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Federal regulator orders Vineyard Bank to increase capital

SAN RAFAEL, Aug. 4. 2008 – Vineyard National Bancorp, headquartered in Corona in Southern California and with a branch in San Rafael, has been ordered by the Office of the Comptroller of the Currency to comply with strict new operational directives to make “organizational, financial, operational and compliance procedural changes to strengthen Vineyard.”

Under the order, the bank must put together a compliance committee to “monitor and coordinate compliance with the consent order, identify experienced and competent individuals to serve on a permanent full-time basis as chief executive officer and chief credit officer, maintain capital ratios above the statutory minimums, develop and implement a three-year capital program.”

Meanwhile, the bank’s loan loss reserve for the first quarter of 2008 rose to more than $48 million from about $21 million in 2007. Vineyard has assets of $2.4 billion. Observers said most of Vineyard’s problem assets are related to real estate lending in Southern California.

James LeSieur, board chair and interim CEO said, “I want to take the opportunity to assure our customers and employees that Vineyard's capital remains strong, exceeding adequate regulatory requirements, and its deposit accounts are insured by the Federal Deposit Insurance Corp. to the maximum amount permitted by law.”

Tuesday is the annual meeting of the bank where there will be a vote for the board of directors. The incumbent is being challenged by a new board, headed by former Chief Executive Officer Norman Morales, who resigned in January of this year.

“The incumbent board has proposed a compromise that would bring at least some of the other slate on the board,” said Jim Lucas, spokesperson for Vineyard Bank.

The incumbent board is opposing the effort.

"The potentially inadequate disclosures are a red flag warning to those who care about good corporate governance," said Mr. LeSieur, chairman and interim CEO. "The campaign by Messrs. Morales and Salmanson is not about shareholder rights – it is a transparent attempt by a former CEO to return to power with the help of his friends and associates."