | 39    |       |  |     | 1.6  | %  
|                                             | Other investments          |                                            |        | 3,994   |         |          |        | 99         |        |         |     | 5.0                               | %   |            |        | 761     |         |         |       | 8     |       |  |     | 2.1  | %  
|                                             |                            |                                            |        |         |         |          |        |            |        |         |     |                                   |     |            |        |         |         |         |       |       |       |  |     |     
|                                             |                            | Total Interest-earning assets              |        |         | 453,684 |          |        |            | 15,211 |         |     |                                   | 6.8 | %          |        |         | 207,005 |         |       |       | 8,240 |  |     |      | 8.0 | %
|                                             |                            |                                            |        |         |         |          |        |            |        |         |     |                                   |     |            |        |         |         |         |       |       |       |  |     |     
|Other assets                                 |                            |                                            | 24,790 |         |         |          |        |            |        |         |     |                                   |     |            | 19,065 |         |         |         |       |       |       |  |     |     
|                                             |                            | Less: allowance for possible loan losses   |        |         | (3,597  | )        |        |            |        |         |     |                                   |     |            |        |         | (1,624  | )       |       |       |       |  |     |      |     |  
|                                             |                            |                                            |        |         |         |          |        |            |        |         |     |                                   |     |            |        |         |         |         |       |       |       |  |     |     
|                                             |                            | Total average assets                       |        | $       | 474,877 |          |        |            |        |         |     |                                   |     |            |        | $       | 224,446 |         |       |       |       |  |     |      |     |  
|                                             |                            |                                            |        |         |         |          |        |            |        |         |     |                                   |     |            |        |         |         |         |       |       |       |  |     |     
|Liabilities and Stockholders Equity         |                            |                                            |        |         |         |          |        |            |        |         |     |                                   |     |            |        |         |         |         |       |       |       |  |     |     
|                                             | Savings deposits           |                                            | $      | 160,552 |         |          |        | 1,594      |        |         |     | 2.0                               | %   |            |        | 66,344  |         |         |       | 596   |       |  |     | 1.8  | %  
|                                             | Time deposits              |                                            |        | 120,366 |         |          |        | 1,800      |        |         |     | 3.0                               | %   |            |        | 64,369  |         |         |       | 1,219 |       |  |     | 3.8  | %  
|                                             | Subordinated debt          |                                            |        | 5,000   |         |          |        | 110        |        |         |     | 4.4                               | %   |            |        |        |         |         |       |      |       |  |     |     |    
|                                             | Convertible debentures     |                                            |        |        |         |          |        |           |        |         |     | 0.0                               | %   |            |        | 3,694   |         |         |       | 185   |       |  |     | 10.1 | %  
|                                             | Trust preferred securities |                                            |        | 17,000  |         |          |        | 416        |        |         |     | 4.9                               | %   |            |        | 12,000  |         |         |       | 339   |       |  |     | 5.7  | %  
|                                             | FHLB and other borrowings  |                                            |        | 85,715  |         |          |        | 744        |        |         |     | 1.8                               | %   |            |        | 15,022  |         |         |       | 140   |       |  |     | 1.9  | %  
|                                             |                            |                                            |        |         |         |          |        |            |        |         |     |                                   |     |            |        |         |         |         |       |       |       |  |     |     
|                                             |                            | Total interest-bearing liabilities         |        |         | 388,633 |          |        |            | 4,664  |         |     |                                   | 2.4 | %          |        |         | 161,429 |         |       |       | 2,479 |  |     |      | 3.1 | %
|                                             |                            |                                            |        |         |         |          |        |            |        |         |     |                                   |     |            |        |         |         |         |       |       |       |  |     |     
|                                             | Demand deposits            |                                            |        | 61,828  |         |          |        |            |        |         |     |                                   |     |            |        | 50,246  |         |         |       |       |       |  |     |      |    
|                                             | Other liabilities          |                                            |        | 3,816   |         |          |        |            |        |         |     |                                   |     |            |        | 1,657   |         |         |       |       |       |  |     |      |    
|                                             |                            |                                            |        |         |         |          |        |            |        |         |     |                                   |     |            |        |         |         |         |       |       |       |  |     |     
|                                             | Total average liabilities  |                                            |        | 454,277 |         |          |        |            |        |         |     |                                   |     |            |        | 213,332 |         |         |       |       |       |  |     |      |    
|                                             | Stockholders equity       |                                            |        | 20,600  |         |          |        |            |        |         |     |                                   |     |            |        | 11,114  |         |         |       |       |       |  |     |      |    
|                                             |                            |                                            |        |         |         |          |        |            |        |         |     |                                   |     |            |        |         |         |         |       |       |       |  |     |     
|                                             |                            | Total liabilities and
Stockholders equity |        | $       | 474,877 |          |        |            |        |         |     |                                   |     |            |        | $       | 224,446 |         |       |       |       |  |     |      |     |  
|                                             |                            |                                            |        |         |         |          |        |            |        |         |     |                                   |     |            |        |         |         |         |       |       |       |  |     |     
|Net interest spread2                         |                            |                                            |        |         |         |          |        |            |        |         | 4.3 | %                                 |     |            |        |         |         |         |       |       |       |  | 4.9 | %   
|                                             |                            |                                            |        |         |         |          |        |            |        |         |     |                                   |     |            |        |         |         |         |       |       |       |  |     |     
|Net interest income
and net interest margin3 |                            |                                            |        |         |         | $        | 10,547 |            |        |         | 4.7 | %                                 |     |            |        |         |         | $       | 5,761 |       |       |  | 5.6 | %   
|                                             |                            |                                            |        |         |         |          |        |            |        |         |     |                                   |     |            |        |         |         |         |       |       |       |  |     |     



|1 |  | The yield for securities that are classified as available-for-sale is
based on historical amortized cost balances.                            
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------
| 
|2 |  | Net interest spread represents the average yield earned on interest
earning assets less the average rate paid on interest bearing
liabilities.
| 
|3 |  | Net interest margin is computed by dividing annualized net interest
income by total average earning assets.                                   

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Provision for Possible Loan Losses

For the three months ended June 30, 2003 and 2002, the provision for loan
losses was $1.3 million and $0.3 million, respectively. Total provision for
possible loan losses was $1.8 million for the six month period ended June 30,
2003 as compared to $0.5 million for the same period in 2002. The provision for
loan losses has increased to support the significant growth in loans
experienced during such periods and to reflect the increased risk of
construction and commercial loans.

The Companys allowance for possible loan losses was $4.8 million or 1.21% of
gross loans at June 30, 2003 compared to $2.1 million or 1.07% of gross loans
at June 30, 2002. At December 31, 2002, the allowance for possible loan losses
was $3.0 million or 1.19% of gross loans. Additions to the reserve are
effected through the provision for possible loan losses. Also affecting the
reserve are loans charged off and loans recovered. Net loan recoveries for the
three months ended June 30, 2003 were $3,000 whereas net loan charge-offs for
the three months ended June 30, 2002 were $89,000.
Net loan recoveries for the six months ended June 30, 2003 were $13,000 whereas
net loan charge-offs for the same period in 2002 were $102,000. Also, a
further addition to the allowance for possible loan losses during the six
months ended June 30, 2002, was an adjustment of $197,000 relating to the
purchased allowance for possible loan losses on an acquired loan portfolio.

Although the Company maintains an allowance for possible loan losses at a level
it considers to be adequate to provide for losses, based on presently known
conditions, there can be no assurance that such losses will not exceed the
estimated amounts, thereby adversely affecting future results of operations.
The calculation for the adequacy of the allowance for possible loan losses, and
therefore the requisite amount of the provision for possible loan losses, is
based on several factors, including underlying loan collateral, delinquency
trends, borrowers cash flow and historic loan loss experience. All of these
factors can change without notice based on market and economic conditions and
other factors.

Non-Interest Income

Non-interest income for the three and six months ended June 30, 2003 was $2.0
million and $3.3 million, respectively, as compared to $0.7 million and $1.2
million for the same respective periods of 2002. This represents an increase
of $1.3 million or 195% and $2.1 million or 176%, respectively.

In the fourth quarter of 2002, the Company began its SBA lending department.
The guaranteed portions of the SBA loans originated are eventually sold. The
sale of the guaranteed portion of the SBA loans generated income of $0.3
million and $0.5 million for the three and six months ended
June 30, 2003, respectively.

For the three and six months ended June 30, 2003, net gains from the sale of
investment securities amounted to $1.0 million and
$1.6 million, respectively, as compared to
$0.1 million and $0.2 million for the same periods in 2002, respectively. The gains were a
result of managements sale of investment securities in order to manage liquidity needs, interest rate risk,
and strategic planning in meeting capital requirements during a period when
market rates were favorable. Therefore, the Company realized gains upon sale
from its available-for-sale investment portfolio.

Income from fees and service charges also increased $0.3 million and $0.4
million for the three and six months ended June 30, 2003 as compared to the
same periods in 2002 as the volume of loans and deposits have increased.

Non-Interest Expenses

The Companys non-interest expense for the three and six months ended June 30,
2003 were $3.6 million and $6.9 million, respectively, as compared to $2.2
million and $4.6 million for the same periods in 2002, respectively. The
increases for the three and six months ended June 30, 2003 as compared to the
same periods in 2002 were $1.4 million or 64% and $2.3 million or 50%,
respectively. Non-interest expense consists primarily of (i) salaries and
other employee expenses, (ii) occupancy expenses, (iii) furniture and equipment
expenses, and (iv) data processing, marketing, professional fees, office
supplies, postage and telephone, insurance and assessments, administrative, and
other non-interest expense.

Salaries and employee benefits is the largest component of non-interest
expense. Beginning with the appointment of the Companys current Chief
Executive Officer in the fourth quarter of 2000, management has implemented
several structural changes within the operations of the Company in order to
support its strategic plan initiatives. In each of the following areas, a
seasoned and experienced individual has been recruited from other local
financial institutions to head

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their respective area: credit administration,
loan operations and construction support, SFR construction business
development, marketing, information technology, community banking, finance and
human resources. Additional personnel have been placed in business development
capacities for commercial and community banking. With the addition of these
individuals to the Companys existing personnel, the Company has been able to
produce significant growth in deposits and loans in 2003 and 2002, while
providing the infrastructure needed to support longer-term growth. The
Companys salaries and employee benefits expense increased by $1.2 million or
54% to $3.5 million for the six months ended June 30, 2003 from $2.3 million
for the six months ended June 30, 2002.

Occupancy expense increased $0.1 million or 49% and $0.2 million or 39% for the
three and six months ended June 30, 2003, respectively, from $0.2 million and $0.4 million in
the same periods of 2002, respectively. In 2002, the loan production office in Manhattan
Beach expanded into a larger facility to accommodate additional staff as the
single family coastal construction loan production increased. The Company also
entered into new office leases in San Diego and Beverly Hills for the
production of SBA loans as the Company began its SBA lending department in the
fourth quarter of 2002. In addition, the Corona branch location was opened early in
the second quarter of 2003. Correspondingly, expenses related to
furniture and fixtures increased $52,000 or 25% and $98,000 or 27% in the three and six
months ended June 30, 2003, respectively, as compared to the same periods in 2002.

Other non-interest expense increased $0.5 million or 54% and $0.8 million or
52% for the three and six months ended June 30, 2003 as compared to the
respective prior periods in 2002. Other non-interest expenses increased significantly due
primarily to the Companys implementation of its strategy to grow the Company.
All categories of other non-interest expense, with the exception of data
processing and certain administrative expenses, increased including marketing,
professional services, office supplies, postage and telephone, and insurance
due to increases in the number of employees and the volume of loan and deposit
production. In particular, the Companys marketing expense increased
significantly from $0.3 million in the first six months of 2002 to $0.6 million
in the first six months of 2003 as the Company increased its advertising and
promotional campaigns in its communities.

The following is a breakdown of other non-interest expense for the six and
three months ended June 30, 2003 and 2002 (in thousands):

|                            |                                        |                                  |   |                           |       |                             |   |      |       |      |   |     |       |  |   |     |     | 
|--------------------------- | -------------------------------------- | -------------------------------- | - | ------------------------- | ----- | --------------------------- | - | ---- | ----- | ---- | - | --- | ----- |  | - | --- | --- | 
|                            |                                        |                                  |   | Six Months Ended June 30, |       | Three Months Ended June 30,
|                            |                                        |                                  |   |                           |       |                            
|                            |                                        |                                  |   | 2003                      |       | 2002                        |   | 2003 |       | 2002
|                            |                                        |                                  |   |                           |       |                             |   |      |       |     
|Other non-interest expense: |                                        |                                  |   |                           |       |                             |   |      |       |      |   |     |       |  |   |    
|                            | Data processing                        |                                  | $ | 319                       |       |                             | $ | 356  |       |      | $ | 153 |       |  | $ | 164 |    
|                            | Marketing expenses                     |                                  |   | 617                       |       |                             |   | 271  |       |      |   | 349 |       |  |   | 167 |    
|                            | Professional expenses                  |                                  |   | 302                       |       |                             |   | 254  |       |      |   | 163 |       |  |   | 139 |    
|                            | Office supplies, postage and telephone |                                  |   | 304                       |       |                             |   | 216  |       |      |   | 160 |       |  |   | 93  |    
|                            | Insurance and assessment expense       |                                  |   | 147                       |       |                             |   | 85   |       |      |   | 78  |       |  |   | 44  |    
|                            | Administrative expense                 |                                  |   | 59                        |       |                             |   | 84   |       |      |   | 26  |       |  |   | 45  |    
|                            | Other                                  |                                  |   | 641                       |       |                             |   | 303  |       |      |   | 394 |       |  |   | 209 |    
|                            |                                        |                                  |   |                           |       |                             |   |      |       |      |   |     |       |  |   |    
|                            |                                        | Total other non-interest expense |   | $                         | 2,389 |                             |   | $    | 1,569 |      |   | $   | 1,323 |  |   | $   | 861 | 
|                            |                                        |                                  |   |                           |       |                             |   |      |       |      |   |     |       |  |   |    

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Financial Condition

Assets

At June 30, 2003, total assets increased $226.0 million or 59% to $611.3
million from $385.3 million at December 31, 2002. Assets were comprised
primarily of $391.7 million in gross loans and $179.1 million in investment
securities at June 30, 2003. This is an increase of $138.5 million or 55% in
gross loans and $91.5 million or 105% in investment securities from December
31, 2002. This was offset by a decrease of $4.8 million in Fed Funds Sold
between December 31, 2002 and June 30, 2003.

Investments

The Company increased its securities portfolio during the first six months of
2003 through the purchase of mortgage-backed securities, which are typically
insured by U.S. Government-backed agencies. The Companys securities portfolio
amounted to $179.1 million, or 29% of total assets, at June 30, 2003 and $87.6
million, or 23% of total assets, at December 31, 2002. The securities
portfolio was comprised of securities classified as available-for-sale. In
accordance with SFAS No. 115, investment securities available-for-sale are
carried at fair value and adjusted for amortization of premiums and accretions
of discounts.

The amortized cost and fair values of investment securities available-for-sale
at June 30, 2003, were (in thousands):

|                           |       |   |           |         |            |   |            |    |            |   |      |      |   |   |         |         | 
|-------------------------- | ----- | - | --------- | ------- | ---------- | - | ---------- | -- | ---------- | - | ---- | ---- | - | - | ------- | ------- | 
|                           |       |   |           |         |            |   | Gross      |    | Gross      |   |      |      |  
|                           |       |   | Amortized |         | Unrealized |   | Unrealized |    |            |   |     
|                           |       |   | Cost      |         | Gains      |   | Losses     |    | Fair Value
|                           |       |   |           |         |            |   |            |    |           
|Mortgage-backed securities |       | $ | 159,083   |         |            | $ | 7          |    |            | $ | (118 | )    |   | $ | 158,972 |        
|U.S. agency securities     |       |   | 20,038    |         |            |   | 44         |    |            |   |     |      |   |   | 20,082  |        
|                           |       |   |           |         |            |   |            |    |            |   |      |      |   |   |         |        
|                           | Total |   | $         | 179,121 |            |   | $          | 51 |            |   | $    | (118 | ) |   | $       | 179,054 | 
|                           |       |   |           |         |            |   |            |    |            |   |      |      |   |   |         |        

The amortized cost and fair values of investment securities available-for-sale
at December 31, 2002, were (in thousands):

|                           |  |           |        |            |  |            |     |            |  |   |   |  |  |   |        | 
|-------------------------- |  | --------- | ------ | ---------- |  | ---------- | --- | ---------- |  | - | - |  |  | - | ------ | 
|                           |  |           |        |            |  | Gross      |     | Gross      |  |   |   | 
|                           |  | Amortized |        | Unrealized |  | Unrealized |     |            |  |  
|                           |  | Cost      |        | Gains      |  | Losses     |     | Fair Value
|                           |  |           |        |            |  |            |     |           
|Mortgage-backed securities |  | $         | 87,364 |            |  | $          | 189 |            |  | $ |  |  |  | $ | 87,553 | 
|                           |  |           |        |            |  |            |     |            |  |   |   |  |  |   |        | 

The amortized cost and fair values of investment securities available-for-sale
at June 30, 2003, by expected maturities are shown below (in thousands).
Expected maturities may differ from contractual maturities because borrowers
may have the right to call or prepay obligations with or without call or
prepayment penalties.

|                   |  |                               |         |            |  |   |         | 
|------------------ |  | ----------------------------- | ------- | ---------- |  | - | ------- | 
|                   |  | Securities Available-for-Sale
|                   |  | at June 30, 2003             
|                   |  |                              
|                   |  | Amortized                     |         |            |  |  
|                   |  | Cost                          |         | Fair Value
|                   |  |                               |         |           
|Due after 10 years |  | $                             | 179,121 |            |  | $ | 179,054 | 
|                   |  |                               |         |            |  |   |         | 

Proceeds from sales of mortgage-backed securities available-for-sale during the
six months ended June 30, 2003 were $176.8 million. Gross gains on those sales
were $1.6 million. Included in stockholders equity at June 30, 2003 is
$39,000 of net unrealized losses, net of tax benefits, on investment securities
available-for-sale.

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Proceeds from sales of mortgage-backed securities available-for-sale during the
six months ended June 30, 2002 were $15.9 million. Gross gains on those sales
were $179,000. Included in stockholders equity at December 31, 2002 is
$109,000 of net unrealized gains, net of taxes, on investment securities
available-for-sale.

Securities with a carrying value and fair value of $179.1 million and $87.6
million at June 30, 2003 and December 31, 2002, respectively, were pledged to
secure public monies as required by law, Treasury, tax and loan deposits, and
Federal Home Loan Bank advances.

Loans

The Company continued to have significant growth in its loan portfolio,
increasing its gross loans during the first six months of 2003 by $138.5
million or 55% from $253.2 million at December 31, 2002 to $391.7 million at
June 30, 2003. All the Banks loans, commitments, and commercial and standby
letters of credit have been granted to customers in the Companys market area,
which includes the counties of Riverside, San Diego, San Bernardino, Los
Angeles, and Orange. The concentrations of credit by type of loan are set
forth below (in thousands):

|                                       |             |                               |         |          |         |              |         |        |         | 
|-------------------------------------- | ----------- | ----------------------------- | ------- | -------- | ------- | ------------ | ------- | ------ | ------- | 
|                                       |             |                               |         | June 30, |         | December 31,
|                                       |             |                               |         | 2003     |         | 2002        
|                                       |             |                               |         |          |         |             
|Commercial, financial and agricultural |             | $                             | 30,639  |          |         | $            | 19,232  |       
|Real Estate  construction             |             |                               | 216,314 |          |         |              | 110,212 |       
|Real Estate  mortgage                 |             |                               |         |          |         |              |         |       
|                                       | Commercial  |                               |         | 101,542  |         |              |         | 93,122 |        
|                                       | Residential |                               |         | 39,009   |         |              |         | 23,480 |        
|Installment loans to individuals       |             |                               | 4,529   |          |         |              | 5,659   |       
|All other loans (including overdrafts) |             |                               | 23      |          |         |              | 60      |       
|                                       |             |                               |         |          |         |              |         |       
|                                       |             |                               | 392,056 |          |         |              | 251,765 |       
|Unearned income                        |             |                               | (1,479  | )        |         |              | (626    | )     
|                                       |             |                               |         |          |         |              |         |       
|                                       |             | Loans, Net of
Unearned Income |         | $        | 390,577 |              |         | $      | 251,139 | 
|                                       |             |                               |         |          |         |              |         |       
|Loans held for sale                    |             | $                             | 1,135   |          |         | $            | 2,112   |       
|                                       |             |                               |         |          |         |              |         |       

Mortgage loans held for sale in the secondary market are carried at the lower
of cost or estimated market value in the aggregate market. The
Company currently sells substantially all of the permanent
single-family residential loans that it originates. Net unrealized
losses are recognized through a valuation allowance by charges to income.
Gains or losses realized on the sales are recognized at the time of sale and
are determined by the difference between the net proceeds and the carrying
value of the loans sold. Gains and losses on sales of loans are included in
non-interest income.

At June 30, 2003, the Bank had approximately $53.2 million in loans pledged to
secure FHLB borrowings.

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Allowance for Loan and Lease Losses

The allowance for loan and lease losses is maintained at a level which, in
managements judgment, is adequate to absorb credit losses inherent in the loan
and lease portfolio. The amount of the allowance is based on managements
evaluation of the collectibility of the loan portfolio, including the nature of
the portfolio, credit concentrations, trends in historical loss experience,
specific impaired loans, and economic conditions. The allowance is increased
by a provision for loan and lease losses, which is charged to expense and
reduced by charge-offs, net of recoveries.

Transactions in the reserve for loan and lease losses are summarized as follows
(in thousands):

|                                           |  |          |       |              |  |   |       |  
|------------------------------------------ |  | -------- | ----- | ------------ |  | - | ----- | -
|                                           |  | June 30, |       | December 31,
|                                           |  | 2003     |       | 2002        
|                                           |  |          |       |             
|Balance, beginning of year                 |  | $        | 3,003 |              |  | $ | 1,450 |  
|Credit from purchase of loan portfolio     |  |          |      |              |  |   | 197   |  
|Recoveries on loans previously charged off |  |          | 13    |              |  |   | 167   |  
|Loans charged off                          |  |          |      |              |  |   | (241  | )
|Provision charged to operating expense     |  |          | 1,750 |              |  |   | 1,430 |  
|                                           |  |          |       |              |  |   |       |  
|Balance, end of period                     |  | $        | 4,766 |              |  | $ | 3,003 |  
|                                           |  |          |       |              |  |   |       |  

The provisions of SFAS No. 114 and SFAS No. 118 permit the valuation allowance
for loan losses to be determined on a loan-by-loan basis or by aggregating
loans with similar risk characteristics. The Bank considers a loan to be
impaired when it is probable that the Bank will be unable to collect all
amounts due (principal and interest) according to the contractual terms of the
loan agreement. Measurement of impairment is based on the expected future cash
flows of an impaired loan which are to be discounted at the loans effective
interest rate, or measured by reference to an observable market value, if one
exists, or the fair value of the collateral for a collateral-dependent loan.
The Bank selects the measurement method on a loan-by-loan basis except that
collateral-dependent loans for which foreclosure is probable are measured at
the fair value of the collateral. The Bank recognizes interest income on
impaired loans based on its existing methods of recognizing interest income on
nonaccrual and troubled debt restructured loans.

The Bank had impaired loans of $0.1 million and $0 as of June 30, 2003 and
December 31, 2002, respectively.

The following is a summary of information pertaining to impaired loans as of
June 30, 2003 and December 31, 2002.

|                                                              |  |          |   |              |  |                |    | 
|------------------------------------------------------------- |  | -------- | - | ------------ |  | -------------- | -- | 
|                                                              |  | June 30, |   | December 31,
|                                                              |  | 2003     |   | 2002        
|                                                              |  |          |   |             
|                                                              |  |          |   |              |  | (in thousands)
|Average investment in impaired loans                          |  |          | 1 |              |  |                | 22 | 
|Interest income recognized on impaired loans                  |  |          |  |              |  |                |   | 
|Interest income recognized on a cash basis
for impaired loans |  |          |  |              |  |                |   | 

Nonperforming Assets

At June 30, 2003, the Bank had non-accrual loans or loans classified as troubled
debt restructurings of $0.1 million as compared to $0 at December 31, 2002. At
June 30, 2003 and December 31, 2002, the Bank had no loans past due 90 days or
more in interest or principal and still accruing interest.

Deposits

Deposits represent the Banks primary source of funds for funding the Banks
loan activities. The Bank increased its deposits by $146.3 million or 51%
from $287.5 million at December 31, 2002 to $433.8 million at June 30, 2003.
The increase is primarily due to the increase of $57.2 million or 59% in money
market accounts and $69.8 million or 73% in time certificates of deposit.

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At June 30, 2003, the composition of the average deposit portfolio was 18% in
non-interest bearing deposits, 47% in money market, NOW and savings deposits,
and 35% in time certificates of deposit, while the composition was 26%, 41%,
and 33%, respectively, at December 31, 2002.

At June 30, 2003, the scheduled maturities of time certificates of deposit in
denominations of $100,000 or more are as follows (in thousands):

|                               |  |          |        | 
|------------------------------ |  | -------- | ------ | 
|                               |  | June 30,
|                               |  | 2003    
|                               |  |         
|Three months or less           |  | $        | 521    | 
|Over three through six months  |  |          | 1,568  | 
|Over six through twelve months |  |          | 54,988 | 
|Over twelve months             |  |          | 26,811 | 
|                               |  |          |        | 
|                               |  | $        | 83,888 | 
|                               |  |          |        | 

Borrowings

At June 30, 2003, Federal Home Loan Bank (FHLB) advances were $125.0 million
as compared to $45.0 million at December 31, 2002. The increase in FHLB
advances was part of the Companys strategic plan to fund the growth of earning
assets.

Pursuant to collateral agreements with the FHLB, advances are secured by all
capital stock in FHLB, certain investment securities, and certain qualifying
loans. FHLB advances consist of the following as of June 30, 2003 (dollars in
thousands):

|         |  |          |      |        |  |   |         | 
|-------- |  | -------- | ---- | ------ |  | - | ------- | 
|         |  | Weighted |      |        |  |  
|         |  | Average  |      |        |  |  
|Maturity |  | Rate     |      | Amount
|         |  |          |      |       
|2003     |  |          | 1.25 | %      |  | $ | 65,000  | 
|2004     |  |          | 1.37 | %      |  |   | 45,000  | 
|2005     |  |          | 1.98 | %      |  |   | 15,000  | 
|         |  |          |      |        |  |   |         | 
|         |  |          | 1.38 | %      |  | $ | 125,000 | 
|         |  |          |      |        |  |   |         | 

In June 2003, the Company obtained a $10.0 million line of credit from a
correspondent financial institution of which $5.0 million was outstanding at
June 30, 2003. The funds were drawn and held at the Company as working
capital. The line of credit bears interest at a floating rate and matures in
June 2004. Interest is due quarterly. Currently, the line is secured by all of the
Banks outstanding common stock. The Company intends to pay off
the line of credit with a portion of the net proceeds from the
offering of the Series B Preferred Stock. After the line of
credit is paid off, the Company intends to terminate the credit
facility.

In December 2002 and December 2001, the Company issued trust preferred
securities of $5.0 million and $12.0 million, respectively. See Note #2 in
Item 1 hereof. Additionally, in December 2002, the Company issued $5.0 million
in subordinated debt which bears a floating rate of interest of 3.05% over the
three month LIBOR and has a fifteen-year maturity with quarterly interest
payments. The initial rate was set at 4.45%. As of June 30, 2003, the rate
had reset to 4.34%. The total of those two issuances of $10.0 million in
December 2002 was downstreamed to the Bank as additional capital for the Bank.

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The Bank has undrawn unsecured lines of credit with five correspondent banks totaling $33.0
million at June 30, 2003. Additionally, the Bank has a
borrowing line at the Federal Home Loan Bank totaling $213.5 million, with
$125.0 million outstanding at June 30, 2003, representing 35% of total assets
of the Bank.

Stockholders Equity

At June 30, 2003 and December 31, 2002, stockholders equity was $21.5 million
and $20.0 million, respectively. The increase in stockholders equity was due
primarily to the net income for the first six months of 2003 of $3.1 million,
partially offset by common stock repurchases and dividends paid on preferred
stock.

Liquidity

The Company relies on asset-liability management to assure adequate liquidity
and to maintain an appropriate balance between interest sensitive-earning
assets and interest-bearing liabilities. Liquidity management involves the
ability to meet the cash flow requirements of customers. Typical demands on
liquidity are deposit run-off from demand deposits and savings accounts,
maturing time deposits, which are not renewed, and anticipated funding under
credit commitments to customers. Interest rate sensitivity management seeks to avoid
fluctuating interest margins to enhance consistent growth of net interest
income through periods of changing interest rates.

The Banks Asset-Liability Management Committee manages the Companys
liquidity position, the parameters of which are approved by the Board of
Directors. The liquidity position of the Bank is monitored daily. The Banks
loan to deposit and borrowing ratio was 70% and 75% as of June 30, 2003 and
December 31, 2002, respectively. The Banks policy is to strive for a loan to
deposit and borrowing ratio between 70% and 90%.

Management believes the level of liquid assets is sufficient to meet current
and anticipated funding needs. Liquid assets represent approximately 10.4% of
total assets at June 30, 2003. The liquidity contingency process outlines
authorities and a reasonable course of action in case of unexpected liquidity
needs. At June 30, 2003, the Company had
a $10.0 million line of credit, $5.0 million of which was
drawn. The line of credit is secured by all of the Banks common
stock. The Company intends to pay off the line of credit with a
portion of the proceeds from the Series B Preferred Stock
offering. The Company intends to terminate the credit facility after
it is paid off. The Bank has undrawn borrowing lines with five correspondent banks totaling
$33.0 million as well as an Advance Line with the Federal Home Loan Bank
allowing the Bank to borrow up to 35% of its total assets as of June 30, 2003.
This advance line is collateralized by investment securities and/or eligible
loans.

Capital Resources

Neither the Company nor the Bank has any significant commitments for capital
expenditures.

The Company (on a consolidated basis) and the Bank are subject to various
regulatory capital requirements administered by federal banking agencies.
Failure to meet minimum capital requirements can initiate certain mandatory,
and possibly additional discretionary, actions by regulators that, if
undertaken, could have a direct material effect on the Companys and the Banks
financial statements. Under capital adequacy guidelines and the regulatory
framework for prompt corrective action as applicable, the Company and the Bank
must meet specific capital guidelines that involve quantitative measures of the
Companys and the Banks assets, liabilities and certain off-balance sheet
items as calculated under regulatory accounting practices. The Companys and
the Banks capital amounts and classification are also subject to qualitative
judgments by the regulators about components, risk weightings and other
factors. Prompt corrective action provisions are not applicable to bank
holding companies.

Quantitative measures established by regulation to ensure capital adequacy
require the Company and the Bank to maintain minimum amounts and ratios (set
forth in the table below) of total and Tier 1 capital (as defined in the
regulations) to risk-weighted assets (as defined) and of Tier 1 capital (as
defined) to average assets (as defined). Management believes, as of June 30,
2003, that the Company and the Bank meet all applicable capital adequacy
requirements.

As of the most recent formal notification from the Federal Deposit Insurance
Corporation, the Bank was categorized as well capitalized under the regulatory
framework for prompt corrective action. To be categorized as well capitalized,
the Bank must maintain minimum capital ratios as set forth in the table below.
The following table also sets forth the Companys and the Banks actual
regulatory capital amounts and ratios (dollar amounts in thousands):

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|                                       |         |  |                   |        |                   |  |                   |      |         |  |                |        |                   |  |         |     |   |  |                   |        |  |  |  |      |  
|-------------------------------------- | ------- |  | ----------------- | ------ | ----------------- |  | ----------------- | ---- | ------- |  | -------------- | ------ | ----------------- |  | ------- | --- | - |  | ----------------- | ------ |  |  |  | ---- | -
|                                       |         |  |                   |        |                   |  |                   |      |         |  | 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 June 30, 2003                    |         |  |                   |        |                   |  |                   |      |         |  |                |        |                   |  |         |     |   |  |                   |        |  |  |  |     
|Total capital to risk-weighted
assets: |         |  |                   |        |                   |  |                   |      |         |  |                |        |                   |  |         |     |   |  |                   |        |  |  |  |     
|                                       | Bank    |  | $                 | 52,232 |                   |  |                   | 12.0 | %       |  | $              | 34,694 |                   |  |         | 8.0 | % |  | $                 | 43,367 |  |  |  | 10.0 | %
|                                       | Company |  | $                 | 48,275 |                   |  |                   | 11.1 | %       |  | $              | 34,797 |                   |  |         | 8.0 | % |  |                   | N/A    |  |  |  | N/A  |  
|Tier 1 to risk-weighted assets:        |         |  |                   |        |                   |  |                   |      |         |  |                |        |                   |  |         |     |   |  |                   |        |  |  |  |     
|                                       | Bank    |  | $                 | 47,465 |                   |  |                   | 10.9 | %       |  | $              | 17,347 |                   |  |         | 4.0 | % |  | $                 | 26,020 |  |  |  | 6.0  | %
|                                       | Company |  | $                 | 28,696 |                   |  |                   | 6.6  | %       |  | $              | 17,399 |                   |  |         | 4.0 | % |  |                   | N/A    |  |  |  | N/A  |  
|Tier 1 capital to average assets:      |         |  |                   |        |                   |  |                   |      |         |  |                |        |                   |  |         |     |   |  |                   |        |  |  |  |     
|                                       | Bank    |  | $                 | 47,465 |                   |  |                   | 9.0  | %       |  | $              | 21,223 |                   |  |         | 4.0 | % |  | $                 | 26,529 |  |  |  | 5.0  | %
|                                       | Company |  | $                 | 28,696 |                   |  |                   | 5.4  | %       |  | $              | 21,278 |                   |  |         | 4.0 | % |  |                   | N/A    |  |  |  | N/A  |  
|As of December 31, 2002                |         |  |                   |        |                   |  |                   |      |         |  |                |        |                   |  |         |     |   |  |                   |        |  |  |  |     
|Total capital to risk-weighted
assets: |         |  |                   |        |                   |  |                   |      |         |  |                |        |                   |  |         |     |   |  |                   |        |  |  |  |     
|                                       | Bank    |  | $                 | 41,789 |                   |  |                   | 15.0 | %       |  | $              | 22,364 |                   |  |         | 8.0 | % |  | $                 | 27,955 |  |  |  | 10.0 | %
|                                       | Company |  | $                 | 44,838 |                   |  |                   | 16.0 | %       |  | $              | 22,454 |                   |  |         | 8.0 | % |  |                   | N/A    |  |  |  | N/A  |  
|Tier 1 to risk-weighted assets:        |         |  |                   |        |                   |  |                   |      |         |  |                |        |                   |  |         |     |   |  |                   |        |  |  |  |     
|                                       | Bank    |  | $                 | 38,786 |                   |  |                   | 13.9 | %       |  | $              | 11,182 |                   |  |         | 4.0 | % |  | $                 | 16,773 |  |  |  | 6.0  | %
|                                       | Company |  | $                 | 26,452 |                   |  |                   | 9.4  | %       |  | $              | 11,227 |                   |  |         | 4.0 | % |  |                   | N/A    |  |  |  | N/A  |  
|Tier 1 capital to average assets:      |         |  |                   |        |                   |  |                   |      |         |  |                |        |                   |  |         |     |   |  |                   |        |  |  |  |     
|                                       | Bank    |  | $                 | 38,786 |                   |  |                   | 11.6 | %       |  | $              | 13,353 |                   |  |         | 4.0 | % |  | $                 | 16,691 |  |  |  | 5.0  | %
|                                       | Company |  | $                 | 26,452 |                   |  |                   | 7.9  | %       |  | $              | 13,412 |                   |  |         | 4.0 | % |  |                   | N/A    |  |  |  | N/A  |  

Economic Concerns

The financial condition of the Bank has been, and is expected to continue to
be, affected by the overall general economic conditions and the real estate
market in California. The future success of the Bank is dependent, in large
part, upon the quality of its assets.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Companys business is subject to general economic risks that could
adversely impact its results of operations and financial condition.

Changes in economic conditions, particularly an economic slowdown in
California, could hurt the Companys business.The Companys business is
directly affected by political and market conditions, broad trends in industry
and finance, legislative and regulatory changes, changes in governmental
monetary and fiscal policies, and inflation, all of which are beyond the
Companys control. A deterioration in economic conditions, in particular an
economic slowdown within California, could result in the following
consequences, any of which could hurt the Companys business materially:



| |  |  | loan delinquencies may increase;                                                                                                                                                                                                   
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | problem assets and foreclosures may increase;                                                                                                                                                                                      
|
| |  |  | demand for the Companys products and services may decline; and                                                                                                                                                                    
|
| |  |  | collateral for loans made by the Company, 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 its loans
held for investment.

A downturn in the California real estate market could hurt its business.The
Companys business activities and credit exposure are concentrated in
California. A downturn in the California real estate market could hurt the
Companys business because many of its loans are secured by real estate located
within California. As of June 30, 2003, approximately 91% of the Companys
loans held for investment consisted of loans secured by real estate located in
California. If there is a significant decline in real estate values,
especially in California, the collateral for the Companys loans will provide
less security. As a result, the Companys ability to recover on defaulted
loans by selling the underlying real estate would be diminished, and the
Company would be more likely to suffer losses on defaulted loans. Real estate
values in California could be affected by, among other things, earthquakes and
other natural disasters particular to California.

The Company may suffer losses in its loan portfolio despite its underwriting
practices. The Company seeks to mitigate the risks inherent in its loan
portfolio by adhering to specific underwriting practices. These practices
include analysis of a borrowers prior credit history, financial statements,
tax returns and cash flow projections, valuation of collateral based on reports
of independent appraisers and verification of liquid assets. Although the
Company believes that its underwriting criteria are appropriate for the various
kinds of loans the Company makes, the Company may incur losses on loans that
meet its underwriting criteria, and these losses may exceed the amounts set
aside as reserves in its allowance for loan losses.

The Companys business is subject to interest rate risk and variations in
interest rates may negatively affect its financial performance.

Like other financial institutions, the Companys operating results are largely
dependent on its net interest income. Net interest income is the difference
between interest earned on loans and securities and interest expense incurred
on deposits and borrowings. The Companys net interest income is impacted by
changes in market rates of interest, the interest rate sensitivity of its
assets and liabilities, prepayments on its loans and securities and limits on
increases in the rates of interest charged on its loans. The Company expects
that it will continue to realize income from the differential or spread
between the interest earned on loans, securities and other interest-earning
assets, and interest paid on deposits, borrowings and other interest-bearing
liabilities. Net interest spreads are affected by the difference between the
maturities and repricing characteristics of interest-earning assets and
interest-bearing liabilities.

The Company cannot control or accurately predict changes in market rates of
interest. The following are some factors that may affect market interest
rates, all of which are beyond the Companys control:



| |  |  | inflation;                                                          
| | - |  | --------------------------------------------------------------------
|
| |  |  | slow or stagnant economic growth or recession;                      
|
| |  |  | unemployment;                                                       
|
| |  |  | money supply and the monetary policies of the Federal Reserve Board;
|
| |  |  | international disorders; and                                        
|
| |  |  | instability in domestic and foreign financial markets.              

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The Company is vulnerable to an increase in interest rates because its
interest-earning assets generally have longer maturities than its
interest-bearing liabilities. Under such circumstances, material and prolonged
increases in interest rates will negatively affect the Companys net interest
income. In addition, loan volume and yields are affected by market interest
rates on loans, and rising interest rates generally are associated with a lower
volume of loan originations. In addition, an increase in the general level of
interest rates may adversely affect the ability of certain borrowers to pay the
interest on and principal of their obligations. Accordingly, changes in levels
of market interest rates could materially and adversely affect the Companys
net interest spread, asset quality, loan origination volume, securities
portfolio, and overall profitability. Although the Company attempts to manage
its interest rate risk, the Company cannot assure you that it can minimize its
interest rate risk.

Interest Rates and Differentials

The Companys earnings depend primarily upon the difference between the income
it receives from its loan portfolio and investment securities and its cost of
funds, principally interest paid on savings and time deposits. Interest rates
charged on the Companys loans are affected principally by the demand for
loans, the supply of money available for lending purposes, and competitive
factors. In turn, these factors are influenced by general economic conditions
and other constraints beyond the Companys control, such as governmental
economic and tax policies, general supply of money in the economy, governmental
budgetary actions, and the actions of the Federal Reserve Board.

Asset/Liability Management

The Company earns income principally from the differential or spread between
the interest earned on loans, investments, other interest-earning assets and
the interest paid on deposits and borrowings. The Company, like other
financial institutions, is subject to interest rate risk to the degree that its
interest-earning assets reprice differently than its interest-bearing
liabilities. The Companys primary objective in managing interest rate risk is
to minimize the adverse impact of changes in interest rates on the Companys
net interest income and capital, while maintaining an asset-liability balance
sheet mix that produces the most effective and efficient returns.

Interest rate sensitivity varies with different types of interest-earning
assets and interest-bearing liabilities. The Bank intends to maintain
interest-earning assets, comprised primarily of both loans and investments, and
interest-bearing liabilities, comprised primarily of deposits, maturing or
repricing in similar time horizons in order to minimize or eliminate any impact
from interest rate changes.

A sudden and substantial increase or decrease in interest rates may adversely
impact the Companys income to the extent that the interest rates associated
with the assets and liabilities do not change at the same speed, to the same
extent, or on the same basis. The Company has adopted formal policies and
practices to monitor its interest rate risk exposure. As a part of its risk
management practices, the Company uses the Economic Value of Equity (EVE) or
Earnings at Risk (EAR) to monitor its interest rate risk.

The Companys overall strategy is to minimize the adverse impact of immediate
incremental changes in market interest rates (rate shock) on EVE and EAR. The
EVE is defined as the present value of assets, minus the present value of
liabilities. The EAR is defined as the net interest income, which is interest
income less interest expense. The attainment of this goal requires a balance
between profitability, liquidity and interest rate risk exposure. To minimize
the adverse impact of changes in market interest rates, the Bank simulates the
effect of instantaneous interest rate changes on EVE at period end and EAR over
a one year horizon.

The table below shows the estimated impact of changes in interest rates on EVE
and EAR on June 30, 2003, assuming shifts of 100 to 200 basis points in both
directions (in thousands):

|             |  |                          |         |                  |  |                   |        |            |  |  |        |   |  |  |        | 
|------------ |  | ------------------------ | ------- | ---------------- |  | ----------------- | ------ | ---------- |  |  | ------ | - |  |  | ------ | 
|             |  | Economic Value of Equity |         | Earnings at Risk
|             |  |                          |         |                 
|Simulated    |  | Cumulative Dollar        |         | Percentage       |  | Cumulative Dollar |        | Percentage
|Rate Changes |  | Change                   |         | Change           |  | Change            |        | Change    
|             |  |                          |         |                  |  |                   |        |           
|+ 200        |  |                          | (12,541 | )                |  |                   | -19.54 |            |  |  | 739    |   |  |  | 2.92   | 
|+ 100        |  |                          | (5,433  | )                |  |                   | -8.47  |            |  |  | 23     |   |  |  | 0.09   | 
|- 100        |  |                          | (5,419  | )                |  |                   | -8.45  |            |  |  | (1,003 | ) |  |  | -3.96  | 
|- 200        |  |                          | (6,792  | )                |  |                   | -10.58 |            |  |  | (3,753 | ) |  |  | -14.81 | 

The amount and percentage changes represent the cumulative dollar and
percentage change in each rate change scenario from the base case. These
estimates are based upon a number of assumptions, including: the nature and
timing

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of interest rate levels including yield curve, prepayments on loans and
securities, pricing strategies on loans and deposits, replacement of asset and
liability cashflows, and other assumptions. While the assumptions used are
based on current economic and local market conditions, there is no assurance as
to the predictive nature of these conditions including how customer preferences
or competitor influences might change.

At June 30, 2003, the Companys estimated changes in EVE and EAR were within
the ranges established by the Board of Directors.

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ITEM 4. CONTROLS AND PROCEDURES

Within the 90 days prior to the date of this report, the Company carried out an
evaluation, under the supervision and with the participation of the Companys
management, including the Companys Chief Executive Officer along with the
Companys Executive Vice President and Chief Financial Officer, of the
effectiveness of the design and operation of the Companys disclosure controls
and procedures pursuant to the Exchange Act Rule 13a-14. Based upon that
evaluation, the Companys Chief Executive Officer along with the Companys
Executive Vice President and Chief Financial Officer concluded that the
Companys disclosure controls and procedures are effective in timely alerting
them to material information relating to the Company (including its
consolidated subsidiaries) required to be included in the Companys periodic
SEC filings. There have been no significant changes in the Companys internal
controls or in other factors which could significantly affect these controls
subsequent to the date the Company carried out its evaluation.

Disclosure controls and procedures are Company controls and other procedures
that are designed to ensure that information required to be disclosed by the
Company in the reports that it files or submits under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified
in the SECs rules and forms. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that information
required to be disclosed by the Company in the reports that it files under the
Exchange Act is accumulated and communicated to the Companys management,
including its Chief Executive Officer and Executive Vice President and Chief
Financial Officer, as appropriate, to allow timely decisions regarding required
disclosure.

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PART II

OTHER INFORMATION




ITEM 1. LEGAL PROCEEDINGS

The Company is involved in various litigation matters. In the opinion of
management and the Companys legal counsel, the disposition of all such
litigation pending will not have a material effect on the Companys financial
statements.




ITEM 2. CHANGES IN SECURITIES

None




ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None




ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

On May 22, 2003, the Company held its annual meeting of stockholders for the purpose of the election of directors of
the Company, to adopt the Vineyard National Bancorp 2004 Restricted Share Plan, and the ratification of Vavrinek, Trine,
Day & Company, LLP as the Companys independent accountants.

1.  Election of Directors of the Company to serve until the next annual stockholders meeting

|                       |  |          |           |          |  |           |  |           |  |  |        |  |  |  |  | 
|---------------------- |  | -------- | --------- | -------- |  | --------- |  | --------- |  |  | ------ |  |  |  |  | 
|                       |  | Number   |           | Number   |  | Number    |  |           |  | 
|                       |  | of Votes |           | of Votes |  | of Votes  |  | Broker   
|                       |  | For      |           | Against  |  | Abstained |  | Non-Votes
|                       |  |          |           |          |  |           |  |          
|Frank S. Alvarez       |  |          | 2,420,997 |          |  |           |  |           |  |  | 18,893 | 
|Charles L. Keagle      |  |          | 2,420,558 |          |  |           |  |           |  |  | 19,332 | 
|Norman Morales         |  |          | 2,419,837 |          |  |           |  |           |  |  | 20,053 | 
|Joel H. Ravitz         |  |          | 2,420,997 |          |  |           |  |           |  |  | 18,893 | 
|Dr. Lester Stroh,
M.D. |  |          | 2,421,078 |          |  |           |  |           |  |  | 18,812 | 

2.  Adopt the Vineyard National Bancorp 2004 Restricted Share Plan

|          |  |          |        |           |  |           |        |  |  |  |  | 
|--------- |  | -------- | ------ | --------- |  | --------- | ------ |  |  |  |  | 
|Number    |  | Number   |        | Number    |  |           |        | 
|of Votes  |  | of Votes |        | of Votes  |  | Broker   
|For       |  | Against  |        | Abstained |  | Non-Votes
|          |  |          |        |           |  |          
|2,366,686 |  |          | 50,501 |           |  |           | 22,703 | 

3.       Ratification of Vavrinek, Trine, Day & Company, LLP as the Companys independent accountants

|          |  |          |        |           |  |           |        |  |  |  |  | 
|--------- |  | -------- | ------ | --------- |  | --------- | ------ |  |  |  |  | 
|Number    |  | Number   |        | Number    |  |           |        | 
|of Votes  |  | of Votes |        | of Votes  |  | Broker   
|For       |  | Against  |        | Abstained |  | Non-Votes
|          |  |          |        |           |  |          
|2,408,287 |  |          | 11,529 |           |  |           | 20,074 | 

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ITEM 5. OTHER INFORMATION

None




ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K



| | a) |  | Exhibits                                                                                           
| | -- |  | ---------------------------------------------------------------------------------------------------
|
| |    |  | 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 Section 906 Certification by the Chief Executive Officer and
the Chief Financial Officer.       
|
| | b) |  | Reports on Form 8-K:                                                                               
|
| |    |  | The following reports on Form 8-K were filed by the Company during
the quarter ended June 30, 2003:



| | i)  |  | April 7, 2003 
announcing the press release of the Companys earnings for the first
quarter of 2003                                                  
| | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | ii) |  | April 9, 2003 
announcing the Agreement and Plan of
Merger dated April 8, 2003, entered into among the Company, the
Bank and Southland Business Bank.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized on this 30th day of July 2003.

| |  |  |  |                           |  |                                                  
| |  |  |  | ------------------------- |  | -------------------------------------------------
| |  |  |  | VINEYARD NATIONAL BANCORP
| |  |  |  |                           |  |                                                  
| |  |  |  | By:                       |  | /s/  Norman Morales                              
| |  |  |  |                           |  |                                                  
| |  |  |  |                           |  | Norman Morales                                   
| |  |  |  |                           |  | President and Chief Executive Officer            
| |  |  |  |                           |  |                                                  
| |  |  |  | By                        |  | /s/  Gordon
Fong                                 
| |  |  |  |                           |  |                                                  
| |  |  |  |                           |  | Gordon Fong                                      
| |  |  |  |                           |  | Senior Vice President and Chief Financial Officer
| |  |  |  |                           |  | (Principal Financial Officer)                    

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Exhibit 31.1

CERTIFICATION
PURSUANT TO RULE 13a-14
AS ADOPTED PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002

I, Norman Morales, President and Chief Executive Officer (Principal Executive
Officer), certify that:



| | 1. |  | I have reviewed this quarterly report on Form 10-Q of
Vineyard National Bancorp;                                                                                                                                                                                                                                              
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 2. |  | Based on my knowledge, this quarterly report does not
contain any untrue statement of a material fact or omit to state
a material fact necessary to make the statements made, in light
of the circumstances under which such statements were made, not
misleading with respect to the period covered by this quarterly
report;
|
| | 3. |  | Based on my knowledge, the financial statements, and
other financial information included in this quarterly report,
fairly present in all material respects the financial condition,
results of operations and cash flows of the registrant as of,
and for, the periods presented in this quarterly report;                   
|
| | 4. |  | The registrants other certifying officers and I are
responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) for the registrant and we have:                                                                                               



| | (a) |  | Designed such disclosure
controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its
consolidated subsidiaries, is made known to us by
others within those entities, particularly during the
period in which this report is being
prepared;         
| | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (b) |  | Evaluated the effectiveness of
the registrants disclosure controls and procedures
and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and                                                                                                    
|
| | (c) |  | Disclosed in this report any
change in the registrants internal control over financial
reporting that occurred during the registrants most recent
fiscal quarter (the registrants fourth fiscal quarter in the
case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrants internal
control over financial reporting; and



| | 5. |  | The registrants other certifying officers and I have
disclosed, based on our most recent evaluation, to the
registrants auditors and to the audit committee of the
registrants board of directors (or persons performing the
equivalent function):
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (a) |  | All significant deficiencies and
material weaknesses in the design or operation of internal control
over financial reporting which are reasonably likely to adversely
affect the registrants ability to record, process, summarize
and report financial information; and
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (b) |  | Any fraud, whether or not
material, that involves management or other employees
who have a significant role in the registrants
internal controls.                                                                                                                       

|                    |  |                                      
|------------------- |  | -------------------------------------
|Date: July 30, 2003 |  | /s/  Norman
Morales                  
|                    |  |                                      
|                    |  | Norman Morales                       
|                    |  | President and Chief Executive Officer

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Exhibit 31.2

CERTIFICATION
PURSUANT TO RULE 13a-14
AS ADOPTED PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002

I, Gordon Fong, Senior Vice President and Chief Financial Officer (Principal
Financial Officer), certify that:



| | 1. |  | I have reviewed this quarterly report on Form 10-Q of
Vineyard National Bancorp;                                                                                                                                                                                                                                              
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 2. |  | Based on my knowledge, this quarterly report does not
contain any untrue statement of a material fact or omit to state
a material fact necessary to make the statements made, in light
of the circumstances under which such statements were made, not
misleading with respect to the period covered by this quarterly
report;
|
| | 3. |  | Based on my knowledge, the financial statements, and
other financial information included in this quarterly report,
fairly present in all material respects the financial condition,
results of operations and cash flows of the registrant as of,
and for, the periods presented in this quarterly report;                   
|
| | 4. |  | The registrants other certifying officers and I are
responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) for the registrant and we have:                                                                                               



| | (a) |  | Designed such disclosure
controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its
consolidated subsidiaries, is made known to us by
others within those entities, particularly during the
period in which this report is being
prepared;         
| | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (b) |  | Evaluated the effectiveness of
the registrants disclosure controls and procedures
and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and                                                                                                    
|
| | (c) |  | Disclosed in this report any
change in the registrants internal control over financial
reporting that occurred during the registrants most recent
fiscal quarter (the registrants fourth fiscal quarter in the
case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrants internal
control over financial reporting; and



| | 5. |  | The registrants other certifying officers and I have
disclosed, based on our most recent evaluation, to the
registrants auditors and to the audit committee of the
registrants board of directors (or persons performing the
equivalent function):
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (a) |  | All significant deficiencies and
material weaknesses in the design or operation of internal control
over financial reporting which are reasonably likely to adversely
affect the registrants ability to record, process, summarize
and report financial information; and
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (b) |  | Any fraud, whether or not
material, that involves management or other employees
who have a significant role in the registrants
internal controls.                                                                                                                       

|                    |  |                                                  
|------------------- |  | -------------------------------------------------
|Date: July 30, 2003 |  | /s/  Gordon
Fong                                 
|                    |  |                                                  
|                    |  | Gordon Fong                                      
|                    |  | Senior Vice President and Chief Financial Officer
|                    |  | (Principal Financial Officer)                    

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