Experts speculate on Vineyard Bank's future

Jul 12, 2009 (Inland Valley Daily Bulletin - McClatchy-Tribune Information Services via COMTEX) -- VNBC | Quote | Chart | News | PowerRating -- The fact that Vineyard Bank hasn't been bought by another bank or taken over by federal regulators has some banking specialists scratching their heads.

The bank's holding company, Corona-based Vineyard National Bancorp, has been flying under the radar since its common and preferred shares were delisted from major stock exchanges and bumped down to a penny stock exchange in April.

"I think the regulators have so many other issues right now that as long as the liquidity is decent, they're keeping banks like Vineyard open," said Joey Warmenhoven, banking specialist at Seattle-based investment firm McAdams Wright Ragen.

The Office of the Comptroller of the Currency has had Vineyard Bank under its watchful eye since mid-2008 -- and the holding company's regulator, the Federal Reserve Board, is keeping watch as well.

Several institutions on Warmenhoven's list of soon-to-fail community banks haven't been taken over by regulators or sold, which is odd, he says.

However, it doesn't mean their troubles have gone away.

"Just looking purely at the capital ratios and loan problems, I think they need a miracle," Warmenhoven said about Vineyard. "I think maybe the regulators haven't found anyone to take the branches and deposits. The other problem is that private equity isn't looking at banks like this."

Vineyard's troubles probably go further than is evident, according to Michael Natzic, senior vice president at Stone &

Youngberg LLC's office in Big Bear Lake.

He said Vineyard was the lead partner with other West Coast community banks in loan pools, where several institutions threw their money together to make big residential construction loans during the housing market boom.

That information doesn't have to be disclosed to shareholders, which means the full extent of the bank's problems probably go much deeper than what's been disclosed in its parent company's public filings, he said.

"If you look at smaller community banks out there that are having loan problems, the vast majority of those are in participation with Vineyard," Natzic said. "It's an interesting web."

Since Vineyard's first-quarter 2009 and annual 2008 reports were not filed with the Securities and Exchange Commission on time, what was filed in place of those reports are unaudited documents.

"You go through these periods of silence where there's zero information coming out on them," Natzic said. "I'm amazed we haven't heard anything on them."

Second quarter Federal Deposit Insurance Corp. call reports -- information on the financial health of individual banks -- are scheduled to be published on the FDIC's Web site between now and the first week in August.

"Even if one gets in to us at the end of July, it may be a couple of days before it's published," said FDIC spokesman David Barr.

The company's stock price took a nose dive from a peak of $32 during the housing market boom to less than $1 in October. The stock closed at 11 cents on Friday.

First Tennessee Bank -- a subsidiary of First Horizon National Corp., which received $866 million in TARP money -- has had several chances to foreclose on Vineyard Bank's stock, a move that could push Vineyard National Bancorp into bankruptcy.

The Corona holding company is almost one year delinquent on a $48million loan from First Tennessee.

Unaudited filings show the company had $168million in debt versus $3million in cash, and $337million in nonperforming loans, as of Dec. 31.

In April, it seemed the only option on the table was a proposed stock-purchase arrangement with an investor-backed Minnesota corporation formed by Douglas Kratz, a Vineyard National Bancorp board member.

The proposal would have sold Vineyard Bank for $18 million, as long as the investor corporation raised another $125 million in capital and injected $100 million of it into the bank, subject to regulatory approval.

Since then, the holding company hasn't said a word.

Vineyard executives could not be reached for comment.

For those still waiting for signs of life from the beleaguered company and bank, "the (FDIC) call report is going to come out," Natzic notes.

"It's probably more of the same (bad news)," he said. "I don't see any surprises."

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