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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

FORM 10-Q

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

FOR THE QUARTER ENDED JUNE 30, 2003

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

For the transition period from        to       

Commission File No. 0-20862

VINEYARD NATIONAL BANCORP

(Exact Name of Registrant as Specified in its Charter)
     
California   33-0309110
(State or other jurisdiction of   (IRS employer
incorporation or organization)   identification number)
     
9590 Foothill Boulevard   91730
Rancho Cucamonga, California   (Zip Code)
(Address of principal executive offices)    

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

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

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

APPLICABLE TO CORPORATE ISSUER

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

Page 1 of 36

TABLE OF CONTENTS

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

Table of Contents

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

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

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

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Table of Contents

PART I

ITEM I. FINANCIAL STATEMENTS

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

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

See accompanying notes to financial statements.

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Table of Contents

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

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

See accompanying notes to financial statements.

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Table of Contents

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

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