Seeking to shore up its finances, federal regulators have ordered Vineyard National Bank of Corona to stop accepting so-called hot-money deposits that are considered too risky for the money-losing bank.
Vineyard is among the growing group of Southland lenders battered by a wave of housing defaults, including mortgage giants Countrywide Financial Corp., which was acquired by Bank of America in January, and IndyMac Bancorp, which failed last month and was taken over by regulators.
Vineyard, with 16 branches, has been crunched by giant losses suffered by home builders and developers. In its quarterly report Wednesday, the bank said the Office of the Comptroller of the Currency had ordered it not to accept or renew any brokered deposit accounts -- one in a series of measures designed to improve the bank's stability.
The brokered deposit accounts are known as hot-money accounts because they are arranged through financial intermediaries and chase the highest-yielding certificates of deposit. They are considered unstable because of their high cost and the fact that they can quickly be shifted to other institutions offering higher rates.
The regulators' conditions also include a requirement to find "experienced and competent individuals" as chief executive and chief credit officer. Vineyard fired its CEO in January.
Vineyard has nearly $2 billion in deposits, with branches in Orange, Los Angeles, Marin, Riverside, San Bernardino and San Diego counties.
Despite troubles with loans to builders in the Inland Empire and developers in downtown Los Angeles, executives say the bank's main business -- financing luxury beach homes in Southern California -- has so far held up well.
Its parent company, Vineyard National Bancorp, said Wednesday that it lost $62.5 million in the second quarter. That amount, far greater than analysts had foreseen just a week ago, follows losses totaling $70 million in the two previous quarters.
The parent company and the bank have been placed on a list of problem institutions by their respective regulators, the Federal Reserve and the Office of the Comptroller, which is part of the Treasury Department.
Interim CEO James G. LeSieur said the company already was complying with the regulators' demands by cutting back lending, especially for housing tracts, and trying to reduce its dependence on high-cost deposits by establishing traditional relationships with depositors. He emphasized that the bank continued to "work diligently" to maintain its lower-cost deposits.
