IndyMac’s long shadow falls on Corona’s Vineyard Bank

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From Times staff writer E. Scott Reckard:

IndyMac Bank’s failure in July was expected to make matters worse for other ailing banks by spooking depositors. We’re now seeing that that wasn’t idle speculation.

Vineyard National Bancorp of Corona said Monday that housing-related losses and depositors’ withdrawal of funds after IndyMac’s collapse have cast doubt on its future and it must raise substantial amounts of capital to continue operations through this year.

A community bank with $1.8 billion in loans and $1.9 billion in deposits as of June 30, Vineyard had specialized in financing home builders. To fund its loans the bank relied on high-yielding certificates of deposit.

In its quarterly filing with the Securities and Exchange Commission on Monday, Vineyard said that ‘negative publicity relating to our financial results and the financial results of other financial institutions, together with the seizure of IndyMac Bank by federal regulators in July, has caused a significant amount of customer deposit withdrawals.’

The result, the company said, is ‘affecting our liquidity and our ability to meet our obligations as they have come due.’ It said that ‘significant additional sources’ of funds were needed to continue operations through 2008 and beyond.

As The Times reported last week, bank regulators have classified Vineyard and its operating subsidiary, Vineyard Bank, as troubled and have imposed a series of restrictions on operations.

‘Based on their assessment of our ability to continue to operate in a safe and sound manner, our regulators may take other and further action, including assumption of control of the Bank, to protect the interests of depositors insured by the FDIC,’ Vineyard said in its filing.

Vineyard’s shares fell 8 cents to a seven-year low of $1.92 before the filing. The price has plunged 49% since the end of June.

Newport Beach-based Downey Financial Corp. on Monday also said it suffered deposit outflows in July, but Downey said about 40% of that money has since returned. See this earlier post.