|  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)                                |
|                                                                                                       |                                                          |

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VINEYARD      NATIONAL BANCORP AND SUBSIDIARIES

|                    | PART                I – FINANCIAL INFORMATION                                                                                                                                                    |   |
|-------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                    |                                                                                                                                                                                                   |   |
| ITEM                1.  | Financial                Statements                                                                                                                                                                    |   |
|                    |                                                                                                                                                                                                   |   |
|                    | Consolidated                Balance Sheets at June 30, 2008 and December 31,                2007                                                                                                       | 4      |
|                    |                                                                                                                                                                                                   |   |
|                    | Consolidated                Statements of Operations for the Three and Six                Months Ended June 30, 2008 and 2007                                                                          | 5      |
|                    |                                                                                                                                                                                                   |   |
|                    | Consolidated                Statements of Changes in Stockholders' Equity and                Comprehensive Income/(Loss) for the Six Months Ended June 30, 2008                and                2007 | 6      |
|                    |                                                                                                                                                                                                   |   |
|                    | Consolidated                Statements of Cash Flows for the Six Months Ended                June 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

ITEM      1.   Financial Statements

VINEYARD      NATIONAL BANCORP AND SUBSIDIARIES

| (Dollars                in thousands)                                       |   | June                30, 2008 |      |   | December                31, 2007 |   |
|-----------------------------------------------------------------------------|--------|------------------------------|-----------|--------|----------------------------------|--------|
| ASSETS                                                                      |   |                         |      |   |                             |   |
| Cash                and due from                                            |   | $                            | 27,271    |   |                             | $      | 47,537 |   |
| Federal                funds sold                                           |   |                         | 178,000   |   |                             |   | 36,000 |   |
| Cash                and cash equivalents                                    |   |                         | 205,271   |   |                             |   | 83,537 |   |
| Investment                securities                                        |   |                         | 130,694   |   |                             |   | 177,321 |   |
| Loans                held-for-sale                                          |   |                         | 64,801    |   |                             |   | 119,427 |   |
| Loans,                net of unearned income                                |   |                         | 1,892,947 |   |                             |   | 2,008,071 |   |
| Less:  Allowance                for loan losses                   |   |                         | (52,175   | )      |                             |   | (48,849 | ) |
| Net                Loans                                                    |   |                         | 1,840,772 |   |                             |   | 1,959,222 |   |
| Bank                premises and equipment, net                             |   |                         | 17,225    |   |                             |   | 18,326 |   |
| Accrued                interest                                             |   |                         | 10,867    |   |                             |   | 11,834 |   |
| Other                real estate owned                                      |   |                         | 6,175     |   |                             |   | 17,375 |   |
| Federal                Home Loan Bank ("FHLB") and other stock, at cost     |   |                         | 20,024    |   |                             |   | 25,066 |   |
| Income                taxes receivable, net                                 |   |                         | 23,823    |   |                             |   | 3,208 |   |
| Deferred                income tax asset                                    |   |                         | -         |   |                             |   | 28,357 |   |
| Goodwill                and other intangibles                               |   |                         | 1,553     |   |                             |   | 4,637 |   |
| Other                assets                                                 |   |                         | 43,279    |   |                             |   | 34,969 |   |
| TOTAL                ASSETS                                                 |   | $                            | 2,364,484 |   |                             | $      | 2,483,279 |   |
|                                                                        |   |                         |      |   |                             |   |   |   |
| LIABILITIES                AND STOCKHOLDERS' EQUITY                         |   |                         |      |   |                             |   |   |   |
| Liabilities                                                                 |   |                         |      |   |                             |   |   |   |
| Deposits                                                                    |   |                         |      |   |                             |   |   |   |
| Non-interest                bearing                                         |   | $                            | 233,704   |   |                             | $      | 316,905 |   |
| Interest-bearing                                                            |   |                         | 1,711,591 |   |                             |   | 1,618,747 |   |
| Total                Deposits                                               |   |                         | 1,945,295 |   |                             |   | 1,935,652 |   |
| Exchange                balances                                            |   |                         | 23,125    |   |                             |   | 47,515 |   |
| FHLB                advances                                                |   |                         | 155,000   |   |                             |   | 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                       |   |                         | 42,779    |   |                             |   | 46,367 |   |
| TOTAL                LIABILITIES                                            |   |                         | 2,334,969 |   |                             |   | 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 9,887,591 and 10,285,775 shares       |   |                         |      |   |                             |   |   |   |
| in                2008 and 2007, respectively                               |   |                         | 89,474    |   |                             |   | 92,772 |   |
| Additional                paid-in capital                                   |   |                         | 1,331     |   |                             |   | 1,727 |   |
| Accumulated                deficit                                          |   |                         | (88,032   | )      |                             |   | (5,372 | ) |
| Unallocated                Employee Stock Ownership Plan ("ESOP") shares    |   |                         | (4,873    | )      |                             |   | (5,168 | ) |
| Accumulated                other comprehensive loss                         |   |                         | -         |   |                             |   | (2,549 | ) |
| TOTAL                STOCKHOLDERS' EQUITY                                   |   |                         | 29,515    |   |                             |   | 113,025 |   |
| TOTAL                LIABILITIES AND STOCKHOLDERS' EQUITY                   |   | $                            | 2,364,484 |   |                             | $      | 2,483,279 |   |
|                                                                        |   |                         |      |   |                             |   |   |   |
| See                accompanying notes to consolidated financial statements. |   |                         |      |   |                             |   |   |   |

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Table          of Contents

VINEYARD      NATIONAL BANCORP AND SUBSIDIARIES

| (Dollars                in thousands, except per share amounts)                                |   | Three                Months Ended June 30, |    |   | Six                Months Ended June 30, |   |
|------------------------------------------------------------------------------------------------|--------|--------------------------------------------|---------|--------|------------------------------------------|--------|
|                                                                                           |   | 2008                                       |    |   | 2007                                     |   |   | 2008 |   |   | 2007 |   |
| Interest                Income                                                                 |   |                                       |    |   |                                     |   |   |   |   |   |   |   |
| Interest                and fees on loans                                                      |   | $                                          | 34,945  |   |                                     | $      | 44,518 |   |   | $ | 75,418 |   |   | $ | 86,729 |   |
| Interest                on investment securities and federal funds sold                        |   |                                       | 2,395   |   |                                     |   | 2,967 |   |   |   | 4,074 |   |   |   | 5,905 |   |
| TOTAL                INTEREST INCOME                                                           |   |                                       | 37,340  |   |                                     |   | 47,485 |   |   |   | 79,492 |   |   |   | 92,634 |   |
|                                                                                           |   |                                       |    |   |                                     |   |   |   |   |   |   |   |   |   |   |   |
| Interest                Expense                                                                |   |                                       |    |   |                                     |   |   |   |   |   |   |   |   |   |   |   |
| Interest                on savings deposits                (1)                                 |   |                                       | 3,554   |   |                                     |   | 6,513 |   |   |   | 9,148 |   |   |   | 13,052 |   |
| Interest                on time deposits in denominations of $100,000 or more                  |   |                                       | 7,029   |   |                                     |   | 6,491 |   |   |   | 14,199 |   |   |   | 12,884 |   |
| Interest                on other time deposits                                                 |   |                                       | 4,749   |   |                                     |   | 4,177 |   |   |   | 9,092 |   |   |   | 8,318 |   |
| Interest                on FHLB advances and other borrowings                                  |   |                                       | 4,753   |   |                                     |   | 6,934 |   |   |   | 9,916 |   |   |   | 12,517 |   |
| TOTAL                INTEREST EXPENSE                                                          |   |                                       | 20,085  |   |                                     |   | 24,115 |   |   |   | 42,355 |   |   |   | 46,771 |   |
| NET                INTEREST INCOME                                                             |   |                                       | 17,255  |   |                                     |   | 23,370 |   |   |   | 37,137 |   |   |   | 45,863 |   |
|                                                                                           |   |                                       |    |   |                                     |   |   |   |   |   |   |   |   |   |   |   |
| Provision                for Loan Losses                                                       |   |                                       | (40,500 | )      |                                     |   | (500 | ) |   |   | (67,400 | ) |   |   | (1,700 | ) |
|                                                                                           |   |                                       |    |   |                                     |   |   |   |   |   |   |   |   |   |   |   |
| NET                INTEREST (LOSS) / INCOME AFTER                                              |   |                                       |    |   |                                     |   |   |   |   |   |   |   |   |   |   |   |
| PROVISION                FOR LOAN LOSSES                                                       |   |                                       | (23,245 | )      |                                     |   | 22,870 |   |   |   | (30,263 | ) |   |   | 44,163 |   |
|                                                                                           |   |                                       |    |   |                                     |   |   |   |   |   |   |   |   |   |   |   |
| Other                Income                                                                    |   |                                       |    |   |                                     |   |   |   |   |   |   |   |   |   |   |   |
| Fees                and service charges                                                        |   |                                       | 424     |   |                                     |   | 416 |   |   |   | 772 |   |   |   | 899 |   |
| Gain                on sale of SBA loans and SBA broker fee income                             |   |                                       | 4       |   |                                     |   | 581 |   |   |   | 174 |   |   |   | 1,181 |   |
| Gain                / (loss) on sale of other loans & investment                securities |   |                                       | 48      |   |                                     |   | 337 |   |   |   | (83 | ) |   |   | 337 |   |
| Other                income                                                                    |   |                                       | 70      |   |                                     |   | 128 |   |   |   | 144 |   |   |   | 247 |   |
| TOTAL                OTHER INCOME                                                              |   |                                       | 546     |   |                                     |   | 1,462 |   |   |   | 1,007 |   |   |   | 2,664 |   |
|                                                                                           |   |                                       |    |   |                                     |   |   |   |   |   |   |   |   |   |   |   |
| Other                Expense                                                                   |   |                                       |    |   |                                     |   |   |   |   |   |   |   |   |   |   |   |
| Salaries                and employee benefits                                                  |   |                                       | 6,593   |   |                                     |   | 7,856 |   |   |   | 14,982 |   |   |   | 15,450 |   |
| Occupancy                expense of premises                                                   |   |                                       | 1,595   |   |                                     |   | 1,423 |   |   |   | 3,096 |   |   |   | 2,802 |   |
| Furniture                and equipment                                                         |   |                                       | 1,010   |   |                                     |   | 1,052 |   |   |   | 2,213 |   |   |   | 2,131 |   |
| Legal                services                                                                  |   |                                       | 1,792   |   |                                     |   | 286 |   |   |   | 2,474 |   |   |   | 426 |   |
| Audit                services                                                                  |   |                                       | 674     |   |                                     |   | 186 |   |   |   | 1,502 |   |   |   | 361 |   |
| Other                professional services                                                     |   |                                       | 1,822   |   |                                     |   | 360 |   |   |   | 3,352 |   |   |   | 692 |   |
| Office                supplies, postage and telephone                                          |   |                                       | 534     |   |                                     |   | 572 |   |   |   | 1,075 |   |   |   | 1,199 |   |
| Business                development                                                            |   |                                       | 351     |   |                                     |   | 594 |   |   |   | 934 |   |   |   | 1,160 |   |
| Loan                related                                                                    |   |                                       | 1,171   |   |                                     |   | 267 |   |   |   | 1,753 |   |   |   | 480 |   |
| Write                down of assets                                                            |   |                                       | 7,416   |   |                                     |   | - |   |   |   | 11,284 |   |   |   | - |   |
| Other                                                                                          |   |                                       | 2,020   |   |                                     |   | 1,578 |   |   |   | 3,488 |   |   |   | 2,600 |   |
| TOTAL                OTHER EXPENSES                                                            |   |                                       | 24,978  |   |                                     |   | 14,174 |   |   |   | 46,153 |   |   |   | 27,301 |   |
| (LOSS)                / INCOME BEFORE INCOME TAXES                                             |   |                                       | (47,677 | )      |                                     |   | 10,158 |   |   |   | (75,409 | ) |   |   | 19,526 |   |
| INCOME                TAX PROVISION                                                            |   |                                       | 20,270  |   |                                     |   | 4,156 |   |   |   | 5,790 |   |   |   | 8,015 |   |
| NET                (LOSS) / INCOME                                                             |   | $                                          | (67,947 | )      |                                     | $      | 6,002 |   |   | $ | (81,199 | ) |   | $ | 11,511 |   |
|                                                                                           |   |                                       |    |   |                                     |   |   |   |   |   |   |   |   |   |   |   |
| (LOSS)                / EARNINGS PER SHARE                (2)                                  |   |                                       |    |   |                                     |   |   |   |   |   |   |   |   |   |   |   |
| BASIC                                                                                          |   | $                                          | (7.03   | )      |                                     | $      | 0.54 |   |   | $ | (8.44 | ) |   | $ | 1.03 |   |
| DILUTED                                                                                        |   | $                                          | (7.03   | )      |                                     | $      | 0.53 |   |   | $ | (8.44 | ) |   | $ | 1.01 |   |
|                                                                                           |   |                                       |    |   |                                     |   |   |   |   |   |   |   |   |   |   |   |
| CASH                DIVIDENDS DECLARED PER SHARE                                               |   | $                                          | -       |   |                                     | $      | 0.08 |   |   | $ | 0.08 |   |   | $ | 0.15 |   |
| CASH                DIVIDENDS PAID PER SHARE                                                   |   | $                                          | -       |   |                                     | $      | 0.08 |   |   | $ | 0.08 |   |   | $ | 0.15 |   |
|                                                                                           |   |                                       |    |   |                                     |   |   |   |   |   |   |   |   |   |   |   |
| See                accompanying notes to consolidated financial statements.                    |   |                                       |    |   |                                     |   |   |   |   |   |   |   |   |   |   |   |

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

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Table          of Contents

VINEYARD      NATIONAL BANCORP AND SUBSIDIARIES

| (Dollars                in thousands)                    |      |   |                        |       |       |   |    |   |          |   |     |   |        |   | 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       | )      |   |   |   |   |   |   |   | - |   |
| Restricted                shares surrendered to Vineyard |      |   |                        |       |       |   |    |   |          |   |     |   |        |   |          |   |   |   |   |   |   |   |   |   |   |
| National                Bancorp ("Company")              |      |   |                        | (3,446     | )          |   | (83     | )      |          |   |     |   |        |   |          |   |   |   |   |   |   |   |   | (83 | ) |
| Transfer                of unissued common stock to      |      |   |                        |       |       |   |    |   |          |   |     |   |        |   |          |   |   |   |   |   |   |   |   |   |   |
| restricted                stock                          |      |   |                        |       |       |   | 1,608   |   |          | (1,608 | )        |   |        |   |          |   |   |   |   |   |   |   |   | - |   |
| Purchase                of restricted stock              |      |   |                        | (36,750    | )          |   |    |   |          | (858   | )        |   |        |   |          |   |   |   |   |   |   |   |   | (858 | ) |
| Vesting                of restricted stock               |      |   |                        | 17,944     |       |   |    |   |          |   |     |   |        |   |          |   |   |   |   |   |   |   |   | - |   |
| Issuance                of preferred stock               |      | 22,029 |                        |       |       |   |    |   |          |   |     |   |        |   |          |   |   |   |   |   |   |   |   | 22,029 |   |
| Amortization                of restricted stock          |      |   |                        |       |       |   |    |   |          | 546    |     |   |        |   |          |   |   |   |   |   |   |   |   | 546 |   |
| Share-based                compensation expense          |      |   |                        |       |       |   |    |   |          | 66     |     |   |        |   |          |   |   |   |   |   |   |   |   | 66 |   |
| Release                of ESOP shares                    |      |   |                        |       |       |   |    |   |          | (3     | )        |   |        |   |          |   |   | 278    |   |   |   |   |   | 275 |   |
| Cash                paid for fractional shares in        |      |   |                        |       |       |   |    |   |          |   |     |   |        |   |          |   |   |   |   |   |   |   |   |   |   |
| stock                dividend distribution               |      |   |                        |       |       |   |    |   |          |   |     |   |        |   | (18           | )      |   |   |   |   |   |   |   | (18 | ) |
| Cash                dividends declared on                |      |   |                        |       |       |   |    |   |          |   |     |   |        |   |          |   |   |   |   |   |   |   |   |   |   |
| preferred                stock                           |      |   |                        |       |       |   |    |   |          |   |     |   |        |   | (460          | )      |   |   |   |   |   |   |   | (460 | ) |
| Cash                dividends declared on                |      |   |                        |       |       |   |    |   |          |   |     |   |        |   |          |   |   |   |   |   |   |   |   |   |   |
| common                stock                              |      |   |                        |       |       |   |    |   |          |   |     |   |        |   | (1,706        | )      |   |   |   |   |   |   |   | (1,706 | ) |
| Comprehensive                income                      |      |   |                        |       |       |   |    |   |          |   |     |   |        |   |          |   |   |   |   |   |   |   |   |   |   |
| Net                Income                                |      |   |                        |       |       |   |    |   |          |   |     | $      | 11,511      |   |          | 11,511 |   |   |   |   |   |   |   |   | 11,511 |   |
| Unrealized                security holding               |      |   |                        |       |       |   |    |   |          |   |     |   |        |   |          |   |   |   |   |   |   |   |   |   |   |   |
| losses                (net of $1,683                     |      |   |                        |       |       |   |    |   |          |   |     |   |        |   |          |   |   |   |   |   |   |   |   |   |   |   |
| tax                benefit)                              |      |   |                        |       |       |   |    |   |          |   |     |   | (2,325      | )      |          |   |   |   |   |   |   | (2,325 | ) |   | (2,325 | ) |
| Total                comprehensive income                |      |   |                        |       |       |   |    |   |          |   |     | $      | 9,186       |   |          |   |   |   |   |   |   |   |   |   |   |   |
| Balance                at June 30, 2007                  | $         | 31,694 |                        | 10,917,058 |       | $      | 102,653 |   | $             | 292    |     |   |        |   | $             | 49,123 |   | $      | (5,487 | ) | $ | (6,238 | ) | $ | 172,037 |   |

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Table          of Contents

| (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                                  |      |   |                        | 24,884     |       |   |    |   |          |   |        |   |        |   |          |    |   |   |   |   |   |   |   | - |   |
| Amortization                of restricted stock                             |      |   |                        |       |       |   |    |   |          | 397    |        |   |        |   |          |    |   |   |   |   |   |   |   | 397 |   |
| Reversal                of share-based compensation expense                 |      |   |                        |       |       |   |    |   |          | (176   | )           |   |        |   |          |    |   |   |   |   |   |   |   | (176 | ) |
| Release                of ESOP shares                                       |      |   |                        |       |       |   |    |   |          | (159   | )           |   |        |   |          |    |   | 295    |   |   |   |   |   | 136 |   |
| Cash                dividends declared on preferred                         |      |   |                        |       |       |   |    |   |          |   |        |   |        |   |          |    |   |   |   |   |   |   |   |   |   |
| stock                                                                       |      |   |                        |       |       |   |    |   |          |   |        |   |        |   | (644          | )       |   |   |   |   |   |   |   | (644 | ) |
| Cash                dividends declared on common                            |      |   |                        |       |       |   |    |   |          |   |        |   |        |   |          |    |   |   |   |   |   |   |   |   |   |
| stock                                                                       |      |   |                        |       |       |   |    |   |          |   |        |   |        |   | (817          | )       |   |   |   |   |   |   |   | (817 | ) |
| Comprehensive                loss                                           |      |   |                        |       |       |   |    |   |          |   |        |   |        |   |          |    |   |   |   |   |   |   |   |   |   |
| Net                Loss                                                     |      |   |                        |       |       |   |    |   |          |   |        | $      | (81,199     | )      |          | (81,199 | )      |   |   |   |   |   |   |   | (81,199 | ) |
| Reclassification                adjustment for                              |      |   |                        |       |       |   |    |   |          |   |        |   |        |   |          |    |   |   |   |   |   |   |   |   |   |   |
| impairment                on investment securities                          |      |   |                        |       |       |   |    |   |          |   |        |   | 2,549       |   |          |    |   |   |   |   |   | 2,549 |   |   | 2,549 |   |
| Total                comprehensive loss                                     |      |   |                        |       |       |   |    |   |          |   |        | $      | (78,650     | )      |          |    |   |   |   |   |   |   |   |   |   |   |
| Balance                at June 30, 2008                                     | $         | 31,615 |                        | 9,887,591  |       | $      | 89,474  |   | $             | 1,331  |        |   |        |   | $             | (88,032 | )      | $      | (4,873 | ) | $ | - |   | $ | 29,515 |   |
|                                                                        |      |   |                        |       |       |   |    |   |          |   |        |   |        |   |          |    |   |   |   |   |   |   |   |   |   |   |
| See                accompanying notes to consolidated financial statements. |      |   |                        |       |       |   |    |   |          |   |        |   |        |   |          |    |   |   |   |   |   |   |   |   |

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VINEYARD      NATIONAL BANCORP AND SUBSIDIARIES

| (Dollars                in thousands)                                         |   | Six                Months Ended June 30, |    |
|-------------------------------------------------------------------------------|--------|------------------------------------------|---------|
|                                                                          |   | 2008                                     |    |   | 2007 |   |
| Cash                Flows From Operating Activities                           |   |                                     |    |   |   |   |
| Net                (Loss) / Income                                            |   | $                                        | (81,199 | ) |   | $ | 11,511 |   |
| Adjustments                to Reconcile Net (Loss) / Income                   |   |                                     |    |   |   |   |   |   |
| to                Net Cash Provided by Operating Activities                   |   |                                     |    |   |   |   |   |   |
|                                                                          |   |                                     |    |   |   |   |   |   |
| Depreciation                and amortization                                  |   |                                     | 2,443   |   |   |   | 3,111 |   |
| FHLB                stock dividends                                           |   |                                     | (405    | ) |   |   | (245 | ) |
| (Reversal)                / recognition of share-based compensation           |   |                                     | (239    | ) |   |   | 66 |   |
| Provision                for credit losses                                    |   |                                     | 67,376  |   |   |   | 1,300 |   |
| Release                of ESOP shares                                         |   |                                     | 136     |   |   |   | 275 |   |
| Decrease                in deferred tax assets                                |   |                                     | 26,591  |   |   |   | 102 |   |
| Loss                / (gain) on sale of assets                                |   |                                     | 234     |   |   |   | (777 | ) |
| Write-down                of assets                                           |   |                                     | 11,284  |   |   |   | - |   |
| Changes                in assets and liabilities                              |   |                                     |    |   |   |   |   |   |
| (Increase)                / decrease in other assets                          |   |                                     | (7,189  | ) |   |   | 1 |   |
| (Increase)                / decrease in net taxes receivable                  |   |                                     | (20,615 | ) |   |   | 4,165 |   |
| Increase                in unearned loan fees                                 |   |                                     | (1,018  | ) |   |   | (1,793 | ) |
| (Increase)                / decrease in interest receivable                   |   |                                     | 967     |   |   |   | (175 | ) |
| Increase                in interest payable                                   |   |                                     | 134     |   |   |   | 478 |   |
| (Decrease)                / increase in accrued expense and other liabilities |   |                                     | (2,242  | ) |   |   | 166 |   |
| Origination                and purchase of held-for-sale loans,               |   |                                     |    |   |   |   |   |   |
| net                of principal reductions                                    |   |                                     | -       |   |   |   | (8,258 | ) |
| Proceeds                from sale of held-for-sale loans                      |   |                                     | 22,035  |   |   |   | 8,402 |   |
| Total                Adjustment                                               |   |                                     | 99,492  |   |   |   | 6,818 |   |
| Net                Cash Provided By Operating Activities                      |   |                                     | 18,293  |   |   |   | 18,329 |   |
|                                                                          |   |                                     |    |   |   |   |   |   |
| 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                  |   |                                     | 7,919   |   |   |   | 15,188 |   |
| Purchase                of FHLB and other stock                               |   |                                     | (1,366  | ) |   |   | (8,452 | ) |
| Redemption                of FHLB stock                                       |   |                                     | 6,813   |   |   |   | - |   |
| Origination                and purchase of loans, net of principal reductions |   |                                     | 61,630  |   |   |   | (205,626 | ) |
| Proceeds                from sale of loans                                    |   |                                     | 21,359  |   |   |   | 66,341 |   |
| Proceeds                from sale of property, plant, and equipment           |   |                                     | 26      |   |   |   | - |   |
| Proceeds                from sale of other real estate owned                  |   |                                     | 8,155   |   |   |   | - |   |
| Capital                expenditures                                           |   |                                     | (772    | ) |   |   | (363 | ) |
| Net                Cash Provided By / (Used In) Investing Activities          |   | $                                        | 140,292 |   |   | $ | (132,912 | ) |

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| (Dollars                in thousands)                                          |   |   |    |   |   |   |
|--------------------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|
|                                                                           |   | 2008   |    |   | 2007   |   |
| Cash                Flows From Financing Activities                            |   |   |    |   |   |   |
| Net                (decrease) / increase in non-interest bearing deposits      |   | $      | (83,201 | )      |   | $      | 8,364 |   |
| Net                increase in interest-bearing deposits                       |   |   | 92,844  |   |   |   | 47,715 |   |
| Decrease                in exchange balances                                   |   |   | (24,390 | )      |   |   | - |   |
| Net                (decrease) / increase in FHLB advances                      |   |   | (20,000 | )      |   |   | 84,000 |   |
| Increase                / (decrease) in other borrowings                       |   |   | 3,050   |   |   |   | (14,000 | ) |
| Purchase                of common stock                                        |   |   | (3,339  | )      |   |   | (83 | ) |
| Purchase                of restricted stock                                    |   |   | (458    | )      |   |   | (858 | ) |
| Dividends                paid on preferred stock                               |   |   | (644    | )      |   |   | (463 | ) |
| Dividends                paid on common stock                                  |   |   | (817    | )      |   |   | (1,706 | ) |
| Proceeds                from exercise of stock options                         |   |   | 104     |   |   |   | - |   |
| Proceeds                from issuance of preferred stock                       |   |   | -       |   |   |   | 22,029 |   |
| Cash                paid in lieu of fractional shares of stock dividend        |   |   | -       |   |   |   | (18 | ) |
| Net                Cash (Used In) / Provided By Financing Activities           |   |   | (36,851 | )      |   |   | 144,980 |   |
|                                                                           |   |   |    |   |   |   |   |   |
| Net                Increase in Cash and Cash Equivalents                       |   |   | 121,734 |   |   |   | 30,397 |   |
|                                                                           |   |   |    |   |   |   |   |   |
| Cash                and Cash                Equivalents, Beginning of year     |   |   | 83,537  |   |   |   | 35,129 |   |
|                                                                           |   |   |    |   |   |   |   |   |
| Cash                and Cash                Equivalents, End of period         |   | $      | 205,271 |   |   | $      | 65,526 |   |
|                                                                           |   |   |    |   |   |   |   |   |
| Supplementary                Information                                       |   |   |    |   |   |   |   |   |
| Cash                paid during period for:                                    |   |   |    |   |   |   |   |   |
| Interest                                                                       |   | $      | 42,221  |   |   | $      | 46,293 |   |
| Income                tax                                                      |   | $      | -       |   |   | $      | 4,500 |   |
| Other                non-cash items:                                           |   |   |    |   |   |   |   |   |
| Charge-offs                in loan portfolio                                   |   | $      | 64,630  |   |   | $      | 153 |   |
| Transfers                to OREO                                               |   | $      | 1,554   |   |   | $      | 11,653 |   |
| Transfers                from loans held-for-investment to loans held-for-sale |   | $      | 64,801  |   |   | $      | - |   |
| Transfers                from loans held-for-sale to loans held-for-investment |   | $      | 87,689  |   |   | $      | - |   |
| Net                change in unrealized loss on investment securities          |   | $      | -       |   |   | $      | 4,008 |   |
| Other                than temporary impairment of investment securities        |   | $      | 5,459   |   |   | $      | - |   |
| Issuance                of 5% stock dividend                                   |   | $      | -       |   |   | $      | 12,309 |   |
|                                                                           |   |   |    |   |   |   |   |   |
| See                accompanying notes to consolidated financial statements.    |   |   |    |   |   |   |   |   |

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

| 2)   | Loan                Portfolio                Management: In order to produce a base of stabilized long-term                earnings, we will seek to proactively rebalance the existing loan                portfolio and diversify new business generation to reduce our risk                profile, meet our targeted concentration ranges within sub-markets                and                sub-portfolios, and maintain an overall portfolio yield consistent                with                quality and sustainable returns; |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

| 4)   | Corporate                Reallocation and                Reorganization: To improve our operating efficiencies, we will                continually review our resource allocation to ensure the optimum                allocation of talent among functions. We seek to continue to deploy                and                redeploy resources, both personnel and other operating costs, toward                achievement of our objectives; and |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 5)   | Protection                and Preservation of                Capital:                 We will focus on protecting and preserving capital. Income                from the Bank, in the long term, is expected to be a contributor                to                increasing capital and accretive to our risk based capital ratios.                In                light of current economic conditions and to address the deterioration                in                the loan portfolio, we have significantly curtailed new loan generation,                which combined with loan sales and repayments may make additional                capital                available. In addition, in order to address the financial impact                of the                abrupt and severe decline in real estate values and the potential                continuing deterioration in the loan portfolio, we will also pursue                strategic alternatives, which may include a significant capital raise,                to                strengthen our capital. |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|                                                          |   | Six                months ended |   |
|---------------------------------------------------------------|--------|---------------------------------|--------|
|                                                          |   | June                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                     |   |   | (105,000 | )      |      |   | 21.25  |        |   |                      | -         |   |   |   | - |   |
| Outstanding                at June 30, 2008             |   |   | 259,087  |   |      | $      | 3.97   |        |   | 3.68                years |      |   | $ | (49 | ) |
| Exercisable                at June 30, 2008             |   |   | 259,087  |   |      | $      | 3.97   |        |   | 3.68                years |      |   | $ | (49 | ) |

| (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                                               |   |   | -       |   |      |   | -      |        |   |                      | -         |   |   |   | - |   |
| Forfeited                or expired                     |   |   | -       |   |      |   | -      |        |   |                      | -         |   |   |   | - |   |
| Outstanding                at June 30, 2007             |   |   | 441,079 |   |      | $      | 8.01   |        |   | 4.43                years |      |   | $ | 6,598 |   |
| Exercisable                at June 30, 2007             |   |   | 336,079 |   |      | $      | 3.87   |        |   | 4.72                years |      |   | $ | 6,419 |   |

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|                                          |   |       |     |   | 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 June 30, 2008     |   |       | -        |   |                      | $      | - |   |

|                                          |   |       |    |   | 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 June 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                                       |   |                             | (55,072 | )      |                             |   | 22.19 |   |
| Vested                                          |   |                             | (24,884 | )      |                             |   | 21.38 |   |
| Outstanding                at June 30, 2008     |   |                             | 285,435 |   |                             | $      | 24.55 |   |

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| (Dollars                in thousands)       |   | As                of         |    |
|---------------------------------------------|--------|------------------------------|---------|
|                                        |   | June                30, 2008 |    |   | December                31, 2007 |   |
| Commitments                to extend credit |   | $                            | 390,501 |   |   | $ | 618,336 |   |
| Commitments                to extend credit |   |                         |    |   |   |   |   |   |
| to                directors and officers    |   | $                            | 430     |   |   | $ | 365 |   |
| Standby                letters of credit    |   | $                            | 6,243   |   |   | $ | 7,425 |   |
| Commercial                letters of credit |   | $                            | -       |   |   | $ | - |   |

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| (Dollars                in thousands)                   |   | Three                Months Ended June 30, |    |
|---------------------------------------------------------|--------|--------------------------------------------|---------|
|                                                    |   | 2008                                       |    |   | 2007 |   |
|                                                    |   | Income                                     |    |   | Shares |   |   | Income |   |   | Shares |   |
| Net                (loss) / income as reported          |   | $                                          | (67,947 | ) |   |   |   |   | $ | 6,002 |   |   |   |   |
| Less:                Preferred stock dividends declared |   |                                       | -       |   |   |   |   |   |   | (231 | ) |   |   |   |
| Shares                outstanding at end of period      |   |                                       |    |   |   |   | 9,887,591 |   |   |   |   |   |   |   | 10,917,058 |   |
| Unreleased                and unallocated ESOP shares   |   |                                       |    |   |   |   | (217,930 | ) |   |   |   |   |   |   | (245,368 | ) |
| Impact                of weighting shares               |   |                                       |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| issued                during the period                 |   |                                       |    |   |   |   | (3,115 | ) |   |   |   |   |   |   | (1,259 | ) |
| Used                in basic EPS                        |   | $                                          | (67,947 | ) |   |   | 9,666,546 |   |   | $ | 5,771 |   |   |   | 10,670,431 |   |
| Dilutive                effect of outstanding           |   |                                       |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| stock                options and warrants               |   |                                       |    |   |   |   | - |   |   |   |   |   |   |   | 267,891 |   |
| Used                in diluted EPS (1)                  |   | $                                          | (67,947 | ) |   |   | 9,666,546 |   |   | $ | 5,771 |   |   |   | 10,938,322 |   |

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| (Dollars                in thousands)                   |   | Six                Months Ended June 30, |    |
|---------------------------------------------------------|--------|------------------------------------------|---------|
|                                                    |   | 2008                                     |    |   | 2007 |   |
|                                                    |   | Income                                   |    |   | Shares |   |   | Income |   |   | Shares |   |
| Net                (loss) / income as reported          |   | $                                        | (81,199 | ) |   |   |   |   | $ | 11,511 |   |   |   |   |
| Less:                Preferred stock dividends declared |   |                                     | (644    | ) |   |   |   |   |   | (460 | ) |   |   |   |
| Shares                outstanding at end of period      |   |                                     |    |   |   |   | 9,887,591 |   |   |   |   |   |   |   | 10,917,058 |   |
| Unreleased                and unallocated ESOP shares   |   |                                     |    |   |   |   | (217,930 | ) |   |   |   |   |   |   | (245,368 | ) |
| Impact                of weighting shares               |   |                                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| issued                during the period                 |   |                                     |    |   |   |   | 28,628 |   |   |   |   |   |   |   | 6,510 |   |
| Used                in basic EPS                        |   | $                                        | (81,843 | ) |   |   | 9,698,289 |   |   | $ | 11,051 |   |   |   | 10,678,200 |   |
| Dilutive                effect of outstanding           |   |                                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| stock                options and warrants               |   |                                     |    |   |   |   | - |   |   |   |   |   |   |   | 263,734 |   |
| Used                in diluted EPS (1)                  |   | $                                        | (81,843 | ) |   |   | 9,698,289 |   |   | $ | 11,051 |   |   |   | 10,941,934 |   |

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

| (Dollars                in thousands)        |   | At                June 30, 2008 |    |
|----------------------------------------------|--------|---------------------------------|---------|
|                                         |   | Total                           |    |   | (Level                1) |   |   | (Level                2) |   |   | (Level                3) |   |
|                                         |   |                            |    |   |   |   |   |   |   |   |   |   |
| Trading                securities            |   | $                               | 4,457   |   |   | $ | 4,457 |   |   | $ | - |   |   | $ | - |   |
| Available-for-sale                securities |   |                            | 126,237 |   |   |   | - |   |   |   | 126,237 |   |   |   | - |   |
| Total                                        |   | $                               | 130,694 |   |   | $ | 4,457 |   |   | $ | 126,237 |   |   | $ | - |   |

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|                                  |   |                            |    |   |                         |   |   |                     |   |   |                     |   |   | Quarter                ended |    |
|---------------------------------------|--------|---------------------------------|---------|--------|------------------------------|--------|--------|--------------------------|--------|--------|--------------------------|--------|--------|------------------------------|---------|
| (Dollars                in thousands) |   | At                June 30, 2008 |    |   | June                30, 2008 |   |
|                                  |   | Total                           |    |   | (Level                1)     |   |   | (Level                2) |   |   | (Level                3) |   |   | Total                Losses  |    |
| Loans                held-for-sale    |   | $                               | 64,801  |   |                         | $      | -      |                     |   | $      | -                        |   |   | $                            | 64,801  |   |   | $ | - |   |
| Impaired                loans (1)     |   |                            | 271,553 |   |                         |   | -      |                     |   |   | -                        |   |   |                         | 271,553 |   |   |   | (18,113 | ) |
| OREO                (2)               |   |                            | 6,175   |   |                         |   | -      |                     |   |   | -                        |   |   |                         | 6,175   |   |   |   | (600 | ) |
| Total                                 |   | $                               | 342,529 |   |                         | $      | -      |                     |   | $      | -                        |   |   | $                            | 342,529 |   |   | $ | (18,713 | ) |

| (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)          |   | Six                  Months Ended June 30, |    |
|--------------------------------------------------|--------|--------------------------------------------|---------|
|                                             |   | 2008                                       |    |   | 2007 |   |
|                                             |   |                                       |    |   | Percent |   |   |   |   |   | Percent |   |
|                                             |   |                                       |    |   | of                  Pretax |   |   |   |   |   | of                  Pretax |   |
|                                             |   | Amount                                     |    |   | Loss |   |   | Amount |   |   | Income |   |
| Federal                  rate                    |   | $                                          | (26,393 | ) |   |   | 35.0 | % |   | $ | 6,834 |   |   |   | 35.0 | % |
| Changes                  due to state income     |   |                                       |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| tax,                  net of federal tax benefit |   |                                       | (5,352  | ) |   |   | 7.1 | % |   |   | 1,367 |   |   |   | 7.0 | % |
| Change                  in valuation allowance   |   |                                       | 38,271  |   |   |   | -50.7 | % |   |   | - |   |   |   | 0.0 | % |
| Other                                            |   |                                       | (736    | ) |   |   | 0.9 | % |   |   | (186 | ) |   |   | -1.0 | % |
| Total                                            |   | $                                          | 5,790   |   |   |   | -7.7 | % |   | $ | 8,015 |   |   |   | 41.0 | % |

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

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

| 2)   | Loan                Portfolio                Management: In order to produce a base of stabilized long-term                earnings, we will seek to proactively rebalance the existing loan                portfolio and diversify new business generation to reduce our risk                profile, meet our targeted concentration ranges within sub-markets                and                sub-portfolios, and maintain an overall portfolio yield consistent                with                quality and sustainable returns; |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

| 4)   | Corporate                Reallocation and                Reorganization: To improve our operating efficiencies, we will                continually review our resource allocation to ensure the optimum                allocation of talent among functions. We seek to continue to deploy                and                redeploy resources, both personnel and other operating costs, toward                achievement of our objectives; and |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 5)   | Protection                and Preservation of                Capital:                 We will focus on protecting and preserving capital. Income                from the Bank, in the long term, is expected to be a contributor                to                increasing capital and accretive to our risk based capital ratios.                In                light of current economic conditions and to address the deterioration                in                the loan portfolio, we have significantly curtailed new loan generation,                which combined with loan sales and repayments may make additional                capital                available. In addition, in order to address the financial impact                of the                abrupt and severe decline in real estate values and the potential                continuing deterioration in the loan portfolio, we will also pursue                strategic alternatives, which may include a significant capital raise,                to                strengthen our capital. |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| (i)   | the                coastal communities of Los Angeles, Orange and San Diego                counties; |
|-----------------|------------------------------------------------------------------------------------------------------|

| (ii)   | the                San Gabriel Valley and San Fernando Valley regions of Los Angeles                county; |
|------------------|-------------------------------------------------------------------------------------------------------------|

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

| (iv)   | the                northern communities of Marin and Santa Clara                counties. |
|------------------|-------------------------------------------------------------------------------------------|

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| ·   | Luxury                Home Construction Lending :  The                Bank                originates single family residential (“SFR”) luxury home construction                loans (consisting of attached and detached homes generally priced                at $2.0                million and above) primarily within Los Angeles’ “south bay” coastal                communities (including Manhattan Beach, Hermosa Beach, El Segundo,                Redondo                Beach, and the Palos Verdes Peninsula area), Los Angeles’ “west side”                (including Beverly Hills, Brentwood, Bel Air and Malibu) and Orange                County                regions where we believe the Bank has a competitive advantage based                on                established builder and customer relationships and expertise in the                construction market.  The Bank established its Santa Clara RFC in                February 2007 primarily to generate SFR luxury home construction                loans.  Although the general California real estate market has                slowed considerably, and the selling time for luxury homes has increased                in 2008, we believe the median price of these homes has not deteriorated                significantly.  Therefore, we continue to believe there is                relative strength in the demand for this loan product within the                luxury                housing market along the California coast and in other established                affluent regions of California.  However, we have temporarily                suspended lending in this business line in Southern California and                moderated production in this business line in Northern California                given                the current softness and uncertainties in the general real estate                market.                We believe the high employment level, strong incomes, wealth accumulation                and good schools in these luxury regions contribute to a continued                confidence in these markets.  These types of construction loans                typically range from $1.0 million to $5.0                million. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Commercial                Construction Lending: The Bank originates commercial construction                loans, which primarily include loans for the construction of office                buildings, retail space, churches, and multifamily/apartment                projects.  The majority of commercial construction loans are                used for the construction of low-rise office buildings and medical                offices.  This product is mainly originated throughout Southern                California, including the Inland Empire region and Los Angeles and                Orange                counties.  Commercial construction loans generated from this                division typically range from $2.0 million to $25.0                million.  The Bank had a balance of $227.7 million and $198.2                million of commercial construction loans at June 30, 2008 and December                31,                2007, respectively, net of undisbursed commitments of $72.0 million                and                $115.9 million for the same periods, respectively.  Due to the                current softness and uncertainties in the general real estate market,                we                have significantly curtailed production in this business                line. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Tract                Construction Lending:  The Bank has SFR tract                construction loans, primarily secured by newly-constructed, entry                to                mid-level detached and attached homes.  The majority of these loans                were originated within the Inland Empire of Southern California,                and the                remainder was originated throughout California. This division has                experienced significant challenges in the last several quarters,                as home                sales decline, inventory levels increase, and housing prices in the                Inland                Empire region continue to soften. The majority of the Bank’s builder                clients continue to offer various buyer incentives to complete projects                and move inventory in the face of declining absorption                rates.  Although we cannot control many economic and market                driven factors impacting this business segment, we have completed                an                analysis of our tract construction portfolio and we believe we are                taking                proactive steps to address identified risk factors within our                control.  To that end, we have halted origination of this                product type. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| ·   | Income                Property Lending:  The Bank has an income property                lending division to service the lending needs in markets for commercial                real estate and multifamily/apartments in California and neighboring                states. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| o   | Commercial                Real Estate: The                Bank’s                commercial real estate loan portfolio includes loans secured by office                buildings, retail outlets and industrial properties, the majority                of which                are located in Los Angeles county, Orange county, and the Inland                Empire                region in Southern California.  Consistent                with our risk reduction efforts,                we continue to focus on loans with strong sponsorship and properties                in                established markets.   Commercial                real estate loans generated from this division typically range from                $2.0                million to $10.0 million.  The Bank had a balance of $527.5                million and $524.9 million of income property commercial real estate                loans                generated from this division at June 30, 2008 and December 31, 2007,                respectively. |
|---------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| o   | Residential                Real Estate:  The Bank’s residential income property loan                portfolio consists primarily of multi-family/apartment                loans.  These loans are originated primarily in Los Angeles and                Orange counties, with some lending in the Inland Empire                region.  This portfolio is currently benefiting from low home                affordability as potential home buyers are choosing to remain in                rental                housing.   Multi-family/apartment                loans typically range from $0.5 million to $5.0 million.  The                Bank had a balance of $193.1 million and $149.9 million of residential                income property loans at June 30, 2008 and December 31, 2007,                respectively.  We have moderated the growth of this type of loan                to reduce our concentration in real estate and to preserve capital                and                liquidity. |
|---------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Branching                System:                 Several of the Bank’s full-service banking centers are redesigned to offer                a high-tech, high-service environment.  Along with the Bank’s                traditional teller lines, it has also incorporated client service                desks                that integrate both traditional teller and new account operations                with                state-of-the-art cash machines.  To further the reach of each of                the Bank’s banking centers, its RFCs operate exclusively to generate                deposits and/or loans.  The Bank also offers courier services,                internet-based banking, and ATMs and kiosks to make banking more                convenient to our customers. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Cash                Management:                 To offer expedient banking with new and emerging technologies, the                Bank                offers various cash management services to its customers.  These                services facilitate business customers’ cash flow and aid in maximizing                their investment potential by aligning products and services to a                customer’s needs. The Bank’s cash management services include the                following: |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| o   | Remote                Item                Capture:  This technology, also known as “electronic                deposit”, allows clients to scan items for deposit and electronically send                images of the items securely to the Bank’s processor.  This                service also provides customers with the convenience to perform banking                activities from within their place of business and after traditional                banking hours. |
|---------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

| o   | Lockbox                Processing: The Bank’s lockbox services aid customers in expediting                the processing of their deposits and increasing their float value                for                investment purposes.  This product also provides same-day                reporting of deposits. |
|---------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| o   | Positive                Pay:  This service provides business customers with                increased efficiency and security by allowing them to review checks                presented against their accounts prior to disbursing funds while                helping                clients to identify potentially fraudulent activity in their                account. |
|---------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| (Dollars                in thousands)                     |   | For                the three months ended June 30, |      |
|-----------------------------------------------------------|--------|----------------------------------------------------|-----------|
|                                                      |   | 2008                                               |      |   | 2007 |   |
|                                                      |   | Average                                            |      |   |   |   |   | Average |   |   | Average |   |   |   |   |   | Average |   |
|                                                      |   | Balance                                            |      |   | Interest |   |   | Yield/Cost |   |   | Balance |   |   | Interest |   |   | Yield/Cost |   |
| Assets                                                    |   |                                               |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans                (1)                                  |   | $                                                  | 2,045,364 |   |   | $ | 34,945 |   |   |   | 6.87 | % |   | $ | 2,037,736 |   |   | $ | 44,518 |   |   |   | 8.76 | % |
| Investment                securities (2)                  |   |                                               | 138,623   |   |   |   | 2,004 |   |   |   | 5.79 | % |   |   | 214,992 |   |   |   | 2,641 |   |   |   | 4.92 | % |
| Federal                funds sold                         |   |                                               | 17,223    |   |   |   | 76 |   |   |   | 1.77 | % |   |   | 2,323 |   |   |   | 31 |   |   |   | 5.27 | % |
| Other                investments                          |   |                                               | 19,938    |   |   |   | 315 |   |   |   | 6.36 | % |   |   | 23,353 |   |   |   | 295 |   |   |   | 5.06 | % |
| Total                interest-earning assets              |   |                                               | 2,221,148 |   |   |   | 37,340 |   |   |   | 6.76 | % |   |   | 2,278,404 |   |   |   | 47,485 |   |   |   | 8.36 | % |
| Other                assets                               |   |                                               | 160,971   |   |   |   |   |   |   |   |   |   |   |   | 129,410 |   |   |   |   |   |   |   |   |   |
| Less:                allowance for loan losses            |   |                                               | (52,656   | ) |   |   |   |   |   |   |   |   |   |   | (21,057 | ) |   |   |   |   |   |   |   |   |
| Total                average assets                       |   | $                                                  | 2,329,463 |   |   |   |   |   |   |   |   |   |   | $ | 2,386,757 |   |   |   |   |   |   |   |   |   |
|                                                      |   |                                               |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities                and Stockholders' Equity       |   |                                               |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Savings                deposits                (3)        |   | $                                                  | 520,484   |   |   |   | 3,554 |   |   |   | 2.75 | % |   | $ | 642,763 |   |   |   | 6,513 |   |   |   | 4.06 | % |
| Time                deposits                              |   |                                               | 1,006,585 |   |   |   | 11,778 |   |   |   | 4.71 | % |   |   | 820,421 |   |   |   | 10,668 |   |   |   | 5.22 | % |
| FHLB                advances                              |   |                                               | 202,002   |   |   |   | 2,270 |   |   |   | 4.46 | % |   |   | 292,648 |   |   |   | 3,687 |   |   |   | 5.02 | % |
| Other                borrowings                           |   |                                               | 49,185    |   |   |   | 827 |   |   |   | 6.65 | % |   |   | 48,285 |   |   |   | 830 |   |   |   | 6.80 | % |
| Subordinated                debt                          |   |                                               | 5,000     |   |   |   | 74 |   |   |   | 5.88 | % |   |   | 5,000 |   |   |   | 109 |   |   |   | 8.61 | % |
| Junior                subordinated debentures             |   |                                               | 115,470   |   |   |   | 1,582 |   |   |   | 5.42 | % |   |   | 115,470 |   |   |   | 2,308 |   |   |   | 7.91 | % |
| Total                interest-bearing liabilities         |   |                                               | 1,898,726 |   |   |   | 20,085 |   |   |   | 4.23 | % |   |   | 1,924,587 |   |   |   | 24,115 |   |   |   | 5.01 | % |
| Demand                deposits                            |   |                                               | 267,744   |   |   |   |   |   |   |   |   |   |   |   | 286,878 |   |   |   |   |   |   |   |   |   |
| Exchange                liabilities                       |   |                                               | 22,763    |   |   |   |   |   |   |   |   |   |   |   | - |   |   |   |   |   |   |   |   |   |
| Other                liabilities                          |   |                                               | 57,639    |   |   |   |   |   |   |   |   |   |   |   | 24,800 |   |   |   |   |   |   |   |   |   |
| Total                average liabilities                  |   |                                               | 2,246,872 |   |   |   |   |   |   |   |   |   |   |   | 2,236,265 |   |   |   |   |   |   |   |   |   |
| Total                average stockholders' equity         |   |                                               | 82,591    |   |   |   |   |   |   |   |   |   |   |   | 150,492 |   |   |   |   |   |   |   |   |   |
| Total                average liabilities and              |   |                                               |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| stockholders'                equity                       |   | $                                                  | 2,329,463 |   |   |   |   |   |   |   |   |   |   | $ | 2,386,757 |   |   |   |   |   |   |   |   |   |
|                                                      |   |                                               |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                interest spread                (4)     |   |                                               |      |   |   |   |   |   |   |   | 2.53 | % |   |   |   |   |   |   |   |   |   |   | 3.35 | % |
| Net                interest income                        |   |                                               |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| and                net interest margin                (5) |   |                                               |      |   |   | $ | 17,255 |   |   |   | 3.14 | % |   |   |   |   |   | $ | 23,370 |   |   |   | 4.13 | % |

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| (Dollars                in thousands)                     |   | For                the six months ended June 30, |      |
|-----------------------------------------------------------|--------|--------------------------------------------------|-----------|
|                                                      |   | 2008                                             |      |   | 2007 |   |
|                                                      |   | Average                                          |      |   |   |   |   | Average |   |   | Average |   |   |   |   |   | Average |   |
|                                                      |   | Balance                                          |      |   | Interest |   |   | Yield/Cost |   |   | Balance |   |   | Interest |   |   | Yield/Cost |   |
| Assets                                                    |   |                                             |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans                (1)                                  |   | $                                                | 2,087,215 |   |   | $ | 75,418 |   |   |   | 7.27 | % |   | $ | 1,990,824 |   |   | $ | 86,729 |   |   |   | 8.79 | % |
| Investment                securities (2)                  |   |                                             | 144,885   |   |   |   | 3,302 |   |   |   | 4.56 | % |   |   | 218,349 |   |   |   | 5,310 |   |   |   | 4.87 | % |
| Federal                funds sold                         |   |                                             | 13,400    |   |   |   | 156 |   |   |   | 2.34 | % |   |   | 1,602 |   |   |   | 42 |   |   |   | 5.27 | % |
| Other                investments                          |   |                                             | 20,375    |   |   |   | 616 |   |   |   | 6.08 | % |   |   | 20,916 |   |   |   | 553 |   |   |   | 5.33 | % |
| Total                interest-earning assets              |   |                                             | 2,265,875 |   |   |   | 79,492 |   |   |   | 7.05 | % |   |   | 2,231,691 |   |   |   | 92,634 |   |   |   | 8.37 | % |
| Other                assets                               |   |                                             | 153,891   |   |   |   |   |   |   |   |   |   |   |   | 128,675 |   |   |   |   |   |   |   |   |   |
| Less:                allowance for loan losses            |   |                                             | (52,215   | ) |   |   |   |   |   |   |   |   |   |   | (20,488 | ) |   |   |   |   |   |   |   |   |
| Total                average assets                       |   | $                                                | 2,367,551 |   |   |   |   |   |   |   |   |   |   | $ | 2,339,878 |   |   |   |   |   |   |   |   |   |
|                                                      |   |                                             |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities                and Stockholders' Equity       |   |                                             |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Savings                deposits                (3)        |   | $                                                | 588,164   |   |   |   | 9,148 |   |   |   | 3.13 | % |   | $ | 651,039 |   |   |   | 13,052 |   |   |   | 4.04 | % |
| Time                deposits                              |   |                                             | 962,593   |   |   |   | 23,291 |   |   |   | 4.87 | % |   |   | 823,088 |   |   |   | 21,202 |   |   |   | 5.19 | % |
| FHLB                advances                              |   |                                             | 197,576   |   |   |   | 4,541 |   |   |   | 4.57 | % |   |   | 249,220 |   |   |   | 6,241 |   |   |   | 5.01 | % |
| Other                borrowings                           |   |                                             | 46,908    |   |   |   | 1,599 |   |   |   | 6.74 | % |   |   | 41,554 |   |   |   | 1,465 |   |   |   | 7.01 | % |
| Subordinated                debt                          |   |                                             | 5,000     |   |   |   | 175 |   |   |   | 6.93 | % |   |   | 5,000 |   |   |   | 218 |   |   |   | 8.67 | % |
| Junior                subordinated debentures             |   |                                             | 115,470   |   |   |   | 3,601 |   |   |   | 6.17 | % |   |   | 115,470 |   |   |   | 4,593 |   |   |   | 7.91 | % |
| Total                interest-bearing liabilities         |   |                                             | 1,915,711 |   |   |   | 42,355 |   |   |   | 4.43 | % |   |   | 1,885,371 |   |   |   | 46,771 |   |   |   | 4.99 | % |
| Demand                deposits                            |   |                                             | 278,206   |   |   |   |   |   |   |   |   |   |   |   | 282,394 |   |   |   |   |   |   |   |   |   |
| Exchange                balances                          |   |                                             | 28,221    |   |   |   |   |   |   |   |   |   |   |   | - |   |   |   |   |   |   |   |   |   |
| Other                liabilities                          |   |                                             | 51,423    |   |   |   |   |   |   |   |   |   |   |   | 24,296 |   |   |   |   |   |   |   |   |   |
| Total                average liabilities                  |   |                                             | 2,273,561 |   |   |   |   |   |   |   |   |   |   |   | 2,192,061 |   |   |   |   |   |   |   |   |   |
| Total                average stockholders' equity         |   |                                             | 93,990    |   |   |   |   |   |   |   |   |   |   |   | 147,817 |   |   |   |   |   |   |   |   |   |
| Total                average liabilities and              |   |                                             |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| stockholders'                equity                       |   | $                                                | 2,367,551 |   |   |   |   |   |   |   |   |   |   | $ | 2,339,878 |   |   |   |   |   |   |   |   |   |
|                                                      |   |                                             |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                interest spread                (4)     |   |                                             |      |   |   |   |   |   |   |   | 2.62 | % |   |   |   |   |   |   |   |   |   |   | 3.38 | % |
| Net                interest income                        |   |                                             |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| and                net interest margin                (5) |   |                                             |      |   |   | $ | 37,137 |   |   |   | 3.31 | % |   |   |   |   |   | $ | 45,863 |   |   |   | 4.15 | % |

|  (1) | Interest                on loans includes loan fees, which totaled $1.2 million and $2.4                million                for the three months ended June 30, 2008 and 2007, respectively,                and $2.8                million and $4.8 million for the six months ended June 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 six months ended June 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 given 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 $1.3 million or 16.1% to                $6.6                million for the three months ended June 30, 2008 as compared to $7.9                million for the same period in 2007, and by $0.5 million or 3.0%                to $15.0                million for the six months ended June 30, 2008 as compared to $15.5                million for the same period in 2007. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                         (ii) | Occupancy                expense amounted to $1.6 million and $3.1 million for the three and                six                months ended June 30, 2008, respectively, in comparison to $1.4 million                and $2.8 million for the same periods in 2007, respectively. The                increase                was due to 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 $1.0 million and $2.2 million for the three                and                six months ended June 30, 2008, respectively, compared to $1.1 million                and                $2.1 million for the same periods in 2007,                respectively. |
|-------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (iv)   | Professional                services, including legal, audit and other professional services,                was $4.3                million and $7.3 million for the three and six months ended June                30, 2008,                respectively, compared to $0.8 million and $1.5 million for the same                periods in 2007, respectively, resulting in increases of $3.5 million                and                $5.8 million for the three months and six ended June 30, 2008,                respectively. The significant increase for the three and six months                ended                June 30, 2008 was related primarily to additional audit and legal                costs                professional service expenses associated with 1) the internal control                investigation, 2) the Consent Solicitation, and 3) the Company’s pursuit                of strategic alternatives.  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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| (v)   | Write-down                of assets during the three months and six months ended June 30, 2008                totaled $7.4 million and $11.3 million, respectively. These write-downs                in                investment securities, goodwill, foreclosed real estate owned and                loans                held-for-sale occurred, in part, as a result of market forces impacting                the Company attributable to the severe declines in real estate values                in                Southern California. There were no write downs during the three and                six                months ended June 30, 2007. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (vi)   | Other                non-interest expenses totaled $4.1 million and $3.0 million for the                three                months ended June 30, 2008 and 2007, respectively, and $7.3 million                and                $5.4 million for the six months ended June 30, 2008 and 2007,                respectively.  The main increase in other expenses consisted of                foreclosure and appraisal expenses, included in loan related                expenses.  The following is a breakdown of other expenses for                the three and six months ended June 30, 2008 and                2007: |
|------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (Dollars                in thousands)                 |   | Three                Months Ended June 30, |   |   | Six                Months Ended June 30, |   |
|-------------------------------------------------------|--------|--------------------------------------------|--------|--------|------------------------------------------|--------|
|                                                  |   | 2008                                       |   |   | 2007                                     |   |   | 2008 |   |   | 2007 |   |
| Other                non-interest expense:            |   |                                       |   |   |                                     |   |   |   |   |   |   |   |
| Office                supplies, postage and telephone |   | $                                          | 534    |   |                                     | $      | 572 |   |   | $ | 1,075 |   |   | $ | 1,199 |   |
| Business                development                   |   |                                       | 351    |   |                                     |   | 594 |   |   |   | 934 |   |   |   | 1,160 |   |
| Data                processing                        |   |                                       | 419    |   |                                     |   | 387 |   |   |   | 820 |   |   |   | 732 |   |
| Marketing                                             |   |                                       | 207    |   |                                     |   | 227 |   |   |   | 407 |   |   |   | 423 |   |
| Insurance                and assessments              |   |                                       | 640    |   |                                     |   | 413 |   |   |   | 1,113 |   |   |   | 765 |   |
| Administrative                                        |   |                                       | 178    |   |                                     |   | 225 |   |   |   | 363 |   |   |   | 397 |   |
| Loan                related                           |   |                                       | 1,171  |   |                                     |   | 267 |   |   |   | 1,753 |   |   |   | 480 |   |
| Other                                                 |   |                                       | 576    |   |                                     |   | 326 |   |   |   | 785 |   |   |   | 283 |   |
| Total                other non-interest expense       |   | $                                          | 4,076  |   |                                     | $      | 3,011 |   |   | $ | 7,250 |   |   | $ | 5,439 |   |

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| (Dollars                in thousands)                             |   |      |    |   | Gross      |   |   | Gross      |   |   |                      |   |
|-------------------------------------------------------------------|--------|-----------|---------|--------|------------|--------|--------|------------|--------|--------|---------------------------|--------|
|                                                              |   | Amortized |    |   | Unrealized |   |   | Unrealized |   |   |                      |   |
|                                                              |   | Cost      |    |   | Gains      |   |   | Losses     |   |   | Fair                Value |   |
| Trading                securities:                                |   | $         | 4,613   |   |       | $      | -      |       |   | $      | (156                      | )      |   | $ | 4,457 |   |
|                                                              |   |      |    |   |       |   |   |       |   |   |                      |   |   |   |   |   |
| Available-for-sale                securities:                     |   |      |    |   |       |   |   |       |   |   |                      |   |   |   |   |   |
| U.S.agency                securities                              |   |      | 13,427  |   |       |   | -      |       |   |   | -                         |   |   |   | 13,427 |   |
| Mortgage-backed                securities                         |   |      | 110,507 |   |       |   | -      |       |   |   | -                         |   |   |   | 110,507 |   |
| Mutual                funds                                       |   |      | 2,303   |   |       |   | -      |       |   |   | -                         |   |   |   | 2,303 |   |
| Total                available-for-sale                securities |   |      | 126,237 |   |       |   | -      |       |   |   | -                         |   |   |   | 126,237 |   |
| Total                Investment                Securities         |   | $         | 130,850 |   |       | $      | -      |       |   | $      | (156                      | )      |   | $ | 130,694 |   |

| (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 |   |

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| (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                 |   | $                                  | 13,427 |   |                               | $      | -      |                      |   | $ | - |   |   | $ | - |   |   | $ | 13,427 |   |   | $ | - |   |
| Mortgage-backed                securities            |   |                               | 29,568 |   |                               |   | -      |                      |   |   | 80,939 |   |   |   | - |   |   |   | 110,507 |   |   |   | - |   |
| Mutual                funds                          |   |                               | 2,303  |   |                               |   | -      |                      |   |   | - |   |   |   | - |   |   |   | 2,303 |   |   |   | - |   |
| Total                                                |   | $                                  | 45,298 |   |                               | $      | -      |                      |   | $ | 80,939 |   |   | $ | - |   |   | $ | 126,237 |   |   | $ | - |   |

| (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     |   | $                                      | 13,427  |   |                      | $      | 13,427 |   |
| Mortgage-backed                securities |   |                                   | 110,507 |   |                      |   | 110,507 |   |
| Total                                     |   | $                                      | 123,934 |   |                      | $      | 123,934 |   |

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| (Dollars                in thousands)                 |   | June                30, 2008 |      |   | December                31, 2007 |   |
|-------------------------------------------------------|--------|------------------------------|-----------|--------|----------------------------------|--------|
|                                                  |   |                         |      |   |                             |   |   |   |   |   |   |   |
|                                                  |   | Amount                       |      |   | %                                |   |   | Amount |   |   | % |   |
| Commercial                and industrial              |   | $                            | 179,345   |   |                             |   | 9.5 | % |   | $ | 156,966 |   |   |   | 7.8 | % |
| Real                estate construction and land:     |   |                         |      |   |                             |   |   |   |   |   |   |   |   |   |   |   |
| Single-family                luxury                   |   |                         | 536,795   |   |                             |   | 28.4 | % |   |   | 582,962 |   |   |   | 29.0 | % |
| Single-family                tract                    |   |                         | 54,431    |   |                             |   | 2.9 | % |   |   | 146,627 |   |   |   | 7.3 | % |
| Commercial                                            |   |                         | 227,694   |   |                             |   | 12.0 | % |   |   | 198,186 |   |   |   | 9.9 | % |
| Land                                                  |   |                         |      |   |                             |   |   |   |   |   |   |   |   |   |   |   |
| Single-family                luxury                   |   |                         | 25,282    |   |                             |   | 1.3 | % |   |   | 22,931 |   |   |   | 1.2 | % |
| Single-family                tract                    |   |                         | 30,031    |   |                             |   | 1.6 | % |   |   | 64,405 |   |   |   | 3.2 | % |
| Commercial                                            |   |                         | 12,592    |   |                             |   | 0.7 | % |   |   | 15,439 |   |   |   | 0.8 | % |
| Other                                                 |   |                         | 5,390     |   |                             |   | 0.3 | % |   |   | 909 |   |   |   | 0.0 | % |
| Real                estate mortgage:                  |   |                         |      |   |                             |   |   |   |   |   |   |   |   |   |   |   |
| Commercial                                            |   |                         | 527,135   |   |                             |   | 27.8 | % |   |   | 553,531 |   |   |   | 27.6 | % |
| Multi-family                residential               |   |                         | 139,152   |   |                             |   | 7.4 | % |   |   | 93,662 |   |   |   | 4.7 | % |
| Other                residential                      |   |                         | 53,903    |   |                             |   | 2.8 | % |   |   | 56,257 |   |   |   | 2.8 | % |
| Consumer                loans                         |   |                         | 99,891    |   |                             |   | 5.3 | % |   |   | 115,702 |   |   |   | 5.7 | % |
| All                other loans (including overdrafts) |   |                         | 58        |   |                             |   | 0.0 | % |   |   | 264 |   |   |   | 0.0 | % |
|                                                  |   |                         | 1,891,699 |   |                             |   | 99.9 | % |   |   | 2,007,841 |   |   |   | 100.0 | % |
| Less:                                                 |   |                         |      |   |                             |   |   |   |   |   |   |   |   |   |   |   |
| Unearned                premium on loans              |   |                         | 2,565     |   |                             |   | 0.1 | % |   |   | 3,272 |   |   |   | 0.2 | % |
| Deferred                loan fees                     |   |                         | (1,317    | )      |                             |   | -0.1 | % |   |   | (3,042 | ) |   |   | -0.2 | % |
| Loans,                net of unearned income          |   | $                            | 1,892,947 |   |                             |   | 100.0 | % |   | $ | 2,008,071 |   |   |   | 100.0 | % |
| Loans                held-for-sale                    |   | $                            | 64,801    |   |                             |   |   |   |   | $ | 119,427 |   |   |   |   |   |

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Table          of Contents

| (Dollars                in thousands)       |   | Three                months ended June 30, |   |   | Six                months ended June 30, |   |
|---------------------------------------------|--------|--------------------------------------------|--------|--------|------------------------------------------|--------|
|                                        |   | 2008                                       |   |   | 2007                                     |   |   | 2008 |   |   | 2007 |   |
| Servicing                rights capitalized |   | $                                          | 3      |   |                                     | $      | 136 |   |   | $ | 35 |   |   | $ | 172 |   |
| Servicing                rights amortized   |   | $                                          | 67     |   |                                     | $      | 99 |   |   |   | 157 |   |   | $ | 252 |   |
| Valuation                allowances         |   | $                                          | -      |   |                                     | $      | - |   |   |   | - |   |   |   | - |   |

| (Dollars                in thousands)                |   | Six                months ended June 30, |   |
|------------------------------------------------------|--------|------------------------------------------|--------|
|                                                 |   | 2008                                     |   |   | 2007 |   |
| Servicing                rights, beginning of year   |   | $                                        | 749    |   |   | $ | 933 |   |
| Servicing                rights added in period, net |   |                                     | 35     |   |   |   | 172 |   |
| Servicing                rights amortized            |   |                                     | (157   | ) |   |   | (252 | ) |
| Servicing                rights, end of period       |   | $                                        | 627    |   |   | $ | 853 |   |

| (Dollars                in thousands)                     |   | Six                months ended June 30, |    |
|-----------------------------------------------------------|--------|------------------------------------------|---------|
|                                                      |   | 2008                                     |    |   | 2007 |   |
| Allowance                for  Loan Losses       |   |                                     |    |   |   |   |
| Balance,                beginning of period               |   | $                                        | 48,849  |   |   | $ | 19,689 |   |
| Recoveries                on loans previously charged off |   |                                     | 556     |   |   |   | 19 |   |
| Loans                charged off                          |   |                                     | (64,630 | ) |   |   | (153 | ) |
| Provision                charged to operating expense     |   |                                     | 67,400  |   |   |   | 1,700 |   |
| Balance,                end of period                     |   | $                                        | 52,175  |   |   | $ | 21,255 |   |
|                                                      |   |                                     |    |   |   |   |   |   |
| Reserve                for Unfunded Commitments           |   |                                     |    |   |   |   |   |   |
| Balance,                beginning of period               |   | $                                        | 966     |   |   | $ | 1,396 |   |
| Net                decrease charged to other expenses     |   |                                     | (24     | ) |   |   | (400 | ) |
| Balance,                end of period                     |   | $                                        | 942     |   |   | $ | 996 |   |
|                                                      |   |                                     |    |   |   |   |   |   |
| Allowance                for Credit Losses                |   |                                     |    |   |   |   |   |   |
| Allowance                for loan losses                  |   | $                                        | 52,175  |   |   | $ | 21,255 |   |
| Reserve                for unfunded commitments           |   |                                     | 942     |   |   |   | 996 |   |
| Allowance                for credit losses                |   | $                                        | 53,117  |   |   | $ | 22,251 |   |

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| (Dollars                in thousands)                    |   | As                of         |    |
|----------------------------------------------------------|--------|------------------------------|---------|
|                                                     |   | June                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         |   |                         | 16,060  |   |   |   | - |   |
| Real                estate-mortgage                      |   |                         | 5,098   |   |   |   | - |   |
| Consumer                loans                            |   |                         | 12      |   |   |   | 25 |   |
| Total                loans past due more than 90 days    |   |                         |    |   |   |   |   |   |
| and                still accruing                        |   | $                            | 21,170  |   |   | $ | 54 |   |
|                                                     |   |                         |    |   |   |   |   |   |
| Renegotiated                loans                        |   | $                            | 13,934  |   |   | $ | - |   |
|                                                     |   |                         |    |   |   |   |   |   |
| Non-accrual                loans                         |   |                         |    |   |   |   |   |   |
| Aggregate                loan amounts                    |   |                         |    |   |   |   |   |   |
| Commercial                and industrial                 |   | $                            | 4,250   |   |   | $ | 892 |   |
| Real                estate construction and land         |   |                         | 181,605 |   |   |   | 70,975 |   |
| Real                estate-mortgage                      |   |                         | 4,969   |   |   |   | 3,355 |   |
| Consumer                loans                            |   |                         | 1,825   |   |   |   | 140 |   |
| Total                non-accrual loans                   |   | $                            | 192,649 |   |   | $ | 75,362 |   |
|                                                     |   |                         |    |   |   |   |   |   |
| Total                non-performing loans                |   | $                            | 227,753 |   |   | $ | 75,416 |   |
|                                                     |   |                         |    |   |   |   |   |   |
| Other                Real Estate Owned                   |   | $                            | 6,175   |   |   | $ | 17,375 |   |

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Table          of Contents

| (Dollars                in thousands)                                 |   | As                of    |    |
|-----------------------------------------------------------------------|--------|-------------------------|---------|
|                                                                  |   | June                30, |    |   | December                31, |   |
|                                                                  |   | 2008                    |    |   | 2007 |   |
|                                                                  |   |                    |    |   |   |   |
| Impaired                loans with a specific valuation allowance     |   | $                       | 54,046  |   |   | $ | 103,732 |   |
| Impaired                loans without a specific valuation allowance  |   |                    | 217,507 |   |   |   | 36,156 |   |
| Total                impaired loans                                   |   | $                       | 271,553 |   |   | $ | 139,888 |   |
|                                                                  |   |                    |    |   |   |   |   |   |
| Specific                valuation allowance related to impaired loans |   | $                       | 18,113  |   |   | $ | 20,848 |   |

| (Dollars                in thousands)                            |   | Six                months ended June 30, |    |
|------------------------------------------------------------------|--------|------------------------------------------|---------|
|                                                             |   | 2008                                     |    |   | 2007 |   |
| Average                recorded investment in impaired loans     |   | $                                        | 180,415 |   |   | $ | 16,613 |   |
| Cash                receipts applied to reduce principal balance |   | $                                        | 25,104  |   |   | $ | 8,435 |   |
| Interest                income recognized for cash payments      |   | $                                        | 280     |   |   | $ | 67 |   |

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Table          of Contents

| (Dollars                in thousands)            |   | As                of         |      |
|--------------------------------------------------|--------|------------------------------|-----------|
|                                             |   | June                30, 2008 |      |   | December                31, 2007 |   |
| Money                market deposits             |   | $                            | 366,924   |   |   | $ | 568,713 |   |
| Savings                and NOW deposits          |   |                         | 111,902   |   |   |   | 136,982 |   |
| Time                deposits under $100,000      |   |                         | 653,672   |   |   |   | 360,249 |   |
| Time                deposits of $100,000 or more |   |                         | 579,093   |   |   |   | 552,803 |   |
| Total                                            |   | $                            | 1,711,591 |   |   | $ | 1,618,747 |   |

| (Dollars                in thousands)           |   |   |    |
|-------------------------------------------------|--------|--------|---------|
|                                            |   |   |    |
| Three                months or less             |   | $      | 195,250 |   |
| Over                three through twelve months |   |   | 297,799 |   |
| Over                one through five years      |   |   | 86,044  |   |
|                                            |   | $      | 579,093 |   |

| (Dollars                in                thousands) |   | June                30, |    |   | December                31, |   |
|------------------------------------------------------|--------|-------------------------|---------|--------|-----------------------------|--------|
|                                                 |   | 2008                    |    |   | 2007                        |   |
| Short-term                borrowings:                |   |                    |    |   |                        |   |
| FHLB                advances                         |   | $                       | 70,000  |   |                        | $      | 40,000 |   |
| Other                borrowings                      |   |                    | 48,300  |   |                        |   | 45,250 |   |
| Total                Short-term borrowings           |   |                    | 118,300 |   |                        |   | 85,250 |   |
| Long-term                borrowings:                 |   |                    |    |   |                        |   |   |   |
| FHLB                advances                         |   |                    | 85,000  |   |                        |   | 135,000 |   |
| Subordinated                debentures               |   |                    | 5,000   |   |                        |   | 5,000 |   |
| Junior                subordinated debentures        |   |                    | 115,470 |   |                        |   | 115,470 |   |
| Total                Long-term borrowings            |   |                    | 205,470 |   |                        |   | 255,470 |   |
|                                                 |   |                    |    |   |                        |   |   |   |
| Total                Borrowings                      |   | $                       | 323,770 |   |                        | $      | 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                                  |   |     | 4.87%  |   |     |   | 90,000  |    |   |   | 90,000 |   |
| 2010                                  |   |     | 4.64%  |        |     |   | 45,000  |    |   |   | 45,000 |   |
|                                  |   |     | 4.80%  |   |     | $      | 155,000 |    |   | $ | 155,000 |   |

| (Dollars                in thousands)        |                                 |                             |   | As                of June 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    |   |   |   | 6.41 | % |   | $ | 12,372 |   |
| Vineyard                Statutory Trust II   | 3-month                LIBOR + 3.35% | December                26, 2032 |   |                               | 155    |   |   |   | 6.06 | % |   |   | 5,155 |   |
| Vineyard                Statutory Trust III  | 3-month                LIBOR + 3.05% | October                8, 2033   |   |                               | 310    |   |   |   | 5.76 | % |   |   | 10,310 |   |
| Vineyard                Statutory Trust IV   | 3-month                LIBOR + 2.85% | January                23, 2034  |   |                               | 310    |   |   |   | 5.75 | % |   |   | 10,310 |   |
| Vineyard                Statutory Trust V    | 3-month                LIBOR + 2.85% | April                23, 2034    |   |                               | 310    |   |   |   | 5.56 | % |   |   | 10,310 |   |
| Vineyard                Statutory Trust VI   | 3-month                LIBOR + 2.85% | July                23, 2034     |   |                               | 372    |   |   |   | 5.77 | % |   |   | 12,372 |   |
| Vineyard                Statutory Trust VII  | 3-month                LIBOR + 2.00% | December                16, 2034 |   |                               | 310    |   |   |   | 4.68 | % |   |   | 10,310 |   |
| Vineyard                Statutory Trust VIII | 3-month                LIBOR + 2.25% | May                23, 2035      |   |                               | 310    |   |   |   | 4.89 | % |   |   | 10,310 |   |
| Vineyard                Statutory Trust IX   | 3-month                LIBOR + 1.70% | November                23, 2035 |   |                               | 464    |   |   |   | 4.34 | % |   |   | 15,464 |   |
| Vineyard                Statutory Trust XI   | 3-month                LIBOR + 1.60% | June                23, 2036     |   |                               | 557    |   |   |   | 4.40 | % |   |   | 18,557 |   |
|                                         |                                 |                             |   | $                                  | 3,470  |   |   |   | 5.24 | % |   | $ | 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 June 30, 2008                     |   |                               |    |   |                               |   |   |                               |   |   |   |   |   |   |   |   |   |   |
| Total                  capital to risk-weighted assets:  |   |                               |    |   |                               |   |   |                               |   |   |   |   |   |   |   |   |   |   |
| Bank                                                     |   | $                                  | 212,249 |   |                               |   | 9.78   | %                                  |   | $ | 173,600 |   |   |   | 8.00 | % |   | $ | 217,000 |   |   |   | 10.0 | % |
| Consolidated                                             |   | $                                  | 55,860  |   |                               |   | 2.54   | %                                  |   | $ | 175,900 |   |   |   | 8.00 | % |   |   | N/A |   |   |   | N/A |   |
|                                                     |   |                               |    |   |                               |   |   |                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Tier                  1 capital to risk-weighted assets: |   |                               |    |   |                               |   |   |                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Bank                                                     |   | $                                  | 184,789 |   |                               |   | 8.51   | %                                  |   | $ | 86,900 |   |   |   | 4.00 | % |   | $ | 130,300 |   |   |   | 6.0 | % |
| Consolidated                                             |   | $                                  | 27,930  |   |                               |   | 1.27   | %                                  |   | $ | 88,000 |   |   |   | 4.00 | % |   |   | N/A |   |   |   | N/A |   |
|                                                     |   |                               |    |   |                               |   |   |                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Tier                  1 capital to average assets:       |   |                               |    |   |                               |   | .      |                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Bank                                                     |   | $                                  | 184,789 |   |                               |   | 8.05   | %                                  |   | $ | 91,800 |   |   |   | 4.00 | % |   | $ | 114,800 |   |   |   | 5.0 | % |
| Consolidated                                             |   | $                                  | 27,930  |   |                               |   | 1.20   | %                                  |   | $ | 93,100 |   |   |   | 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    |   |                                    | $      | (19,004 | )                                |   |   | -33.1                        | %      |   | $ | (9,708 | ) |   |   | -16.5 | % |
|                                  | 100    |   |                                    | $      | (9,758  | )                                |   |   | -17.0                        | %      |   | $ | (5,192 | ) |   |   | -8.8 | % |
|                                  | -100   |   |                                    | $      | 10,863  |                             |   |   | 18.9                         | %      |   | $ | (1,634 | ) |   |   | -2.8 | % |
|                                  | -200   |   |                                    | $      | 14,411  |                             |   |   | 25.1                         | %      |   | $ | (3,882 | ) |   |   | -6.6 | % |

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ITEM      3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT      MARKET RISK

ITEM      4. CONTROLS AND PROCEDURES

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

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| ·   | Continued                enhancement of the information security monitoring procedures and                documentation including the implementation of changes to user access,                system logs and security policies. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

ITEM      1.  LEGAL PROCEEDINGS

ITEM      1A.  RISK FACTORS

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

| (Dollars                in thousands) |   |                     |   |   |                      |   |   |                               |   |   | Approximate                       |   |
|---------------------------------------|--------|--------------------------|--------|--------|---------------------------|--------|--------|------------------------------------|--------|--------|-----------------------------------|--------|
|                                  |   |                     |   |   |                      |   |   | Total                Number of     |   |   | Dollar                Value of    |   |
|                                  |   | Total                    |   |   |                      |   |   | Shares                Purchased    |   |   | Shares                that May    |   |
|                                  |   | Number                of |   |   | Average                   |   |   | as                Part of Publicly |   |   | Yet                be Purchased   |   |
|                                  |   | Shares                   |   |   | Price                Paid |   |   | Announced                Plans     |   |   | Under                the Plans or |   |
| Period                                |   | Purchased                |   |   | Per                Share  |   |   | or                Programs (1)     |   |   | Program                           |   |
|                                  |   |                     |   |   |                      |   |   |                               |   |   |                              |   |
| April                1-30, 2008       |   |                     | -      |   |                      | $      | -      |                               |   |   | -                                 |   |   | $ | 15,970 |   |
| May                1-31, 2008         |   |                     | -      |   |                      |   | -      |                               |   |   | -                                 |   |   | $ | 15,970 |   |
| June                1-30, 2008        |   |                     | -      |   |                      |   | -      |                               |   |   | -                                 |   |   | $ | 15,970 |   |
| Total                                 |   |                     | -      |   |                      | $      | -      |                               |   |   | -                                 |   |   |   |   |   |

| (1)   | In                July 2002, we                adopted a stock repurchase program in the initial amount of $2.0                million.  In each of December 2003, January 2005 and May 2005,                we announced increases in our stock repurchase program of $5.0                million, and in October 2005 and August 2007, we announced an additional                increase of $20.0 million in our stock repurchase program for a total                amount of $57.0 million.  Under our stock repurchase program, we                have been acquiring our common stock shares in the open market from                time                to time.  Our stock repurchase program does not have an                expiration date. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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ITEM      3.  DEFAULTS UPON SENIOR SECURITIES

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

ITEM      5.  OTHER INFORMATION

ITEM      6.  EXHIBITS

| EXHIBIT                NO. | DESCRIPTION |
|----------------------------|-------------|
| 3.1                        |        | Amended                and Restated Bylaws of Vineyard National Bancorp, as                amended |
| 10.1                       |        | Third                Modification Agreement and Covenant Waiver between Vineyard National                Bancorp and First Tennessee Bank, National Association(1) |
| 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 |

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SIGNATURES

|   |   | VINEYARD                NATIONAL BANCORPBy:                     /s/                James G. LeSieur____________________James                G. LeSieurInterim                Chief Executive Officer  By:                    /s/                Gordon Fong_________________________Gordon                FongExecutive                Vice President and Chief Financial Officer(Principal                Financial Officer)    |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |

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