Dedicated to Deposits: Deals, Data, and Discussion

Update on Vineyard Bank

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Vineyard Bank's troubles were reported yesterday in this LA Times article. Last week, Vineyard Bank issued this press release on the consent order issued by the Office of the Comptroller of the Currency. As part of this order Vineyard will no longer be accepting brokered deposits which are considered hot-money deposits.

I hope Vineyard can pull through. I've been reporting on their recent high yield CD specials. My last post was on July 24th when they started offering a 4.50% APY 6-month CD. This special continues, and now they are offering 4.50% APY for the 12-month term.

It appears these CD specials are working. Here's an excerpt from the article:
By emphasizing customer service and setting CD rates competitively, "our new deposit generation has been very good" and should help offset losses in brokered deposits, the bank's chief risk officer, Louie Couro, said in an interview.

However, one disturbing thing mentioned in the article is the amount of deposits that may be above the FDIC limits:
Vineyard estimated that about $660 million of its nearly $2 billion in deposits are above those standard insured limits.

I suppose some of this money may be covered by PODs (see post), but it's likely that many people may still be over the FDIC limits.

Thanks to the reader who emailed me this news article.

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Comments
10 comments.
Comment #1 by Anonymous posted on
Anonymous
I opened a 6-month CD with them last week. While the bank employee I interacted with was friendly, the account-opening process was horribly inefficient -- I was the only customer in the bank when I walked in, and it took 45 minutes to get the CD set up. They would be well off to allow customers to open accounts online, even if they still required a branch visit to fund the account.

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Comment #2 by Anonymous posted on
Anonymous
In the condition they're in, they would be well advised to market their CDs nationwide and allow online applications and funding. It is amazing to me that they could be so asleep at the switch on this. However, with the OCC forbidding brokered deposits, that means that this insitution is probably no longer considered "well capitalized" -- which is an ominous sign. Speaking of being asleep at the switch, the levels of noninsured deposits at this institution is shocking considering the bank's financial condition. I am amazed that account holders are so cavalier when it comes to putting their money at serious, yet 100% avoidable risk.

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Comment #3 by Michael (anonymous) posted on
Michael
I have a friend who has $250K in Vineyard's money market account.

It is a single account, so he was not insured over the $100K.

I called and screamed at him yesterday and told him to run to Vineyard and get the account changed to a POD account. He did.

Whew!

Wouldn't it be nice if the banks called all of their clients who have uninsured funds and advised them to get their **** in the bank to make the change?

Of course the banks won't do that for fear the clients will pull their uninsured funds out rather than simply adding PODs, etc.

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Comment #4 by Anonymous posted on
Anonymous
I think there should be a federal law requiring banks to send out a warning notice to each and every customer who has uninsured funds, and requiring those customers to: 1. sign a waiver allowing them to continue having money that is uninsured, 2. restructure their accounts with POD designees, 3. withdraw uninsured funds and transfer them to another institution. I know that many of you will say that this is the customer's responsibility, which it is; however banks are required to notify customers for any number of other things that affect their accounts, but not required to notify customers that their money is literally at risk of vanishing. This doesn't make sense. Furthermore, as easy as it seems to most of us to understand FDIC limits, there are a lot of people who just aren't very sophisticated when it comes to this stuff. I hate to think of little old ladies who have their $172,000 life savings in some savings account making 0.5% and seeing them lose $72,000 when their trusted bank fails.

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Comment #5 by Anonymous posted on
Anonymous
Michael, that was good advice you gave your friend; I have a strong feeling that you just saved him $150,000 from being lost! If I were you, I would go a step further and urge him to open up a couple of new accounts at other banks and ACH pull $150k elsewhere. That will save him from having to deal with FDIC red tape and having his funds temporarily frozen if Vineyard goes under.

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Comment #6 by Anonymous posted on
Anonymous
Caveat emptor is Latin for "Let the buyer beware".

So, tell all your friends Caveat emptor!


We opened a CD with them a couple of weeks ago. 6 months @ 4.5%. Best deal at the time! $20K deposited. We're very happy with Vineyard Bank. Have no qualms with them at all. If they fail, our $20K is fully backed up by FDIC.

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Comment #7 by Anonymous posted on
Anonymous
Everyone needs to get under the $100k limit IMMEDIATELY.

The following statement in Vineyard's most recent regulatory filing sums up the bank's dire condition: "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."

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Comment #8 by Anonymous posted on
Anonymous
There is a bank called Chino Commercial Bank that does advise their customers of FDIC limits and how to structure accounts so they are FDIC insured, even if they hold funds at other instutions. They also have CDARS accounts, which places your funds in CDs in amounts of $99,000 (allowing room for interest) in triple A rated banks and this way you are fully FDIC insured and you don't have to do the leg work by going to several different banks and you recieve one statement showing all CDs.
To help determine your banks stability you want to look at their equity anything below 5% is not a good sign and quarterly losses; losses quarter after quarter, again not a good sign. Don't assume bigger is better, when your small you have more control.

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Comment #9 by Anonymous posted on
Anonymous
BTW - Vineyards equity as of 6/30/08 was 1.30%

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Comment #10 by twoweeled (anonymous) posted on
twoweeled
I was in Manhattan Beach Vineyard once while I watch a woman take forever opening an account. However, it was not the fault of the bank person, but due to the endless questions, over and over again. The patience displayed by vineyard employees is beyond compare. The lady asking and inquiring has the nerve after about 1/2 an hour to ask, why is this taking so long? I wanted to call the cops and have her thrown out! Some people believe the world exist to service, only them, and nothing else in the world matters. I have seen nothing but understanding and concern from these employees. Do your research (on your own time)and make sure your insured. Then move on and let the rest of us finish what we need to do!

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