Vineyard National Bancorp in “troubled condition”

It was an interesting experience delving into Vineyard National Bancorp’s 10-K annual filing today.  If you don’t know what you’re looking for, you might pass up important information while getting lost in financial jargon.

You can find the 148-page Securities-and-Exchange document at:

Check out my story on the business tab of our web site, or look at it right here: “Bank’s problems mount.”

Bank’s problems mount

Holding company expecting poor Fed characterization

Matt Wrye, Staff Writer


Perhaps it’s the best way to describe Corona-based Vineyard National Bancorp, the holding company for Vineyard Bank, which has 15 branches in Southern California.

Besides, that’s how the all-knowing Federal Reserve Board expects to describe the bank in the future – in a “troubled condition” – according to the company’s 148-page annual 2007 report.

It’s a rare phrase, only used for banks mired by mounting losses.

Vineyard is so troubled that it’s on the hunt for money to satisfy regulatory requirements. The bank’s connection with the Inland Empire’s real-estate mess is emerging as it reports millions of dollars in loan losses.

On May 1, the bank said it was talking with one party about a capital infusion.

“Such discussions are ongoing,” the report says.

But the money may not be available when needed, the report says. And even if it’s available, a deal might not be on terms acceptable to Vineyard.

The story gets uglier.

Vineyard’s stock could be delisted from the NASDAQ exchange because the company didn’t file its 10-K annual report for 2007 on time. The late report was filed Monday.

Why the delay?

Vineyard has been juggling some hefty issues over the last six months, one of which is a proxy battle.

Former CEO Norman Morales is trying to gain control of the bank. He resigned in January but was then given the green light in April by an independent inspector to nominate his very own board-of-director candidates at the company’s upcoming annual meeting.

Some stakeholders expect Vineyard to announce its yearly meeting date this week.

But even if Morales board candidates are approved by shareholders, that team might not win approval of the Office of Comptroller of the Currency in Washington. The national bank regulator has the power to do this if it designates a bank as being in “troubled condition,” which it’s already done to Vineyard.

Investor Jon Salmanson, who is helping Morales in his proxy contest, could not be reached for comment.

The proxy battle is only the half of it.

Vineyard announced Friday the termination of its executive vice president and chief lending officer, Michael Cain, while also eliminating the position of chief lending officer.

Experts disagree over whether Vineyard is looking to be bought out by another holding company or looking for a private equity firm to come to its rescue.

But in the meantime, the bank has hired a financial adviser to help it explore options for raising capital.

The bank reported so much in loan losses over the last two quarters that it’s suspending stock dividends “for the foreseeable future,” according to the May 1 financial statement. Vineyard doesn’t satisfy certain asset-to-liability ratio requirements under California law.

For 2007, Vineyard made a loan loss allowance of almost $49million – more than double its allowance for 2006 and more than triple for 2005.

Vineyard also said it had $142million in “substandard loans” for 2007. It means there’s a possibility the bank will take a loss on some of those loans “if the deficiencies are not corrected,” the report says.

Recently, the bank reported a first-quarter loss of $16.6million because of a $26.9million loan-loss provision for construction loans originated between 2005 and 2007.

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