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|  California(State                or other jurisdiction of incorporation or organization)                    | 33-0309110(IRS                employer identification number) |
|------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------|
|                                                                                                                  |
|                                                                                                             |                                                          |
|  1260                Corona Pointe Court, Corona, CA(Address                of principal executive offices) |  92879(Zip                Code)                          |

| Indicate                by check mark whether the registrant is a shell company (as defined                in                Rule 12b-2 of the Exchange Act). Yes [ ] No [x] |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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VINEYARD      NATIONAL BANCORP AND SUBSIDIARIES

|                    | PART                I – FINANCIAL INFORMATION                                                                                                                                           |   |
|-------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                    |                                                                                                                                                                                          |   |
| ITEM                1.  | Financial                Statements                                                                                                                                                           |   |
|                    |                                                                                                                                                                                          |   |
|                    | Consolidated                Balance Sheets at September 30, 2008 and December 31,                2007                                                                                         | 4      |
|                    |                                                                                                                                                                                          |   |
|                    | Consolidated                Statements of Operations for the Three and Nine Months Ended September                30,                2008 and 2007                                            | 5      |
|                    |                                                                                                                                                                                          |   |
|                    | Consolidated                Statements of Changes in Stockholders' Equity and Comprehensive                Income/(Loss) for the Nine Months Ended September 30, 2008 and                2007 | 6      |
|                    |                                                                                                                                                                                          |   |
|                    | Consolidated                Statements of Cash Flows for the Nine Months Ended September 30,                2008 and                2007                                                      | 8      |
|                    |                                                                                                                                                                                          |   |
|                    | Notes                to Consolidated Financial Statements                                                                                                                                     | 10     |
|                    |                                                                                                                                                                                          |   |
| ITEM                2.  | Management's                Discussion and Analysis of Financial Condition                and Results of Operations                                                                           | 23     |
|                    |                                                                                                                                                                                          |   |
| ITEM                3.  | Quantitative                and Qualitative Disclosures about Market                Risk                                                                                                      | 52     |
|                    |                                                                                                                                                                                          |   |
| ITEM                4.  | Controls                and Procedures                                                                                                                                                        | 52     |
|                    |                                                                                                                                                                                          |   |
|                    | PART                II – OTHER INFORMATION                                                                                                                                              |   |
|                    |                                                                                                                                                                                          |   |
| ITEM                1.  | Legal                Proceedings                                                                                                                                                              | 53     |
|                    |                                                                                                                                                                                          |   |
| ITEM                1A. | Risk                Factors                                                                                                                                                                   | 53     |
|                    |                                                                                                                                                                                          |   |
| ITEM                2.  | Unregistered                Sales of Equity Securities and Use of                Proceeds                                                                                                     | 54     |
|                    |                                                                                                                                                                                          |   |
| ITEM                3.  | Defaults                Upon Senior Securities                                                                                                                                                | 55     |
|                    |                                                                                                                                                                                          |   |
| ITEM                4.  | Submission                of Matters to a Vote of Security                Holders                                                                                                             | 55     |
|                    |                                                                                                                                                                                          |   |
| ITEM                5.  | Other                Information                                                                                                                                                              | 55     |
|                    |                                                                                                                                                                                          |   |
| ITEM                6.  | Exhibits                                                                                                                                                                                      | 55     |
|                    |                                                                                                                                                                                          |   |
| Signatures              |                                                                                                                                                                                          | 56     |
|                    |                                                                                                                                                                                          |   |
| Exhibits                |                                                                                                                                                                                          |   |
|                    |                                                                                                                                                                                          |   |

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Table          of Contents

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Table          of Contents

VINEYARD      NATIONAL BANCORP AND SUBSIDIARIES

| (Dollars                in thousands)                                       |   | September                30, 2008 |      |   | December                31, 2007 |   |
|-----------------------------------------------------------------------------|--------|-----------------------------------|-----------|--------|----------------------------------|--------|
|                                                                        |   |                              |      |   |                             |   |
| ASSETS                                                                      |   |                              |      |   |                             |   |
| Cash                and due from                                            |   | $                                 | 62,894    |   |                             | $      | 47,537 |   |
| Federal                funds sold                                           |   |                              | 27,000    |   |                             |   | 36,000 |   |
| Cash                and cash equivalents                                    |   |                              | 89,894    |   |                             |   | 83,537 |   |
| Investment                securities                                        |   |                              | 125,023   |   |                             |   | 177,321 |   |
| Loans                held-for-sale                                          |   |                              | 8,391     |   |                             |   | 119,427 |   |
| Loans,                net of unearned income                                |   |                              | 1,802,865 |   |                             |   | 2,008,071 |   |
| Less:  Allowance                for loan losses                   |   |                              | (63,791   | )      |                             |   | (48,849 | ) |
| Net                Loans                                                    |   |                              | 1,739,074 |   |                             |   | 1,959,222 |   |
| Bank                premises and equipment, net                             |   |                              | 15,750    |   |                             |   | 18,326 |   |
| Accrued                interest                                             |   |                              | 8,949     |   |                             |   | 11,834 |   |
| Other                real estate owned                                      |   |                              | 38,641    |   |                             |   | 17,375 |   |
| Federal                Home Loan Bank ("FHLB") and other stock, at cost     |   |                              | 21,678    |   |                             |   | 25,066 |   |
| Income                taxes receivable, net                                 |   |                              | 26,409    |   |                             |   | 3,208 |   |
| Deferred                income tax asset                                    |   |                              | -         |   |                             |   | 28,357 |   |
| Goodwill                and other intangibles                               |   |                              | 1,430     |   |                             |   | 4,637 |   |
| Other                assets                                                 |   |                              | 23,503    |   |                             |   | 34,969 |   |
| TOTAL                ASSETS                                                 |   | $                                 | 2,098,742 |   |                             | $      | 2,483,279 |   |
|                                                                        |   |                              |      |   |                             |   |   |   |
| LIABILITIES                AND STOCKHOLDERS' EQUITY                         |   |                              |      |   |                             |   |   |   |
| Liabilities                                                                 |   |                              |      |   |                             |   |   |   |
| Deposits                                                                    |   |                              |      |   |                             |   |   |   |
| Non-interest                bearing                                         |   | $                                 | 143,238   |   |                             | $      | 316,905 |   |
| Interest-bearing                                                            |   |                              | 1,477,386 |   |                             |   | 1,618,747 |   |
| Total                Deposits                                               |   |                              | 1,620,624 |   |                             |   | 1,935,652 |   |
|                                                                        |   |                              |      |   |                             |   |   |   |
| Exchange                balances                                            |   |                              | -         |   |                             |   | 47,515 |   |
| FHLB                advances                                                |   |                              | 281,000   |   |                             |   | 175,000 |   |
| Other                borrowings                                             |   |                              | 48,300    |   |                             |   | 45,250 |   |
| Subordinated                debentures                                      |   |                              | 5,000     |   |                             |   | 5,000 |   |
| Junior                subordinated debentures                               |   |                              | 115,470   |   |                             |   | 115,470 |   |
| Accrued                interest and other liabilities                       |   |                              | 25,822    |   |                             |   | 46,367 |   |
| TOTAL                LIABILITIES                                            |   |                              | 2,096,216 |   |                             |   | 2,370,254 |   |
| COMMITMENTS                AND CONTINGENCIES                                |   |                              |      |   |                             |   |   |   |
| Stockholders'                Equity                                         |   |                              |      |   |                             |   |   |   |
| Contributed                capital                                          |   |                              |      |   |                             |   |   |   |
| Perpetual                preferred stock - authorized 10,000,000 shares     |   |                              |      |   |                             |   |   |   |
| Series                C - no par value, issued and outstanding 10,000       |   |                              |      |   |                             |   |   |   |
| shares                in 2008 and 2007                                      |   |                              | 9,665     |   |                             |   | 9,665 |   |
| Series                D - no par value, issued and outstanding 2,300,000    |   |                              |      |   |                             |   |   |   |
| shares                in 2008 and 2007                                      |   |                              | 21,950    |   |                             |   | 21,950 |   |
| Common                stock - no par value, authorized 50,000,000 shares;   |   |                              |      |   |                             |   |   |   |
| issued                and outstanding 9,893,978 and 10,285,775 shares       |   |                              |      |   |                             |   |   |   |
| in                2008 and 2007, respectively                               |   |                              | 89,474    |   |                             |   | 92,772 |   |
| Additional                paid-in capital                                   |   |                              | 1,361     |   |                             |   | 1,727 |   |
| Accumulated                deficit                                          |   |                              | (116,591  | )      |                             |   | (5,372 | ) |
| Unallocated                Employee Stock Ownership Plan ("ESOP") shares    |   |                              | (4,703    | )      |                             |   | (5,168 | ) |
| Accumulated                other comprehensive gain/(loss)                  |   |                              | 1,370     |   |                             |   | (2,549 | ) |
| TOTAL                STOCKHOLDERS' EQUITY                                   |   |                              | 2,526     |   |                             |   | 113,025 |   |
| TOTAL                LIABILITIES AND STOCKHOLDERS' EQUITY                   |   | $                                 | 2,098,742 |   |                             | $      | 2,483,279 |   |
|                                                                        |   |                              |      |   |                             |   |   |   |
| See                accompanying notes to consolidated financial statements. |   |                              |      |   |                             |   |   |   |

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VINEYARD      NATIONAL BANCORP AND SUBSIDIARIES

| (Dollars                in thousands, except per share amounts)                                |   | Three                Months Ended September 30, |    |   | Nine                Months Ended September 30, |   |
|------------------------------------------------------------------------------------------------|--------|-------------------------------------------------|---------|--------|------------------------------------------------|--------|
|                                                                                           |   | 2008                                            |    |   | 2007                                           |   |   | 2008 |   |   | 2007 |   |
| Interest                Income                                                                 |   |                                            |    |   |                                           |   |   |   |   |   |   |   |
| Interest                and fees on loans                                                      |   | $                                               | 29,344  |   |                                           | $      | 45,627 |   |   | $ | 104,762 |   |   | $ | 132,356 |   |
| Interest                on investment securities and federal funds sold                        |   |                                            | 2,538   |   |                                           |   | 3,058 |   |   |   | 6,612 |   |   |   | 8,963 |   |
| TOTAL                INTEREST INCOME                                                           |   |                                            | 31,882  |   |                                           |   | 48,685 |   |   |   | 111,374 |   |   |   | 141,319 |   |
|                                                                                           |   |                                            |    |   |                                           |   |   |   |   |   |   |   |   |   |   |   |
| Interest                Expense                                                                |   |                                            |    |   |                                           |   |   |   |   |   |   |   |   |   |   |   |
| Interest                on savings deposits                (1)                                 |   |                                            | 2,037   |   |                                           |   | 7,091 |   |   |   | 11,185 |   |   |   | 20,143 |   |
| Interest                on time deposits in denominations of $100,000 or more                  |   |                                            | 5,909   |   |                                           |   | 7,170 |   |   |   | 20,108 |   |   |   | 20,054 |   |
| Interest                on other time deposits                                                 |   |                                            | 7,497   |   |                                           |   | 4,720 |   |   |   | 16,589 |   |   |   | 13,038 |   |
| Interest                on FHLB advances and other borrowings                                  |   |                                            | 5,204   |   |                                           |   | 5,387 |   |   |   | 15,120 |   |   |   | 17,904 |   |
| TOTAL                INTEREST EXPENSE                                                          |   |                                            | 20,647  |   |                                           |   | 24,368 |   |   |   | 63,002 |   |   |   | 71,139 |   |
| NET                INTEREST INCOME                                                             |   |                                            | 11,235  |   |                                           |   | 24,317 |   |   |   | 48,372 |   |   |   | 70,180 |   |
|                                                                                           |   |                                            |    |   |                                           |   |   |   |   |   |   |   |   |   |   |   |
| Provision                for Loan Losses                                                       |   |                                            | (21,362 | )      |                                           |   | (1,000 | ) |   |   | (88,762 | ) |   |   | (2,700 | ) |
|                                                                                           |   |                                            |    |   |                                           |   |   |   |   |   |   |   |   |   |   |   |
| NET                INTEREST (LOSS) / INCOME AFTER                                              |   |                                            |    |   |                                           |   |   |   |   |   |   |   |   |   |   |   |
| PROVISION                FOR LOAN LOSSES                                                       |   |                                            | (10,127 | )      |                                           |   | 23,317 |   |   |   | (40,390 | ) |   |   | 67,480 |   |
|                                                                                           |   |                                            |    |   |                                           |   |   |   |   |   |   |   |   |   |   |   |
| Other                Income                                                                    |   |                                            |    |   |                                           |   |   |   |   |   |   |   |   |   |   |   |
| Fees                and service charges                                                        |   |                                            | 540     |   |                                           |   | 464 |   |   |   | 1,312 |   |   |   | 1,363 |   |
| (Loss)/gain                on sale of SBA loans and SBA broker fee income                      |   |                                            | (72     | )      |                                           |   | 145 |   |   |   | 102 |   |   |   | 1,326 |   |
| Gain                / (loss) on sale of other loans & investment                securities |   |                                            | 3       |   |                                           |   | - |   |   |   | (80 | ) |   |   | 337 |   |
| Other                income                                                                    |   |                                            | 389     |   |                                           |   | 82 |   |   |   | 533 |   |   |   | 329 |   |
| TOTAL                OTHER INCOME                                                              |   |                                            | 860     |   |                                           |   | 691 |   |   |   | 1,867 |   |   |   | 3,355 |   |
|                                                                                           |   |                                            |    |   |                                           |   |   |   |   |   |   |   |   |   |   |   |
| Other                Expense                                                                   |   |                                            |    |   |                                           |   |   |   |   |   |   |   |   |   |   |   |
| Salaries                and employee benefits                                                  |   |                                            | 5,903   |   |                                           |   | 8,132 |   |   |   | 20,885 |   |   |   | 23,582 |   |
| Occupancy                expense of premises                                                   |   |                                            | 3,128   |   |                                           |   | 1,450 |   |   |   | 6,224 |   |   |   | 4,252 |   |
| Furniture                and equipment                                                         |   |                                            | 904     |   |                                           |   | 1,104 |   |   |   | 3,117 |   |   |   | 3,235 |   |
| Legal                services                                                                  |   |                                            | 1,513   |   |                                           |   | 252 |   |   |   | 3,987 |   |   |   | 678 |   |
| Audit                services                                                                  |   |                                            | 420     |   |                                           |   | 239 |   |   |   | 1,922 |   |   |   | 600 |   |
| Other                professional services                                                     |   |                                            | 917     |   |                                           |   | 272 |   |   |   | 4,269 |   |   |   | 964 |   |
| Office                supplies, postage and telephone                                          |   |                                            | 527     |   |                                           |   | 567 |   |   |   | 1,602 |   |   |   | 1,766 |   |
| Business                development                                                            |   |                                            | 236     |   |                                           |   | 500 |   |   |   | 1,170 |   |   |   | 1,660 |   |
| Loan                related                                                                    |   |                                            | 1,185   |   |                                           |   | 363 |   |   |   | 2,938 |   |   |   | 843 |   |
| Write                down of assets                                                            |   |                                            | 3,255   |   |                                           |   | 397 |   |   |   | 14,539 |   |   |   | 397 |   |
| Other                                                                                          |   |                                            | 3,873   |   |                                           |   | 1,439 |   |   |   | 7,361 |   |   |   | 4,039 |   |
| TOTAL                OTHER EXPENSES                                                            |   |                                            | 21,861  |   |                                           |   | 14,715 |   |   |   | 68,014 |   |   |   | 42,016 |   |
| (LOSS)                / INCOME BEFORE INCOME TAXES                                             |   |                                            | (31,128 | )      |                                           |   | 9,293 |   |   |   | (106,537 | ) |   |   | 28,819 |   |
| INCOME                TAX (BENEFIT)/PROVISION                                                  |   |                                            | (2,569  | )      |                                           |   | 3,822 |   |   |   | 3,221 |   |   |   | 11,837 |   |
| NET                (LOSS) / INCOME                                                             |   | $                                               | (28,559 | )      |                                           | $      | 5,471 |   |   | $ | (109,758 | ) |   | $ | 16,982 |   |
|                                                                                           |   |                                            |    |   |                                           |   |   |   |   |   |   |   |   |   |   |   |
| (LOSS)                / EARNINGS PER SHARE                (2)                                  |   |                                            |    |   |                                           |   |   |   |   |   |   |   |   |   |   |   |
| BASIC                                                                                          |   | $                                               | (2.95   | )      |                                           | $      | 0.46 |   |   | $ | (11.39 | ) |   | $ | 1.49 |   |
| DILUTED                                                                                        |   | $                                               | (2.95   | )      |                                           | $      | 0.45 |   |   | $ | (11.39 | ) |   | $ | 1.46 |   |
|                                                                                           |   |                                            |    |   |                                           |   |   |   |   |   |   |   |   |   |   |   |
| CASH                DIVIDENDS DECLARED PER SHARE                                               |   | $                                               | -       |   |                                           | $      | 0.08 |   |   | $ | 0.08 |   |   | $ | 0.23 |   |
| CASH                DIVIDENDS PAID PER SHARE                                                   |   | $                                               | -       |   |                                           | $      | 0.08 |   |   | $ | 0.08 |   |   | $ | 0.23 |   |
|                                                                                           |   |                                            |    |   |                                           |   |   |   |   |   |   |   |   |   |   |   |
| See                accompanying notes to consolidated financial statements.                    |   |                                            |    |   |                                           |   |   |   |   |   |   |   |   |   |   |   |

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

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VINEYARD      NATIONAL BANCORP AND SUBSIDIARIES

|                                                     |   |      |   |   |                        |   |       |       |   |   |    |   |          |   |     |   |                                                                                                              |        |   |    | Accumulated   |   |   |   |   |
|----------------------------------------------------------|--------|-----------|--------|--------|-----------------------------|--------|------------|------------|--------|--------|---------|--------|---------------|--------|----------|--------|-------------------------------------------------------------------------------------------------------------------|-------------|--------|---------|---------------|--------|--------|--------|--------|
|                                                     |   | Perpetual |   |   | Common                Stock |   |       | Additional |   |   |    |   |          |   |     |   |                                                                                                              | Other       |   |    |          |   |
|                                                     |   | Preferred |   |   | Number                of    |   |       |       |   |   | Paid-in |   | Comprehensive |   | Retained |   |                                                                                                              | Unallocated |   |    | Comprehensive |   |   |   |   |
|                                                     |   | Stock     |   |   | Shares                      |   |       | Amount     |   |   | Capital |   | Income        |   | Earnings |   |                                                                                                              | ESOP        |   |    | Loss          |   |   | Total  |   |
| Balance                at December 31, 2006              |   | $         | 9,665  |   |                        |   | 10,939,310 |       |   | $      | 88,819  |   |          | $      | 2,149    |   |                                                                                                              |        | $      | 52,105  |          |   | $      | (5,765 | )      |   | $ | (3,913 | ) |   | $ | 143,060 |   |
|                                                     |   |      |   |   |                        |   |       |       |   |   |    |   |          |   |     |   |                                                                                                              |        |   |    |          |   |   |   |   |   |   |   |   |   |   |   |   |
| Issuance                of five percent stock dividend   |   |      |   |   |                        |   |       |       |   |   | 12,309  |   |          |   |     |   |                                                                                                              |        |   | (12,309 | )             |   |   |   |   |   |   |   |   |   |   | - |   |
| Exercise                of stock options                 |   |      |   |   |                        |   | 24,229     |       |   |   | 68      |   |          |   |     |   |                                                                                                              |        |   |    |          |   |   |   |   |   |   |   |   |   |   | 68 |   |
| Restricted                shares surrendered to Vineyard |   |      |   |   |                        |   |       |       |   |   |    |   |          |   |     |   |                                                                                                              |        |   |    |          |   |   |   |   |   |   |   |   |   |   |   |   |
| National                Bancorp ("Company")              |   |      |   |   |                        |   | (6,512     | )          |   |   | (135    | )      |          |   |     |   |                                                                                                              |        |   |    |          |   |   |   |   |   |   |   |   |   |   | (135 | ) |
| Transfer                of unissued common stock to      |   |      |   |   |                        |   |       |       |   |   |    |   |          |   |     |   |                                                                                                              |        |   |    |          |   |   |   |   |   |   |   |   |   |   |   |   |
| restricted                stock                          |   |      |   |   |                        |   |       |       |   |   | 1,721   |   |          |   | (1,721   | )      |                                                                                                              |        |   |    |          |   |   |   |   |   |   |   |   |   |   | - |   |
| Purchase                of common stock                  |   |      |   |   |                        |   | (150,000   | )          |   |   | (2,882  | )      |          |   |     |   |                                                                                                              |        |   |    |          |   |   |   |   |   |   |   |   |   |   | (2,882 | ) |
| Purchase                of restricted stock              |   |      |   |   |                        |   | (36,750    | )          |   |   |    |   |          |   | (858     | )      |                                                                                                              |        |   |    |          |   |   |   |   |   |   |   |   |   |   | (858 | ) |
| Vesting                of restricted stock               |   |      |   |   |                        |   | 29,518     |       |   |   |    |   |          |   |     |   |                                                                                                              |        |   |    |          |   |   |   |   |   |   |   |   |   |   | - |   |
| Issuance                of preferred stock               |   |      | 21,961 |   |                        |   |       |       |   |   |    |   |          |   |     |   |                                                                                                              |        |   |    |          |   |   |   |   |   |   |   |   |   |   | 21,961 |   |
| Amortization                of restricted stock          |   |      |   |   |                        |   |       |       |   |   |    |   |          |   | 932      |   |                                                                                                              |        |   |    |          |   |   |   |   |   |   |   |   |   |   | 932 |   |
| Share-based                compensation expense          |   |      |   |   |                        |   |       |       |   |   |    |   |          |   | 107      |   |                                                                                                              |        |   |    |          |   |   |   |   |   |   |   |   |   |   | 107 |   |
| Release                of ESOP shares                    |   |      |   |   |                        |   |       |       |   |   |    |   |          |   | (1       | )      |                                                                                                              |        |   |    |          |   |   | 445    |   |   |   |   |   |   |   | 444 |   |
| Disgorgement                of short-swing profit        |   |      |   |   |                        |   |       |       |   |   |    |   |          |   | 11       |   |                                                                                                              |        |   |    |          |   |   |   |   |   |   |   |   |   |   | 11 |   |
| Cash                paid for fractional shares in        |   |      |   |   |                        |   |       |       |   |   |    |   |          |   |     |   |                                                                                                              |        |   |    |          |   |   |   |   |   |   |   |   |   |   | - |   |
| stock                dividend distribution               |   |      |   |   |                        |   |       |       |   |   |    |   |          |   |     |   |                                                                                                              |        |   | (18     | )             |   |   |   |   |   |   |   |   |   |   | (18 | ) |
| Cash                dividends declared on                |   |      |   |   |                        |   |       |       |   |   |    |   |          |   |     |   |                                                                                                              |        |   |    |          |   |   |   |   |   |   |   |   |   |   |   |   |
| preferred                stock                           |   |      |   |   |                        |   |       |       |   |   |    |   |          |   |     |   |                                                                                                              |        |   | (1,070  | )             |   |   |   |   |   |   |   |   |   |   | (1,070 | ) |
| Cash                dividends declared on                |   |      |   |   |                        |   |       |       |   |   |    |   |          |   |     |   |                                                                                                              |        |   |    |          |   |   |   |   |   |   |   |   |   |   |   |   |
| common                stock                              |   |      |   |   |                        |   |       |       |   |   |    |   |          |   |     |   |                                                                                                              |        |   | (2,591  | )             |   |   |   |   |   |   |   |   |   |   | (2,591 | ) |
| Comprehensive                income                      |   |      |   |   |                        |   |       |       |   |   |    |   |          |   |     |   |                                                                                                              |        |   |    |          |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                Income                                |   |      |   |   |                        |   |       |       |   |   |    |   |          |   |     |   |  $              16,982                 |        |   | 16,982  |          |   |   |   |   |   |   |   |   |   |   | 16,982 |   |
| Unrealized                security holding               |   |      |   |   |                        |   |       |       |   |   |    |   |          |   |     |   |                                                                                                              |        |   |    |          |   |   |   |   |   |   |   |   |   |   |   |   |
| losses                (net of $464                       |   |      |   |   |                        |   |       |       |   |   |    |   |          |   |     |   |                                                                                                              |        |   |    |          |   |   |   |   |   |   |   |   |   |   |   |   |
| tax                benefit)                              |   |      |   |   |                        |   |       |       |   |   |    |   |          |   |     |   |                   (642) |        |   |    |          |   |   |   |   |   |   | (642 | ) |   |   | (642 | ) |
| Total                comprehensive income                |   |      |   |   |                        |   |       |       |   |   |    |   |          |   |     |   |  $              16,340                 |        |   |    |          |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance                at September 30, 2007             |   | $         | 31,626 |   |                        |   | 10,799,795 |       |   | $      | 99,900  |   |          | $      | 619      |   |                                                                                                              |        | $      | 53,099  |          |   | $      | (5,320 | )      |   | $ | (4,555 | ) |   | $ | 175,369 |   |

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| (Dollars                in thousands)                                       |   |      |   |   |                        |   |       |       |   |   |    |   |   |          |   |   |        |   |     |        |   |   | Accumulated   |   |   |   |   |
|-----------------------------------------------------------------------------|--------|-----------|--------|--------|-----------------------------|--------|------------|------------|--------|--------|---------|--------|--------|---------------|--------|--------|-------------|--------|----------|-------------|--------|--------|---------------|--------|--------|--------|--------|
|                                                                        |   | Perpetual |   |   | Common                Stock |   |       | Additional |   |   |    |   |   |          |   |   |        |   |     | Other       |   |   |          |   |
|                                                                        |   | Preferred |   |   | Number                of    |   |       |       |   |   | Paid-in |   |   | Comprehensive |   |   | Accumulated |   |     | Unallocated |   |   | Comprehensive |   |   |   |   |
|                                                                        |   | Stock     |   |   | Shares                      |   |       | Amount     |   |   | Capital |   |   | Loss          |   |   | Deficit     |   |     | ESOP        |   |   | Loss          |   |   | Total  |   |
| Balance                at December 31, 2007                                 |   | $         | 31,615 |   |                        |   | 10,285,775 |       |   | $      | 92,772  |   |   | $             | 1,727  |   |        |   |     |        | $      | (5,372 | )             |   | $      | (5,168 | )      |   | $ | (2,549 | ) |   | $ | 113,025 |   |
|                                                                        |   |      |   |   |                        |   |       |       |   |   |    |   |   |          |   |   |        |   |     |        |   |   |          |   |   |   |   |   |   |   |   |   |   |   |   |
| Exercise                of stock options                                    |   |      |   |   |                        |   | 26,763     |       |   |   | 104     |   |   |          |   |   |        |   |     |        |   |   |          |   |   |   |   |   |   |   |   |   |   | 104 |   |
| Restricted                shares surrendered to the Company                 |   |      |   |   |                        |   | (7,039     | )          |   |   | (63     | )      |   |          |   |   |        |   |     |        |   |   |          |   |   |   |   |   |   |   |   |   |   | (63 | ) |
| Purchase                of common stock                                     |   |      |   |   |                        |   | (383,500   | )          |   |   | (3,339  | )      |   |          |   |   |        |   |     |        |   |   |          |   |   |   |   |   |   |   |   |   |   | (3,339 | ) |
| Purchase                of restricted stock                                 |   |      |   |   |                        |   | (59,292    | )          |   |   |    |   |   |          | (458   | )      |        |   |     |        |   |   |          |   |   |   |   |   |   |   |   |   |   | (458 | ) |
| Vesting                of restricted stock                                  |   |      |   |   |                        |   | 31,271     |       |   |   |    |   |   |          |   |   |        |   |     |        |   |   |          |   |   |   |   |   |   |   |   |   |   | - |   |
| Amortization                of restricted stock                             |   |      |   |   |                        |   |       |       |   |   |    |   |   |          | 565    |   |        |   |     |        |   |   |          |   |   |   |   |   |   |   |   |   |   | 565 |   |
| Reversal                of share-based compensation expense                 |   |      |   |   |                        |   |       |       |   |   |    |   |   |          | (176   | )      |        |   |     |        |   |   |          |   |   |   |   |   |   |   |   |   |   | (176 | ) |
| Release                of ESOP shares                                       |   |      |   |   |                        |   |       |       |   |   |    |   |   |          | (297   | )      |        |   |     |        |   |   |          |   |   | 465    |   |   |   |   |   |   |   | 168 |   |
| Cash                dividends declared on preferred                         |   |      |   |   |                        |   |       |       |   |   |    |   |   |          |   |   |        |   |     |        |   |   |          |   |   |   |   |   |   |   |   |   |   |   |   |
| stock                                                                       |   |      |   |   |                        |   |       |       |   |   |    |   |   |          |   |   |        |   |     |        |   | (644   | )             |   |   |   |   |   |   |   |   |   |   | (644 | ) |
| Cash                dividends declared on common                            |   |      |   |   |                        |   |       |       |   |   |    |   |   |          |   |   |        |   |     |        |   |   |          |   |   |   |   |   |   |   |   |   |   |   |   |
| stock                                                                       |   |      |   |   |                        |   |       |       |   |   |    |   |   |          |   |   |        |   |     |        |   | (817   | )             |   |   |   |   |   |   |   |   |   |   | (817 | ) |
| Comprehensive                loss                                           |   |      |   |   |                        |   |       |       |   |   |    |   |   |          |   |   |        |   |     |        |   |   |          |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                Loss                                                     |   |      |   |   |                        |   |       |       |   |   |    |   |   |          |   |   |        | $      | (109,758 | )           |   |   | (109,758      | )      |   |   |   |   |   |   |   |   |   |   | (109,758 | ) |
| Unrealized                security holding                                  |   |      |   |   |                        |   |       |       |   |   |    |   |   |          |   |   |        |   |     |        |   |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| gains                                                                       |   |      |   |   |                        |   |       |       |   |   |    |   |   |          |   |   |        |   | 3,919    |        |   |   |          |   |   |   |   |   |   |   | 3,919 |   |   |   | 3,919 |   |
| Total                comprehensive loss                                     |   |      |   |   |                        |   |       |       |   |   |    |   |   |          |   |   |        | $      | (105,839 | )           |   |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance                at September 30, 2008                                |   | $         | 31,615 |   |                        |   | 9,893,978  |       |   | $      | 89,474  |   |   | $             | 1,361  |   |        |   |     |        |   | $      | (116,591      | )      |   | $      | (4,703 | ) |   | $ | 1,370 |   |   | $ | 2,526 |   |
|                                                                        |   |      |   |   |                        |   |       |       |   |   |    |   |   |          |   |   |        |   |     |        |   |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| See                accompanying notes to consolidated financial statements. |   |      |   |   |                        |   |       |       |   |   |    |   |   |          |   |   |        |   |     |        |   |   |          |   |   |   |   |   |   |   |   |   |   |

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VINEYARD      NATIONAL BANCORP AND SUBSIDIARIES

| (Dollars                in thousands)                                         |   | Nine                Months Ended September 30, |     |
|-------------------------------------------------------------------------------|--------|------------------------------------------------|----------|
|                                                                          |   | 2008                                           |     |   | 2007 |   |
| Cash                Flows From Operating Activities                           |   |                                           |     |   |   |   |
| Net                (Loss) / Income                                            |   | $                                              | (109,758 | ) |   | $ | 16,982 |   |
| Adjustments                to Reconcile Net (Loss) / Income                   |   |                                           |     |   |   |   |   |   |
| to                Net Cash Provided by Operating Activities                   |   |                                           |     |   |   |   |   |   |
|                                                                          |   |                                           |     |   |   |   |   |   |
| Depreciation                and amortization                                  |   |                                           | 4,030    |   |   |   | 4,689 |   |
| FHLB                stock dividends                                           |   |                                           | (585     | ) |   |   | (445 | ) |
| (Reversal)                / recognition of share-based compensation           |   |                                           | (239     | ) |   |   | 107 |   |
| Provision                for credit losses                                    |   |                                           | 90,321   |   |   |   | 2,100 |   |
| Release                of ESOP shares                                         |   |                                           | 168      |   |   |   | 444 |   |
| Decrease                in deferred tax assets                                |   |                                           | 26,590   |   |   |   | 102 |   |
| Loss                on sale of assets                                         |   |                                           | 53       |   |   |   | (861 | ) |
| Write-down                of assets                                           |   |                                           | 14,539   |   |   |   | 397 |   |
| Changes                in assets and liabilities                              |   |                                           |     |   |   |   |   |   |
| Decrease                / (increase) in other assets                          |   |                                           | 17,034   |   |   |   | (691 | ) |
| (Increase)                / decrease in net taxes receivable                  |   |                                           | (23,201  | ) |   |   | 2,437 |   |
| Increase                / (decrease) in unearned loan fees                    |   |                                           | 1,768    |   |   |   | (2,149 | ) |
| Decrease                / (increase) in accrued interest receivable           |   |                                           | 2,885    |   |   |   | (946 | ) |
| Increase                in accrued interest payable                           |   |                                           | 272      |   |   |   | 588 |   |
| (Decrease)                / increase in accrued expense and other liabilities |   |                                           | (20,920  | ) |   |   | 671 |   |
| Origination                and purchase of held-for-sale loans,               |   |                                           |     |   |   |   |   |   |
| net                of principal reductions                                    |   |                                           | 17,309   |   |   |   | (12,839 | ) |
| Proceeds                from sale of held-for-sale loans                      |   |                                           | 22,035   |   |   |   | 10,697 |   |
| Total                Adjustment                                               |   |                                           | 152,059  |   |   |   | 4,301 |   |
| Net                Cash Provided By Operating Activities                      |   |                                           | 42,301   |   |   |   | 21,283 |   |
|                                                                          |   |                                           |     |   |   |   |   |   |
| Cash                Flows From Investing Activities                           |   |                                           |     |   |   |   |   |   |
| Proceeds                from sales of mortgage-backed                         |   |                                           |     |   |   |   |   |   |
| securities                available-for-sale                                  |   |                                           | 36,528   |   |   |   | - |   |
| Proceeds                from principal reductions and maturities of           |   |                                           |     |   |   |   |   |   |
| mortgage-backed                securities available-for-sale                  |   |                                           | 10,777   |   |   |   | 22,525 |   |
| Purchase                of FHLB and other stock                               |   |                                           | (2,840   | ) |   |   | (10,755 | ) |
| Redemption                of FHLB stock                                       |   |                                           | 6,813    |   |   |   | 5,699 |   |
| Origination                and purchase of loans, net of principal reductions |   |                                           | 114,348  |   |   |   | (307,888 | ) |
| Proceeds                from sale of loans                                    |   |                                           | 38,840   |   |   |   | 67,688 |   |
| Proceeds                from sale of property, plant, and equipment           |   |                                           | 59       |   |   |   | - |   |
| Proceeds                from sale of other real estate owned                  |   |                                           | 19,067   |   |   |   | - |   |
| Capital                expenditures                                           |   |                                           | (817     | ) |   |   | (1,039 | ) |
| Cash                paid for sale of subsidiary                               |   |                                           | (72      | ) |   |   | - |   |
| Net                Cash Provided By / (Used In) Investing Activities          |   | $                                              | 222,703  |   |   | $ | (223,770 | ) |

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| (Dollars                in thousands)                                          |   |   |     |   |   |   |
|--------------------------------------------------------------------------------|--------|--------|----------|--------|--------|--------|
|                                                                           |   | 2008   |     |   | 2007   |   |
| Cash                Flows From Financing Activities                            |   |   |     |   |   |   |
| Net                decrease in non-interest bearing deposits                   |   | $      | (173,667 | )      |   | $      | (745 | ) |
| Net                (decrease) / increase in interest-bearing deposits          |   |   | (141,361 | )      |   |   | 45,203 |   |
| Decrease                in exchange balances                                   |   |   | (47,515  | )      |   |   | - |   |
| Net                increase in FHLB advances                                   |   |   | 106,000  |   |   |   | 145,000 |   |
| Increase                / (decrease) in other borrowings                       |   |   | 3,050    |   |   |   | (6,900 | ) |
| Purchase                of common stock                                        |   |   | (3,339   | )      |   |   | (3,017 | ) |
| Purchase                of restricted stock                                    |   |   | (458     | )      |   |   | (858 | ) |
| Dividends                paid on preferred stock                               |   |   | (644     | )      |   |   | (1,073 | ) |
| Dividends                paid on common stock                                  |   |   | (817     | )      |   |   | (2,591 | ) |
| Proceeds                from exercise of stock options                         |   |   | 104      |   |   |   | 68 |   |
| Proceeds                from issuance of preferred stock, net                  |   |   | -        |   |   |   | 21,961 |   |
| Cash                paid in lieu of fractional shares of stock dividend        |   |   | -        |   |   |   | (18 | ) |
| Cash                received for disgorgement of short swing profit            |   |   | -        |   |   |   | 11 |   |
| Net                Cash (Used In) / Provided By Financing Activities           |   |   | (258,647 | )      |   |   | 197,041 |   |
|                                                                           |   |   |     |   |   |   |   |   |
| Net                Increase / (Decrease) in Cash and Cash Equivalents          |   |   | 6,357    |   |   |   | (5,446 | ) |
|                                                                           |   |   |     |   |   |   |   |   |
| Cash                and Cash                Equivalents, Beginning of year     |   |   | 83,537   |   |   |   | 35,129 |   |
|                                                                           |   |   |     |   |   |   |   |   |
| Cash                and Cash                Equivalents, End of period         |   | $      | 89,894   |   |   | $      | 29,683 |   |
|                                                                           |   |   |     |   |   |   |   |   |
| Supplementary                Information                                       |   |   |     |   |   |   |   |   |
| Cash                paid during period for:                                    |   |   |     |   |   |   |   |   |
| Interest                                                                       |   | $      | 42,083   |   |   | $      | 70,551 |   |
| Income                tax                                                      |   | $      | -        |   |   | $      | 10,050 |   |
| Other                non-cash items:                                           |   |   |     |   |   |   |   |   |
| Charge-offs                in loan portfolio                                   |   | $      | 75,383   |   |   | $      | 153 |   |
| Transfers                to OREO                                               |   | $      | 47,697   |   |   | $      | 12,862 |   |
| Transfers                from loans held-for-investment to loans held-for-sale |   | $      | 64,801   |   |   | $      | 141,078 |   |
| Transfers                from loans held-for-sale to loans held-for-investment |   | $      | 87,690   |   |   | $      | - |   |
| Net                change in unrealized loss on investment securities          |   | $      | (5,686   | )      |   | $      | 1,106 |   |
| Issuance                of 5% stock dividend                                   |   | $      | -        |   |   | $      | 12,309 |   |
|                                                                           |   |   |     |   |   |   |   |   |
| See                accompanying notes to consolidated financial statements.    |   |   |     |   |   |   |   |   |

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| §   | establish                a compliance committee to monitor and coordinate compliance with                the                Consent Order; |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------|

| §   | identify                experienced and competent individuals to serve on a permanent, full-time                basis as chief executive officer and chief credit                officer; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | maintain                capital ratios above the statutory minimums and develop a three-year                capital plan; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------|

| §   | suspend                the payment of dividends without regulatory                approval; |
|--------------------|---------------------------------------------------------------------------------------------|

| §   | limit                annual loan growth; |
|--------------------|------------------------------------------|

| §   | establish                a program for the maintenance of adequate allowances for loan                losses; |
|--------------------|---------------------------------------------------------------------------------------------------------------|

| §   | adopt                a written asset diversification                program; |
|--------------------|------------------------------------------------------------------------------|

| §   | review,                revise and adhere to the Bank’s loan                policy; |
|--------------------|------------------------------------------------------------------------------------------|

| §   | ensure                the use and reporting of appropriate risk rating of                assets; |
|--------------------|--------------------------------------------------------------------------------------------------|

| §   | establish                an effective, independent and ongoing loan review                system; |
|--------------------|---------------------------------------------------------------------------------------------------|

| §   | take                appropriate action to protect the Bank’s interest in its problem                assets; |
|--------------------|-------------------------------------------------------------------------------------------------------------------|

| §   | ensure                the maintenance of sufficient liquidity to sustain current operations                and                withstand anticipated or extraordinary demand;                and |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | improve                the management of the Bank’s information technology activities and to                address various deficiencies cited by the                OCC. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | suspend                the declaration, payment or receipt of dividends without prior                approval; |
|--------------------|----------------------------------------------------------------------------------------------------------------|

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|   |   |
|--------|--------|

| §   | suspend                any distributions of interest, principal or other sums on subordinated                debentures or trust preferred securities without prior                approval; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | not                incur, increase, or guarantee any debt without prior                approval; |
|--------------------|--------------------------------------------------------------------------------------------------|

| §   | not                purchase or redeem any shares of stock without prior                approval; |
|--------------------|--------------------------------------------------------------------------------------------------|

| §   | submit                a written capital plan to the FRB; |
|--------------------|----------------------------------------------------------|

| §   | have                VNB serve as a source of financial strength to the                Bank; |
|--------------------|---------------------------------------------------------------------------------------------|

| §   | ensure                that VNB and its subsidiaries comply with sections 23A and 23B of                the                Federal Reserve Act and Regulation W of the Board of Governors of                the                Federal Reserve System; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | not                appoint any new director or senior executive officer or change the                responsibilities of any current senior executive officers without                providing the FRB with 30 days prior written notice and not make                any                appointment or change if such is disapproved by the                FRB; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | not                make indemnification or severance payments to, or enter into agreements                providing for such indemnification or severance payments with,                institution-affiliated parties, which include key employees and directors                of the Company, without complying with certain statutory restrictions                including prior approval of the FRB and the FDIC;                and   |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | provide                quarterly written reports to the FRB concerning the actions taken                by us to                comply with the Written Agreement. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|                                                          |   | Nine                months ended  |   |
|---------------------------------------------------------------|--------|-----------------------------------|--------|
|                                                          |   | September                30, 2007 |   |
| Dividend                yield                                 |   |                              | 1.42   | % |
| Expected                life (in years)                       |   |                              | 3.25   |   |
| Expected                volatility                            |   |                              | 27.14  | % |
| Risk-free                rate                                 |   |                              | 4.48   | % |
| Weighted                average fair value of options granted |   | $                                 | 4.79   |   |

| (Dollars                in thousands, except per share) |   |   |     |   |      |   |   | Weighted-   |   |                      |      |   |
|---------------------------------------------------------|--------|--------|----------|--------|-----------|--------|--------|-------------|--------|---------------------------|-----------|--------|
|                                                    |   |   |     |   | Weighted- |   |   | Average     |   |                      |      |   |
|                                                    |   |   |     |   | Average   |   |   | Remaining   |   |                      | Aggregate |   |
|                                                    |   |   |     |   | Exercise  |   |   | Contractual |   |                      | Intrinsic |   |
|                                                    |   | Shares |     |   | Price     |   |   | Term        |   |                      | Value     |   |
| Outstanding                at December 31, 2007         |   |   | 390,850  |   |      | $      | 8.60   |        |   | 3.89                years |      |   | $ | - |   |
| Granted                                                 |   |   | -        |   |      |   | -      |        |   |                      | -         |   |   |   | - |   |
| Exercised                                               |   |   | (26,763  | )      |      |   | 3.89   |        |   |                      | -         |   |   |   | - |   |
| Forfeited                or expired                     |   |   | (306,206 | )      |      |   | 9.91   |        |   |                      | -         |   |   |   | - |   |
| Outstanding                at September 30, 2008        |   |   | 57,881   |   |      | $      | 3.89   |        |   | 3.99                years |      |   | $ | - |   |
| Exercisable                at September 30, 2008        |   |   | 57,881   |   |      | $      | 3.89   |        |   | 3.99                years |      |   | $ | - |   |

| (Dollars                in thousands, except per share) |   |   |    |   |      |   |   | Weighted-   |   |                      |      |   |
|---------------------------------------------------------|--------|--------|---------|--------|-----------|--------|--------|-------------|--------|---------------------------|-----------|--------|
|                                                    |   |   |    |   | Weighted- |   |   | Average     |   |                      |      |   |
|                                                    |   |   |    |   | Average   |   |   | Remaining   |   |                      | Aggregate |   |
|                                                    |   |   |    |   | Exercise  |   |   | Contractual |   |                      | Intrinsic |   |
|                                                    |   | Shares |    |   | Price     |   |   | Term        |   |                      | Value     |   |
| Outstanding                at December 31, 2006         |   |   | 388,579 |   |      | $      | 6.19   |        |   | 5.03                years |      |   | $ | - |   |
| Granted                                                 |   |   | 52,500  |   |      |   | 21.44  |        |   |                      | -         |   |   |   | - |   |
| Exercised                                               |   |   | (24,229 | )      |      |   | 2.81   |        |   |                      | -         |   |   |   | - |   |
| Forfeited                or expired                     |   |   | -       |   |      |   | -      |        |   |                      | -         |   |   |   | - |   |
| Outstanding                at September 30, 2007        |   |   | 416,850 |   |      | $      | 8.31   |        |   | 4.18                years |      |   | $ | 3,506 |   |
| Exercisable                at September 30, 2007        |   |   | 311,850 |   |      | $      | 3.95   |        |   | 4.48                years |      |   | $ | 3,982 |   |

|                                           |   |       |     |   | Weighted-                 |   |
|------------------------------------------------|--------|------------|----------|--------|---------------------------|--------|
|                                           |   |       |     |   | Average                   |   |
|                                           |   | Non-vested |     |   | Grant-Date                |   |
|                                           |   | Shares     |     |   | Fair                Value |   |
| Nonvested                at December 31, 2007  |   |       | 105,000  |   |                      | $      | 4.78 |   |
| Granted                                        |   |       | -        |   |                      |   | - |   |
| Vested                                         |   |       | -        |   |                      |   | - |   |
| Forfeited                or expired            |   |       | (105,000 | )      |                      |   | 4.78 |   |
| Nonvested                at September 30, 2008 |   |       | -        |   |                      | $      | - |   |

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|                                           |   |       |    |   | Weighted-                 |   |
|------------------------------------------------|--------|------------|---------|--------|---------------------------|--------|
|                                           |   |       |    |   | Average                   |   |
|                                           |   | Non-vested |    |   | Grant-Date                |   |
|                                           |   | Shares     |    |   | Fair                Value |   |
| Nonvested                at December 31, 2006  |   |       | 52,500  |   |                      | $      | 4.76 |   |
| Granted                                        |   |       | 52,500  |   |                      |   | 4.79 |   |
| Vested                                         |   |       | -       |   |                      |   | - |   |
| Forfeited                or expired            |   |       | -       |   |                      |   | - |   |
| Nonvested                at September 30, 2007 |   |       | 105,000 |   |                      | $      | 4.78 |   |

|                                             |   |                             |    |   | Weighted-                Average |   |
|--------------------------------------------------|--------|----------------------------------|---------|--------|----------------------------------|--------|
|                                             |   | Restricted                Shares |    |   | Fair                Value        |   |
| Outstanding                at December 31, 2007  |   |                             | 298,466 |   |                             | $      | 23.72 |   |
| Granted                                          |   |                             | 66,925  |   |                             |   | 7.27 |   |
| Forfeited                                        |   |                             | (87,588 | )      |                             |   | 13.95 |   |
| Vested                                           |   |                             | (31,271 | )      |                             |   | 17.01 |   |
| Outstanding                at September 30, 2008 |   |                             | 246,532 |   |                             | $      | 26.12 |   |

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| (Dollars                in thousands)       |   | As                of              |    |
|---------------------------------------------|--------|-----------------------------------|---------|
|                                        |   | September                30, 2008 |    |   | December                31, 2007 |   |
| Commitments                to extend credit |   | $                                 | 274,234 |   |   | $ | 618,336 |   |
| Commitments                to extend credit |   |                              |    |   |   |   |   |   |
| to                directors and officers    |   | $                                 | -       |   |   | $ | 365 |   |
| Standby                letters of credit    |   | $                                 | 6,226   |   |   | $ | 7,425 |   |
| Commercial                letters of credit |   | $                                 | -       |   |   | $ | - |   |

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| (Dollars                in thousands)                   |   | Three                Months Ended September 30, |    |
|---------------------------------------------------------|--------|-------------------------------------------------|---------|
|                                                    |   | 2008                                            |    |   | 2007 |   |
|                                                    |   | Income                                          |    |   | Shares |   |   | Income |   |   | Shares |   |
| Net                (loss) / income as reported          |   | $                                               | (28,559 | ) |   |   |   |   | $ | 5,471 |   |   |   |   |
| Less:                Preferred stock dividends declared |   |                                            | -       |   |   |   |   |   |   | (610 | ) |   |   |   |
| Shares                outstanding at end of period      |   |                                            |    |   |   |   | 9,893,978 |   |   |   |   |   |   |   | 10,799,795 |   |
| Unreleased                and unallocated ESOP shares   |   |                                            |    |   |   |   | (210,260 | ) |   |   |   |   |   |   | (238,306 | ) |
| Impact                of weighting shares               |   |                                            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| issued                during the period                 |   |                                            |    |   |   |   | (3,917 | ) |   |   |   |   |   |   | 25,944 |   |
| Used                in basic EPS                        |   | $                                               | (28,559 | ) |   |   | 9,679,801 |   |   | $ | 4,861 |   |   |   | 10,587,433 |   |
| Dilutive                effect of outstanding           |   |                                            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| stock                options and warrants               |   |                                            |    |   |   |   | - |   |   |   |   |   |   |   | 229,761 |   |
| Used                in diluted EPS (1)                  |   | $                                               | (28,559 | ) |   |   | 9,679,801 |   |   | $ | 4,861 |   |   |   | 10,817,194 |   |

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| (Dollars                in thousands)                   |   | Nine                Months Ended September 30, |     |
|---------------------------------------------------------|--------|------------------------------------------------|----------|
|                                                    |   | 2008                                           |     |   | 2007 |   |
|                                                    |   | Income                                         |     |   | Shares |   |   | Income |   |   | Shares |   |
| Net                (loss) / income as reported          |   | $                                              | (109,758 | ) |   |   |   |   | $ | 16,982 |   |   |   |   |
| Less:                Preferred stock dividends declared |   |                                           | (644     | ) |   |   |   |   |   | (1,070 | ) |   |   |   |
| Shares                outstanding at end of period      |   |                                           |     |   |   |   | 9,893,978 |   |   |   |   |   |   |   | 10,799,795 |   |
| Unreleased                and unallocated ESOP shares   |   |                                           |     |   |   |   | (210,260 | ) |   |   |   |   |   |   | (238,306 | ) |
| Impact                of weighting shares               |   |                                           |     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| issued                during the period                 |   |                                           |     |   |   |   | 8,364 |   |   |   |   |   |   |   | 85,407 |   |
| Used                in basic EPS                        |   | $                                              | (110,402 | ) |   |   | 9,692,082 |   |   | $ | 15,912 |   |   |   | 10,646,896 |   |
| Dilutive                effect of outstanding           |   |                                           |     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| stock                options and warrants               |   |                                           |     |   |   |   | - |   |   |   |   |   |   |   | 265,152 |   |
| Used                in diluted EPS (1)                  |   | $                                              | (110,402 | ) |   |   | 9,692,082 |   |   | $ | 15,912 |   |   |   | 10,912,048 |   |

| (1)   | In                accordance with SFAS No. 128 “Earnings per Share”,                due to the net loss for the three and nine months ended September                30,                2008, the impact of securities convertible to common stock is not                included                as its effect would be                anti-dilutive. |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (Dollars                in thousands)        |   | At                September 30, 2008 |    |
|----------------------------------------------|--------|--------------------------------------|---------|
|                                         |   | Total                                |    |   | (Level                1) |   |   | (Level                2) |   |   | (Level                3) |   |
|                                         |   |                                 |    |   |   |   |   |   |   |   |   |   |
| Available-for-sale                securities |   | $                                    | 125,023 |   |   | $ | - |   |   | $ | 125,023 |   |   | $ | - |   |
| Total                                        |   | $                                    | 125,023 |   |   | $ | - |   |   | $ | 125,023 |   |   | $ | - |   |

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|                                  |   |                                 |    |   |                              |   |   |                     |   |   |                     |   |   | Quarter                ended |    |
|---------------------------------------|--------|--------------------------------------|---------|--------|-----------------------------------|--------|--------|--------------------------|--------|--------|--------------------------|--------|--------|------------------------------|---------|
| (Dollars                in thousands) |   | At                September 30, 2008 |    |   | September                30, 2008 |   |
|                                  |   | Total                                |    |   | (Level                1)          |   |   | (Level                2) |   |   | (Level                3) |   |   | Total                Losses  |    |
| Loans                held-for-sale    |   | $                                    | 8,391   |   |                              | $      | -      |                     |   | $      | -                        |   |   | $                            | 8,391   |   |   | $ | - |   |
| Impaired                loans (1)     |   |                                 | 296,467 |   |                              |   | -      |                     |   |   | -                        |   |   |                         | 296,467 |   |   |   | (26,728 | ) |
| OREO                (2)               |   |                                 | 38,641  |   |                              |   | -      |                     |   |   | -                        |   |   |                         | 38,641  |   |   |   | - |   |
| Total                                 |   | $                                    | 343,499 |   |                              | $      | -      |                     |   | $      | -                        |   |   | $                            | 343,499 |   |   | $ | (26,728 | ) |

| (1)   | Represents                carrying value of impaired loans net of corresponding specific reserve                in                the ALL. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------|

| (2)   | Represents                the carrying value and related losses of foreclosed real estate owned                that                were measured at fair value subsequent to their initial classification                as                foreclosed assets. |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| (Dollars                in thousands)                 |   | September                30, 2008 |      |   | December                31, 2007 |   |
|-------------------------------------------------------|--------|-----------------------------------|-----------|--------|----------------------------------|--------|
|                                                  |   |                              |      |   |                             |   |   |   |   |   |   |   |
|                                                  |   | Amount                            |      |   | %                                |   |   | Amount |   |   | % |   |
| Commercial                and industrial              |   | $                                 | 197,780   |   |                             |   | 11.0 | % |   | $ | 156,966 |   |   |   | 7.8 | % |
| Real                estate construction and land:     |   |                              |      |   |                             |   |   |   |   |   |   |   |   |   |   |   |
| Single-family                luxury                   |   |                              | 492,283   |   |                             |   | 27.3 | % |   |   | 582,962 |   |   |   | 29.0 | % |
| Single-family                tract                    |   |                              | 47,434    |   |                             |   | 2.6 | % |   |   | 146,627 |   |   |   | 7.3 | % |
| Commercial                                            |   |                              | 219,629   |   |                             |   | 12.2 | % |   |   | 198,186 |   |   |   | 9.9 | % |
| Land                                                  |   |                              |      |   |                             |   |   |   |   |   |   |   |   |   |   |   |
| Single-family                luxury                   |   |                              | 18,769    |   |                             |   | 1.0 | % |   |   | 22,931 |   |   |   | 1.2 | % |
| Single-family                tract                    |   |                              | 31,283    |   |                             |   | 1.7 | % |   |   | 64,405 |   |   |   | 3.2 | % |
| Commercial                                            |   |                              | 9,158     |   |                             |   | 0.5 | % |   |   | 15,439 |   |   |   | 0.8 | % |
| Other                                                 |   |                              | 265       |   |                             |   | 0.0 | % |   |   | 909 |   |   |   | 0.0 | % |
| Real                estate mortgage:                  |   |                              |      |   |                             |   |   |   |   |   |   |   |   |   |   |   |
| Commercial                                            |   |                              | 507,137   |   |                             |   | 28.1 | % |   |   | 553,531 |   |   |   | 27.6 | % |
| Multi-family                residential               |   |                              | 134,878   |   |                             |   | 7.5 | % |   |   | 93,662 |   |   |   | 4.7 | % |
| Other                residential                      |   |                              | 49,991    |   |                             |   | 2.8 | % |   |   | 56,257 |   |   |   | 2.8 | % |
| Consumer                loans                         |   |                              | 92,433    |   |                             |   | 5.1 | % |   |   | 115,702 |   |   |   | 5.7 | % |
| All                other loans (including overdrafts) |   |                              | 167       |   |                             |   | 0.0 | % |   |   | 264 |   |   |   | 0.0 | % |
|                                                  |   |                              | 1,801,207 |   |                             |   | 99.9 | % |   |   | 2,007,841 |   |   |   | 100.0 | % |
| Less:                                                 |   |                              |      |   |                             |   |   |   |   |   |   |   |   |   |   |   |
| Unearned                premium on loans              |   |                              | 2,245     |   |                             |   | 0.1 | % |   |   | 3,272 |   |   |   | 0.2 | % |
| Deferred                loan fees                     |   |                              | (587      | )      |                             |   | 0.0 | % |   |   | (3,042 | ) |   |   | -0.2 | % |
| Loans,                net of unearned income          |   | $                                 | 1,802,865 |   |                             |   | 100.0 | % |   | $ | 2,008,071 |   |   |   | 100.0 | % |
| Loans                held-for-sale                    |   | $                                 | 8,391     |   |                             |   |   |   |   | $ | 119,427 |   |   |   |   |   |

| (Dollars                in thousands)                                 |   | As                of         |    |
|-----------------------------------------------------------------------|--------|------------------------------|---------|
|                                                                  |   | September                30, |    |   | December                31, |   |
|                                                                  |   | 2008                         |    |   | 2007 |   |
|                                                                  |   |                         |    |   |   |   |
| Impaired                loans with a specific valuation allowance     |   | $                            | 119,370 |   |   | $ | 103,732 |   |
| Impaired                loans without a specific valuation allowance  |   |                         | 177,097 |   |   |   | 36,156 |   |
| Total                impaired loans                                   |   | $                            | 296,467 |   |   | $ | 139,888 |   |
|                                                                  |   |                         |    |   |   |   |   |   |
| Specific                valuation allowance related to impaired loans |   | $                            | 26,728  |   |   | $ | 20,848 |   |

| (Dollars                in thousands)                            |   | Nine                months ended September 30, |    |
|------------------------------------------------------------------|--------|------------------------------------------------|---------|
|                                                             |   | 2008                                           |    |   | 2007 |   |
| Average                recorded investment in impaired loans     |   | $                                              | 226,536 |   |   | $ | 14,996 |   |
| Cash                receipts applied to reduce principal balance |   | $                                              | 80,212  |   |   | $ | 9,180 |   |
| Interest                income recognized for cash payments      |   | $                                              | 1,261   |   |   | $ | 100 |   |

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| (Dollars                in thousands)    |   | Three                Months Ended |   |   | Nine                Months Ended  |   |
|------------------------------------------|--------|-----------------------------------|--------|--------|-----------------------------------|--------|
|                                     |   | September                30, 2008 |   |   | September                30, 2008 |   |
| Current                                  |   |                              |   |   |                              |   |
| Federal                                  |   | $                                 | 5,813  |   |                              | $      | (14,867 | ) |
| State                                    |   |                              | -      |   |                              |   | - |   |
| Total                Current Income Tax  |   | $                                 | 5,813  |   |                              | $      | (14,867 | ) |
|                                     |   |                              |   |   |                              |   |   |   |
| Deferred                                 |   |                              |   |   |                              |   |   |   |
| Federal                                  |   |                              | (6,461 | )      |                              |   | 13,530 |   |
| State                                    |   |                              | (1,921 | )      |                              |   | 4,558 |   |
| Total                State Franchise Tax |   |                              | (8,382 | )      |                              |   | 18,088 |   |
| Total                Income Taxes        |   | $                                 | (2,569 | )      |                              | $      | 3,221 |   |

| (Dollars                in thousands)                                      |   | Three                months ended |    |   | Nine                months ended  |   |
|----------------------------------------------------------------------------|--------|-----------------------------------|---------|--------|-----------------------------------|--------|
|                                                                       |   | September                30, 2008 |    |   | September                30, 2008 |   |
|                                                                       |   |                              |    |   | Percent                           |   |   |   |   |   | Percent |   |
|                                                                       |   |                              |    |   | of                Pretax          |   |   |   |   |   | of                Pretax |   |
|                                                                       |   | Amount                            |    |   | Loss                              |   |   | Amount |   |   | Income |   |
| Federal                rate                                                |   | $                                 | (10,895 | )      |                              |   | -35.0 | % |   | $ | (37,288 | ) |   |   | -35.0 | % |
| Changes                due to state income tax, net of federal tax benefit |   |                              | (2,216  | )      |                              |   | -7.1 | % |   |   | (7,568 | ) |   |   | -7.1 | % |
| Tax                Credits                                                 |   |                              | (2,125  | )      |                              |   | -6.8 | % |   |   | (2,125 | ) |   |   | -2.0 | % |
| Other                                                                      |   |                              | 935     |   |                              |   | 3.0 | % |   |   | 199 |   |   |   | 0.2 | % |
| Change                in valuation allowance                               |   |                              | 11,732  |   |                              |   | 37.7 | % |   |   | 50,003 |   |   |   | 46.9 | % |
| Total                                                                      |   | $                                 | (2,569  | )      |                              |   | -8.2 | % |   | $ | 3,221 |   |   |   | 3.0 | % |

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| (Dollars                in thousands)              |   | At                September 30, 2008 |    |
|----------------------------------------------------|--------|--------------------------------------|---------|
|                                               |   |                                 |    |
| Deferred                Tax Assets                 |   |                                 |    |
| Reserve                for loan losses             |   | $                                    | 26,822  |   |
| Reserve                for other real estate owned |   |                                 | 332     |   |
| Non-deductible                reserves             |   |                                 | 2,743   |   |
| Net                operating losses                |   |                                 | 19,517  |   |
| Deferred                income                     |   |                                 | 1,682   |   |
| Fixed                assets                        |   |                                 | 377     |   |
| Stock                compensation                  |   |                                 | 768     |   |
| Other                assets and liabilities        |   |                                 | 1,901   |   |
| Other                unrealized gain on securities |   |                                 | 1,463   |   |
| Tax                credits                         |   |                                 | 2,666   |   |
| Total                gross deferred tax assets     |   |                                 | 58,271  |   |
| Less:                valuation allowance           |   |                                 | (51,466 | )  |
| Total                net deferred tax assets       |   |                                 | 6,805   |   |
|                                               |   |                                 |    |   |
| Deferred                Tax Liabilities            |   |                                 |    |   |
| Other                assets and liabilities        |   |                                 | (1,866  | ) |
| Mark-to-market                accounting           |   |                                 | (3,253  | )  |
| Deferred                costs                      |   |                                 | (1,686  | ) |
| Total                deferred tax liabilities      |   |                                 | (6,805  | ) |
| Net                deferred tax assets             |   | $                                    | -       |   |

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

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| §   | establish                a compliance committee to monitor and coordinate compliance with                the                Consent Order; |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------|

| §   | identify                experienced and competent individuals to serve on a permanent, full-time                basis as chief executive officer and chief credit                officer; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | maintain                capital ratios above the statutory minimums and develop a three-year                capital plan; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------|

| §   | suspend                the payment of dividends without regulatory                approval; |
|--------------------|---------------------------------------------------------------------------------------------|

| §   | limit                annual loan growth; |
|--------------------|------------------------------------------|

| §   | establish                a program for the maintenance of adequate allowances for loan                losses; |
|--------------------|---------------------------------------------------------------------------------------------------------------|

| §   | adopt                a written asset diversification                program; |
|--------------------|------------------------------------------------------------------------------|

| §   | review,                revise and adhere to the Bank’s loan                policy; |
|--------------------|------------------------------------------------------------------------------------------|

| §   | ensure                the use and reporting of appropriate risk rating of                assets; |
|--------------------|--------------------------------------------------------------------------------------------------|

| §   | establish                an effective, independent and ongoing loan review                system; |
|--------------------|---------------------------------------------------------------------------------------------------|

| §   | take                appropriate action to protect the Bank’s interest in its problem                assets; |
|--------------------|-------------------------------------------------------------------------------------------------------------------|

| §   | ensure                the maintenance of sufficient liquidity to sustain current operations                and                withstand anticipated or extraordinary demand;                and |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | improve                the management of the Bank’s information technology activities and to                address various deficiencies cited by the                OCC. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| §   | suspend                the declaration, payment or receipt of dividends without prior                approval; |
|--------------------|----------------------------------------------------------------------------------------------------------------|

| §   | suspend                any distributions of interest, principal or other sums on subordinated                debentures or trust preferred securities without prior                approval; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | not                incur, increase, or guarantee any debt without prior                approval; |
|--------------------|--------------------------------------------------------------------------------------------------|

| §   | not                purchase or redeem any shares of stock without prior                approval; |
|--------------------|--------------------------------------------------------------------------------------------------|

| §   | submit                a written capital plan to the FRB; |
|--------------------|----------------------------------------------------------|

| §   | have                VNB serve as a source of financial strength to the                Bank; |
|--------------------|---------------------------------------------------------------------------------------------|

| §   | ensure                that the Company and its subsidiaries comply with sections 23A and                23B of                the Federal Reserve Act and Regulation W of the Board of Governors                of the                Federal Reserve System; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | not                appoint any new director or senior executive officer or change the                responsibilities of any current senior executive officers without                providing the FRB with 30 days prior written notice and not make                any                appointment or change if such is disapproved by the                FRB; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | not                make indemnification or severance payments to, or enter into agreements                providing for such indemnification or severance payments with,                institution-affiliated parties, which include key employees and directors                of the Company, without complying with certain statutory restrictions                including prior approval of the FRB and the FDIC;                and  |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | provide                quarterly written reports to the FRB concerning the actions taken                by the                Company to comply with the Written                Agreement. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| (Dollars                in thousands)                     |   | For                the three months ended September 30, |      |
|-----------------------------------------------------------|--------|---------------------------------------------------------|-----------|
|                                                      |   | 2008                                                    |      |   | 2007 |   |
|                                                      |   | Average                                                 |      |   |   |   |   | Average |   |   | Average |   |   |   |   |   | Average |   |
|                                                      |   | Balance                                                 |      |   | Interest |   |   | Yield/Cost |   |   | Balance |   |   | Interest |   |   | Yield/Cost |   |
| Assets                                                    |   |                                                    |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans                (1)                                  |   | $                                                       | 1,915,631 |   |   | $ | 29,344 |   |   |   | 6.13 | % |   | $ | 2,070,975 |   |   | $ | 45,627 |   |   |   | 8.74 | % |
| Investment                securities (2)                  |   |                                                    | 130,977   |   |   |   | 1,751 |   |   |   | 5.34 | % |   |   | 206,681 |   |   |   | 2,610 |   |   |   | 5.05 | % |
| Federal                funds sold                         |   |                                                    | 94,418    |   |   |   | 497 |   |   |   | 2.09 | % |   |   | 12,937 |   |   |   | 170 |   |   |   | 5.20 | % |
| Other                investments                          |   |                                                    | 21,222    |   |   |   | 290 |   |   |   | 5.44 | % |   |   | 20,874 |   |   |   | 278 |   |   |   | 5.29 | % |
| Total                interest-earning assets              |   |                                                    | 2,162,248 |   |   |   | 31,882 |   |   |   | 5.90 | % |   |   | 2,311,467 |   |   |   | 48,685 |   |   |   | 8.36 | % |
| Other                assets                               |   |                                                    | 170,351   |   |   |   |   |   |   |   |   |   |   |   | 135,305 |   |   |   |   |   |   |   |   |   |
| Less:                allowance for loan losses            |   |                                                    | (53,974   | ) |   |   |   |   |   |   |   |   |   |   | (21,390 | ) |   |   |   |   |   |   |   |   |
| Total                average assets                       |   | $                                                       | 2,278,625 |   |   |   |   |   |   |   |   |   |   | $ | 2,425,382 |   |   |   |   |   |   |   |   |   |
|                                                      |   |                                                    |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities                and Stockholders' Equity       |   |                                                    |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Savings                deposits                (3)        |   | $                                                       | 315,964   |   |   |   | 2,037 |   |   |   | 2.56 | % |   | $ | 680,455 |   |   |   | 7,091 |   |   |   | 4.13 | % |
| Time                deposits                              |   |                                                    | 1,270,199 |   |   |   | 13,406 |   |   |   | 4.20 | % |   |   | 902,512 |   |   |   | 11,890 |   |   |   | 5.23 | % |
| FHLB                advances                              |   |                                                    | 249,500   |   |   |   | 2,645 |   |   |   | 4.16 | % |   |   | 213,450 |   |   |   | 2,642 |   |   |   | 4.86 | % |
| Other                borrowings                           |   |                                                    | 49,800    |   |   |   | 890 |   |   |   | 7.00 | % |   |   | 15,974 |   |   |   | 295 |   |   |   | 7.23 | % |
| Subordinated                debt                          |   |                                                    | 5,000     |   |   |   | 78 |   |   |   | 6.11 | % |   |   | 5,000 |   |   |   | 110 |   |   |   | 8.62 | % |
| Junior                subordinated debentures             |   |                                                    | 115,470   |   |   |   | 1,591 |   |   |   | 5.39 | % |   |   | 115,470 |   |   |   | 2,340 |   |   |   | 7.93 | % |
| Total                interest-bearing liabilities         |   |                                                    | 2,005,933 |   |   |   | 20,647 |   |   |   | 4.07 | % |   |   | 1,932,861 |   |   |   | 24,368 |   |   |   | 4.99 | % |
| Demand                deposits                            |   |                                                    | 188,460   |   |   |   |   |   |   |   |   |   |   |   | 291,606 |   |   |   |   |   |   |   |   |   |
| Exchange                liabilities                       |   |                                                    | 18,869    |   |   |   |   |   |   |   |   |   |   |   | - |   |   |   |   |   |   |   |   |   |
| Other                liabilities                          |   |                                                    | 44,754    |   |   |   |   |   |   |   |   |   |   |   | 27,276 |   |   |   |   |   |   |   |   |   |
| Total                average liabilities                  |   |                                                    | 2,258,016 |   |   |   |   |   |   |   |   |   |   |   | 2,251,743 |   |   |   |   |   |   |   |   |   |
| Total                average shareholders' equity         |   |                                                    | 20,609    |   |   |   |   |   |   |   |   |   |   |   | 173,639 |   |   |   |   |   |   |   |   |   |
| Total                average liabilities and              |   |                                                    |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| stockholders'                equity                       |   | $                                                       | 2,278,625 |   |   |   |   |   |   |   |   |   |   | $ | 2,425,382 |   |   |   |   |   |   |   |   |   |
|                                                      |   |                                                    |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                interest spread                (4)     |   |                                                    |      |   |   |   |   |   |   |   | 1.83 | % |   |   |   |   |   |   |   |   |   |   | 3.37 | % |
| Net                interest income                        |   |                                                    |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| and                net interest margin                (5) |   |                                                    |      |   |   | $ | 11,235 |   |   |   | 2.09 | % |   |   |   |   |   | $ | 24,317 |   |   |   | 4.19 | % |

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Table          of Contents

| (Dollars                in thousands)                     |   | For                the nine months ended September 30, |      |
|-----------------------------------------------------------|--------|--------------------------------------------------------|-----------|
|                                                      |   | 2008                                                   |      |   | 2007 |   |
|                                                      |   | Average                                                |      |   |   |   |   | Average |   |   | Average |   |   |   |   |   | Average |   |
|                                                      |   | Balance                                                |      |   | Interest |   |   | Yield/Cost |   |   | Balance |   |   | Interest |   |   | Yield/Cost |   |
| Assets                                                    |   |                                                   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans                (1)                                  |   | $                                                      | 2,029,603 |   |   | $ | 104,762 |   |   |   | 6.91 | % |   | $ | 2,017,835 |   |   | $ | 132,356 |   |   |   | 8.77 | % |
| Investment                securities (2)                  |   |                                                   | 140,215   |   |   |   | 5,053 |   |   |   | 4.81 | % |   |   | 214,416 |   |   |   | 7,919 |   |   |   | 4.93 | % |
| Federal                funds sold                         |   |                                                   | 40,603    |   |   |   | 653 |   |   |   | 2.15 | % |   |   | 5,422 |   |   |   | 212 |   |   |   | 5.21 | % |
| Other                investments                          |   |                                                   | 20,659    |   |   |   | 906 |   |   |   | 5.86 | % |   |   | 20,902 |   |   |   | 832 |   |   |   | 5.32 | % |
| Total                interest-earning assets              |   |                                                   | 2,231,080 |   |   |   | 111,374 |   |   |   | 6.68 | % |   |   | 2,258,575 |   |   |   | 141,319 |   |   |   | 8.36 | % |
| Other                assets                               |   |                                                   | 159,570   |   |   |   |   |   |   |   |   |   |   |   | 130,910 |   |   |   |   |   |   |   |   |   |
| Less:                allowance for loan losses            |   |                                                   | (52,806   | ) |   |   |   |   |   |   |   |   |   |   | (20,792 | ) |   |   |   |   |   |   |   |   |
| Total                average assets                       |   | $                                                      | 2,337,844 |   |   |   |   |   |   |   |   |   |   | $ | 2,368,693 |   |   |   |   |   |   |   |   |   |
|                                                      |   |                                                   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities                and Stockholders' Equity       |   |                                                   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Savings                deposits                (3)        |   | $                                                      | 496,768   |   |   |   | 11,185 |   |   |   | 3.01 | % |   | $ | 660,952 |   |   |   | 20,143 |   |   |   | 4.07 | % |
| Time                deposits                              |   |                                                   | 1,065,877 |   |   |   | 36,697 |   |   |   | 4.60 | % |   |   | 849,854 |   |   |   | 33,092 |   |   |   | 5.21 | % |
| FHLB                advances                              |   |                                                   | 215,010   |   |   |   | 7,186 |   |   |   | 4.43 | % |   |   | 237,166 |   |   |   | 8,883 |   |   |   | 4.96 | % |
| Other                borrowings                           |   |                                                   | 47,879    |   |   |   | 2,489 |   |   |   | 6.83 | % |   |   | 32,933 |   |   |   | 1,760 |   |   |   | 7.05 | % |
| Subordinated                debt                          |   |                                                   | 5,000     |   |   |   | 253 |   |   |   | 6.66 | % |   |   | 5,000 |   |   |   | 328 |   |   |   | 8.65 | % |
| Junior                subordinated debentures             |   |                                                   | 115,470   |   |   |   | 5,192 |   |   |   | 5.91 | % |   |   | 115,470 |   |   |   | 6,933 |   |   |   | 7.92 | % |
| Total                interest-bearing liabilities         |   |                                                   | 1,946,004 |   |   |   | 63,002 |   |   |   | 4.31 | % |   |   | 1,901,375 |   |   |   | 71,139 |   |   |   | 4.99 | % |
| Demand                deposits                            |   |                                                   | 248,358   |   |   |   |   |   |   |   |   |   |   |   | 285,499 |   |   |   |   |   |   |   |   |   |
| Exchange                balances                          |   |                                                   | 24,801    |   |   |   |   |   |   |   |   |   |   |   | - |   |   |   |   |   |   |   |   |   |
| Other                liabilities                          |   |                                                   | 49,630    |   |   |   |   |   |   |   |   |   |   |   | 25,300 |   |   |   |   |   |   |   |   |   |
| Total                average liabilities                  |   |                                                   | 2,268,793 |   |   |   |   |   |   |   |   |   |   |   | 2,212,174 |   |   |   |   |   |   |   |   |   |
| Total                average shareholders' equity         |   |                                                   | 69,051    |   |   |   |   |   |   |   |   |   |   |   | 156,519 |   |   |   |   |   |   |   |   |   |
| Total                average liabilities and              |   |                                                   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| stockholders'                equity                       |   | $                                                      | 2,337,844 |   |   |   |   |   |   |   |   |   |   | $ | 2,368,693 |   |   |   |   |   |   |   |   |   |
|                                                      |   |                                                   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                interest spread                (4)     |   |                                                   |      |   |   |   |   |   |   |   | 2.37 | % |   |   |   |   |   |   |   |   |   |   | 3.37 | % |
| Net                interest income                        |   |                                                   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| and                net interest margin                (5) |   |                                                   |      |   |   | $ | 48,372 |   |   |   | 2.91 | % |   |   |   |   |   | $ | 70,180 |   |   |   | 4.17 | % |

|  (1) | Interest                on loans includes loan fees, which totaled $1.0 million and $2.1                million                for the three months ended September 30, 2008 and 2007, respectively,                and                $3.7 million and $6.8 million for the nine months ended September                30, 2008                and 2007, respectively. The average loan balance includes loans                held-for-sale and non-accrual loans. |
|-----------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  (2) | The                yield for securities that are classified as available-for-sale is                based on                historical amortized cost balances. |
|-----------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  (3) | Includes                savings, NOW and money market deposit accounts. |
|-----------|-------------------------------------------------------------------------|

|  (4) | Net                interest spread represents the average yield earned on interest-earning                assets less the average rate paid on interest-bearing liabilities. |
|-----------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  (5) | Net                interest margin is computed by dividing net interest income by total                average interest-earning assets. |
|-----------|-----------------------------------------------------------------------------------------------------------------------------------------|

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Table          of Contents

|   | (i) | Salaries                and employee benefits expense is the largest component of non-interest                expense. During the three and nine months ended September 30, 2008,                this                expense category decreased primarily due to the reduction of employees                including those in management roles. Net against these reductions                was the                $1.0 million of compensation paid to our former President and Chief                Executive Officer in connection with his termination of employment                during                the first quarter of 2008. The aforementioned changes resulted in                a                decrease of salaries and employee benefits expense by $2.2 million                or                27.4% to $5.9 million for the three months ended September 30, 2008                as                compared to $8.1 million for the same period in 2007, and by $2.7                million                or 11.4% to $20.9 million for the nine months ended September 30,                2008 as                compared to $23.6 million for the same period in 2007. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                         (ii) | Occupancy                expense amounted to $3.1 million and $6.2 million for the three and                nine                months ended September 30, 2008, respectively, in comparison to $1.5                million and $4.3 million for the same periods in 2007, respectively.                The                increase was due to the acceleration of depreciating certain leasehold                improvements during 2008, as well as a new RFC we established in                March                2008 in Sherman Oaks, California. |
|----------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (iii)   | Furniture                and equipment expense, which is mainly comprised of depreciation                and                maintenance expense, was $.9 million and $3.1 million for the three                and                nine months ended September 30, 2008, respectively, compared to $1.1                million and $3.2 million for the same periods in 2007,                respectively. |
|-------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (iv)   | Professional                services, including legal, audit and other professional services,                was $2.9                million and $10.2 million for the three and nine months ended September                30, 2008, respectively, compared to $0.8 million and $2.2 million                for the                same periods in 2007, respectively, resulting in increases of $2.1                million                and $7.9 million for the three and nine months ended September 30,                2008,                respectively. The significant increase for the three and nine months                ended                September 30, 2008 was related primarily to additional audit and                legal                costs professional service expenses associated with 1) the internal                control investigation, 2) the consent and proxy solicitations, and                3) our                pursuit of strategic alternatives including the capital offering                costs                relating to unsuccessful negotiations.  In addition, we paid                $0.2 million of consulting fees to our former Chief Executive Officer,                in                connection with his severance agreement, during the first quarter                of                2008. |
|------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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Table          of Contents

| (v)   | Write-down                of assets during the three and nine months ended September 30, 2008                totaled $3.3 million and $14.5 million, respectively, as compared                to                approximately $397,000 for the three and nine months ended September                30,                2007.  These write-downs include other than temporary                impairments on investment securities, impairment of goodwill related                to                our former Exchange Companies, declines in the value of foreclosed                real                estate owned and declines in the market value of loans held-for-sale.                These declines occurred, in part, as a result of market forces impacting                us attributable to the severe declines in real estate values in Southern                California. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (vi)   | Other                non-interest expenses totaled $3.9 million and $1.4 million for the                three                months ended September 30, 2008 and 2007, respectively, and $7.4                million                and $4.0 million for the nine months ended September 30, 2008 and                2007,                respectively.  The main increase in other expenses consisted of                foreclosure, appraisal, and other loan related expenses due to the                increase in non-performing assets.  The following is a breakdown                of other expenses for the three and nine months ended September 30,                2008                and 2007: |
|------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (Dollars                in thousands)           |   | Three                Months Ended September 30, |   |   | Nine                Months Ended September 30, |   |
|-------------------------------------------------|--------|-------------------------------------------------|--------|--------|------------------------------------------------|--------|
|                                            |   | 2008                                            |   |   | 2007                                           |   |   | 2008 |   |   | 2007 |   |
| Other                non-interest expense:      |   |                                            |   |   |                                           |   |   |   |   |   |   |   |
| Data                processing                  |   | $                                               | 398    |   |                                           | $      | 380 |   |   | $ | 1,218 |   |   | $ | 1,112 |   |
| Marketing                                       |   |                                            | 435    |   |                                           |   | 275 |   |   |   | 842 |   |   |   | 698 |   |
| Insurance                and assessments        |   |                                            | 592    |   |                                           |   | 327 |   |   |   | 1,705 |   |   |   | 1,092 |   |
| Administrative                                  |   |                                            | 194    |   |                                           |   | 163 |   |   |   | 557 |   |   |   | 560 |   |
| Other                                           |   |                                            | 2,254  |   |                                           |   | 294 |   |   |   | 3,039 |   |   |   | 577 |   |
| Total                other non-interest expense |   | $                                               | 3,873  |   |                                           | $      | 1,439 |   |   | $ | 7,361 |   |   | $ | 4,039 |   |

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Table          of Contents

| (Dollars                in thousands)         |   |      |    |   | Gross      |   |   | Gross      |   |   |                      |   |
|-----------------------------------------------|--------|-----------|---------|--------|------------|--------|--------|------------|--------|--------|---------------------------|--------|
|                                          |   | Amortized |    |   | Unrealized |   |   | Unrealized |   |   |                      |   |
|                                          |   | Cost      |    |   | Gains      |   |   | Losses     |   |   | Fair                Value |   |
| Available-for-sale                securities: |   |      |    |   |       |   |   |       |   |   |                      |   |
| U.S.                agency securities         |   | $         | 13,643  |   |       | $      | -      |       |   | $      | (162                      | )      |   | $ | 13,481 |   |
| Mortgage-backed                securities     |   |      | 107,681 |   |       |   | 1,528  |       |   |   | -                         |   |   |   | 109,209 |   |
| Mutual                funds                   |   |      | 2,328   |   |       |   | 5      |       |   |   | -                         |   |   |   | 2,333 |   |
| Total                Investment Securities    |   | $         | 123,652 |   |       | $      | 1,533  |       |   | $      | (162                      | )      |   | $ | 125,023 |   |

| (Dollars                in thousands)              |   |      |    |   | Gross      |   |   | Gross      |   |   |                      |   |
|----------------------------------------------------|--------|-----------|---------|--------|------------|--------|--------|------------|--------|--------|---------------------------|--------|
|                                               |   | Amortized |    |   | Unrealized |   |   | Unrealized |   |   |                      |   |
|                                               |   | Cost      |    |   | Gains      |   |   | Losses     |   |   | Fair                Value |   |
| Trading                Securities                  |   | $         | 5,516   |   |       | $      | 268    |       |   | $      | -                         |   |   | $ | 5,784 |   |
|                                               |   |      |    |   |       |   |   |       |   |   |                      |   |   |   |   |   |
| Available-for-sale                securities:      |   |      |    |   |       |   |   |       |   |   |                      |   |   |   |   |   |
| U.S.                agency securities              |   |      | 13,328  |   |       |   | -      |       |   |   | (193                      | )      |   |   | 13,135 |   |
| Mortgage-backed                securities          |   |      | 160,214 |   |       |   | 9      |       |   |   | (4,111                    | )      |   |   | 156,112 |   |
| Mutual                funds                        |   |      | 2,310   |   |       |   | -      |       |   |   | (20                       | )      |   |   | 2,290 |   |
| Total                available-for-sale securities |   |      | 175,852 |   |       |   | 9      |       |   |   | (4,324                    | )      |   |   | 171,537 |   |
| Total                Investment Securities         |   | $         | 181,368 |   |       | $      | 277    |       |   | $      | (4,324                    | )      |   | $ | 177,321 |   |

| (Dollars                in thousands)     |   | Less                than 12 months |   |   | 12                months or Longer |   |   | Total                     |   |
|-------------------------------------------|--------|------------------------------------|--------|--------|------------------------------------|--------|--------|---------------------------|--------|
|                                      |   |                               |   |   | Gross                              |   |   |                      |   |   | Gross |   |   |   |   |   | Gross |   |
|                                      |   |                               |   |   | Unrealized                         |   |   |                      |   |   | Unrealized |   |   |   |   |   | Unrealized |   |
|                                      |   |                               |   |   | Holding                            |   |   |                      |   |   | Holding |   |   |   |   |   | Holding |   |
|                                      |   | Fair                Value          |   |   | Losses                             |   |   | Fair                Value |   |   | Losses |   |   | Fair                Value |   |   | Losses |   |
|                                      |   |                               |   |   |                               |   |   |                      |   |   |   |   |   |   |   |   |   |   |
| U.S.                agency securities     |   | $                                  | 13,481 |   |                               | $      | (162   | )                         |   | $ | - |   |   | $ | - |   |   | $ | 13,481 |   |   | $ | (162 | ) |
| Mortgage-backed                securities |   |                               | -      |   |                               |   | -      |                      |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Mutual                funds               |   |                               | -      |   |                               |   | -      |                      |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Total                                     |   | $                                  | 13,481 |   |                               | $      | (162   | )                         |   | $ | - |   |   | $ | - |   |   | $ | 13,481 |   |   | $ | (162 | ) |

----

Table          of Contents

| (Dollars                in thousands)     |   | Less                than 12 months |   |   | 12                months or Longer |   |   | Total                     |   |
|-------------------------------------------|--------|------------------------------------|--------|--------|------------------------------------|--------|--------|---------------------------|--------|
|                                      |   |                               |   |   | Gross                              |   |   |                      |   |   | Gross |   |   |   |   |   | Gross |   |
|                                      |   |                               |   |   | Unrealized                         |   |   |                      |   |   | Unrealized |   |   |   |   |   | Unrealized |   |
|                                      |   |                               |   |   | Holding                            |   |   |                      |   |   | Holding |   |   |   |   |   | Holding |   |
|                                      |   | Fair                Value          |   |   | Losses                             |   |   | Fair                Value |   |   | Losses |   |   | Fair                Value |   |   | Losses |   |
|                                      |   |                               |   |   |                               |   |   |                      |   |   |   |   |   |   |   |   |   |   |
| U.S.                agency securities     |   | $                                  | 13,135 |   |                               | $      | (193   | )                         |   | $ | - |   |   | $ | - |   |   | $ | 13,135 |   |   | $ | (193 | ) |
| Mortgage-backed                securities |   |                               | 21,308 |   |                               |   | (241   | )                         |   |   | 129,955 |   |   |   | (3,870 | ) |   |   | 151,263 |   |   |   | (4,111 | ) |
| Mutual                funds               |   |                               | 2,290  |   |                               |   | (20    | )                         |   |   | - |   |   |   | - |   |   |   | 2,290 |   |   |   | (20 | ) |
| Total                                     |   | $                                  | 36,733 |   |                               | $      | (454   | )                         |   | $ | 129,955 |   |   | $ | (3,870 | ) |   | $ | 166,688 |   |   | $ | (4,324 | ) |

| (Dollars                in thousands)     |   |                                   |    |   |                      |   |
|-------------------------------------------|--------|----------------------------------------|---------|--------|---------------------------|--------|
|                                      |   | Maturing                after 10 years |    |
|                                      |   | Amortized                              |    |   |                      |   |
|                                      |   | Cost                                   |    |   | Fair                Value |   |
| U.S.                agency securities     |   | $                                      | 13,643  |   |                      | $      | 13,481 |   |
| Mortgage-backed                securities |   |                                   | 107,681 |   |                      |   | 109,209 |   |
| Total                                     |   | $                                      | 121,324 |   |                      | $      | 122,690 |   |

----

Table          of Contents

| (Dollars                in thousands)                 |   | September                30, 2008 |      |   | December                31, 2007 |   |
|-------------------------------------------------------|--------|-----------------------------------|-----------|--------|----------------------------------|--------|
|                                                  |   | Amount                            |      |   | %                                |   |   | Amount |   |   | % |   |
| Commercial                and industrial              |   | $                                 | 197,780   |   |                             |   | 11.0 | % |   | $ | 156,966 |   |   |   | 7.8 | % |
| Real                estate construction and land:     |   |                              |      |   |                             |   |   |   |   |   |   |   |   |   |   |   |
| Single-family                luxury                   |   |                              | 492,283   |   |                             |   | 27.3 | % |   |   | 582,962 |   |   |   | 29.0 | % |
| Single-family                tract                    |   |                              | 47,434    |   |                             |   | 2.6 | % |   |   | 146,627 |   |   |   | 7.3 | % |
| Commercial                                            |   |                              | 219,629   |   |                             |   | 12.2 | % |   |   | 198,186 |   |   |   | 9.9 | % |
| Land                                                  |   |                              |      |   |                             |   |   |   |   |   |   |   |   |   |   |   |
| Single-family                luxury                   |   |                              | 18,769    |   |                             |   | 1.0 | % |   |   | 22,931 |   |   |   | 1.2 | % |
| Single-family                tract                    |   |                              | 31,283    |   |                             |   | 1.7 | % |   |   | 64,405 |   |   |   | 3.2 | % |
| Commercial                                            |   |                              | 9,158     |   |                             |   | 0.5 | % |   |   | 15,439 |   |   |   | 0.8 | % |
| Other                                                 |   |                              | 265       |   |                             |   | 0.0 | % |   |   | 909 |   |   |   | 0.0 | % |
| Real                estate mortgage:                  |   |                              |      |   |                             |   |   |   |   |   |   |   |   |   |   |   |
| Commercial                                            |   |                              | 507,137   |   |                             |   | 28.1 | % |   |   | 553,531 |   |   |   | 27.6 | % |
| Multi-family                residential               |   |                              | 134,878   |   |                             |   | 7.5 | % |   |   | 93,662 |   |   |   | 4.7 | % |
| Other                residential                      |   |                              | 49,991    |   |                             |   | 2.8 | % |   |   | 56,257 |   |   |   | 2.8 | % |
| Consumer                loans                         |   |                              | 92,433    |   |                             |   | 5.1 | % |   |   | 115,702 |   |   |   | 5.7 | % |
| All                other loans (including overdrafts) |   |                              | 167       |   |                             |   | 0.0 | % |   |   | 264 |   |   |   | 0.0 | % |
|                                                  |   |                              | 1,801,207 |   |                             |   | 99.9 | % |   |   | 2,007,841 |   |   |   | 100.0 | % |
| Less:                                                 |   |                              |      |   |                             |   |   |   |   |   |   |   |   |   |   |   |
| Unearned                premium on loans              |   |                              | 2,245     |   |                             |   | 0.1 | % |   |   | 3,272 |   |   |   | 0.2 | % |
| Deferred                loan fees                     |   |                              | (587      | )      |                             |   | 0.0 | % |   |   | (3,042 | ) |   |   | -0.2 | % |
| Loans,                net of unearned income          |   | $                                 | 1,802,865 |   |                             |   | 100.0 | % |   | $ | 2,008,071 |   |   |   | 100.0 | % |
| Loans                held-for-sale                    |   | $                                 | 8,391     |   |                             |   |   |   |   | $ | 119,427 |   |   |   |   |   |

| (Dollars                in thousands)       |   | Three                months ended September 30, |   |   | Nine                months ended September 30, |   |
|---------------------------------------------|--------|-------------------------------------------------|--------|--------|------------------------------------------------|--------|
|                                        |   | 2008                                            |   |   | 2007                                           |   |   | 2008 |   |   | 2007 |   |
| Servicing                rights capitalized |   | $                                               | (12    | )      |                                           | $      | 13 |   |   | $ | 23 |   |   | $ | 185 |   |
| Servicing                rights amortized   |   | $                                               | 58     |   |                                           | $      | 116 |   |   | $ | 215 |   |   | $ | 368 |   |
| Valuation                allowances         |   | $                                               | -      |   |                                           | $      | - |   |   | $ | - |   |   | $ | - |   |

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| (Dollars                in thousands)                |   | Nine                months ended September 30, |   |
|------------------------------------------------------|--------|------------------------------------------------|--------|
|                                                 |   | 2008                                           |   |   | 2007 |   |
| Servicing                rights, beginning of year   |   | $                                              | 749    |   |   | $ | 933 |   |
| Servicing                rights added in period, net |   |                                           | 23     |   |   |   | 185 |   |
| Servicing                rights amortized            |   |                                           | (215   | ) |   |   | (368 | ) |
| Servicing                rights, end of period       |   | $                                              | 557    |   |   | $ | 750 |   |

| (Dollars                in thousands)                     |   | Nine                months ended September 30, |    |
|-----------------------------------------------------------|--------|------------------------------------------------|---------|
|                                                      |   | 2008                                           |    |   | 2007 |   |
| Allowance                for  Loan Losses       |   |                                           |    |   |   |   |
| Balance,                beginning of period               |   | $                                              | 48,849  |   |   | $ | 19,689 |   |
| Recoveries                on loans previously charged off |   |                                           | 1,563   |   |   |   | 19 |   |
| Loans                charged off                          |   |                                           | (75,383 | ) |   |   | (153 | ) |
| Provision                charged to operating expense     |   |                                           | 88,762  |   |   |   | 1,700 |   |
| Balance,                end of period                     |   | $                                              | 63,791  |   |   | $ | 21,255 |   |
|                                                      |   |                                           |    |   |   |   |   |   |
| Reserve                for Unfunded Commitments           |   |                                           |    |   |   |   |   |   |
| Balance,                beginning of period               |   | $                                              | 966     |   |   | $ | 1,396 |   |
| Net                decrease charged to other expenses     |   |                                           | 1,559   |   |   |   | (400 | ) |
| Balance,                end of period                     |   | $                                              | 2,525   |   |   | $ | 996 |   |
|                                                      |   |                                           |    |   |   |   |   |   |
| Allowance                for Credit Losses                |   |                                           |    |   |   |   |   |   |
| Allowance                for loan losses                  |   | $                                              | 63,791  |   |   | $ | 21,255 |   |
| Reserve                for unfunded commitments           |   |                                           | 2,525   |   |   |   | 996 |   |
| Allowance                for credit losses                |   | $                                              | 66,316  |   |   | $ | 22,251 |   |

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| (Dollars                in thousands)                    |   | As                of              |    |
|----------------------------------------------------------|--------|-----------------------------------|---------|
|                                                     |   | September                30, 2008 |    |   | December                31, 2007 |   |
| Accruing                Loans More than 90 Days Past Due |   |                              |    |   |   |   |
| Aggregate                loan amounts                    |   |                              |    |   |   |   |
| Commercial                and industrial                 |   | $                                 | -       |   |   | $ | 29 |   |
| Real                estate construction and land         |   |                              | -       |   |   |   | - |   |
| Real                estate-mortgage                      |   |                              | -       |   |   |   | - |   |
| Consumer                loans                            |   |                              | -       |   |   |   | 25 |   |
| Total                loans past due more than 90 days    |   |                              |    |   |   |   |   |   |
| and                still accruing                        |   | $                                 | -       |   |   | $ | 54 |   |
|                                                     |   |                              |    |   |   |   |   |   |
| Renegotiated                loans                        |   | $                                 | 13,934  |   |   | $ | - |   |
|                                                     |   |                              |    |   |   |   |   |   |
| Non-accrual                loans                         |   |                              |    |   |   |   |   |   |
| Aggregate                loan amounts                    |   |                              |    |   |   |   |   |   |
| Commercial                and industrial                 |   | $                                 | 12,888  |   |   | $ | 892 |   |
| Real                estate construction and land         |   |                              | 147,871 |   |   |   | 70,975 |   |
| Real                estate-mortgage                      |   |                              | 57,851  |   |   |   | 3,355 |   |
| Consumer                loans                            |   |                              | 5,149   |   |   |   | 140 |   |
| Total                non-accrual loans                   |   | $                                 | 223,759 |   |   | $ | 75,362 |   |
|                                                     |   |                              |    |   |   |   |   |   |
| Total                non-performing loans                |   | $                                 | 237,693 |   |   | $ | 75,416 |   |
|                                                     |   |                              |    |   |   |   |   |   |
| Other                Real Estate Owned                   |   | $                                 | 38,641  |   |   | $ | 17,375 |   |

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| (Dollars                in thousands)                                 |   | As                of         |    |
|-----------------------------------------------------------------------|--------|------------------------------|---------|
|                                                                  |   | September                30, |    |   | December                31, |   |
|                                                                  |   | 2008                         |    |   | 2007 |   |
| Impaired                loans with a specific valuation allowance     |   | $                            | 119,370 |   |   | $ | 103,732 |   |
| Impaired                loans without a specific valuation allowance  |   |                         | 177,097 |   |   |   | 36,156 |   |
| Total                impaired loans                                   |   | $                            | 296,467 |   |   | $ | 139,888 |   |
|                                                                  |   |                         |    |   |   |   |   |   |
| Specific                valuation allowance related to impaired loans |   | $                            | 26,728  |   |   | $ | 20,848 |   |

| (Dollars                in thousands)                            |   | Nine                months ended September 30, |    |
|------------------------------------------------------------------|--------|------------------------------------------------|---------|
|                                                             |   | 2008                                           |    |   | 2007 |   |
| Average                recorded investment in impaired loans     |   | $                                              | 226,536 |   |   | $ | 14,996 |   |
| Cash                receipts applied to reduce principal balance |   | $                                              | 80,212  |   |   | $ | 9,180 |   |
| Interest                income recognized for cash payments      |   | $                                              | 1,261   |   |   | $ | 100 |   |

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| (Dollars                in thousands)            |   | As                of              |      |
|--------------------------------------------------|--------|-----------------------------------|-----------|
|                                             |   | September                30, 2008 |      |   | December                31, 2007 |   |
| Money                market deposits             |   | $                                 | 146,148   |   |   | $ | 568,713 |   |
| Savings                and NOW deposits          |   |                              | 78,332    |   |   |   | 136,982 |   |
| Time                deposits under $100,000      |   |                              | 754,357   |   |   |   | 360,249 |   |
| Time                deposits of $100,000 or more |   |                              | 498,549   |   |   |   | 552,803 |   |
| Total                                            |   | $                                 | 1,477,386 |   |   | $ | 1,618,747 |   |

| (Dollars                in thousands)           |   |   |    |
|-------------------------------------------------|--------|--------|---------|
|                                            |   |   |    |
| Three                months or less             |   | $      | 161,402 |   |
| Over                three through twelve months |   |   | 267,315 |   |
| Over                one through five years      |   |   | 69,832  |   |
|                                            |   | $      | 498,549 |   |

| (Dollars                in thousands)         |   | September                30, |    |   | December                31, |   |
|-----------------------------------------------|--------|------------------------------|---------|--------|-----------------------------|--------|
|                                          |   | 2008                         |    |   | 2007                        |   |
| Short-term                borrowings:         |   |                         |    |   |                        |   |
| FHLB                advances                  |   | $                            | 236,000 |   |                        | $      | 40,000 |   |
| Other                borrowings               |   |                         | 48,300  |   |                        |   | 45,250 |   |
| Total                Short-term borrowings    |   |                         | 284,300 |   |                        |   | 85,250 |   |
| Long-term                borrowings:          |   |                         |    |   |                        |   |   |   |
| FHLB                advances                  |   |                         | 45,000  |   |                        |   | 135,000 |   |
| Subordinated                debentures        |   |                         | 5,000   |   |                        |   | 5,000 |   |
| Junior                subordinated debentures |   |                         | 115,470 |   |                        |   | 115,470 |   |
| Total                Long-term borrowings     |   |                         | 165,470 |   |                        |   | 255,470 |   |
|                                          |   |                         |    |   |                        |   |   |   |
| Total                Borrowings               |   | $                            | 449,770 |   |                        | $      | 340,720 |   |

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| (Dollars                in thousands) |   | Weighted |   |   |     |   |    |    |   |
|---------------------------------------|--------|----------|--------|--------|----------|--------|---------|---------|--------|
|                                  |   | Average  |   |   | Maturity |   |    | Putable |   |
| Maturity                              |   | Rate     |   |   | Amount   |   |    | Amount  |   |
| 2008                                  |   |     | 4.83   | %      |     | $      | 20,000  |    |   | $ | 20,000 |   |
| 2009                                  |   |     | 3.83   | %      |     |   | 216,000 |    |   |   | 90,000 |   |
| 2010                                  |   |     | 4.64   | %      |     |   | 45,000  |    |   |   | 45,000 |   |
|                                  |   |     | 4.03   | %      |     | $      | 281,000 |    |   | $ | 155,000 |   |

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| (Dollars                in thousands)        |                                 |                             |   | As                of September 30, 2008 |   |
|----------------------------------------------|--------------------------------------|----------------------------------|--------|-----------------------------------------|--------|
|                                         |                                 |                             |   | Common                                  |   |   | Effective |   |   |   |   |
|                                         | Interest                Rate         | Maturity                Date     |   | Stock                                   |   |   | Interest                Rate |   |   | Balance |   |
| Vineyard                Statutory Trust I    | 3-month                LIBOR + 3.60% | December                18, 2031 |   | $                                       | 372    |   |   |   | 6.48 | % |   | $ | 12,372 |   |
| Vineyard                Statutory Trust II   | 3-month                LIBOR + 3.35% | December                26, 2032 |   |                                    | 155    |   |   |   | 6.14 | % |   |   | 5,155 |   |
| Vineyard                Statutory Trust III  | 3-month                LIBOR + 3.05% | October                8, 2033   |   |                                    | 310    |   |   |   | 5.84 | % |   |   | 10,310 |   |
| Vineyard                Statutory Trust IV   | 3-month                LIBOR + 2.85% | January                23, 2034  |   |                                    | 310    |   |   |   | 5.65 | % |   |   | 10,310 |   |
| Vineyard                Statutory Trust V    | 3-month                LIBOR + 2.85% | April                23, 2034    |   |                                    | 310    |   |   |   | 5.64 | % |   |   | 10,310 |   |
| Vineyard                Statutory Trust VI   | 3-month                LIBOR + 2.85% | July                23, 2034     |   |                                    | 372    |   |   |   | 5.65 | % |   |   | 12,372 |   |
| Vineyard                Statutory Trust VII  | 3-month                LIBOR + 2.00% | December                16, 2034 |   |                                    | 310    |   |   |   | 4.81 | % |   |   | 10,310 |   |
| Vineyard                Statutory Trust VIII | 3-month                LIBOR + 2.25% | May                23, 2035      |   |                                    | 310    |   |   |   | 5.06 | % |   |   | 10,310 |   |
| Vineyard                Statutory Trust IX   | 3-month                LIBOR + 1.70% | November                23, 2035 |   |                                    | 464    |   |   |   | 4.51 | % |   |   | 15,464 |   |
| Vineyard                Statutory Trust XI   | 3-month                LIBOR + 1.60% | June                23, 2036     |   |                                    | 557    |   |   |   | 4.81 | % |   |   | 18,557 |   |
|                                         |                                 |                             |   | $                                       | 3,470  |   |   |   | 5.36 | % |   | $ | 115,470 |   |

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| (Dollars                in thousands)                  |   |                             |    |   |                             |   |   | Capital                Needed    |   |
|--------------------------------------------------------|--------|----------------------------------|---------|--------|----------------------------------|--------|--------|----------------------------------|--------|
|                                                   |   |                             |    |   |                             |   |   |                             |   |   |   |   |   | To                Be Well |   |
|                                                   |   |                             |    |   |                             |   |   |                             |   |   |   |   |   | Capitalized                Under |   |
|                                                   |   |                             |    |   |                             |   |   | For                Capital       |   |   | Prompt                Corrective |   |
|                                                   |   | Actual                Regulatory |    |   | Adequacy                Purposes |   |   | Action                Provisions |   |
|                                                   |   | Capital                          |    |   |                             |   |   | Capital                          |   |   |   |   |   | Capital |   |   |   |   |
|                                                   |   | Amount                           |    |   | Ratio                            |   |   | Amount                           |   |   | Ratio |   |   | Amount |   |   | Ratio |   |
| As                of September 30, 2008                |   |                             |    |   |                             |   |   |                             |   |   |   |   |   |   |   |   |   |   |
| Total                capital to risk-weighted assets:  |   |                             |    |   |                             |   |   |                             |   |   |   |   |   |   |   |   |   |   |
| Bank                                                   |   | $                                | 186,285 |   |                             |   | 9.48   | %                                |   | $ | 157,200 |   |   |   | 8.00 | % |   | $ | 196,500 |   |   |   | 10.0 | % |
| Consolidated                                           |   | $                                | (274    | )      |                             |   | -0.01  | %                                |   | $ | 219,200 |   |   |   | 8.00 | % |   |   | N/A |   |   |   | N/A |   |
|                                                   |   |                             |    |   |                             |   |   |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Tier                1 capital to risk-weighted assets: |   |                             |    |   |                             |   |   |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Bank                                                   |   | $                                | 161,195 |   |                             |   | 8.20   | %                                |   | $ | 78,600 |   |   |   | 4.00 | % |   | $ | 117,900 |   |   |   | 6.0 | % |
| Consolidated                                           |   | $                                | (274    | )      |                             |   | -0.01  | %                                |   | $ | 109,600 |   |   |   | 4.00 | % |   |   | N/A |   |   |   | N/A |   |
|                                                   |   |                             |    |   |                             |   |   |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Tier                1 capital to average assets:       |   |                             |    |   |                             |   |   |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Bank                                                   |   | $                                | 161,195 |   |                             |   | 7.19   | %                                |   | $ | 89,700 |   |   |   | 4.00 | % |   | $ | 112,100 |   |   |   | 5.0 | % |
| Consolidated                                           |   | $                                | (274    | )      |                             |   | -0.01  | %                                |   | $ | 109,600 |   |   |   | 4.00 | % |   |   | N/A |   |   |   | N/A |   |
|                                                   |   |                             |    |   |                             |   |   |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| As                of December 31, 2007                 |   |                             |    |   |                             |   |   |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                capital to risk-weighted assets:  |   |                             |    |   |                             |   |   |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Bank                                                   |   | $                                | 287,392 |   |                             |   | 11.93  | %                                |   | $ | 192,700 |   |   |   | 8.00 | % |   | $ | 240,900 |   |   |   | 10.00 | % |
| Consolidated                                           |   | $                                | 252,528 |   |                             |   | 10.36  | %                                |   | $ | 195,000 |   |   |   | 8.00 | % |   |   | N/A |   |   |   | N/A |   |
|                                                   |   |                             |    |   |                             |   |   |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Tier                1 capital to risk-weighted assets: |   |                             |    |   |                             |   |   |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Bank                                                   |   | $                                | 257,032 |   |                             |   | 10.67  | %                                |   | $ | 96,400 |   |   |   | 4.00 | % |   | $ | 144,500 |   |   |   | 6.00 | % |
| Consolidated                                           |   | $                                | 147,886 |   |                             |   | 6.07   | %                                |   | $ | 97,500 |   |   |   | 4.00 | % |   |   | N/A |   |   |   | N/A |   |
|                                                   |   |                             |    |   |                             |   |   |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Tier                1 capital to average assets:       |   |                             |    |   |                             |   |   |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Bank                                                   |   | $                                | 257,032 |   |                             |   | 10.30  | %                                |   | $ | 99,800 |   |   |   | 4.00 | % |   | $ | 124,800 |   |   |   | 5.00 | % |
| Consolidated                                           |   | $                                | 147,886 |   |                             |   | 5.89   | %                                |   | $ | 100,400 |   |   |   | 4.00 | % |   |   | N/A |   |   |   | N/A |   |

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| (Dollars                in thousands) |   |   |                                    |   |    |                             |   |   |                         |   |
|---------------------------------------|--------|--------|-----------------------------------------|--------|---------|----------------------------------|--------|--------|------------------------------|--------|
|                                  |   |   | Economic                Value of Equity |   |    | Earnings                at Risk  |   |
| Simulated                             |   |   | Cumulative                              |   |    | Cumulative                       |   |   | Cumulative                   |   |   | Cumulative |   |
| Rate                Changes           |   |   | Dollar                Change            |   |    | Percentage                Change |   |   | Dollar                Change |   |   | Percentage                Change |   |
|                                  | 200    |   |                                    | $      | (26,470 | )                                |   |   | -340.3                       | %      |   | $ | (13,239 | ) |   |   | -31.2 | % |
|                                  | 100    |   |                                    | $      | (12,894 | )                                |   |   | -165.8                       | %      |   | $ | (6,552 | ) |   |   | -15.4 | % |
|                                  | -100   |   |                                    | $      | 12,533  |                             |   |   | 161.1                        | %      |   | $ | 302 |   |   |   | 0.7 | % |
|                                  | -200   |   |                                    | $      | 18,954  |                             |   |   | 243.7                        | %      |   | $ | 6 |   |   |   | 0.0 | % |

ITEM      3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES      ABOUT MARKET RISK

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ITEM      4. CONTROLS AND PROCEDURES

| ·   | Continued                training plans regarding the identification and elevation of control                environment issues; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------|

| ·   | Continued                enhancement of the information security monitoring procedures and                documentation including the implementation of changes to user access,                system logs and security policies.  Additionally, the                Information Security Officer (“ISO”) documents all alert and report                settings for the Information Technology (“IT”) systems, which establish a                baseline of security monitoring for periodic audit                assessment; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Hired                an ISO with proven expertise in information technology, information                security and banking.  The ISO reports directly to the Chief                Risk Offer with additional reporting obligations to the Audit Committee,                for independence purposes, if such matters are                warranted; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Engaged                an external independent IT firm to perform an enhanced IT General                Computer                Control audit to include IT controls around financial                reporting; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Augmented                various Board-approved policies and procedures including the Employee                Expense Reimbursement Policy, the Signing Authority Policy and the                Conflict of Interest Policy to substantially reduce or eliminate                ambiguity                and misinterpretation; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| ·   | Wrote                and/or augmented various policies related to loan grading, problem                loan                reporting, loan portfolio management, risk identification, and ALL                methodology to assess financial reporting risks related to the loan                portfolio, all of which are Board                approved; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Established                a system for measuring credit losses and loan portfolio management                protocols which specifies expectations for proactively reviewing,                monitoring and reporting risks to the Directors’ Loan Committee and the                Board of Directors; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Board                approval of our newly developed Problem Asset Resolution Program,                which                states that internal loan authority limits and approval authorities                require that all renewals and extensions of special mention and/or                substandard loans be presented to the Directors’ Loan Committee for review                and approval; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Assessed                the need for and engaged a new external loan review firm to commence                review of the Company's loan portfolio (scheduled for fourth quarter,                2008); |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Engaged                qualified advisors to assist with tax preparation and analysis and                the                application of the proposed accounting treatments for more non-routine                or                complex accounting transactions; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Increased                dialogue and oversight between the Audit Committee and Board of Directors                as it relates to internal controls over financial reporting and                establishment of an effective Tone at the Top structure for the                Company.   This also includes regular dialogue between the                Audit Committee, Board of Directors, Executive Management and the                Director                of Audit; and |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Expanded                Company-wide audit procedures to address such stated material weaknesses                in order to aid in the early detection and remediation of potential                future                breakdowns in controls. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

ITEM      1.  LEGAL PROCEEDINGS

ITEM      1A.  RISK FACTORS

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|   | •                We did not maintain an effective control environment to ensure that                management’s philosophy and operating style promoted commitment and                compliance with policies and procedures and the prevention or detection                of                the override of such policies and procedures. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | •                Our procedures for assessing financial reporting risks related to                the loan                portfolio did not effectively identify and assess whether changes                in                risks, such as those arising from the rapid decline in our lending                markets, impacted the effectiveness of or required changes in our                existing                policies and procedures. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | •                We did not maintain sufficient levels of appropriately qualified                and                trained accounting personnel to have effective procedures for the                selection and application of appropriate accounting and disclosure                policies. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | •                Management oversight and information security policies and procedures                in                place were inadequate to prevent a breach of information technology                security policies by employees. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | •                Our policies, procedures and controls related to expense reimbursement                were not effective to ensure consistent application of established                policies or to detect or prevent unauthorized or potentially fraudulent                transactions. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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ITEM      2.  UNREGISTERED SALES OF EQUITY SECURITIES AND      USE OF PROCEEDS

ITEM      3.  DEFAULTS UPON SENIOR      SECURITIES

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

| 1.   | The                election of seven (7) directors of the                Company: |
|----------------|-----------------------------------------------------------------------------------|

|                                         |   | Number                of Votes For |      |   | Number                of Votes Abstained |   |
|----------------------------------------------|--------|------------------------------------|-----------|--------|------------------------------------------|--------|
|                                         |   |                               |      |   |                                     |   |
| Douglas                Kratz                 |   |                               | 7,932,234 |   |                                     |   | 34,538 |   |
| Glen                Terry                    |   |                               | 7,932,234 |   |                                     |   | 34,358 |   |
| Lester                Strong                 |   |                               | 7,910,441 |   |                                     |   | 34,358 |   |
| Cynthia                Harriss               |   |                               | 7,676,752 |   |                                     |   | 34,358 |   |
| Harice                “Dev” Ogle |   |                               | 7,655,922 |   |                                     |   | 34,358 |   |
| David                A. Buxbaum              |   |                               | 7,329,907 |   |                                     |   | 143,333 |   |
| Charles                L. Keagle             |   |                               | 7,299,334 |   |                                     |   | 143,333 |   |
| Thomas                Koss II                |   |                               | 248,781   |   |                                     |   | 34,538 |   |
| J.                Steven Roush               |   |                               | 58,768    |   |                                     |   | 143,333 |   |
| James                G. LeSieur              |   |                               | 56,308    |   |                                     |   | 143,333 |   |
| Robb                D. Quincey               |   |                               | 51,762    |   |                                     |   | 143,333 |   |
| Joel                H. Ravitz                |   |                               | 40,278    |   |                                     |   | 143,333 |   |
| Norman                Morales                |   |                               | 34,022    |   |                                     |   | 34,538 |   |
| Frank                S. Alvarez              |   |                               | 4,549     |   |                                     |   | 143,333 |   |

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| Number                of Votes For |   | Number                of Votes Against |   | Number                of Votes Abstained |
|------------------------------------|--------|----------------------------------------|--------|------------------------------------------|
| 7,792,795                          |   | 107,972                                |   | 23,227                                   |

ITEM      5.  OTHER INFORMATION

ITEM      6.  EXHIBITS

| EXHIBIT                NO. | DESCRIPTION |
|----------------------------|-------------|
| 2.1                        |        | Stock                Purchase Agreement, dated as of November 12, 2008, by and between                Vineyard                National Bancorp and Vineyard Bancshares, Inc.(6) |
| 10.1                       |        | Consent                Order dated July 22, 2008 issued by the Comptroller of the Currency                in the                matter of Vineyard Bank, N.A., Corona, California                (1) |
| 10.2                       |        | Stipulation                and Consent to the Issuance of a Consent Order dated July 22, 2008                between                the Comptroller of the Currency and Vineyard Bank, N.A., Corona,                California (1) |
| 10.3                       |        | Employment                Agreement, dated September 12, 2008, among Vineyard National Bancorp,                Vineyard Bank, National Association and Glen C. Terry                (3) |
| 10.4                       |        | Written                Agreement by and between Vineyard National Bancorp and the Federal                Reserve                Bank of San Francisco (4) |
| 10.5                       |        | Fifth                Modification Agreement and Covenant Waiver between Vineyard National                Bancorp and First Tennessee Bank, National Association(2) |
| 10.6                       |        | Amendment                to Fifth Modification Agreement and Covenant Waiver between Vineyard                National Bancorp and First Tennessee Bank, National Association(4) |
| 10.7                       |        | Sixth                Modification Agreement and Covenant Waiver between Vineyard National                Bancorp and First Tennessee Bank, National Association(5) |
| 10.8                       |        | Seventh Modification                Agreement and Covenant Waiver effective November 12, 2008                between Vineyard National Bancorp and First Tennessee Bank National                Association (6) |
| 10.9                       |        | Letter                Agreement effective November 12, 2008 between Vineyard National Bancorp                and First Tennessee Bank National Association (6) |
| 31.1                       |        | Certification                of Chief Executive Officer under Section 302 of the Sarbanes-Oxley                Act of                2002 |
| 31.2                       |        | Certification                of Chief Financial Officer under Section 302 of the Sarbanes-Oxley                Act of                2002 |
| 32                         |        | Certification                of Chief Executive Officer and Chief Financial Officer pursuant to                Section                906 of the Sarbanes-Oxley Act 0f                2002 |

| (1)   | Incorporated                by reference from our Form 8-K which we filed with the SEC on July                28,                2008. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------|

| (2)   | Incorporated                by reference from our Form 8-K which we filed with the SEC on August                29,                2008. |
|-----------------|------------------------------------------------------------------------------------------------------------------------------------------|

| (3)   | Incorporated                by reference from our Form 8-K which we filed with the SEC on September                18, 2008. |
|-----------------|------------------------------------------------------------------------------------------------------------------------------|

| (4)   | Incorporated                by reference from our Form 8-K which we filed with the SEC on September                25, 2008. |
|-----------------|------------------------------------------------------------------------------------------------------------------------------|

| (5)   | Incorporated                by reference from our Form 8-K which we filed with the SEC on October                28,                2008. |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------|

| (6)   | Incorporated                by reference from our Form 8-K which we filed with the SEC on November                13,                2008. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------|

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SIGNATURES

|   |   | VINEYARD                NATIONAL BANCORPBy:   /s/                Glen C. Terry____________________Glen                C. TerryChief                Executive Officer  By:   /s/                Gordon Fong_________________________Gordon                FongExecutive                Vice President and Chief Financial Officer(Principal                Financial Officer) |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                 |

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