Vineyard National Bancorp (Nasdaq: VNBC) has been threatened with delisting of its shares from both the Nasdaq and American Stock Exchanges, the Corona-based bank has announced. The bank's failure to file financial statements for the quarter and year ended Dec. 31 on time prompted warning letters from the exchanges dated April 2.

Vineyard plans to appeal the Nasdaq staff determination letter and request a hearing with the exchange's regulators, according to a release. The bank will file a plan for returning to compliance with American Stock Exchange listing requirements. Those actions will forestall the delistings until final determinations are made.

According to a Form 12b-25 filed with the Securities and Exchange Commission on March 18, Vineyard was delayed in filing its annual report due to an internal review and assessment.

"As a result of the investigation, we were unable to sign off on the financial statements," said James LeSieur, Vineyard chairman and interim chief executive officer. "We expect to file the 10K in the near term and we believe in filing it, we'll take care of the issue."

The investigation pertains to internal violations of security policies, procedures and controls concerning the company's information technology function, and the impact, if any, of the violations on the company's internal audit function known as an IT review.

Executive turmoil

The warnings come as Vineyard is embroiled in a proxy fight for control of the company.

Vineyard's common stock is listed on the NASDAQ Global Select market. The bank's common shares have slipped since the proxy fight began. Shares were trading around $9 per share in early March and closed at $6.99 on April 7.

Vineyard's 7.5% Series D noncumulative preferred stock is listed on AMEX.

The bank's latest troubles came only days after two proxy advisory firms made recommendations in favor of the current board.

Glass Lewis & Co. is the latest proxy advisory firm to recommend that shareholders vote against the changes to the company bylaws backed by former Chief Executive Officer Norman Morales and shareholder Jon Salmanson.

"The amendment permits shareholders to nominate directors without any objective reason, which will produce neither a qualified board of directors nor a board that is more responsive to shareholders," The Glass Lewis report said. "The current proposed amendment is narrowly written and only services the purposes of the dissident shareholders."

Last week, Institutional Shareholder Services reported its recommendation that Vineyard shareholders vote against the changes as well.

"It wasn't a surprise, 90% of the time they side with the incumbents," Salmanson said. "We were not too upset about it."

"We believe that the proposed bylaw amendment could possibly require shareholders to vote on director election with insufficient time or information to assess the candidate," the ISS report said.

San Francisco-based Glass Lewis & Co. LLC is a research and professional services firm that assists institutions globally that have investment or financial exposure to public companies.

Institutional Shareholder Services in Rockville, Md. also provides proxy advisory services to institutional investors, mutual funds, and other fiduciaries worldwide.

Proxy Governance, a Virginia-based independent proxy advisor, sided with Vineyard's current board, citing its market strategy for the current economy.

"As we have maintained all along, the campaign by Morales and Salmanson is not about shareholder rights generally but is a transparent attempt by a former CEO to return to power with the help of his friends and associates," LeSieur said.