A proxy fight is brewing at Vineyard National Bancorp — and the antagonist is the Corona, Calif., company's former chief executive officer.
Norman Morales resigned as the $2.5 billion-asset Vineyard's CEO on Jan. 24, six days before it reported a $41.3 million loss for the fourth quarter. He remains Vineyard's largest individual shareholder.
In a Securities and Exchange Commission filing Monday, Mr. Morales and Jon Salmanson, another longtime shareholder, said they intend to nominate an alternative slate of directors, "led by Mr. Morales," at Vineyard's annual shareholder meeting in May. It is unclear how many of the seven board seats Mr. Morales is seeking, but one analyst said he may be trying to gain control of the board to be reinstated as the CEO.
In a brief interview Monday, Mr. Salmanson said neither he nor Mr. Morales would offer further comment.
At issue is the direction of Vineyard, which is heavily concentrated in construction and real estate lending.
The bulk of the fourth-quarter loss resulted from a $40.8 million goodwill writedown, but the company also took a $9.2 million provision for losses on its residential construction loans.
Its stock price has fallen more than 65% since early June, and the shares have been trading at around a six-year low. They rose 6.3% Monday, to close at $8.83.
But in the SEC filing, Mr. Morales said he believed "the correct course for the company is imbedded in the strategic plan which I have communicated to the investment community, including diversifying and growing our business, entrepreneur, and cash management lines in order to better balance our concentrations in real estate and construction lending."
James LeSieur 3rd, Vineyard's interim CEO, would not discuss its strategic plan in a brief interview Monday, nor would he address Mr. Morales' filing.
"At this point we've only had a cursory review" of the filing," Mr. LeSieur said. "We will evaluate it, and when the time is appropriate, we will move forward on what would be in the best interest of our shareholders."
Christopher Nolan, an analyst at Oppenheimer & Co. Inc., said Mr. Morales' resignation from Vineyard had taken him by surprise.
"Obviously, the company has been experiencing difficulties lately," Mr. Nolan said. "But at the same time, I think for Norman to come back and propose an alternate slate of directors means there is probably more to the story than possibly meets the eye."
Even though it is difficult to determine what happened with any certainty, he said, it is "very possible" the board forced Mr. Morales out.
"It struck me as a quick decision" by Vineyard's board, Mr. Nolan said. "It wasn't something where they had preparation or a backup plan."
If Mr. Morales, who became the CEO in October 2000, does return to the board, his deep institutional knowledge could be a "positive" for the company, Mr. Nolan said. "I think he's somebody that does understand the dynamics of the business and exactly what the issues at the company are.
But one risk is that a divisive figure could make the board dysfunctional, he said. "It also depends on how well he is able to get along with other board members. A board only operates by consensus."
Aaron Deer, an analyst with Sandler O'Neill & Partners LP, said it was not clear from the SEC filing how the objectives of Mr. Morales and Mr. Salmanson would differ from the strategy Vineyard's management team is currently pursuing.
"The interim CEO hasn't had a chance to set out on any objectives" in diversifying the balance sheet, Mr. Deer said. It has been "only been a month since Norm left the firm."
He said he believes Mr. Morales will propose his own slate of directors in an attempt to be reinstated as the CEO.
Mr. Morales and Mr. Salmanson said in their filing that they would seek shareholder approval to amend Vineyard's bylaws to permit the two shareholders, who together own 4.1% of the company, or any other shareholder to nominate an alternate slate of directors for the May shareholder meeting. Under Vineyard's current bylaws, the deadline for shareholders to submit nominations is five months before the annual meeting.
The two shareholders said they intend to file their written consents to the amendments and attempt to obtain the written consent of the owners of a majority of Vineyard's outstanding shares no later than April 25. Mr. Morales and Mr. Salmanson would then nominate a new slate of directors.
