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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549




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FORM 10-Q

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

FOR THE QUARTER ENDED SEPTEMBER 30, 2002

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

For the transition period from ______ to ______

Commission File No. 0-20862

VINEYARD NATIONAL BANCORP

(Exact Name of Registrant as Specified in its Charter)


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

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

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

APPLICABLE TO CORPORATE ISSUER

Indicate the number of shares outstanding of the issuers common stock on the
latest practicable date: 2,714,126 shares of common stock as of October 31,
2002.

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TABLE OF CONTENTS



|                          |                                                                                               |                                                            |  |  |  |  |  | 
|------------------------- | --------------------------------------------------------------------------------------------- | ---------------------------------------------------------- |  |  |  |  |  | 
|PART I                   
|                          | ITEM I. FINANCIAL STATEMENTS                                                                 
|                          |                                                                                               | CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION            
|                          |                                                                                               | CONSOLIDATED STATEMENTS OF INCOME                         
|                          |                                                                                               | CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
|                          |                                                                                               | CONSOLIDATED STATEMENTS OF CASH FLOWS                     
|                          | ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|                          | ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                           
|PART II OTHER INFORMATION
|                          | ITEM 1. LEGAL PROCEEDINGS                                                                    
|                          | ITEM 2. CHANGES IN SECURITIES                                                                
|                          | ITEM 3. DEFAULTS UPON SENIOR SECURITIES                                                      
|                          | ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                  
|                          | ITEM 5. OTHER INFORMATION                                                                    
|                          | ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K                                                     
|SIGNATURES               
|EXHIBIT 99.1             
|EXHIBIT 99.2             



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VINEYARD NATIONAL BANCORP

FORM 10-Q INDEX
FOR THE PERIODS ENDED SEPTEMBER 30, 2002 AND 2001,
AND DECEMBER 31, 2001

PART I  FINANCIAL INFORMATION

|           |  |                                                                                       |  |                                                                                                                  |    |  |   | 
|---------- |  | ------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------- | -- |  | - | 
|ITEM 1.    |  | Financial Statements                                                                  |  |                                                                                                                  |    | 
|           |  |                                                                                       |  | Consolidated Statements of Financial Condition
at September 30, 2002 and December 31, 2001                       |    |  | 3 | 
|           |  |                                                                                       |  | Consolidated Statements of Income
for the Nine Months and Three Months Ended September 30, 2002 and 2001         |    |  | 4 | 
|           |  |                                                                                       |  | Consolidated Statements of Changes in Stockholders Equity
for the Nine Months Ended September 30, 2002 and 2001 |    |  | 5 | 
|           |  |                                                                                       |  | Consolidated Statements of Cash Flows
for the Nine Months Ended September 30, 2002 and 2001                      |    |  | 6 | 
|           |  |                                                                                       |  | Notes to Consolidated Financial Statements                                                                       |    |  | 7 | 
|ITEM 2.    |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  |                                                                                                                  | 10 | 
|ITEM 3.    |  | Quantitative and Qualitative Disclosure About Market Risk                             |  |                                                                                                                  | 22 | 
|ITEM 4.    |  | Controls
and Procedures                                                               |  |                                                                                                                  | 23 | 
|           |  |                                                                                       |  | PART II  OTHER INFORMATION                                                                                      |    |  |   | 
|ITEM 1.    |  | Legal Proceedings                                                                     |  |                                                                                                                  | 24 | 
|ITEM 2.    |  | Changes in Securities                                                                 |  |                                                                                                                  | 24 | 
|ITEM 3.    |  | Defaults upon Senior Securities                                                       |  |                                                                                                                  | 24 | 
|ITEM 4.    |  | Submission of Matters to a Vote of Security Holders                                   |  |                                                                                                                  | 24 | 
|ITEM 5.    |  | Other Information                                                                     |  |                                                                                                                  | 24 | 
|ITEM 6.    |  | Exhibits and Reports on Form 8-K                                                      |  |                                                                                                                  | 24 | 
|Signatures |  |                                                                                       |  |                                                                                                                  | 25 | 

FORWARD-LOOKING STATEMENTS

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

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PART I




ITEM I. FINANCIAL STATEMENTS




VINEYARD NATIONAL BANCORP
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
AT SEPTEMBER 30, 2002 AND DECEMBER 31, 2001
(Unaudited except for December 31, 2001)

|                                                                                                                                    |          |                     |                                                   |                                                                                                                                        |   |                      |         |              |   |        |         | 
|----------------------------------------------------------------------------------------------------------------------------------- | -------- | ------------------- | ------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------- | - | -------------------- | ------- | ------------ | - | ------ | ------- | 
|                                                                                                                                    |          |                     |                                                   |                                                                                                                                        |   | Dollars in Thousands
|                                                                                                                                    |          |                     |                                                   |                                                                                                                                        |   |                     
|                                                                                                                                    |          |                     |                                                   |                                                                                                                                        |   | September 30,        |         | December 31,
|                                                                                                                                    |          |                     |                                                   |                                                                                                                                        |   | 2002                 |         | 2001        
|                                                                                                                                    |          |                     |                                                   |                                                                                                                                        |   |                      |         |             
|Assets                                                                                                                              |          |                     |                                                   |                                                                                                                                        |   |                      |         |             
|Cash and due from banks                                                                                                             |          | $                   | 11,187                                            |                                                                                                                                        |   | $                    | 8,430   |             
|Federal funds sold                                                                                                                  |          |                     |                                                  |                                                                                                                                        |   |                      | 6,280   |             
|                                                                                                                                    |          |                     |                                                   |                                                                                                                                        |   |                      |         |             
|                                                                                                                                    |          |                     |                                                   | Total Cash and Cash Equivalents                                                                                                        |   |                      | 11,187  |              |   |        | 14,710  | 
|                                                                                                                                    |          |                     |                                                   |                                                                                                                                        |   |                      |         |             
|Investment securities, Available-for-sale                                                                                           |          |                     | 68,915                                            |                                                                                                                                        |   |                      | 30,550  |             
|Loans, net of unearned income                                                                                                       |          |                     | 214,693                                           |                                                                                                                                        |   |                      | 133,107 |             
|Loans held for sale                                                                                                                 |          |                     | 949                                               |                                                                                                                                        |   |                      | 4,471   |             
|                                                                                                                                    |          |                     | Less: Allowance for possible loan losses          |                                                                                                                                        |   | (2,685               | )       |              |   | (1,450 | )      
|                                                                                                                                    |          |                     |                                                   |                                                                                                                                        |   |                      |         |             
|                                                                                                                                    |          |                     |                                                   | Net Loans                                                                                                                              |   |                      | 212,957 |              |   |        | 136,128 | 
|Bank premises and equipment                                                                                                         |          |                     | 5,495                                             |                                                                                                                                        |   |                      | 5,388   |             
|Accrued interest                                                                                                                    |          |                     | 1,286                                             |                                                                                                                                        |   |                      | 900     |             
|Other real estate owned                                                                                                             |          |                     |                                                  |                                                                                                                                        |   |                      |        |             
|Federal Home Loan Bank and other stock, at cost                                                                                     |          |                     | 1,609                                             |                                                                                                                                        |   |                      | 177     |             
|Other assets                                                                                                                        |          |                     | 3,474                                             |                                                                                                                                        |   |                      | 3,433   |             
|                                                                                                                                    |          |                     |                                                   |                                                                                                                                        |   |                      |         |             
|                                                                                                                                    |          |                     |                                                   | Total Assets                                                                                                                           |   | $                    | 304,923 |              |   | $      | 191,286 | 
|                                                                                                                                    |          |                     |                                                   |                                                                                                                                        |   |                      |         |             
|Liabilities and Stockholders Equity                                                                                                |          |                     |                                                   |                                                                                                                                        |   |                      |         |             
|Liabilities                                                                                                                         |          |                     |                                                   |                                                                                                                                        |   |                      |         |             
|                                                                                                                                    | Deposits |                     |                                                   |                                                                                                                                        |   |                      |         |              |  
|                                                                                                                                    |          |                     | Demand deposits                                   |                                                                                                                                        | $ | 55,393               |         |              | $ | 45,951 |        
|                                                                                                                                    |          |                     | Savings and NOW deposits                          |                                                                                                                                        |   | 32,657               |         |              |   | 31,277 |        
|                                                                                                                                    |          |                     | Money Market deposits                             |                                                                                                                                        |   | 80,902               |         |              |   | 19,949 |        
|                                                                                                                                    |          |                     | Time deposits in denomination of $100,000 or more |                                                                                                                                        |   | 40,803               |         |              |   | 27,093 |        
|                                                                                                                                    |          |                     | Other time deposits                               |                                                                                                                                        |   | 43,138               |         |              |   | 35,111 |        
|                                                                                                                                    |          |                     |                                                   |                                                                                                                                        |   |                      |         |             
|                                                                                                                                    |          |                     |                                                   | Total Deposits                                                                                                                         |   |                      | 252,893 |              |   |        | 159,381 | 
|Federal Home Loan Bank advances                                                                                                     |          |                     | 20,000                                            |                                                                                                                                        |   |                      | 3,000   |             
|Company obligated preferred securities of subsidiary trust holding
floating rate junior subordinated deferrable interest debentures |          |                     | 12,000                                            |                                                                                                                                        |   |                      | 12,000  |             
|Convertible debenture                                                                                                               |          |                     |                                                  |                                                                                                                                        |   |                      | 3,750   |             
|Accrued employee salary and benefits                                                                                                |          |                     | 1,375                                             |                                                                                                                                        |   |                      | 1,252   |             
|Accrued interest and other liabilities                                                                                              |          |                     | 2,181                                             |                                                                                                                                        |   |                      | 1,448   |             
|                                                                                                                                    |          |                     |                                                   |                                                                                                                                        |   |                      |         |             
|                                                                                                                                    |          |                     |                                                   | Total Liabilities                                                                                                                      |   |                      | 288,449 |              |   |        | 180,831 | 
|Stockholders Equity                                                                                                                |          |                     |                                                   |                                                                                                                                        |   |                      |         |             
|                                                                                                                                    |          | Contributed capital |                                                   |                                                                                                                                        |   |                      |         |              |   |       
|                                                                                                                                    |          |                     |                                                   | Common stock-authorized 15,000,000 shares, no par
value; issued and outstanding 2,662,459 and 1,876,126
in 2002 and 2001, respectively |   |                      | 6,046   |              |   |        | 2,151   | 
|                                                                                                                                    |          |                     |                                                   | Additional paid-in surplus                                                                                                             |   |                      | 3,307   |              |   |        | 3,307   | 
|                                                                                                                                    |          |                     | Retained earnings                                 |                                                                                                                                        |   | 6,948                |         |              |   | 5,032  |        
|                                                                                                                                    |          |                     | Accumulated other comprehensive income            |                                                                                                                                        |   | 173                  |         |              |   | (35    | )      
|                                                                                                                                    |          |                     |                                                   |                                                                                                                                        |   |                      |         |             
|                                                                                                                                    |          |                     |                                                   | Total Stockholders Equity                                                                                                             |   |                      | 16,474  |              |   |        | 10,455  | 
|                                                                                                                                    |          |                     |                                                   |                                                                                                                                        |   |                      |         |             
|                                                                                                                                    |          |                     |                                                   | Total Liabilities and Stockholders Equity                                                                                             |   | $                    | 304,923 |              |   | $      | 191,286 | 
|                                                                                                                                    |          |                     |                                                   |                                                                                                                                        |   |                      |         |             

See accompanying notes to financial statements.

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VINEYARD NATIONAL BANCORP
CONSOLIDATED STATEMENTS OF INCOME
FOR THE NINE MONTHS AND THREE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001
(Unaudited)

|                                   |                                                                                            |                                |                                                              |                    |       |                                 |       |                                  |       |       |       |       |       |       |       |       |       |       |     | 
|---------------------------------- | ------------------------------------------------------------------------------------------ | ------------------------------ | ------------------------------------------------------------ | ------------------ | ----- | ------------------------------- | ----- | -------------------------------- | ----- | ----- | ----- | ----- | ----- | ----- | ----- | ----- | ----- | ----- | --- | 
|                                   |                                                                                            |                                |                                                              |                    |       | Dollars in Thousands           
|                                   |                                                                                            |                                |                                                              |                    |       |                                
|                                   |                                                                                            |                                |                                                              |                    |       | Nine Months Ended September 30, |       | Three Months Ended September 30,
|                                   |                                                                                            |                                |                                                              |                    |       |                                 |       |                                 
|                                   |                                                                                            |                                |                                                              |                    |       | 2002                            |       | 2001                             |       | 2002  |       | 2001 
|                                   |                                                                                            |                                |                                                              |                    |       |                                 |       |                                  |       |       |       |      
|Interest Income                    |                                                                                            |                                |                                                              |                    |       |                                 |       |                                  |       |       |       |       |       |       |       |      
|                                   | Interest and fees on loans                                                                 |                                | $                                                            | 11,932             |       |                                 | $     | 7,185                            |       |       | $     | 4,816 |       |       | $     | 2,808 |      
|                                   | Interest on Investment Securities
Obligations of U.S. Government Agencies and Corporations |                                |                                                              | 1,718              |       |                                 |       | 577                              |       |       |       | 642   |       |       |       | 310   |      
|                                   | Interest on other securities                                                               |                                |                                                              | 43                 |       |                                 |       | 8                                |       |       |       | 34    |       |       |       | 1     |      
|                                   | Interest on deposits                                                                       |                                |                                                              |                   |       |                                 |       | 6                                |       |       |       |      |       |       |       |      |      
|                                   | Interest on Federal funds sold                                                             |                                |                                                              | 73                 |       |                                 |       | 571                              |       |       |       | 34    |       |       |       | 125   |      
|                                   |                                                                                            |                                |                                                              |                    |       |                                 |       |                                  |       |       |       |       |       |       |       |      
|                                   |                                                                                            |                                | Total Interest Income                                        |                    |       | 13,766                          |       |                                  |       | 8,347 |       |       |       | 5,526 |       |       |       | 3,244 |    
|                                   |                                                                                            |                                |                                                              |                    |       |                                 |       |                                  |       |       |       |       |       |       |       |      
|Interest Expense                   |                                                                                            |                                |                                                              |                    |       |                                 |       |                                  |       |       |       |       |       |       |       |      
|                                   | Interest on savings deposits                                                               |                                |                                                              | 93                 |       |                                 |       | 142                              |       |       |       | 25    |       |       |       | 50    |      
|                                   | Interest on NOW and money market deposits                                                  |                                |                                                              | 1,009              |       |                                 |       | 408                              |       |       |       | 481   |       |       |       | 160   |      
|                                   | Interest on time deposits in denominations of $100,000 or more                             |                                |                                                              | 955                |       |                                 |       | 668                              |       |       |       | 354   |       |       |       | 294   |      
|                                   | Interest on other time deposits                                                            |                                |                                                              | 938                |       |                                 |       | 1,154                            |       |       |       | 320   |       |       |       | 416   |      
|                                   | Interest on borrowed funds                                                                 |                                |                                                              | 1,038              |       |                                 |       | 166                              |       |       |       | 374   |       |       |       | 101   |      
|                                   |                                                                                            |                                |                                                              |                    |       |                                 |       |                                  |       |       |       |       |       |       |       |       |      
|                                   |                                                                                            |                                | Total Interest Expense                                       |                    |       | 4,033                           |       |                                  |       | 2,538 |       |       |       | 1,554 |       |       |       | 1,021 |    
|                                   |                                                                                            |                                |                                                              |                    |       |                                 |       |                                  |       |       |       |       |       |       |       |      
|                                   |                                                                                            |                                | Net Interest Income                                          |                    |       | 9,733                           |       |                                  |       | 5,809 |       |       |       | 3,972 |       |       |       | 2,223 |    
|Provision for Possible Loan Losses |                                                                                            |                                | (1,145                                                       | )                  |       |                                 | (415  | )                                |       |       | (610  | )     |       |       | (115  | )    
|                                   |                                                                                            |                                |                                                              |                    |       |                                 |       |                                  |       |       |       |       |       |       |       |      
|                                   |                                                                                            |                                | Net Interest Income After Provision
for Possible Loan Losses |                    |       | 8,588                           |       |                                  |       | 5,394 |       |       |       | 3,362 |       |       |       | 2,108 |    
|                                   |                                                                                            |                                |                                                              |                    |       |                                 |       |                                  |       |       |       |       |       |       |       |      
|Other Income                       |                                                                                            |                                |                                                              |                    |       |                                 |       |                                  |       |       |       |       |       |       |       |      
|                                   | Fees and service charges                                                                   |                                |                                                              | 1,105              |       |                                 |       | 1,403                            |       |       |       | 365   |       |       |       | 506   |      
|                                   | Gain on Sale of Investment Securities                                                      |                                |                                                              | 745                |       |                                 |       |                                 |       |       |       | 566   |       |       |       |      |      
|                                   | Litigation Recovery                                                                        |                                |                                                              | 540                |       |                                 |       |                                 |       |       |       | 360   |       |       |       |      |      
|                                   | Other income                                                                               |                                |                                                              | 150                |       |                                 |       | 19                               |       |       |       | 48    |       |       |       | 4     |      
|                                   |                                                                                            |                                |                                                              |                    |       |                                 |       |                                  |       |       |       |       |       |       |       |       |      
|                                   |                                                                                            |                                |                                                              | Total Other Income |       |                                 | 2,540 |                                  |       |       | 1,422 |       |       |       | 1,339 |       |       |       | 510 | 
|                                   |                                                                                            |                                |                                                              |                    |       |                                 |       |                                  |       |       |       |       |       |       |       |      
|Other Expense                      |                                                                                            |                                |                                                              |                    |       |                                 |       |                                  |       |       |       |       |       |       |       |      
|                                   |                                                                                            | Salaries and employee benefits |                                                              |                    | 3,693 |                                 |       |                                  | 3,129 |       |       |       | 1,418 |       |       |       | 1,085 |      
|                                   |                                                                                            | Occupancy expense of premises  |                                                              |                    | 626   |                                 |       |                                  | 490   |       |       |       | 236   |       |       |       | 180   |      
|                                   |                                                                                            | Furniture and equipment        |                                                              |                    | 570   |                                 |       |                                  | 435   |       |       |       | 211   |       |       |       | 154   |      
|                                   |                                                                                            | Debenture conversion           |                                                              |                    | 274   |                                 |       |                                  |      |       |       |       | 274   |       |       |       |      |      
|                                   |                                                                                            | Other expense                  |                                                              |                    | 2,739 |                                 |       |                                  | 1,998 |       |       |       | 1,170 |       |       |       | 705   |      
|                                   |                                                                                            |                                |                                                              |                    |       |                                 |       |                                  |       |       |       |       |       |       |       |       |      
|                                   |                                                                                            |                                | 7,902                                                        |                    |       |                                 | 6,052 |                                  |       |       | 3,309 |       |       |       | 2,124 |      
|                                   |                                                                                            |                                |                                                              |                    |       |                                 |       |                                  |       |       |       |       |       |       |       |      
|Income Before Income Taxes         |                                                                                            |                                | 3,226                                                        |                    |       |                                 | 764   |                                  |       |       | 1,392 |       |       |       | 494   |      
|Income Tax Provision/(Benefit)     |                                                                                            |                                | 1,310                                                        |                    |       |                                 | (154  | )                                |       |       | 584   |       |       |       | 207   |      
|                                   |                                                                                            |                                |                                                              |                    |       |                                 |       |                                  |       |       |       |       |       |       |       |       |      
|Net Income                         |                                                                                            | $                              | 1,916                                                        |                    |       | $                               | 918   |                                  |       | $     | 808   |       |       | $     | 287   |      
|                                   |                                                                                            |                                |                                                              |                    |       |                                 |       |                                  |       |       |       |       |       |       |       |      
|Basic Earnings Per Share           |                                                                                            | $                              | 0.96                                                         |                    |       | $                               | 0.49  |                                  |       | $     | 0.37  |       |       | $     | 0.15  |      
|                                   |                                                                                            |                                |                                                              |                    |       |                                 |       |                                  |       |       |       |       |       |       |       |      
|Diluted Earnings Per Share         |                                                                                            | $                              | 0.74                                                         |                    |       | $                               | 0.44  |                                  |       | $     | 0.35  |       |       | $     | 0.13  |      
|                                   |                                                                                            |                                |                                                              |                    |       |                                 |       |                                  |       |       |       |       |       |       |       |      

See accompanying notes to financial statements.

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VINEYARD NATIONAL BANCORP
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001
(Unaudited)

|                            |                            |                                                    |           |                      |  |        |       |         |  |            |       |               |  |       |       |       |     |   |    |             |    |   |        |       |     | 
|--------------------------- | -------------------------- | -------------------------------------------------- | --------- | -------------------- |  | ------ | ----- | ------- |  | ---------- | ----- | ------------- |  | ----- | ----- | ----- | --- | - | -- | ----------- | -- | - | ------ | ----- | --- | 
|                            |                            |                                                    |           | Dollars in Thousands
|                            |                            |                                                    |           |                     
|                            |                            |                                                    |           |                      |  |        |       |         |  |            |       |               |  |       |       |       |     |   |    | Accumulated |    |   |        |      
|                            |                            |                                                    |           | ActualNumber of      |  |        |       |         |  | Additional |       |               |  |       |       | Other |     |   |    |            
|                            |                            |                                                    |           | Shares               |  | Common |       | Paid-in |  | Retained   |       | Comprehensive |  |       |       |      
|                            |                            |                                                    |           | Outstanding          |  | Stock  |       | Capital |  | Earnings   |       | Income        |  | Total
|                            |                            |                                                    |           |                      |  |        |       |         |  |            |       |               |  |      
|Balance January 1, 2001     |                            |                                                    | 1,864,826 |                      |  | $      | 2,112 |         |  | $          | 3,307 |               |  | $     | 3,876 |       |     | $ |   |             |    | $ | 9,295  |      
|Stock Options Exercised     |                            |                                                    | 6,300     |                      |  |        | 18    |         |  |            |       |               |  |       |       |       |     |   |    |             |    |   | 18     |      
|                            | Comprehensive income       |                                                    |           |                      |  |        |       |         |  |            |       |               |  |       |       |       |     |   |    |             |    |   |        |       |    
|                            |                            | Net Income                                         |           |                      |  |        |       |         |  |            |       |               |  |       |       |       | 918 |   |    |             |    |   |        |       | 918 | 
|                            |                            | Unrealized security holding gains
(net of $64 tax) |           |                      |  |        |       |         |  |            |       |               |  |       |       |       |     |   |    |             | 90 |   |        |       | 90  | 
|                            |                            |                                                    |           |                      |  |        |       |         |  |            |       |               |  |       |       |       |     |   |    |             |    |   |        |      
|                            |                            | Total other comprehensive income                   |           |                      |  |        |       |         |  |            |       |               |  |       |       |       |     |   |    |             |    |   |        |       | 90  | 
|                            | Total Comprehensive income |                                                    |           |                      |  |        |       |         |  |            |       |               |  |       |       |       |     |   |    |             |    |   |        | 1,008 |    
|                            |                            |                                                    |           |                      |  |        |       |         |  |            |       |               |  |       |       |       |     |   |    |             |    |   |        |      
|Balance, September 30, 2001 |                            |                                                    | 1,871,126 |                      |  | $      | 2,130 |         |  | $          | 3,307 |               |  | $     | 4,794 |       |     | $ | 90 |             |    | $ | 10,321 |      
|                            |                            |                                                    |           |                      |  |        |       |         |  |            |       |               |  |       |       |       |     |   |    |             |    |   |        |      

|                            |                              |                                                              |           |                 |  |        |       |         |  |            |       |               |  |       |       |       |       |   |     |             |      |   |        |       |       | 
|--------------------------- | ---------------------------- | ------------------------------------------------------------ | --------- | --------------- |  | ------ | ----- | ------- |  | ---------- | ----- | ------------- |  | ----- | ----- | ----- | ----- | - | --- | ----------- | ---- | - | ------ | ----- | ----- | 
|                            |                              |                                                              |           |                
|                            |                              |                                                              |           |                 |  |        |       |         |  |            |       |               |  |       |       |       |       |   |     | Accumulated |      |   |        |      
|                            |                              |                                                              |           | ActualNumber of |  |        |       |         |  | Additional |       |               |  |       |       | Other |       |   |     |            
|                            |                              |                                                              |           | Shares          |  | Common |       | Paid-in |  | Retained   |       | Comprehensive |  |       |       |      
|                            |                              |                                                              |           | Outstanding     |  | Stock  |       | Capital |  | Earnings   |       | Income        |  | Total
|                            |                              |                                                              |           |                 |  |        |       |         |  |            |       |               |  |      
|Balance January 1, 2002     |                              |                                                              | 1,876,126 |                 |  | $      | 2,151 |         |  | $          | 3,307 |               |  | $     | 5,032 |       |       | $ | (35 | )           |      | $ | 10,455 |      
|                            | Stock options exercised      |                                                              |           | 36,333          |  |        |       | 145     |  |            |       |               |  |       |       |       |       |   |     |             |      |   |        | 145   |      
|                            | Convertible debenture option |                                                              |           | 750,000         |  |        |       | 3,750   |  |            |       |               |  |       |       |       |       |   |     |             |      |   |        | 3,750 |      
|                            |                              | Comprehensive income                                         |           |                 |  |        |       |         |  |            |       |               |  |       |       |       |       |   |     |             |      |   |        |       |       | 
|                            |                              | Net Income                                                   |           |                 |  |        |       |         |  |            |       |               |  |       |       |       | 1,916 |   |     |             |      |   |        |       | 1,916 | 
|                            |                              | Unrealized security holding gains
(net of $464 tax)          |           |                 |  |        |       |         |  |            |       |               |  |       |       |       |       |   |     |             | 640  |   |        |       |       | 
|                            |                              | less reclassification adjustment
for gains
(net of $313 tax) |           |                 |  |        |       |         |  |            |       |               |  |       |       |       |       |   |     |             | (432 | ) |        |       | 208   | 
|                            |                              |                                                              |           |                 |  |        |       |         |  |            |       |               |  |       |       |       |       |   |     |             |      |   |        |      
|                            |                              | Total other comprehensive income                             |           |                 |  |        |       |         |  |            |       |               |  |       |       |       |       |   |     |             |      |   |        |       | 208   | 
|                            | Total Comprehensive income   |                                                              |           |                 |  |        |       |         |  |            |       |               |  |       |       |       |       |   |     |             |      |   |        | 2,124 |      
|                            |                              |                                                              |           |                 |  |        |       |         |  |            |       |               |  |       |       |       |       |   |     |             |      |   |        |      
|Balance, September 30, 2002 |                              |                                                              | 2,662,459 |                 |  | $      | 6,046 |         |  | $          | 3,307 |               |  | $     | 6,948 |       |       | $ | 173 |             |      | $ | 16,474 |      
|                            |                              |                                                              |           |                 |  |        |       |         |  |            |       |               |  |       |       |       |       |   |     |             |      |   |        |      

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VINEYARD NATIONAL BANCORP
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001
(Unaudited)

|                                                                                 |                                                                                            |                                                                             |                                                  |                  |       |                      |        |               |        |         |        |  
|-------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------ | --------------------------------------------------------------------------- | ------------------------------------------------ | ---------------- | ----- | -------------------- | ------ | ------------- | ------ | ------- | ------ | -
|                                                                                 |                                                                                            |                                                                             |                                                  |                  |       | Dollars in Thousands
|                                                                                 |                                                                                            |                                                                             |                                                  |                  |       |                     
|                                                                                 |                                                                                            |                                                                             |                                                  |                  |       | September 30,        |        | September 30,
|                                                                                 |                                                                                            |                                                                             |                                                  |                  |       | 2002                 |        | 2001         
|                                                                                 |                                                                                            |                                                                             |                                                  |                  |       |                      |        |              
|Reconciliation of Net Income to
Net Cash Provided (Used) by Operating Activities |                                                                                            |                                                                             |                                                  |                  |       |                      |        |              
|                                                                                 | Net Income                                                                                 |                                                                             | $                                                | 1,916            |       |                      | $      | 918           |       
|                                                                                 | Adjustments to Reconcile Net Income
to Net Cash Provided (Used) by Operating Activities    |                                                                             |                                                  |                  |       |                      |        |               |       
|                                                                                 |                                                                                            | Depreciation and amortization                                               |                                                  |                  | 857   |                      |        |               | (304   | )      
|                                                                                 |                                                                                            | Provision for possible loan losses                                          |                                                  |                  | 1,145 |                      |        |               | 415    |        
|                                                                                 |                                                                                            | Adjustment to Allowance for Possible Loan Losses relating to
acquired loans |                                                  |                  | 198   |                      |        |               |        |        
|                                                                                 |                                                                                            | Increase in deferred taxes                                                  |                                                  |                  |       |                      |        |               | (532   | )      
|                                                                                 |                                                                                            | Increase in taxes payable                                                   |                                                  |                  | 1,111 |                      |        |               | 111    |        
|                                                                                 |                                                                                            | (Increase)/Decrease in other assets                                         |                                                  |                  | (192  | )                    |        |               | 401    |        
|                                                                                 |                                                                                            | Gain on sale investment securities                                          |                                                  |                  | (745  | )                    |        |               |        |        
|                                                                                 |                                                                                            | Decrease/(Increase) in loans held for sale                                  |                                                  |                  | 3,522 |                      |        |               | (2,115 | )      
|                                                                                 |                                                                                            | Decrease in unearned loan fees                                              |                                                  |                  | (345  | )                    |        |               | (25    | )      
|                                                                                 |                                                                                            | Increase in interest receivable                                             |                                                  |                  | (386  | )                    |        |               | (270   | )      
|                                                                                 |                                                                                            | (Decrease)/Increase in interest payable                                     |                                                  |                  | (285  | )                    |        |               | 462    |        
|                                                                                 |                                                                                            | Increase in accrued expense and other liabilities                           |                                                  |                  | 30    |                      |        |               | 238    |        
|                                                                                 |                                                                                            |                                                                             |                                                  |                  |       |                      |        |               |       
|                                                                                 |                                                                                            |                                                                             |                                                  | Total Adjustment |       |                      | 4,910  |               |        |         | (1,619 | )
|                                                                                 |                                                                                            |                                                                             |                                                  |                  |       |                      |        |               |       
|                                                                                 |                                                                                            |                                                                             | Net Cash Provided (Used) By Operating Activities |                  |       | 6,826                |        |               |        | (701    | )     
|Cash Flows From Investing Activities                                             |                                                                                            |                                                                             |                                                  |                  |       |                      |        |              
|                                                                                 | Proceeds from sales of investment securities available-for-sale                            |                                                                             |                                                  | 80,798           |       |                      |        | 11,000        |       
|                                                                                 | Proceeds from maturities of investment securities available-for-sale                       |                                                                             |                                                  | 13,500           |       |                      |        | 8,666         |       
|                                                                                 | Net decrease in deposits in other financial institutions                                   |                                                                             |                                                  |                  |       |                      |        | 198           |       
|                                                                                 | Proceeds from principal reductions MBS securities                                          |                                                                             |                                                  | 4,796            |       |                      |        |               |       
|                                                                                 | Purchase of investment securities available-for-sale                                       |                                                                             |                                                  | (136,630         | )     |                      |        | (41,773       | )     
|                                                                                 | (Purchase)/Sale of Federal Home Loan Bank & other stock                                    |                                                                             |                                                  | (1,432           | )     |                      |        | 31            |       
|                                                                                 | Recoveries on loans previously written off                                                 |                                                                             |                                                  | 132              |       |                      |        | 15            |       
|                                                                                 | Net loans made to customers and principal collection of loans                              |                                                                             |                                                  | (81,481          | )     |                      |        | (31,886       | )     
|                                                                                 | Capital expenditures                                                                       |                                                                             |                                                  | (689             | )     |                      |        | (294          | )     
|                                                                                 |                                                                                            |                                                                             |                                                  |                  |       |                      |        |               |       
|                                                                                 |                                                                                            |                                                                             | Net Cash Used By Investing Activities            |                  |       | (121,006             | )      |               |        | (54,043 | )     
|Cash Flows From Financing Activities                                             |                                                                                            |                                                                             |                                                  |                  |       |                      |        |              
|                                                                                 | Net increase in demand deposits, NOW
accounts, savings accounts, and money market
deposits |                                                                             |                                                  | 9,442            |       |                      |        | 15,297        |       
|                                                                                 | Net increase in certificates of deposits                                                   |                                                                             |                                                  | 84,070           |       |                      |        | 32,078        |       
|                                                                                 | Net change in Federal Home Loan Bank Advances                                              |                                                                             |                                                  | 17,000           |       |                      |        |               |       
|                                                                                 | Issuance of Convertible Debentures                                                         |                                                                             |                                                  |                  |       |                      |        | 3,546         |       
|                                                                                 | Stock
options exercised                                                                    |                                                                             |                                                  | 145              |       |                      |        | 18            |       
|                                                                                 |                                                                                            |                                                                             |                                                  |                  |       |                      |        |               |       
|                                                                                 |                                                                                            |                                                                             | Net Cash Provided By Financing Activities        |                  |       | 110,657              |        |               |        | 50,939  |       
|                                                                                 |                                                                                            |                                                                             |                                                  |                  |       |                      |        |               |       
|Net Decrease in Cash and Cash Equivalents                                        |                                                                                            |                                                                             | (3,523                                           | )                |       |                      | (3,805 | )            
|Cash and Cash Equivalents, Beginning of year                                     |                                                                                            |                                                                             | 14,710                                           |                  |       |                      | 16,793 |              
|                                                                                 |                                                                                            |                                                                             |                                                  |                  |       |                      |        |               |       
|Cash and Cash Equivalents, End of quarter                                        |                                                                                            | $                                                                           | 11,187                                           |                  |       | $                    | 12,988 |              
|                                                                                 |                                                                                            |                                                                             |                                                  |                  |       |                      |        |               |       
|Supplemental Information                                                         |                                                                                            |                                                                             |                                                  |                  |       |                      |        |              
|                                                                                 | Change in estimated market value for investment securities                                 |                                                                             | $                                                | 359              |       |                      | $      | 152           |       
|                                                                                 | Income tax paid                                                                            |                                                                             | $                                                | 46               |       |                      | $      |              |       
|                                                                                 | Conversion of debentures                                                                   |                                                                             | $                                                | 3,750            |       |                      | $      |              |       

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NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America for
interim financial information. Accordingly, they do not include all of the
information and footnotes required by accounting principles generally accepted
in the United States of America for complete financial statements. In the
opinion of management, all adjustments considered necessary for a fair
statement of the results for the interim period presented have been included
and are of a normal recurring nature. For further information, refer to the
financial statements and footnotes thereto included in the Companys Annual
Report on Form 10-K for the year ended December 31, 2001. The results of
operations for the nine month period ended September 30, 2002 are not
necessarily indicative of the results to be expected for the full year.

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

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

The allowance for possible loan losses is
maintained through provisions, charged to expenses, at a level
considered adequate to provide for potential loan losses, based on
managements evaluation of the composition of the loan
portfolio, the performance of the loans in the portfolio, evaluations
of loan collateral, prior loss experience, current economic
conditions and the prospects or worth of respective borrowers or
guarantors.

RECENT ACCOUNTING PRONOUNCEMENTS

In June 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 141, Business
Combinations, and SFAS No. 142, Goodwill and Other Intangible Assets. SFAS No.
141 requires that all business combinations initiated after June 30, 2001 be
accounted for by a single method  the purchase method. SFAS No. 141 also
specifies the criteria required for intangible assets to be recognized and
reported apart from goodwill. SFAS No. 142 requires that goodwill and
intangible assets with indefinite useful lives no longer be amortized, but
instead tested for impairment at least annually. SFAS No. 142 also requires
that intangible assets with definite useful lives be amortized over their
respective estimated useful lives to their estimated residual values, and
reviewed for impairment in accordance with SFAS No. 121 (as superceded by SFAS
No. 144), Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of. The Company is required to adopt the provisions of
SFAS No. 141 immediately and SFAS No. 142 effective January 1, 2002. The
adoption of SFAS Nos. 141 and 142 did not have a material impact on the
financial condition or operating results of the Company.

In June 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement
Obligations. This Statement addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and
the associated asset retirement costs. This Statement requires that the fair
value of a liability for an asset retirement obligation be recognized in the
period in which it is incurred if a reasonable estimate of fair value can be
made. The associated asset retirement costs are capitalized as part of the
carrying amount of the long-lived asset. This Statement is effective for
financial statements issued for fiscal years beginning after June 15, 2002. The
Company does not expect adoption of SFAS No. 143 to have a material impact on
the financial condition or operating results of the Company.

In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets. SFAS No. 144 establishes a single accounting
model for the impairment or disposal of long-lived assets, including
discontinued operations. SFAS No. 144 superseded SFAS No. 121, Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of, and APB Opinion No. 30, Reporting the Results of Operations  Reporting the
Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions. This Statement is effective for
financial statements issued for fiscal years beginning after December 15, 2001.
The adoption of SFAS No. 144 did not have a material impact on the financial
condition or operating results of the Company.

In April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements
Nos. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections. Among other provisions, SFAS No. 145 rescinds SFAS No. 4,
Reporting Gains and Losses from Extinguishment of Debt. Accordingly, gains or
losses from extinguishment of debt shall not be reported as extraordinary items
unless the extinguishment qualifies as an extraordinary item under the criteria
of APB No. 30. Gains or losses from extinguishment of debt that do not meet the
criteria of APB No. 30 should be reclassified to income from continuing
operations in all prior periods presented. This Statement is effective for
fiscal years beginning after May 15, 2002. The Company does not expect the
adoption of SFAS No. 145 to have a material impact on the financial position or
results of operations.

In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated
with Exit or Disposal Activities.

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This statement requires that a liability for the cost associated with an exit
or disposal activity be recognized when the liability is incurred and nullifies
the guidance of EITF No. 94-3, Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (including Certain
Costs Incurred in Restructuring), which recognized a liability for an exit cost
at the date of an entitys commitment to an exit plan. SFAS No. 146 requires
that the initial measurement of a liability be at fair value. This statement
will be effective for exit and disposal activities that are initiated after
December 31, 2002. The Company does not expect the adoption of SFAS No. 146 to
have a material impact on the financial position or results of operations.

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

NOTE 2  PARENT COMPANY ITEMS

During the second quarter ended June 30, 2001, the Company issued $3.75 million
of Convertible Subordinated Debentures (the Debentures) in a private
placement offering. The majority of the net proceeds were contributed into the
Bank as additional capital to support its growth. The Debentures were due June
30, 2008, carried an interest coupon of 10% per annum, and may be converted
into common stock at any time prior to maturity or redemption at a price of
$5.00 per share. The Debentures were redeemable at the option of the Company
beginning July 1, 2003, in whole or in part, based on pre-determined redemption
prices and contingent on satisfaction of certain market price conditions. The
private placement offering was marketed to institutional and accredited
investors, with a minimum principal amount of $3 million to become effective.

With the issuance of the Debentures and with their convertibility feature, the
companys Diluted Earnings Per Share (EPS) calculations contained a
measurable difference as discussed in Note 3 below. The Debentures were
registered on March 13, 2002 and trade under CUSIP number 927427 AA 2.

During the third quarter of 2002, the Debentures were converted into Common
stock of the Company at the redemption price of $5.00 per share. To induce the
conversion of the debt, the Company offered to pay holders of the debentures an
amount equivalent to the amount as if interest was payable through June 30,
2003 on those debentures. The total amount of inducement was $274,000, which
was charged to noninterest expense of the Company during the third quarter
ended September 30, 2002.

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

The net proceed to the statutory trust from the sale of the trust preferred
securities was approximately $11.6 million after deducting offering expenses.
The statutory trust subsequently invested all of the proceeds from the sale of
the trust preferred securities in subordinated debentures issued by the
Company. The Company infused approximately $8.0 million of the net proceeds
from the sale of the subordinated debentures into Vineyard Bank to fund its
operations. The remainder of the net proceeds from the sale of the
subordinated debentures may be used primarily to infuse additional capital into
Vineyard Bank to fund its operations and maintain its status as well
capitalized, for general corporate purposes, acquisitions or investments.

The trustee of the statutory trust is State Street Bank & Trust Co.

In September 2002, the Company contributed $3 million in cash to its wholly
owned subsidiary, Vineyard Bank, as working capital.

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NOTE 3  EARNINGS PER SHARE AND BOOK VALUE

Basic EPS excludes dilution and is computed by dividing income available to
common stockholders by the weighted-average number of common shares outstanding
for the period. Diluted EPS reflects the potential dilution that could occur
if securities or other contracts to issue common stock were exercised or
converted into common stock or resulted in the issuance of common stock that
then shared in the earnings of the entity.

The following tables set forth the Companys earnings per share calculations
for the nine and three month periods ended September 30, 2002 and 2001 and the
Companys book value per share at September 30, 2002 and December 31, 2001. In
the following table, (1) Debentures refer to the amount of possible shares
that can be issued from the conversion of the Debentures, and (2) Options
refer to stock options previously granted to employees of the Company and which
were outstanding and exercisable at each measurement date.

|                                                                         |  |                                         |           |                                          |  |      |           |      |  |   |           |   |  |   |           | 
|------------------------------------------------------------------------ |  | --------------------------------------- | --------- | ---------------------------------------- |  | ---- | --------- | ---- |  | - | --------- | - |  | - | --------- | 
|                                                                         |  | For the Nine Months Ended September 30, |           | For the Three Months Ended September 30,
|                                                                         |  |                                         |           |                                         
|                                                                         |  | 2002                                    |           | 2001                                     |  | 2002 |           | 2001
|                                                                         |  |                                         |           |                                          |  |      |           |     
|Shares outstanding at the end of the period                              |  |                                         | 2,662,459 |                                          |  |      | 1,871,126 |      |  |   | 2,662,459 |   |  |   | 1,871,126 | 
|Impact of weighting shares issued during the period                      |  |                                         | (675,920  | )                                        |  |      | (3,537    | )    |  |   | (495,943  | ) |  |   |          | 
|                                                                         |  |                                         |           |                                          |  |      |           |      |  |   |           |   |  |   |           | 
|Used in Basic EPS                                                        |  |                                         | 1,986,539 |                                          |  |      | 1,867,589 |      |  |   | 2,166,516 |   |  |   | 1,871,126 | 
|Dilutive effect of outstanding
stock options                             |  |                                         | 131,319   |                                          |  |      | 32,584    |      |  |   | 167,539   |   |  |   | 71,958    | 
|Dilutive effect of convertible
debentures                                |  |                                         | 656,373   |                                          |  |      | 420,330   |      |  |   |          |   |  |   | 750,000   | 
|                                                                         |  |                                         |           |                                          |  |      |           |      |  |   |           |   |  |   |           | 
|Used in Diluted EPS                                                      |  |                                         | 2,774,231 |                                          |  |      | 2,320,503 |      |  |   | 2,334,055 |   |  |   | 2,693,084 | 
|                                                                         |  |                                         |           |                                          |  |      |           |      |  |   |           |   |  |   |           | 
|Net Income                                                               |  | $                                       | 1,916     |                                          |  | $    | 918       |      |  | $ | 808       |   |  | $ | 287       | 
|Plus: Interest on Convertible Debentures assuming
conversion (after tax) |  |                                         | 148       |                                          |  |      | 96        |      |  |   |          |   |  |   | 59        | 
|                                                                         |  |                                         |           |                                          |  |      |           |      |  |   |           |   |  |   |           | 
|Net Income applicable to common shares                                   |  | $                                       | 2,064     |                                          |  | $    | 1,014     |      |  | $ | 808       |   |  | $ | 346       | 
|                                                                         |  |                                         |           |                                          |  |      |           |      |  |   |           |   |  |   |           | 
|Basic Earnings Per Share                                                 |  | $                                       | 0.96      |                                          |  | $    | 0.49      |      |  | $ | 0.37      |   |  | $ | 0.15      | 
|Diluted Earnings Per Share                                               |  | $                                       | 0.74      |                                          |  | $    | 0.44      |      |  | $ | 0.35      |   |  | $ | 0.13      | 

|                              |                            |   |               |           |              |   |           |           | 
|----------------------------- | -------------------------- | - | ------------- | --------- | ------------ | - | --------- | --------- | 
|                              |                            |   | September 30, |           | December 31,
|                              |                            |   | 2002          |           | 2001        
|                              |                            |   |               |           |             
|Period-end shares
outstanding |                            |   |               |           |              |   |           |          
|                              | Basic                      |   |               | 2,662,459 |              |   |           | 1,876,126 | 
|                              | Debentures                 |   |               |          |              |   |           | 503,425   | 
|                              | Dilutive Effect of Options |   |               |          |              |   |           | 49,485    | 
|                              |                            |   |               |           |              |   |           |           | 
|                              |                            |   | 2,662,459     |           |              |   | 2,429,036 |          
|                              |                            |   |               |           |              |   |           |           | 
|Basic book value              |                            | $ | 6.19          |           |              | $ | 5.57      |          
|Diluted book value            |                            |   | N/A           |           |              | $ | 5.33      |          

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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

OVERVIEW

Vineyard National Bancorp (the Company) is a one-bank holding company. Its
principal asset is the common stock of, and its principal operations are those
conducted by, Vineyard Bank, a state banking association (the Bank). The
Bank is a community bank located in the Inland Empire region of Southern
California. The Bank focuses on the needs of commercial businesses with annual
sales of less than $10 million, retail community businesses, single family
residence developers/builders, individuals and local public and private
organizations. The Bank operates six full-service branches located in Rancho
Cucamonga, Chino, Diamond Bar, Crestline, Blue Jay, and La Verne, in addition
to a real estate loan production office in Manhattan Beach and SBA lending
offices in San Diego and Beverly Hills. Effective November 12, 2002, shares of
the Companys common stock are traded on the Nasdaq National
Market under the ticker symbol
VNBC. Prior to November 12, 2002, shares of the Companys
common stock traded on the Nasdaq SmallCap Market under the same
ticker symbol.

RESULTS OF OPERATIONS

Net earnings for the quarter ended
September 30, 2002 were $808,000, or $0.35
per diluted share, compared with net earnings of $287,000, or $0.13 per diluted
share, for the similar quarter ended in 2001, or an increase of 182%. Net
earnings for the third quarter of 2002 included a one-time charge related to
the early conversion of the Companys Subordinated Debentures in the amount of
$274,000. Absent this charge, on a tax effected basis, the Companys net
earnings would have been $967,000 for the third quarter of 2002, or $0.41 per
diluted share.

The results for the third quarter of 2002 under-states the significant
improvement in operating performance over the same period in 2001. Earnings
before income taxes and provisions for possible loan losses in the third
quarter of 2002 were $2,002,000, as compared to $609,000 for the third quarter
of 2001, or an improvement of approximately 230%. Net earnings for the third
quarter of 2002 produced an annualized return on average equity of 22.6% for
the period, and 27.1% when the one-time charge is excluded.

For the nine months ended September 30, 2002, net earnings were $1,916,000, or
$0.74 per diluted share, compared with net earnings of $918,000, or $0.44 per
diluted share, for the similar nine month period in 2001, or an increase in net
earnings of 109%. Excluding the one-time conversion charge from the nine month
results would have produced net earnings of $2,075,000, on a tax effected
basis, or $0.81 per diluted share.

Earnings before income taxes and provisions for possible loan losses for the
nine months ended September 30, 2002, were $4,371,000, as compared to
$1,179,000 for the same period in 2001, or an improvement of over 270%. Net
earnings for the first nine months of 2002 produced an annualized return on
average equity of 20.6% for the period, and 22.2% when the one-time charge is
excluded.

For the quarter ended September 30, 2002, the Companys net interest income
before its provision for possible loan losses increased by $1,749,000, or 79%
as compared with the same period in 2001. Other operating income for the third
quarter of 2002 increased by $829,000, or 163%, as compared to the same period
in 2001. Total net revenues (net interest income and other operating income)
for the third quarter of 2002 increased by $2,578,000 or 94% as compared to the
same period in 2001.

The Company previously issued $3.75 million in Convertible Debentures during
the second quarter of 2001, with the proceeds used to support the Companys
strategic plan by infusing additional capital into Vineyard Bank. During the
third quarter of 2002, the Company offered the holders of the Debentures an
inducement to convert into the Companys common stock at the predetermined
price, an amount which totaled $274,000. During the third quarter, all of the
Debentures were converted into the Companys common stock, and the
corresponding debt was extinguished.

The Debenture conversion will be immediately accretive to the Companys
operating income for the fourth quarter of 2002 and beyond, with the retirement
of the debt service requirements, which had a cost of $0.02 per diluted share
per quarter. The one-time charge related to the conversion also affected the
2002 third quarter results by an additional $0.06 per diluted share.

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The Debenture conversion will not only relieve the Company of its debt service
requirements, but with the increase in stockholders equity related to the
conversion, the Company now meets the listing requirements to qualify for the
Nasdaq National Market.

For the nine months ended September 30, 2002, total assets increased by $113.6
million, or 59%, to $304.9 million over year-end 2001 results. The Companys
growth in its loan portfolio produced an increase of $78.1 million or 57% for
the nine months ended September 30, 2002, bringing gross loans outstanding to
$215.6 million as compared to the prior year-end 2001s level of $137.6
million.

The Company continued to augment its liquidity position by increasing its
investment portfolio by $38.4 million during the first nine months of 2002, to
$68.9 million. The Company has been successful during the current year in
attracting local deposit funds and has continued to enhance its liquidity.
These liquid assets are further available to support the Companys lending
initiatives. During the second quarter of 2002, the Company also increased its
line of credit with the Federal Home Loan Bank of San Francisco to an amount
equal to 20% of the Companys total assets, or approximately $60.0 million at
September quarter-end 2002. At September 30, 2002, the Company had outstanding
$20.0 million in FHLB advances to support its operations.

For the nine months ended September 30, 2002, total deposits increased by $93.5
million, or 59%, to $252.9 million, as compared to year-end 2001s level of
$159.4 million. The Company continues to seek out and develop depository
relationships with both local businesses and individuals. Each of the Companys
six community banking centers has actively deployed its personnel into the
local markets, and together with additional branding and marketing campaigns,
continues to increase their respective market share in each community. The
Companys cost of funds of approximately 2.0% remains consistent with the
levels experienced over the past two years while it has increased the total
deposit base by approximately $100 million between
December 31, 2001 and September 30, 2002.

The Company has been operating under a Strategic Plan for the past seven
quarters, with continued emphasis on building specialty lines of business to
compliment its community and business banking operations. The Company has
grown by approximately 175% in assets, 170% in loans and 150% in deposits
during this period. Vineyard Banks capital position of approximately $27.5
million continues to increase through its operations, with capital ratios far
in excess of regulatory minimums to be considered well capitalized.

During the third quarter of 2002, the Company added three new specialty lines
of businesses to its existing offerings: Small Business Administration (SBA)
lending, Single Family Residence (SFR) Tract Construction financing, and
Religious Financial Services. In each case, the new business produced from
these specialty lines was minimal during the third quarter, though the cost of
sourcing these operations was incurred during the period. The benefits derived
from these three operations will become apparent beginning in the fourth
quarter of 2002.

Total operating expenses for the third quarter of 2002 increased by $1,185,000
or 56% over the same period in 2001. Excluding the one-time Debenture
conversion charge of $274,000, total operating expenses would have increased
$911,000, or 43%. Salaries and benefits comprised the largest category,
representing $1,418,000 in expenses as compared to total operating expenses of
$3,309,000, or 43% of the total amount, for the third quarter of 2002.

Total operating expenses for the nine months ended September 30, 2002,
increased by $1,850,000 or 31% over the same period in 2001. Excluding the
one-time Debenture conversion charge, total operating expenses would have
increased $1,576,000, or 26%. Salaries and benefits comprised the largest
category, representing $3,693,000 in expenses as compared to total operating
expenses of $7,902,000, or 47% of the total amount, for the first nine months
of 2002.

As previously stated, the Companys marketing and branding program, costs
associated with resourcing its three new specialty lines, and general support
for the growth initiatives contributed to the quarterly increase in operating
expenses. The Companys efficiency ratio, which measures the relationship of
total operating expenses and total operating income, was 62% for the quarter
ended September 30, 2002 and 57% when the Debenture conversion charge is
excluded, as compared with 78% for the same period in 2001.

The Companys continued growth of its loan portfolio necessitated a provision
for possible loan losses in the amount of $610,000 for the third quarter of
2002, compared to a provision of $115,000 in the same period for 2001. This
increased the allowance for possible loan losses to $2.7 million, or 1.25% of
gross loans outstanding at September 30, 2002. For the nine months ended
September 30, 2002, the Companys provision for possible loan losses was
$1,145,000, as compared with $415,000 for the same period in 2001.

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Asset quality remains strong, with the Company reporting only one secured,
non-performing loan for approximately $110,000 and no real estate owned through
foreclosure (OREO) at September 30, 2002. Net charge-offs for the third quarter were
approximately $15,000, and $107,000 for the nine months ended September 30,
2002.

The Company recorded an income tax provision for the third quarter of 2002 in
the amount of $584,000, as compared with $207,000 for the same period in 2001.
For the nine months ended September 30, 2002, the Companys income tax
provision was $1,310,000 versus an income tax credit of $154,000 for the same
period in 2001. During the first six months of 2001, the Company benefited
from the release of a valuation reserve associated with a previously
established deferred income tax asset. The impact of this benefit effectively
neutralized the tax liability for 2001.

NET INTEREST INCOME

The operations of the Company are substantially dependent on its net interest
income, which is the difference between interest income earned from its
interest-earning assets and the interest expense incurred on its
interest-bearing liabilities. The Companys net interest margin is its net
interest income divided by its average interest-earning assets. Net interest
income and net interest margin are affected by several factors, including (1)
the level of, and the relationship between, the dollar amount of
interest-earning assets and interest-bearing liabilities, (2) the relationship
between the repricing or maturity of the Companys adjustable rate and fixed
rate loans and short term investment securities and its deposits and
borrowings, and (3) the magnitude of the Companys non-interest-earning assets,
including nonaccrual loans and OREO.

Though the Company is asset-sensitive, its loan portfolio is sufficiently
blended in composition and complexity to
weather the effects of the market rate decreases experienced over the past
twenty-one months, with only a modest net interest margin compression. A
substantial portion of the Companys immediately repricable loan portfolio have
reached their floor rates and do not continue to adjust downward if the Federal
Reserve Bank lowers rates. The effect of this also contributed to the minimal
compression experienced. Loan fee income, which is included in interest
income, also stabilized interest income during a period of declining interest
rates.

An additional form of funding for the Banks growth is debt issued by the
Company which results in a higher consolidated cost of funds. For the nine
months ended September 30, 2002, the average effective cost of funds for the
Bank was 2.0% compared to 2.3% for the Company. The result of the increase in
interest expense affects the Companys net interest margin. The Companys net
interest margin decreased from 6.2% at year end 2001 to 5.7% at September 30,
2002. However, the Banks net interest margin remained consistently strong
decreasing from 6.4% at year end 2001 to 6.2% at September 30, 2002, a
compression of only 20 basis points principally from the effect of new lending
originations and yields less than the original, existing portfolio.

The following table shows average balance sheet data, related revenues and
costs, and effective weighted average yields and costs, for the three and nine
months ended September 30, 2002 and 2001.

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|                                            |                            |                                            |        |                                          |         |          |       |       |       |         |     |          |     |       |        |         |         |         |       |       |       |  |     |      |     |  
|------------------------------------------- | -------------------------- | ------------------------------------------ | ------ | ---------------------------------------- | ------- | -------- | ----- | ----- | ----- | ------- | --- | -------- | --- | ----- | ------ | ------- | ------- | ------- | ----- | ----- | ----- |  | --- | ---- | --- | -
|                                            |                            |                                            |        | For the Three Months Ended September 30,
|                                            |                            |                                            |        |                                         
|                                            |                            |                                            |        | 2002                                     |         | 2001    
|                                            |                            |                                            |        |                                          |         |         
|                                            |                            |                                            |        | Average                                  |         |          |       |       |       | Average |     | Average  |     |       |        |         |         | Average
|                                            |                            |                                            |        | Balance                                  |         | Interest |       | Yield |       | Balance |     | Interest |     | Yield
|                                            |                            |                                            |        |                                          |         |          |       |       |       |         |     |          |     |      
|Assets                                      |                            |                                            |        |                                          |         |          |       |       |       |         |     |          |     |       |        |         |         |         |       |       |       |  |     |     
|                                            | Loans                      |                                            | $      | 206,942                                  |         |          | $     | 4,816 |       |         |     | 9.2      | %   |       | $      | 108,065 |         |         | $     | 2,808 |       |  |     | 10.4 | %  
|                                            | Investment securities      |                                            |        | 50,350                                   |         |          |       | 642   |       |         |     | 5.0      | %   |       |        | 23,489  |         |         |       | 310   |       |  |     | 5.2  | %  
|                                            | Federal funds sold         |                                            |        | 8,061                                    |         |          |       | 34    |       |         |     | 1.7      | %   |       |        | 10,697  |         |         |       | 125   |       |  |     | 4.7  | %  
|                                            | FHLB & other stock         |                                            |        | 1,601                                    |         |          |       | 34    |       |         |     | 8.4      | %   |       |        | 126     |         |         |       | 1     |       |  |     | 3.2  | %  
|                                            |                            |                                            |        |                                          |         |          |       |       |       |         |     |          |     |       |        |         |         |         |       |       |       |  |     |     
|                                            |                            | Total Interest-earning assets              |        |                                          | 266,954 |          |       |       | 5,526 |         |     |          | 8.2 | %     |        |         | 142,377 |         |       |       | 3,244 |  |     |      | 9.1 | %
|                                            |                            |                                            |        |                                          |         |          |       |       |       |         |     |          |     |       |        |         |         |         |       |       |       |  |     |     
|Other assets                                |                            |                                            | 19,670 |                                          |         |          |       |       |       |         |     |          |     |       | 18,766 |         |         |         |       |       |       |  |     |     
|                                            |                            | Less: allowance for possible loan
losses   |        |                                          | (2,260  | )        |       |       |       |         |     |          |     |       |        |         | (1,097  | )       |       |       |       |  |     |      |     |  
|                                            |                            |                                            |        |                                          |         |          |       |       |       |         |     |          |     |       |        |         |         |         |       |       |       |  |     |     
|                                            |                            | Total assets                               |        | $                                        | 284,364 |          |       |       |       |         |     |          |     |       |        | $       | 160,046 |         |       |       |       |  |     |      |     |  
|                                            |                            |                                            |        |                                          |         |          |       |       |       |         |     |          |     |       |        |         |         |         |       |       |       |  |     |     
|Liabilities and Stockholders Equity        |                            |                                            |        |                                          |         |          |       |       |       |         |     |          |     |       |        |         |         |         |       |       |       |  |     |     
|                                            | Savings deposits           |                                            | $      | 98,790                                   |         |          |       | 506   |       |         |     | 2.0      | %   |       | $      | 43,821  |         |         |       | 210   |       |  |     | 1.9  | %  
|                                            | Time deposits              |                                            |        | 76,911                                   |         |          |       | 674   |       |         |     | 3.5      | %   |       |        | 56,158  |         |         |       | 710   |       |  |     | 5.1  | %  
|                                            | Short
term borrowings      |                                            |        | 23,874                                   |         |          |       | 113   |       |         |     | 1.9      | %   |       |        |        |         |         |       |      |       |  |     |      |    
|                                            | Trust
preferred securities |                                            |        | 12,000                                   |         |          |       | 170   |       |         |     | 5.6      | %   |       |        |        |         |         |       |      |       |  |     |      |    
|                                            | Convertible debentures     |                                            |        | 3,650                                    |         |          |       | 91    |       |         |     | 9.9      | %   |       |        | 3,750   |         |         |       | 101   |       |  |     | 10.8 | %  
|                                            |                            |                                            |        |                                          |         |          |       |       |       |         |     |          |     |       |        |         |         |         |       |       |       |  |     |     
|                                            |                            | Total interest-bearing liabilities         |        |                                          | 215,225 |          |       |       | 1,554 |         |     |          | 2.9 | %     |        |         | 103,729 |         |       |       | 1,021 |  |     |      | 3.9 | %
|                                            |                            |                                            |        |                                          |         |          |       |       |       |         |     |          |     |       |        |         |         |         |       |       |       |  |     |     
|                                            | Demand deposits            |                                            |        | 57,225                                   |         |          |       |       |       |         |     |          |     |       |        | 43,536  |         |         |       |       |       |  |     |      |    
|                                            | Other liabilities          |                                            |        | 1,564                                    |         |          |       |       |       |         |     |          |     |       |        | 2,587   |         |         |       |       |       |  |     |      |    
|Stockholders equity                        |                            |                                            | 10,350 |                                          |         |          |       |       |       |         |     |          |     |       | 10,194 |         |         |         |       |       |       |  |     |     
|                                            |                            |                                            |        |                                          |         |          |       |       |       |         |     |          |     |       |        |         |         |         |       |       |       |  |     |     
|                                            |                            | Total liabilities and
Stockholders equity |        | $                                        | 284,364 |          |       |       |       |         |     |          |     |       |        | $       | 160,046 |         |       |       |       |  |     |      |     |  
|                                            |                            |                                            |        |                                          |         |          |       |       |       |         |     |          |     |       |        |         |         |         |       |       |       |  |     |     
|Net Interest Spread                         |                            |                                            |        |                                          |         |          |       |       |       |         | 5.3 | %        |     |       |        |         |         |         |       |       |       |  | 5.2 | %   
|                                            |                            |                                            |        |                                          |         |          |       |       |       |         |     |          |     |       |        |         |         |         |       |       |       |  |     |     
|Net Interest Income
and Net Interest Margin |                            |                                            |        |                                          |         | $        | 3,972 |       |       |         | 5.9 | %        |     |       |        |         |         | $       | 2,223 |       |       |  | 6.3 | %   
|                                            |                            |                                            |        |                                          |         |          |       |       |       |         |     |          |     |       |        |         |         |         |       |       |       |  |     |     

|                                            |                            |                                            |        |                                         |         |          |       |        |        |         |     |          |     |       |        |        |         |         |       |       |       |  |     |      |     |  
|------------------------------------------- | -------------------------- | ------------------------------------------ | ------ | --------------------------------------- | ------- | -------- | ----- | ------ | ------ | ------- | --- | -------- | --- | ----- | ------ | ------ | ------- | ------- | ----- | ----- | ----- |  | --- | ---- | --- | -
|                                            |                            |                                            |        | For the Nine Months Ended September 30,
|                                            |                            |                                            |        |                                        
|                                            |                            |                                            |        | 2002                                    |         | 2001    
|                                            |                            |                                            |        |                                         |         |         
|                                            |                            |                                            |        | Average                                 |         |          |       |        |        | Average |     | Average  |     |       |        |        |         | Average
|                                            |                            |                                            |        | Balance                                 |         | Interest |       | Yield  |        | Balance |     | Interest |     | Yield
|                                            |                            |                                            |        |                                         |         |          |       |        |        |         |     |          |     |      
|Assets                                      |                            |                                            |        |                                         |         |          |       |        |        |         |     |          |     |       |        |        |         |         |       |       |       |  |     |     
|                                            | Loans                      |                                            | $      | 173,593                                 |         |          | $     | 11,932 |        |         |     | 9.2      | %   |       | $      | 90,165 |         |         | $     | 7,185 |       |  |     | 10.7 | %  
|                                            | Investment securities      |                                            |        | 46,584                                  |         |          |       | 1,718  |        |         |     | 4.9      | %   |       |        | 12,945 |         |         |       | 583   |       |  |     | 5.9  | %  
|                                            | Federal funds sold         |                                            |        | 5,929                                   |         |          |       | 73     |        |         |     | 1.6      | %   |       |        | 17,144 |         |         |       | 571   |       |  |     | 4.5  | %  
|                                            | FHLB & other stock         |                                            |        | 1,044                                   |         |          |       | 43     |        |         |     | 5.5      | %   |       |        | 203    |         |         |       | 8     |       |  |     | 5.3  | %  
|                                            |                            |                                            |        |                                         |         |          |       |        |        |         |     |          |     |       |        |        |         |         |       |       |       |  |     |     
|                                            |                            | Total Interest-earning assets              |        |                                         | 227,150 |          |       |        | 13,766 |         |     |          | 8.1 | %     |        |        | 120,457 |         |       |       | 8,347 |  |     |      | 9.3 | %
|                                            |                            |                                            |        |                                         |         |          |       |        |        |         |     |          |     |       |        |        |         |         |       |       |       |  |     |     
|Other assets                                |                            |                                            | 19,326 |                                         |         |          |       |        |        |         |     |          |     |       | 17,718 |        |         |         |       |       |       |  |     |     
|                                            |                            | Less: allowance for possible loan
losses   |        |                                         | (1,838  | )        |       |        |        |         |     |          |     |       |        |        | (914    | )       |       |       |       |  |     |      |     |  
|                                            |                            |                                            |        |                                         |         |          |       |        |        |         |     |          |     |       |        |        |         |         |       |       |       |  |     |     
|                                            |                            | Total assets                               |        | $                                       | 244,638 |          |       |        |        |         |     |          |     |       |        | $      | 137,261 |         |       |       |       |  |     |      |     |  
|                                            |                            |                                            |        |                                         |         |          |       |        |        |         |     |          |     |       |        |        |         |         |       |       |       |  |     |     
|Liabilities and Stockholders Equity        |                            |                                            |        |                                         |         |          |       |        |        |         |     |          |     |       |        |        |         |         |       |       |       |  |     |     
|                                            | Savings deposits           |                                            | $      | 77,278                                  |         |          |       | 1,102  |        |         |     | 1.9      | %   |       | $      | 39,192 |         |         |       | 550   |       |  |     | 1.9  | %  
|                                            | Time deposits              |                                            |        | 68,596                                  |         |          |       | 1,893  |        |         |     | 3.7      | %   |       |        | 44,275 |         |         |       | 1,822 |       |  |     | 5.5  | %  
|                                            | Short
term borrowings      |                                            |        | 18,004                                  |         |          |       | 253    |        |         |     | 1.9      | %   |       |        |       |         |         |       |      |       |  |     |      |    
|                                            | Trust
preferred securities |                                            |        | 12,000                                  |         |          |       | 507    |        |         |     | 5.6      | %   |       |        |       |         |         |       |      |       |  |     |      |    
|                                            | Convertible debentures     |                                            |        | 3,650                                   |         |          |       | 278    |        |         |     | 10.2     | %   |       |        | 1,693  |         |         |       | 166   |       |  |     | 13.1 | %  
|                                            |                            |                                            |        |                                         |         |          |       |        |        |         |     |          |     |       |        |        |         |         |       |       |       |  |     |     
|                                            |                            | Total interest-bearing liabilities         |        |                                         | 179,528 |          |       |        | 4,033  |         |     |          | 3.0 | %     |        |        | 85,160  |         |       |       | 2,538 |  |     |      | 4.0 | %
|                                            |                            |                                            |        |                                         |         |          |       |        |        |         |     |          |     |       |        |        |         |         |       |       |       |  |     |     
|                                            | Demand deposits            |                                            |        | 51,997                                  |         |          |       |        |        |         |     |          |     |       |        | 39,825 |         |         |       |       |       |  |     |      |    
|                                            | Other liabilities          |                                            |        | 1,306                                   |         |          |       |        |        |         |     |          |     |       |        | 2,468  |         |         |       |       |       |  |     |      |    
|Stockholders equity                        |                            |                                            | 11,807 |                                         |         |          |       |        |        |         |     |          |     |       | 9,808  |        |         |         |       |       |       |  |     |     
|                                            |                            |                                            |        |                                         |         |          |       |        |        |         |     |          |     |       |        |        |         |         |       |       |       |  |     |     
|                                            |                            | Total liabilities and
Stockholders equity |        | $                                       | 244,638 |          |       |        |        |         |     |          |     |       |        | $      | 137,261 |         |       |       |       |  |     |      |     |  
|                                            |                            |                                            |        |                                         |         |          |       |        |        |         |     |          |     |       |        |        |         |         |       |       |       |  |     |     
|Net Interest Spread                         |                            |                                            |        |                                         |         |          |       |        |        |         | 5.1 | %        |     |       |        |        |         |         |       |       |       |  | 5.3 | %   
|                                            |                            |                                            |        |                                         |         |          |       |        |        |         |     |          |     |       |        |        |         |         |       |       |       |  |     |     
|Net Interest Income
and Net Interest Margin |                            |                                            |        |                                         |         | $        | 9,733 |        |        |         | 5.7 | %        |     |       |        |        |         | $       | 5,809 |       |       |  | 6.4 | %   
|                                            |                            |                                            |        |                                         |         |          |       |        |        |         |     |          |     |       |        |        |         |         |       |       |       |  |     |     

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The Companys gross interest income on all interest-earning assets for the
three and nine months ended September 30, 2002 was $5,526,000 and $13,766,000,
respectively, an increase of $2,282,000, or 70.3%, and $5,419,000, or 64.9%,
respectively, as compared with the results from the same periods in 2001. The
effective yield on all interest-earning assets for the three and nine months
ended September 30, 2002 were 8.2% and 8.1%, respectively, as compared to the
9.1% and 9.3% levels reported for the same periods in 2001, respectively, when
market rates where higher. The increase in interest income over the prior year
is due to the greater volume of earning assets. The average balance of the loan
portfolio outstanding for the nine month period ended September 30, 2002
increased by $83.4 million or 92.5% compared to the average balance of the loan
portfolio outstanding for the same prior period end 2001. The Company has
introduced business lines associated with the origination of single-family
residence construction lending (including single-family tract home construction
financing) along the coastal communities of the Los Angeles and Orange
counties, expanded commercial and industrial lending, and commercial real
estate mortgage products, with a de-emphasis on consumer installment lending.
In augmenting the earning assets of the Bank, management invested in U.S.
Government agency bonds and U.S. Government-sponsored mortgage-backed
securities which contributed to the increase in interest income. The average
balance of the investment securities was $46.6 million generating interest
income of $1,718,000 for the nine months ended September 30, 2002 as compared
to the average balance of $12.9 million for the same period ended 2001
generating interest income of $583,000.

The Company funds its operations through deposits, equity capital and short
term borrowings. During the nine months ended September 30, 2002, total
funding growth was $110.5 million, with deposit growth of $93.5 million and
additional FHLB borrowings of $17 million. The Bank utilized advances from a
credit line established with the Federal Home Loan Bank (FHLB). The Bank
has a total borrowing capacity from the FHLB of up to 20% of its total assets.
Such borrowing facility is utilized by the Bank as an alternative source of
liquidity and all borrowings are collateralized by certain loans and/or
investment securities pledged by the Bank. These borrowings have been short
term, typically three to twelve months, with a floating rate tied to Libor
indices. Interest expense relating to such borrowings were $113,000 and
$253,000 for the three and nine months ended September 30, 2002. In addition,
certain funds from the issuance of the Convertible Debentures and the statutory
trust preferred securities as discussed in Note 2 of ITEM 1  Financial
Statements above were downstreamed from the Company to the Bank as
equity and utilized as other sources of funding by the Bank. Interest expense
on the Convertible Debentures were $91,000 and $278,000 for the three and nine
months ended September 30, 2002, respectively, compared to $101,000 and
$166,000 during the same prior year periods. Interest expense on the trust
preferred securities were $170,000 and $507,000 for the three and nine months
ended September 30, 2002, respectively, compared to none during the same prior
year periods. The interest expense relating to these instruments, combined
with the increase of FHLB advances and the growth in interest-bearing deposits,
increased the gross interest expense on all interest-bearing liabilities for
the three and nine months ended September 30, 2002 to $1,554,000 and
$4,033,000, respectively, an increase of $533,000, or 52.2%, and $1,495,000, or
58.9%, as compared with the same respective periods in 2001. The Companys
average effective cost of funding, inclusive of demand deposits and Company
debt, for the three and nine months ended September 30, 2002 were 2.3% for each
period, as compared to 2.8% and 2.7% for the same periods in 2001. The Banks
average effective cost of funding, exclusive of Company debt, was 2.0% for
both the three and nine month periods ended September 30, 2002 as compared to 2.5%
and 2.6% for the same respective periods in 2001, representing a continuing favorable
decline.

The effect of these changes to the balance sheet composition and the Companys
growth, and the compression on market interest rates has produced net interest
income, before its provision for possible loan losses, for the three and nine
months ended September 30, 2002 of $3,972,000 and $9,733,000, respectively, an
increase of $1,749,000, or 78.7%, and $3,924,000, or 67.6%, over the same
periods in 2001, respectively.

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The following table sets forth the composition of the Companys loan portfolio
as of the dates indicated. As the table illustrates, the Company has
begun shifting its emphasis on loan origination in a manner consistent with
its efforts to broaden and diversify its lending operations.

|                                          |             |                               |        |                      |         |           |    |              |   |           |        |         |         |  |    |     |   | 
|----------------------------------------- | ----------- | ----------------------------- | ------ | -------------------- | ------- | --------- | -- | ------------ | - | --------- | ------ | ------- | ------- |  | -- | --- | - | 
|                                          |             |                               |        | Dollars in Thousands
|                                          |             |                               |        |                     
|                                          |             |                               |        | September 30,        |         | Portfolio |    | December 31, |   | Portfolio
|                                          |             |                               |        | 2002                 |         | %         |    | 2001         |   | %        
|                                          |             |                               |        |                      |         |           |    |              |   |          
|Commercial and industrial                 |             | $                             | 20,520 |                      |         |           | 10 | %            |   | $         | 20,219 |         |         |  | 15 | %  
|Real Estate  construction                |             |                               | 79,815 |                      |         |           | 37 | %            |   |           | 33,254 |         |         |  | 24 | %  
|Real Estate  mortgage                    |             |                               |        |                      |         |           |    |              |   |           |        |         |         |  |    |    
|                                          | Commercial  |                               |        | 77,266               |         |           |    | 35           | % |           |        | 52,458  |         |  |    | 38  | %
|                                          | Residential |                               |        | 29,768               |         |           |    | 14           | % |           |        | 19,063  |         |  |    | 14  | %
|Small
Business Administration SBA loans |             |                               | 1,279  |                      |         |           | 1  | %            |   |           |       |         |         |  |   |    
|Consumer loans to individuals             |             |                               | 6,028  |                      |         |           | 3  | %            |   |           | 8,318  |         |         |  | 6  | %  
|Loans held for sale                       |             |                               | 949    |                      |         |           | 0  | %            |   |           | 4,471  |         |         |  | 3  | %  
|All other loans (including overdrafts)    |             |                               | 62     |                      |         |           | 0  | %            |   |           | 184    |         |         |  | 0  | %  
|                                          |             |                               |        |                      |         |           |    |              |   |           |        |         |         |  |    |    
|                                          | Gross Loans |                               | $      | 215,687              |         |           |    | 100          | % |           | $      | 137,967 |         |  |    | 100 | %
|                                          |             |                               |        |                      |         |           |    |              |   |           |        |         |         |  |    |    
|Unearned income on installment loans      |             |                               | (49    | )                    |         |           |    |              |   |           | (117   | )       |         |  |    |    
|Deferred loan fees                        |             |                               | 4      |                      |         |           |    |              |   |           | (272   | )       |         |  |    |    
|                                          |             |                               |        |                      |         |           |    |              |   |           |        |         |         |  |    |    
|                                          |             | Loans, Net of Unearned Income |        | $                    | 215,642 |           |    |              |   |           |        | $       | 137,578 |  |    |     |   | 
|                                          |             |                               |        |                      |         |           |    |              |   |           |        |         |         |  |    |    

PROVISIONS FOR POSSIBLE LOAN LOSSES

During the three month period ended September 30, 2002, a provision of $610,000
was made as compared to $115,000 for the same period in 2001. Total provision
for possible loan losses was $1,145,000 for the nine month period ended
September 30, 2002 as compared to $415,000 for the same period in 2001. Net
loan charge-offs were $108,000 for the nine months ended September 30, 2002, as
compared to $48,000 for the same period in 2001.

The Companys allowance for possible loan losses increased to $2,685,000 at
September 30, 2002, or 1.25% of gross loans outstanding, compared with
$1,450,000, or 1.05% at December 31, 2001. Additions to the reserve are
effected through the provision for possible loan losses, which is an operating
expense of the Company. A further addition to reserve was through an
adjustment of $198,000 relating to the purchased allowance for loan
losses on an acquired loan portfolio. Such loan portfolio was acquired at fair value. The
difference between the amount paid and the fair value of the loans represents
the premium relating to such loans and is amortized over the life of the loans
as a charge to expense.

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

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NONINTEREST INCOME

Noninterest income for the three and nine months ended September 30, 2002 were
$1,339,000 and $2,540,000, respectively, as compared to $510,000 and $1,422,000
for the same respective periods in 2001. This represents an increase of
$829,000, or 162.5%, and $1,118,000, or 78.6%, respectively.

Contributing to the increase in noninterest income
were the gains recognized on
the sale of investment securities, which amounted to $566,000 during the three months ended
September 30, 2002 and $745,000 for the nine months ended September
30, 2002. It is managements intent to maintain the investment
securities in its available-for-sale portfolio in accordance with SFAS No. 115. During 2002,
management sold certain investment securities to manage liquidity and interest
rate risk during a time when the market environment was favorable and
therefore, generated gains from such sales.

During 2002, the Company received $540,000 in a litigation recovery from its
former commercial insurance couriers. This stems from a reimbursement
of legal fees advanced by the Bank over a period of several years
in the early to mid 1990s. The original lawsuit
brought by a former borrower of the Bank was on a claim regarding the wrongful
foreclosure of the borrowers property.

Fees and service charges represents service charges on deposit accounts, fees
associated with mortgage loans originated for sale, fees associated with Visa
check cards, and other income.

Other income consists of fee income from various services offered, sales
commissions, safe deposit rental, and sundry other income.

NONINTEREST EXPENSES

Noninterest expense for the three and nine months ended September 30, 2002 were
$3,309,000 and $7,902,000, respectively, as compared to $2,124,000 and
$6,052,000 for the same periods in 2001, respectively, representing an increase
of $1,185,000, or 55.8%, and $1,850,000, or 30.6%, respectively. Noninterest
expense consists primarily of (i) salaries and other employee expenses, (ii)
occupancy expenses, (iii) furniture and equipment expenses, and (iv) marketing,
office supplies, postage and telephone, insurance, data processing,
professional fees and other noninterest expense.

Management has implemented several structural changes within the operations of
the Company in order to support its strategic plan initiatives. Seasoned and
experienced individuals have been recruited during the year 2001, and through
the third quarter 2002, from other local financial institutions to head the
respective areas of credit administration, finance, information technology, and
business development for commercial and community banking. With the addition
of these individuals and the entire cadre of existing personnel, the Company
has been able to produce significant growth in deposits and loans, over the
same period in 2001, while providing for the infrastructure to support
longer-term growth. These changes have increased the Companys expenses
associated with salaries and other benefits by $564,000, or 18.0%, for the nine
months ended September 30, 2002 as compared to the same period in 2001. The
total number of full-time equivalent employee was 112 on September 30, 2002
versus 83 one year ago.

Expenses related to occupancy and furniture & equipment were $447,000 and
$1,196,000 for the three and nine months ended September 30, 2002,
respectively, representing increases of $113,000, or 33.8%, and $271,000, or
29.3%, for the same periods in 2001, respectively. In connection with the
increase in bank personnel as discussed above, occupancy expense and furniture
& equipment expense have increased to accommodate a larger work force. These
expenses consist of rent, taxes, maintenance, repair and depreciation of Bank
owned and leased branch buildings. In December 2001, the Company acquired an
additional branch location in the city of La Verne and the costs associated
with the occupancy expense of that location are included in this increase as
well as the first full year of operation for the loan production office located
in Manhattan Beach. Beginning the third quarter of 2002, rent expense is being
incurred for the SBA loan production offices in San Diego and Beverly Hills.

Professional expenses increased $124,000, or 144.2%, and $151,000 or 54.9%, for
the three and nine months ended September 30, 2002 as compared to the
respective prior periods in 2001. The increase is due primarily to
professional services rendered relating to a one-time marketing agreement
incurred by the Bank for $109,000.

In September 2002, the Company paid $274,000 to holders of the Convertible
Debentures to induce the conversion of those instruments into Common stock of
the Company. The conversion expense was equivalent to the amount as if
interest was to be paid through June 30, 2003. The amount was charged to
noninterest expense.

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Other expenses increased $241,000, or 147.9%, and $301,000, or 61.4%, for the
three and nine months ended September 30, 2002 as compared to the respective
prior periods in 2001. The increase is due predominately to the
acceleration and write-off of an intangible asset on the Banks financials in the amount of
$197,000. As of September 30, 2002, the Company has no intangible assets. Other
areas contributing to the increase of other expense are in the areas of business
development expense as the Company increases its campaign efforts
with respect to marketing new products and services, data processing expense related to the
acquisition and ongoing processing for the new La Verne branch, operating
expenses incurred relating to the new SBA offices in San Diego and Beverly
Hills, and holding company operating expenses.

The following table sets forth the breakdown of noninterest expenses for the
nine and three month periods ended
September 30, 2002 and 2001:

|                               |                                         |                             |       |                                 |       |                                  |       |      |       |      |       |     |       |   |       |     |       | 
|------------------------------ | --------------------------------------- | --------------------------- | ----- | ------------------------------- | ----- | -------------------------------- | ----- | ---- | ----- | ---- | ----- | --- | ----- | - | ----- | --- | ----- | 
|                               |                                         |                             |       | Dollars in Thousands           
|                               |                                         |                             |       |                                
|                               |                                         |                             |       | Nine Months Ended September 30, |       | Three Months Ended September 30,
|                               |                                         |                             |       |                                 |       |                                 
|                               |                                         |                             |       | 2002                            |       | 2001                             |       | 2002 |       | 2001
|                               |                                         |                             |       |                                 |       |                                  |       |      |       |     
|Salaries and employee benefits |                                         | $                           | 3,693 |                                 |       | $                                | 3,129 |      |       | $    | 1,418 |     |       | $ | 1,085 |    
|Occupancy                      |                                         |                             | 626   |                                 |       |                                  | 490   |      |       |      | 236   |     |       |   | 180   |    
|Furniture and equipment        |                                         |                             | 570   |                                 |       |                                  | 435   |      |       |      | 211   |     |       |   | 154   |    
|Other non-interest expenses:   |                                         |                             |       |                                 |       |                                  |       |      |       |      |       |     |       |   |       |    
|                               | Data processing                         |                             |       | 513                             |       |                                  |       | 513  |       |      |       | 157 |       |   |       | 168 |      
|                               | Business development                    |                             |       | 463                             |       |                                  |       | 307  |       |      |       | 192 |       |   |       | 131 |      
|                               | Office supplies, postage, and telephone |                             |       | 410                             |       |                                  |       | 277  |       |      |       | 156 |       |   |       | 100 |      
|                               | Professional                            |                             |       | 426                             |       |                                  |       | 275  |       |      |       | 210 |       |   |       | 86  |      
|                               | Bank insurance and assessments          |                             |       | 136                             |       |                                  |       | 136  |       |      |       | 51  |       |   |       | 57  |      
|                               | Debenture conversion                    |                             |       | 274                             |       |                                  |       |     |       |      |       | 274 |       |   |       |    |      
|                               | Other                                   |                             |       | 791                             |       |                                  |       | 490  |       |      |       | 404 |       |   |       | 163 |      
|                               |                                         |                             |       |                                 |       |                                  |       |      |       |      |       |     |       |   |       |    
|                               |                                         | Total Non-Interest Expenses |       | $                               | 7,902 |                                  |       | $    | 6,052 |      |       | $   | 3,309 |   |       | $   | 2,124 | 
|                               |                                         |                             |       |                                 |       |                                  |       |      |       |      |       |     |       |   |       |    

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FINANCIAL CONDITION, CAPITAL RESOURCES & LIQUIDITY AND ASSET QUALITY

During the nine months ended September 30, 2002, the Companys assets increased
by approximately $113.6 million, or 59.4%, as compared to December 31, 2001.
The Company continued to have adequate cash resources with $11.2 million of
cash and funds held on deposit at other financial institutions and $68.9
million in investment securities at September 30, 2002. The overall levels in
liquidity increased by $34.8 million, or 77.0%, and resulted in increased
levels of higher yielding investment securities and decreased levels of Federal
funds sold. The Companys investment portfolio had $299,000 of unrealized
gains on estimated fair values when compared to book values at September 30,
2002.

Total outstanding loans increased during the nine month period ended September
30, 2002 by $78.1 million, or 56.7%, primarily in the area of real
estate,
including construction, commercial and residential mortgages. There was
one loan placed on non-accrual status (not generating income currently) at
September 30, 2002. Such loan is fully secured by real estate. The Company
has no other non-performing assets including OREO as of such date.

The Companys asset growth was primarily funded by the increase in deposits. During the nine month
period ended June 30, 2002, total deposits increased by $93.5 million, or
58.7%. All areas of deposit product types experienced growth over the year-end
2001 levels, such as: demand deposits by $9.4 million, Savings and NOW accounts
by $1.4 million, money market accounts by $61.0 million, time deposits in
excess of $100,000 by $13.7 million, and other time deposits increased by $8.0
million. Managements efforts to generate significant levels of liquidity in
the nine months of 2002 to support its lending activities were a result of a
targeted and focused campaign to generate deposits in the communities the
Company serves. These efforts were supported by increased activities by the
Companys business development personnel, marketing and advertising campaigns,
and promotional interest rates on certain products.

The Bank is a member in the Federal Home Loan Bank. This provides for an
alternative funding source for the Bank in the form of a credit line. This
line provides for a maximum advance of up to 20% of the Banks total assets
based on qualifying collateral. The FHLB system functions as a source of credit
to institutions that are members of the FHLB. Advances are secured by the
Banks mortgage loans, qualifying investment securities, and the capital stock
of the FHLB owned by the Bank. Subject to the FHLBs advance policies and
requirements, these advances can be requested for any business purpose in which
the Bank is authorized to engage. In granting advances, the FHLB considers a
members creditworthiness and other relevant factors. At September 30, 2002,
the amount of borrowing was $20.0 million with the utilization of the advance
line, reaching a high of $31.5 million in outstanding balances during the nine
month period ended September 30, 2002.

Total stockholders equity increased from $10.5 million at December 31, 2001,
to $16.5 million at September 30, 2002, principally as a result of net income
generated for the nine months ended September 30, 2002 and the conversion of
the Debentures into common stock of the Company.

The Companys primary regulator, the Federal Reserve Bank, and the Banks
primary regulators, the California Department of Financial Institutions (DFI)
and the Federal Deposit Insurance Corporation (FDIC), adopted risk-based
capital guidelines which require bank holding companies and banks to maintain
minimum total capital of 8% (of which 4% must consist of Tier 1 capital) of
risk-weighted assets. Further, the Federal Reserve Bank and FDIC generally
require bank and bank holding companies to have a minimum leverage ratio of at
least 4% to be considered adequately capitalized for Federal regulatory
purposes. As of September 30, 2002, the Company had a ratio of total capital to
risk-weighted assets of 14.3%, a ratio of Tier 1 capital to risk-weighted
assets of 10.0%, and a leverage capital ratio of 7.5%. As of September 30,
2002, the Bank had a ratio of total capital to risk-weighted assets of 13.9%, a
ratio of Tier 1 capital to risk-weighted assets of 12.7%, and a leverage
capital ratio of 9.0%. Further, since the Banks Total Capital, Tier 1, and
Leverage ratios exceed 10%, 6%, and 5%, respectively, the Bank is considered
Well-Capitalized under the regulatory framework for prompt corrective action.
The Banks capital ratios were favorably impacted by the contribution from the
Company to the Bank of $11.2 million in capital generated by the sale of the
Debentures and Trust Preferred Securities during 2001. Further, in September
2002, the Company contributed an additional $3 million in capital to the Bank
to support the Banks growth. The Companys management believes that, under
current regulations, the Company and the Bank will continue to meet these
minimum capital requirements in the foreseeable future, and for the Bank to
continue to be Well-Capitalized.

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ASSET QUALITY 

NON-PERFORMING LOANS

The following table sets forth information regarding the Companys
non-performing loans at September 30, 2002 and December 31, 2001:

|                                           |                            |                           |   |                      |     |              |   |   |   | 
|------------------------------------------ | -------------------------- | ------------------------- | - | -------------------- | --- | ------------ | - | - | - | 
|                                           |                            |                           |   | Dollars in Thousands
|                                           |                            |                           |   |                     
|                                           |                            |                           |   | September 30,        |     | December 31,
|                                           |                            |                           |   | 2002                 |     | 2001        
|                                           |                            |                           |   |                      |     |             
|Accruing Loans More Than 90 Days Past Due1 |                            | $                         | 0 |                      |     | $            | 0 |  
|Renegotiated loans2                        |                            |                           | 0 |                      |     |              | 0 |  
|Non-accrual loans                          |                            |                           |   |                      |     |              |   |  
|                                           |                            | Commercial and industrial |   |                      | 117 |              |   |   | 0 | 
|                                           |                            | Real estate               |   |                      | 0   |              |   |   | 0 | 
|                                           |                            |                           |   |                      |     |              |   |  
|                                           | Total
non-accrual loans    |                           | $ | 117                  |     |              | $ | 0 |  
|                                           |                            |                           |   |                      |     |              |   |  
|                                           | Total Non-Performing Loans |                           | $ | 117                  |     |              | $ | 0 |  
|                                           |                            |                           |   |                      |     |              |   |  

(1)  Reflects loans for which there has been no payment of interest and/or
principal for 90 days or more. Ordinarily, loans are placed on non-accrual
status (accrual of interest is discounted) when the Bank has reason to believe
that continued payment of interest and principal is unlikely.

(2)  Renegotiated loans are those that have been renegotiated to provide a
deferral of interest or principal. The Bank had no renegotiated loans at
September 30, 2002 or at December 31, 2001.

The policy of the Company is to review each loan in the loan portfolio on an
on-going basis to identify problem credits. In addition, as an integral part
of its review process of the Bank, the DFI and the FDIC also classify problem
credits upon their scheduled examinations of the Bank. There are three
classifications for problem loans: substandard, doubtful and loss.
Substandard loans have one or more defined weaknesses and are characterized by
the distinct possibility that the Bank will sustain some loss if the
deficiencies are not corrected. Doubtful loans have the weaknesses of
substandard loans with the additional characteristic that the weaknesses make
collection or liquidation in full, on the basis of currently existing facts,
conditions and values, questionable. A loan classified as loss is considered
uncollectible and of such little value that the continuance as an asset of the
institution is not warranted. Another category designated special mention is
maintained for loans which do not currently expose the Bank to a significant
degree or risk to warrant classification in a substandard, doubtful or loss but
do possess credit deficiencies or potential weaknesses deserving managements
close attention.

As of September 30, 2002, the Banks classified loans consisted of
approximately $2.7 million of loans classified as substandard.

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ALLOWANCE FOR POSSIBLE LOAN LOSSES

The allowance for possible loan losses is a general reserve established by
management to absorb losses inherent in the entire portfolio. The level of and
ratio of additions to the reserve are based on a continuous analysis of the
loan portfolio and, at September 30, 2002, reflected an amount, which, in
managements judgment, was adequate to provide for known and inherent loan
losses. In evaluating the adequacy of the allowance, management gives
consideration to the composition of the loan portfolio, the performance of
loans in the portfolio, evaluations of loan collateral, prior loss experience,
current economic conditions and the prospects or worth of respective borrowers
or guarantors.

The allowance for possible loan losses at September 30, 2002, was approximately
$2.7 million, or 1.25%, of total loans, as compared to $1.5 million, or 1.05%,
of total loans at December 31, 2001. The following table provides certain
information with respect to the Companys allowance for possible loan losses as
well as charge-off and recovery activity.

|                                                                                      |             |          |                           |   |                      |     |              |   |  |    | 
|------------------------------------------------------------------------------------- | ----------- | -------- | ------------------------- | - | -------------------- | --- | ------------ | - |  | -- | 
|                                                                                      |             |          |                           |   | Dollars in Thousands
|                                                                                      |             |          |                           |   |                     
|                                                                                      |             |          |                           |   | September 30,        |     | December 31,
|                                                                                      |             |          |                           |   | 2002                 |     | 2001        
|                                                                                      |             |          |                           |   |                      |     |             
|Allowance for Possible Loan Losses,
Beginning of Period                               |             | $        | 1,450                     |   |                      | $   | 784          |  
|                                                                                      | Charge-offs |          |                           |   |                      |     |              |   | 
|                                                                                      |             | Domestic |                           |   |                      |     |              |   |  |   
|                                                                                      |             |          | Commercial and industrial |   |                      | 117 |              |   |  | 69 | 
|                                                                                      |             |          | Real estate  mortgage    |   |                      |    |              |   |  |   | 
|                                                                                      |             |          | Consumer loans            |   |                      | 123 |              |   |  | 60 | 
|                                                                                      |             |          |                           |   |                      |     |              |  
|                                                                                      |             |          | 240                       |   |                      |     | 129          |  
|                                                                                      |             |          |                           |   |                      |     |              |  
|                                                                                      | Recoveries  |          |                           |   |                      |     |              |   | 
|                                                                                      |             | Domestic |                           |   |                      |     |              |   |  |   
|                                                                                      |             |          | Commercial and industrial |   |                      | 48  |              |   |  | 3  | 
|                                                                                      |             |          | Real estate  mortgage    |   |                      |    |              |   |  |   | 
|                                                                                      |             |          | Consumer loans            |   |                      | 84  |              |   |  | 19 | 
|                                                                                      |             |          |                           |   |                      |     |              |  
|                                                                                      |             |          | 132                       |   |                      |     | 22           |  
|                                                                                      |             |          |                           |   |                      |     |              |  
|Net charge-offs                                                                       |             |          | 108                       |   |                      |     | 107          |  
|Additions charged to operations                                                       |             |          | 1,145                     |   |                      |     | 773          |  
|                                                                                      |             |          |                           |   |                      |     |              |  
|Adjustment:
Acquisition of Loan Portfolio Loan Loss Reserves                          |             |          | 198                       |   |                      |     |             |  
|Allowance
for Possible Loan Losses, End of Period                                     |             | $        | 2,685                     |   |                      | $   | 1,450        |  
|                                                                                      |             |          |                           |   |                      |     |              |  
|Ratio of Net Charge-offs During the Year
to Average Loans Outstanding During the Year |             |          | 0.06                      | % |                      |     | 0.11         | %
|                                                                                      |             |          |                           |   |                      |     |              |  
|Ratio of Reserve for Possible Loan Losses to
Loans at Period End                      |             |          | 1.25                      | % |                      |     | 1.05         | %
|                                                                                      |             |          |                           |   |                      |     |              |  

In accordance with SFAS No. 114 (as amended by SFAS No. 118), Accounting by
Creditors for Impairment of a Loan, loans identified as impaired are
measured on the present value of expected future cash flows discounted at the
loans effective interest rate, except that as a practical expedient, a
creditor may measure impairment based on a loans observable market price, or
the fair value of the collateral if the loan is collateral dependent. A loan
is impaired when it is probable the creditor will not be able to collect all
contractual principal and interest payments due in accordance with the terms of
the loan agreement. Loan impairment is evaluated on a loan-by-loan basis as
part of normal loan review procedures of the Bank.

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RECENT LEGISLATION

On July 30, 2002, President Bush signed into law the Sarbanes-Oxley Act of
2002, or the SOA. The stated goals of the SOA are to increase corporate
responsibility, to provide for enhanced penalties for accounting and auditing
improprieties at publicly traded companies and to protect investors by
improving the accuracy and reliability of corporate disclosures pursuant to the
securities laws.

The SOA is the most far-reaching U.S. securities legislation enacted in some
time. The SOA generally applies to all companies, both U.S. and non-U.S., that
file or are required to file periodic reports with the Securities and Exchange
Commission, or the SEC, under the Securities Exchange Act of 1934, or the
Exchange Act. Given the extensive SEC role in implementing rules relating to
many of the SOAs new requirements, the final scope of these requirements
remains to be determined.

The SOA includes very specific additional disclosure requirements and new
corporate governance rules, requires the SEC and securities exchanges to adopt
extensive additional disclosure, corporate governance and other related rules
and mandates further studies of certain issues by the SEC and the Comptroller
General. The SOA represents significant federal involvement in matters
traditionally left to state regulatory systems, such as the regulation of the
accounting profession, and to state corporate law, such as the relationship
between a board of directors and management and between a board of directors
and its committees.

This SOA addresses, among other matters: audit committees; certification of
financial statements by the chief executive officer and the chief financial
officer; the forfeiture of bonuses and profits made by directors and senior
officers in the twelve month period covered by restated financial statements; a
prohibition on insider trading during pension plan black out periods;
disclosure of off-balance sheet transactions; a prohibition on personal loans
to directors and officers; expedited filing requirements for Forms 4s;
disclosure of a code of ethics and filing a Form 8-K for a change or waiver of
such code; real time filing of periodic reports; the formation of a public
accounting oversight board; auditor independence; and various increased
criminal penalties for violations of securities laws.

This SOA contains provisions which became effective upon enactment on July 30,
2002 and provisions which will become effective from within 30 days to one year
from enactment. The SEC has been delegated the task of enacting rules to
implement various of the provisions with respect to, among other matters,
disclosure in periodic filings pursuant to the Exchange Act.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

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

The Companys overall strategy is to minimize the adverse impact of immediate
incremental changes in market interest rates (rate shock) on EVE and EAR. The
EVE is defined as the present value of assets, minus the present value of
liabilities. The EAR is defined as the net interest income, which is interest
income less interest expense. The attainment of this goal requires a balance
between profitability, liquidity and interest rate risk exposure. To minimize
the adverse impact of changes in market interest rates, the Bank simulates the
effect of instantaneous interest rate changes on EVE at period end and EAR over
a one year horizon. The table below shows the estimated impact of changes in
interest rates on EVE and EAR on September 30, 2002, assuming shifts of 100 to
200 basis points in both directions:

|             |  |                          |        |                  |  |        |      |        |  |  |      |   |  |  |      | 
|------------ |  | ------------------------ | ------ | ---------------- |  | ------ | ---- | ------ |  |  | ---- | - |  |  | ---- | 
|             |  | Dollars in Thousands    
|             |  |                         
|             |  | Economic Value of Equity |        | Earnings at Risk
|             |  |                          |        |                 
|Simulated    |  | $                        |        | %                |  | $      |      | %     
|Rate Changes |  | Change                   |        | Change           |  | Change |      | Change
|             |  |                          |        |                  |  |        |      |       
|+ 200        |  |                          | (3,015 | )                |  |        | -7.4 |        |  |  | 651  |   |  |  | 4.8  | 
|+ 100        |  |                          | (987   | )                |  |        | -2.4 |        |  |  | 169  |   |  |  | 1.2  | 
|- 100        |  |                          | (720   | )                |  |        | -1.8 |        |  |  | (62  | ) |  |  | -0.5 | 
|- 200        |  |                          | (1,759 | )                |  |        | -4.3 |        |  |  | (243 | ) |  |  | -1.8 | 

The amount and percentage changes represent the cumulative dollar and
percentage change in each rate change scenario from the base case. These
estimates are based upon a number of assumptions, including: the nature and
timing of interest rate levels including yield curve, prepayments on loans and
securities, pricing strategies on loans and deposits, replacement of asset and
liability cashflows, and other assumptions. While the assumptions used are
based on current economic and local market conditions, there is no assurance as
to the predictive nature of these conditions including how customer preferences
or competitor influences might change.

At September 30, 2002, the Companys estimated changes in Economic Value of
Equity and Earnings at Risk were within the ranges established by the Board of
Directors.

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ITEM 4. CONTROLS AND PROCEDURES

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

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

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PART II

OTHER INFORMATION




ITEM 1. LEGAL PROCEEDINGS

The Company is involved in litigation in the ordinary course of its business.
Management does not presently believe that any of the existing routine
litigation is likely to have a material adverse impact on the Companys
financial condition or results of operations.




ITEM 2. CHANGES IN SECURITIES

None




ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None




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

None




ITEM 5. OTHER INFORMATION

None




ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K



| | a) |  | Exhibits                                                                                                
| | -- |  | --------------------------------------------------------------------------------------------------------
|
| |    |  | None                                                                                                    
|
| | b) |  | Reports on Form 8-K:                                                                                    
|
| |    |  | The following reports on Form 8-K were filed by the Company during
the quarter ended September 30, 2002:

| |      |                                                                 | 
| | ---- | --------------------------------------------------------------- | 
| | i)   | July 10, 2002  Press Release: Second
Quarter Operating Results
| | ii)  | July 10, 2002  Press Release: Restricted
Share Plan           
| | iii) | July 22, 2002  Press Release: Stock
Repurchase Plan           

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized on this 14th day of November 2002.

| |                           |                                                              
| | ------------------------- | -------------------------------------------------------------
| | VINEYARD NATIONAL BANCORP
|
| | By:                       | /s/ NORMAN MORALES                                           
| |                           |                                                              
| |                           | Norman Morales
President and Chief Executive Officer         
|
| | By:                       | /s/ GORDON FONG                                              
| |                           |                                                              
| |                           | Gordon Fong
Senior Vice President and Chief Financial Officer
|
| | By:                       | /s/ FRANK S. ALVAREZ                                         
| |                           |                                                              
| |                           | Chairman of the Board of Directors                           
|
| | By:                       | /s/ CHARLES L. KEAGLE                                        
| |                           |                                                              
| |                           | Director                                                     
|
| | By:                       | /s/ JOEL H. RAVITZ                                           
| |                           |                                                              
| |                           | Director                                                     
|
| | By:                       | /s/ LESTER STROH, M.D.                                       
| |                           |                                                              
| |                           | Director                                                     

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