Positive numbers for bank as deadline looms

As a FDIC deadline to demonstrate improved financial health approaches, Sonoma Valley Bank reported increased capital levels and positive net income during the second quarter of 2010.

The bank posted quarterly earnings of $2.23 million for the three-month period, compared to a loss of nearly $1.48 million in the same quarter a year ago. The capital ratios improved approximately one percent.

The government said in May that major loses on unpaid loans had left the Sonoma Valley Bank with insufficient reserve ratios. The bank was formally directed to raise up to $20 million by August 15.

Despite the improving numbers, meeting the FDIC deadline will be difficult. According to statement released by the bank, “The ongoing challenges associated with the real estate market and extremely tight capital markets make it very difficult to find equity investors.”

The federal order also established criteria in certain risk categories. Progress towards those goals was made in the second quarter, the bank reported.
The bank added $2.3 million to its Allowance for Loans and Lease Losses leaving this important account at a healthy level of 4.8% of total loans, according to President Sean Cutting.

The bank remains focused on improving profitability and reducing expenses as well as seeking strategic alternatives and solutions laid out by FDIC regulators.
Significantly contributing to non-interest income during the quarter were voluntary terminations of participations in a Director Retirement program and a Supplemental Executive Retirement Plan. Certain current and former officers and directors of the company agreed to cancel their participation in the plans, the bank reported.

In other cost-cutting moves, the bank has frozen all officer and employee salaries, and eliminated bonuses.