While officials of Sonoma Valley Bank work to meet a federal mandate to raise up to $20 million in new funding, it’s business as usual for day-to-day customers. But while deposits are insured by the Federal Deposit Insurance Corporation (FDIC), the future of the bank itself depends on an infusion of capital.
“Regulators are being very aggressive,” Cutting said. “They did it to the large banks, now they’re looking at the small banks. Hundreds, if not thousands of banks around the country.”
Sonoma Valley Bank reportedly has suffered major loses on unpaid development and construction loans. Last July, it announced its first loss in 10 years. As the economy contracted, so did bank equity, which ultimately fell below the government threshold.
Cutting said the bank acknowledged its predicament in March with a capital restoration plan. On April 13, the FDIC formally directed the bank to find new money. Although a limit of thirty days was part of that order, Cutting said the bank is working with regulators on a more realistic goal of several months.
“It’s a slow and deliberate process,” he said. “We are working out a timeline to show infusion of equity.”
Cutting said that partnering with another financial institution is a realistic option. “We like being independent. The desire is to remain an independent community bank. That’s our goal.” Then again, he said, the board of directors would be negligent in refusing a generous offer. “The board must do what’s in the best interest of the shareholders.”
Regardless of how many new investors buy into the company, “the ownership structure will change, that’s a fact,” Cutting said. “But banks don’t close. It just doesn’t happen.”
Traded publicly as Sonoma Valley Bancorp, shares are selling now at around $2. The price was around $15 last summer.
Bank customers have not received any statement or update on the FDIC situation. ‘It’s kind of a catch-22,” Cutting said. “We don’t want to be evasive, but as a publicly traded company, we’re kind of in a black-out period as to what we can release.”
The bank will make a public and detailed statement, including earnings information, very soon, Cuttings said.
