A Virginia-based independent proxy advisory and voting firm backed the board of directors in the battle for control at Vineyard National Bank.

Proxy Governance Inc. released a study on the Corona-based bank and its power struggle between the current board of directors and recently deposed president and chief executive officer Norman Morales.

"What is compelling is neither side is a villain; both have strong arguments," said Chris Cernich, a senior research analyst for Proxy Governance.

"It could be that Morales is right, but on the balance of everything we see, we are recommending shareholders vote for the board strategy," he said.

It really comes down to how much shareholders believe the market has shifted and the strategy has shifted as well, Cernich said.

"The campaign by Morales and shareholder Jon Salmanson is not about shareholder rights, it is a transparent attempt by a former CEO to return to power with the help of his friends and associates," said James LeSieur, chairman and interim chief executive officer of Vineyard in a release that questions the experience of the alternative slate of directors proposed by Morales and Salmanson.

"Most of the proposed candidates have personal or business ties with Mr. Morales and lack the substantive background, ownership stakes or knowledge that one tends to find among independent, objective and effective stewards for the shareholders of a publicly traded financial institution," LeSieur said.

Proxy Governance's study compared Vineyard's performance with that of peer companies selected based on industry and market capitalization.

"It's hard to compare given the meltdown in the sector," Cernich said. "Even poor performance might be good in comparison to its peers."

The study showed that Vineyard's performance far exceeded its peers from the first quarter of 2003 up until the fourth quarter of 2004 in quarterly shareholder returns.

During that time there was great volatility with returns peaking as high as 45% and dipping as low as negative 10%.

"For the peers, they've actually performed pretty well over the same period of time," Cernich said. "They don't stand out as spectacular and they certainly aren't lagging."

Morales resigned from Vineyard on Jan. 23 after eight years following a disagreement with the board over strategy implementation.

Share performance began to decline in early 2006 and culminated with a sharp decline in mid-2007.

Following Morales' departure, Vineyard announced a net loss for 2007 of $51 million with $41 million consisting of write-downs.

"What it could suggest is that the strategy the bank had been on, going heavy into certain real estate, may not be as strong as it once was," Cernich said. "The same strategy Morales would like to continue."

"Some of the loans they have, they're going to have to suffer larger losses than they hadn't planned previously," he added. "Which is why they're increasing their provision for loan losses."

Despite siding with the bank, Cernich understands Morales' stance.

"Morales said -- and he's probably right -- that shareholders who bought into the company over the last few years bought into a strategy for what the bank could become and how it could become that," Cernich said. "To his credit, he wants to continue that strategy."

Proxy Governance in Vienna, Va., is an independent proxy advisory and voting firm that provides proxy analysis, voting and reporting services for large institutional shareholders.