<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
----------------------------------------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998 Commission File No. 0-20862
VINEYARD NATIONAL BANCORP
(Exact Name of Registrant as Specified in its Charter)
California 33-0309110
(State of 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 [ ]
APPLICABLE TO CORPORATE ISSUES
Indicate the number of shares outstanding of the issuer's classes of
common stock on the latest practicable date. 1,862,643 shares of common stock as
of March 31 , 1998.
Page 1 of 16
<PAGE> 2
VINEYARD NATIONAL BANCORP AND SUBSIDIARY
MARCH 31, 1998 AND DECEMBER 31, 1997
TABLE OF CONTENTS
PART I
<TABLE>
<S> <C>
FINANCIAL STATEMENTS
Consolidated Balance Sheets
March 31, 1998 and December 31,1997.....................................3
Consolidated Statements of Income
For the Three Months Ended March 31, 1998 and 1997......................4
Consolidated Statements of Changes in Stockholders' Equity
For the Three Months Ended March 31, 1998 and 1997......................5
Consolidated Statements of Cash Flows
For the Three Months Ended March 31, 1998 and 1997......................6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS...................................8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS..............................10
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K..............................14
Exhibit 27. Data Schedule.............................................15
SIGNATURES..................................................................16
</TABLE>
Page 2 of 16
<PAGE> 3
VINEYARD NATIONAL BANCORP AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
MARCH 31, 1998 AND DECEMBER 31, 1997
ASSETS
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
------------- -------------
<S> <C> <C>
Cash and due from banks $ 6,131,380 $ 6,404,346
Federal funds sold 7,950,000 2,950,000
------------- -------------
Total Cash and Cash Equivalents 14,081,380 9,354,346
------------- -------------
Interest-bearing deposits in other financial institutions 297,000
Investment securities
Available-for-sale 5,209,863 4,701,490
Loans, net of unearned income 85,598,247 88,675,135
Loans held for sale 441,750 424,950
Direct lease financing 14,354 14,354
Less: Reserve for probable loan and lease
losses (661,128) (694,880)
------------- -------------
85,393,223 88,419,559
Bank premises and equipment 6,707,919 6,741,300
Accrued interest 528,510 445,033
Cash surrender value of life insurance 1,655,874 981,467
Other real estate owned 287,354 492,492
Other assets 408,631 375,125
------------- -------------
Total Assets $ 114,569,754 $ 111,510,812
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits
Demand deposits 29,819,931 29,455,497
Savings and NOW deposits 25,978,333 25,562,601
Money market deposits 12,087,420 12,168,373
Time deposits in denominations of $100,000 or more 7,405,469 7,522,574
Other time deposits 29,579,590 27,032,311
------------- -------------
104,870,743 101,741,356
Federal funds purchased
Accrued employee salary and benefits 81,939 781,712
Accrued interest and other liabilities 1,285,597 721,241
------------- -------------
Total Liabilities 106,238,279 103,244,309
------------- -------------
Stockholders' Equity
Contributed capital
Common stock - authorized 15,000,000 shares, no par
value, issued and outstanding 1,862,643 shares in
1998 and 1997 2,106,258 2,106,258
Additional paid-in capital 3,306,684 3,306,684
Retained earnings 2,895,844 2,837,599
Valuation allowance for investments 22,689 15,962
------------- -------------
Total Stockholders' Equity 8,331,475 8,266,503
------------- -------------
Total Liabilities and Stockholders' Equity $ 114,569,754 $ 111,510,812
============= =============
</TABLE>
See accompanying notes to financial statements. Page 3 of 16
<PAGE> 4
VINEYARD NATIONAL BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
<TABLE>
<CAPTION>
March 31, March 31,
1998 1997
----------- -----------
<S> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 2,139,977 $ 2,213,388
Interest on Investment Securities
Obligations of U.S. Government Agencies and Corporations 63,213 60,349
Interest on other securities 2,466 2,453
Interest on deposits 1,042 5,433
Interest on Federal funds sold 70,633 32,314
Direct lease financing income 221 2,397
----------- -----------
Total Interest Income 2,277,552 2,316,334
----------- -----------
INTEREST EXPENSE
Interest on savings deposits 50,391 52,618
Interest on NOW and money market deposits 112,539 111,775
Interest on time deposits in denominations of $100,000 or more 101,965 90,971
Interest on other time deposits 362,528 506,724
Interest on Federal funds purchased and other interest 5,459
----------- -----------
Total Interest Expense 627,423 767,547
----------- -----------
Net Interest Income 1,650,129 1,548,787
PROVISION FOR LOAN AND LEASE LOSSES (59,000) (47,782)
----------- -----------
Net Interest Income After Provision
for Loan and Lease Losses 1,591,129 1,501,005
----------- -----------
OTHER INCOME
Fees and service charges 369,153 396,562
Net gain/(loss) on sale of investment securities 3,281 (1,057)
Other income 6,134 3,450
----------- -----------
Total Other Income 378,568 398,955
----------- -----------
OTHER EXPENSES
Salaries and employee benefits 886,210 902,428
Occupancy expense of premises 152,216 158,171
Furniture and equipment expense 151,729 126,896
Other expenses (Note #2) 682,297 623,558
----------- -----------
1,872,452 1,811,053
----------- -----------
Income Before Income Taxes 97,245 88,907
Income Taxes 39,000 36,000
----------- -----------
Net Income $ 58,245 $ 52,907
=========== ===========
Basic and Diluted Earnings Per Share $ 0.03 $ 0.03
=========== ===========
</TABLE>
See accompanying notes to financial statements. Page 4 of 16
<PAGE> 5
VINEYARD NATIONAL BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
<TABLE>
<CAPTION>
Accumulated
Number of Additional Other
Shares Common Paid-in Retained Comprehensive
Outstanding Stock Capital Earnings Income Total
----------- ----------- ---------- ---------- ------ ----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, January 1, 1997 1,862,643 $2,106,258 $3,306,684 $2,433,463 $5,007 $7,851,412
Comprehensive income
Net Income 52,907 52,907
Unrealized security
holding losses (3,289) (3,289)
Less reclassification
adjustments for loss 614 614
Total other comprehensive
income (2,675)
Total Comprehensive income 50,232
---------- ----------- ---------- ---------- ------ ----------
BALANCE, March 31, 1997 1,862,643 $2,106,258 $3,306,684 $2,486,370 $2,332 $7,901,644
========== =========== ========== ========== ====== ==========
</TABLE>
Gross up of Change in Unrealized Gain or Loss
<TABLE>
<CAPTION>
Gross Taxes Net
------- ------- -------
<S> <C> <C> <C>
Net unrealized appreciation, January 1, 1997 $ 8,636 $ 3,629 $ 5,007
Gross losses (5,672) (2,383) (3,289)
Realized losses 1,057 443 614
------- ------- -------
Ending Balance, March 31, 1997 $ 4,021 $ 1,689 $ 2,332
======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
Accumulated
Number of Additional Other
Shares Common Paid-in Retained Comprehensive
Outstanding Stock Capital Earnings Income Total
----------- ----------- ---------- ---------- ------ ----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, January 1, 1998 1,862,643 $2,106,258 $3,306,684 $2,837,599 $15,962 $8,266,503
Comprehensive income
Net Income 58,245 58,245
Unrealized security
holding gains 8,630 8,630
Less reclassification
adjustments for gains (1,903) (1,903)
Total other comprehensive
income 6,727
Total Comprehensive income 64,972
----------- ----------- ---------- ---------- ------- ----------
BALANCE, March 31, 1998 1,862,643 $2,106,258 $3,306,684 $2,895,844 $22,689 $8,331,475
=========== =========== ========== ========== ======= ==========
</TABLE>
Gross up of Change in Unrealized Gain or Loss
<TABLE>
<CAPTION>
Gross Taxes Net
-------- -------- --------
<S> <C> <C> <C>
Net unrealized appreciation, January 1, 1998 $ 27,523 $ 11,561 $ 15,962
Gross gains 14,879 6,249 8,630
Realized gains (3,281) (1,378) (1,903)
-------- -------- --------
Ending Balance, March 31, 1998 $ 39,121 $ 16,432 $ 22,689
======== ======== ========
</TABLE>
See accompanying notes to financial statements. Page 5 of 16
<PAGE> 6
VINEYARD NATIONAL BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
<TABLE>
<CAPTION>
March 31, March 31,
1998 1997
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Interest and fees received $ 1,703,382 $ 1,976,771
Service fees and other income received 375,287 428,933
Financing revenue received under leases 221 2,397
Interest paid (613,663) (811,512)
Cash paid to suppliers and employees (2,518,964) (1,669,553)
Income taxes paid (71,714)
------------ ------------
Net Cash Used In Operating Activities (1,125,451) (72,964)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of investment securities,
available-for-sale 503,363 2,386,296
Purchase of investment securities available-for-sale (991,900) (2,492,852)
Net increase in deposits in other financial institutions (297,000)
Recoveries on loans previously written off 22,786 49,583
Net loans made to customers and principal
collections of loans 3,430,063 2,913,925
Net decrease in leases to customers 98,897
Capital expenditures (140,182) (78,791)
Proceeds from sale of property, plant and equipment 22,386
Net decrease in other real estate owned 173,582 75,888
------------ ------------
Net Cash Provided By Investing Activities 2,723,098 2,952,946
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in demand deposits, NOW accounts,
savings accounts, and money market deposits 699,213 2,307,125
Net increase in certificates of deposits 2,430,174 1,851,271
Net decrease in federal funds purchased (3,700,000)
------------ ------------
Net Cash Provided By Financing Activities 3,129,387 458,396
------------ ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 4,727,034 3,338,378
CASH AND CASH EQUIVALENTS, Beginning of year 9,354,346 7,619,307
------------ ------------
CASH AND CASH EQUIVALENTS, End of quarter $ 14,081,380 $ 10,957,685
============ ============
</TABLE>
See accompanying notes to financial statements. Page 6 of 16
<PAGE> 7
VINEYARD NATIONAL BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
<TABLE>
<CAPTION>
March 31, March 31,
1998 1997
----------- -----------
<S> <C> <C>
RECONCILIATION OF NET INCOME TO
NET CASH PROVIDED BY OPERATING ACTIVITIES
Net Income $ 58,245 $ 52,907
----------- -----------
Adjustments to Reconcile Net Income/(Loss)
to Net Cash Provided by Operating Activities
Depreciation and amortization 146,218 120,732
Provision for probable credit losses 59,000 47,782
Increase/(decrease) in taxes payable (32,714) 36,000
(Increase)/decrease in other assets (695,377) 31,836
Decrease in unearned loan fees (485,513) (209,852)
Decrease in interest receivable (83,477) (89,027)
Increase/(decrease) in interest payable 13,760 (43,965)
Decrease in accrued expense and other liabilities (133,868) (20,434)
Loss on sale of other real estate owned 31,556
(Gain)/Loss on sale of investment securities (3,281) 1,057
----------- -----------
Total Adjustments (1,183,696) (125,871)
----------- -----------
Net Cash Provided By Operating Activities $(1,125,451) $ (72,964)
=========== ===========
SUPPLEMENTARY INFORMATION
Change in valuation allowance for investment securities $ 6,727 $ (2,675)
=========== ===========
</TABLE>
See accompanying notes to financial statements. Page 7 of 16
<PAGE> 8
VINEYARD NATIONAL BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
MARCH 31, 1998 AND 1997
NOTE #1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles 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, 1997. The results of
operations for the three month period ended March 31, 1998, are not necessarily
indicative of the results to be expected for the full year.
Effective for years beginning after December 31, 1996, the Company was required
to implement SFAS No. 125 "Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities," as amended by SFAS No. 127 "Deferral
of the Effective Date of Certain Provisions of FASB Statement No. 125",
establishing accounting and reporting standards for transfers and servicing of
financial assets and extinguishments of liabilities based on consistent
application of the financial-components approach. This approach requires the
recognition of financial assets when control is surrendered, and the
derecognition of liabilities when they are extinguished. Specific criteria are
established for determining when control has been surrendered in the transfer of
financial assets. Liabilities and derivatives incurred or obtained by
transferors in conjunction with the transfer of financial assets are required to
be measured at fair value, if practicable. Servicing assets and other retained
interests in transferred assets are required to be measured by allocating the
previous carrying amount between the assets sold, if any, and the interest that
is retained, if any, based on the relative fair values of the assets on the date
of the transfer. Servicing assets retained are subsequently subject to
amortization and assessment for impairment.
Effective for years beginning after December 31, 1997, the Company was required
to implement SFAS No. 130 "Reporting Comprehensive Income." This statement
establishes standards for reporting and display of comprehensive income and its
components (revenues, expenses, gains, and losses) in a full set of general
purpose financial statements. This statement requires that an enterprise (a)
classify items of other comprehensive income by their nature in a financial
statement, and (b) display the accumulated balance of other comprehensive income
separately from retained earnings and additional paid-in capital in the equity
section of a statement of financial position.
NOTE #2 - OTHER EXPENSES
The following is a breakdown of other expenses for each of the three month
periods ended March 31, 1998 and 1997:
<TABLE>
<CAPTION>
March 31, March 31,
1998 1997
-------- --------
<S> <C> <C>
Data processing $160,202 $171,609
Marketing expenses 95,371 104,343
Office supplies, postage and telephone 94,954 64,260
Professional expenses 166,565 103,037
Bank insurance and assessments 35,168 60,548
Other 130,037 119,761
-------- --------
Total Other Expenses $682,297 $623,558
======== ========
</TABLE>
Page 8 of 16
<PAGE> 9
VINEYARD NATIONAL BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 1998 AND 1997
NOTE #3 - EARNINGS PER SHARE
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.
Page 9 of 16
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
Vineyard National Bancorp (the "Company") is a one-bank holding
company. Its principal asset is the common stock of, and its principal
operations are conducted by, Vineyard National Bank, a National banking
association (the "Bank").
RESULTS OF OPERATIONS
The Company had net income of $58,245 for the quarter ended
March 31, 1998, as compared to $52,907 for the same period in 1997.
NET INTEREST INCOME
The principal determinant of the Bank's net results of operations is
its net interest income. Net interest income is the difference or "margin"
between interest earned on interest-earning assets, such as loans and investment
securities, and interest paid on interest-bearing liabilities, principally
deposits. The Bank's net interest income decreased approximately $101,300 or
6.5% in the three month period ended March 31, 1998, as compared to the same
period in 1997. The decrease was due primarily to approximately a $38,800
decrease in interest income and approximately a $140,000 decrease in interest
expense. The net change was substantially a result of decreases in loan volume
and other time deposits from March 1998 to March 1997.
Outstanding loans and leases decreased during the three month period
ended March 31, 1998, by approximately $3,060,000. During this period total
deposits increased by approximately $3,129,000. The deposit mix changed as
demand deposits increased by approximately $364,000, savings and NOW accounts
increased by approximately $415,000, money market accounts decreased
approximately $81,000, time deposits in excess of $100,000 decreased
approximately $117,000, and other time deposits increased approximately
$2,548,000. The net interest margin (net interest income expressed as a
percentage of interest income) was 72 percent for the three month period ended
March 31, 1998, as compared to 67 percent for the same period in 1997.
PROVISION FOR PROBABLE LOAN LOSSES
The Bank follows the practice of maintaining a reserve for potential
losses on loan and leases (the "Loan Loss Reserve" or the "Reserve") at an
amount which, in Management's judgment, is adequate to absorb potential losses
on total loans and leases outstanding. Losses on loans or leases are charged
against the reserve and the reserve is adjusted periodically to reflect changes
in the volume of outstanding loans and leases and increases in the risk of
potential losses due to a deterioration in the condition of borrowers, in the
value of collateral securing loans or in general economic conditions. Additions
to the reserve are made through a charge against income referred to as the
"Provision for Loan and Lease Losses".
During the three month period ended March 31, 1998, a provision of
$59,000 was made as compared to $47,782 for the same period in 1997. The net
charge-offs on previously granted loans were approximately $92,000 for the three
months ended March 31, 1998, as compared to $26,000 for the same period in 1997.
OTHER INCOME
The decrease of approximately $11,300 in other income in the three
month period ended March 31, 1998, as compared to 1997, was due primarily to the
decrease in fees and service charges.
Page 10 of 16
<PAGE> 11
OTHER EXPENSES
Other expenses, consisting primarily of (i) salaries and other
employee expenses, (ii) occupancy expenses, (iii) furniture and equipment
expenses, and (iv) insurance, data processing, professional fees and other
non-interest expense, increased by approximately $61,000 or 3.4%, during the
three month period ended March 31, 1998, as compared to the same period in 1997.
The increase in other expenses was primarily a result of increases in equipment
and professional services expense.
FINANCIAL CONDITION AND LIQUIDITY
During the three months ended March 31, 1998, the Company's assets
increased by approximately $3,059,000 or 2.7%, compared to December 31, 1997.
The Company continued to have adequate cash resources with approximately
$6,428,000 of cash held on deposit at other financial institutions,
approximately $5,210,000 of investment securities, and $7,950,000 in Federal
Funds Sold at March 31, 1998. Liquidity was up and resulted in the increase in
cash and cash equivalents of approximately $4,727,000. The increased liquidity
resulted primarily from the decrease in total non-liquid assets, an increase in
total deposits and an increase in Federal Funds Sold. The Bank's investment
portfolio contains $2,000 of unrealized gains on estimated fair values when
compared to book values at March 31, 1998. The total loans placed on non-accrual
status (not generating income currently) amounted to approximately $67,000 at
March 31, 1998. All loans on non-accrual status are considered to be impaired.
Total shareholders' equity increased from approximately $8,267,000
at December 31, 1997 to $8,331,000 at March 31, 1998, as a result of net income
generated for the three months then ended and an increase in the valuation
allowance for investment securities.
The Company's and the Bank's primary regulators, the Federal Reserve
Board, and the Office of the Comptroller of the Currency, respectively, 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, respectively. Further, the Federal Reserve
Board and Comptroller 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 March 31, 1998, the Company
had a ratio of capital to risk-weighted assets of 9.42%, a ratio of Tier 1
capital to risk-weighted assets of 8.73%, and a leverage capital ratio of 7.39%.
The Company's management believes that, under current regulations, the Bank will
continue to meet these minimum capital requirements in the foreseeable future.
Page 11 of 16
<PAGE> 12
NON-PERFORMING LOANS
The following table sets forth information regarding the Bank's
non-performing loans at March 31, 1998 and December 31, 1997.
<TABLE>
<CAPTION>
March 31, December 31,
(Dollars in Thousands) 1998 1997
---------- ----------
<S> <C> <C>
Accruing Loans More Than 90 Days Past Due(1)
Aggregate Loan Amounts
Commercial, financial and agricultural $ 94
Real estate $ 109
Installment loans to individuals 38 107
---------- ----------
Total Loans Past Due More Than 90 Days 132 216
---------- ----------
Renegotiated Loans(2) -- --
---------- ----------
Non-accrual Loans(3)
Aggregate Loan Amounts
Commercial, financial and agricultural 28
Real estate 67 201
---------- ----------
Total Non-accrual Loans 67 229
---------- ----------
Total Non-Performing Loans $ 199 $ 445
========== ==========
</TABLE>
(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 which have been renegotiated to provide a
deferral of interest or principal. The Bank had no renegotiated loans during
1998 and 1997.
(3) There was one loan on non-accrual status totaling approximately $67,000 at
March 31, 1998, and four loans totaling approximately $229,000 at December 31,
1997.
The policy of the Company is to review each loan in the loan
portfolio to identify problem credits. In addition, as an integral part of its
review process of the Bank, the Comptroller also classifies problem credits.
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 March 31, 1998, the Bank's classified loans consisted of
approximately $1,737,000 of loans classified as substandard. The Bank's
$1,737,000 of loans classified as substandard consisted of approximately
$1,538,000 of performing loans and approximately $199,000 of non-accrual loans
and loans delinquent 90 days or more but still accruing.
Page 12 of 16
<PAGE> 13
RESERVE FOR PROBABLE LOAN AND LEASE LOSSES
The reserve for probable loan and lease losses is a general reserve
established by Management to absorb potential 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 and lease portfolio and, at March 31, 1998,
reflected an amount which, in management's judgment, was adequate to provide for
known and inherent loan losses. In evaluating the adequacy of the reserve,
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. In addition, the Comptroller, as an integral
part of its examination process, periodically reviews the Bank's allowance for
possible loan and lease losses. The Comptroller may require the Bank to
recognize additions to the allowance based upon its judgment of the information
available to it at the time of its examination. The Bank was most recently
examined by the Comptroller as of September 30, 1997.
The reserve for probable loan and lease losses at March 31, 1998,
was approximately $661,000 or .77% of total loans and leases, as compared to
$695,000 or .78% of total credits at December 31, 1997. Additions to the reserve
are effected through the provision for loan and lease losses which is an
operating expense of the Company.
The following table provides certain information with respect to the
Company's allowance for loan losses as well as charge-off and recovery activity.
<TABLE>
<CAPTION>
March 31, December 31,
(Dollars in Thousands) 1998 1997
---------- ----------
<S> <C> <C>
Allowance For Loan Losses
Balance, Beginning of period $ 694 $ 728
---------- ----------
Charge-offs
Commercial, financial and agricultural 38 34
Real estate mortgage 14
Consumer loans 77 309
---------- ----------
Total Charge-offs 115 357
---------- ----------
Recoveries
Commercial, financial and agricultural 1 18
Real estate mortgage 6
Consumer loans 22 156
---------- ----------
Total Charge-offs 23 180
---------- ----------
Net Charge-offs 92 177
---------- ----------
Provision Charged to Operations 59 144
---------- ----------
Balance, End of period $ 661 $ 695
========== ==========
Net Charge-offs During the Period to Average Loans
Outstanding During the Period Ended 0.03% 0.19%
========== ==========
Allowance For Loan Losses to Total Losses 0.79% 0.78%
========== ==========
</TABLE>
In accordance with SFAS No. 114 (as amended by SFAS No. 118),
"Accounting by Creditors for Impairment of a Loan," those 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.
Page 13 of 16
<PAGE> 14
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits: Data Schedule
b) Reports on Form 8-K: None
Page 14 of 16
<PAGE> 15
SIGNATURES
Pursuant to the requirements of the Security 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 12th day of May 1998.
VINEYARD NATIONAL BANK
By: /s/ Soule Sensenbach
-------------------------------
Soule Sensenbach
Corporate Secretary
Page 15 of 16
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE MARCH 31, 1998
UNAUDITED FINANCIAL STATEMENTS OF VINEYARD NATIONAL BANCORP AND SUBSIDIARY AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 6,131,380
<INT-BEARING-DEPOSITS> 297,000
<FED-FUNDS-SOLD> 7,950,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 5,209,863
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 86,054,351
<ALLOWANCE> 661,128
<TOTAL-ASSETS> 114,569,754
<DEPOSITS> 104,870,743
<SHORT-TERM> 0
<LIABILITIES-OTHER> 1,367,536
<LONG-TERM> 0
0
0
<COMMON> 2,106,258
<OTHER-SE> 6,225,217
<TOTAL-LIABILITIES-AND-EQUITY> 114,569,754
<INTEREST-LOAN> 2,139,977
<INTEREST-INVEST> 65,679
<INTEREST-OTHER> 71,675
<INTEREST-TOTAL> 2,277,552
<INTEREST-DEPOSIT> 627,423
<INTEREST-EXPENSE> 627,423
<INTEREST-INCOME-NET> 1,650,129
<LOAN-LOSSES> 59,000
<SECURITIES-GAINS> 3,281
<EXPENSE-OTHER> 1,872,452
<INCOME-PRETAX> 97,245
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 58,245
<EPS-PRIMARY> 0.03
<EPS-DILUTED> 0.03
<YIELD-ACTUAL> 6.60
<LOANS-NON> 67,000
<LOANS-PAST> 132,000
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 1,737,000
<ALLOWANCE-OPEN> 694,880
<CHARGE-OFFS> 115,538
<RECOVERIES> 22,786
<ALLOWANCE-CLOSE> 661,128
<ALLOWANCE-DOMESTIC> 661,128
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
