Calif. Bank Needs Capital (Update)

Updated from 1:46 p.m. EDT

Vineyard National Bancorp (VNBC) stated late Monday that it would need to raise capital and find new sources of liquidity to continue operating through 2008.

Shares closed down 44% at $1.08 Tuesday.

The $2.4 billion Rancho Cucamonga, Calif., holding company reported a net loss of $67.9 million for the second quarter, mainly resulting from a $40.5 million provision for loan losses, as nonaccruing tract construction loans mounted. This followed a first-quarter loss of $13.3 million.

Vineyard's main subsidiary is Vineyard Bank, NA, which had total assets of $2.3 billion as of June 30. According to its preliminary Federal Deposit Insurance Corporation call report for the second quarter, as provided by Highline Financial, on Aug. 12, the bank remained well-capitalized as of June 30, with a leverage ratio of 8.28% and a risk-based capital ratio of 10.03%.

However, according to Monday's second-quarter 10-Q filing by the holding company, the bank is no longer considered well-capitalized "as a result of the issuance of the Consent Order, among other things."

The bank entered into the consent order with its regulator, the Office of the Comptroller of the Currency, on July 22. The consent order established time frames for the hiring of new executives and included stipulations to preserve capital, such as only paying dividends with prior permission from the OCC and limiting loan growth. The consent order also required that the bank diversify its loan portfolio, improve its loan review and loss-mitigation capabilities and maintain sufficient liquidity "to sustain current operations and withstand anticipated or extraordinary demand."