Sonoma Valley Bank takeover leaves many questions
Westamerica had the three branches open with banners the next day.
In spite of intensive efforts to stave off forced bankruptcy, the directors of Sonoma Valley Bank were surprised and puzzled when FDIC auditors swarmed into the bank’s three branches on Friday, Aug. 20, and shut them down. The bank’s assets were promptly sold to Marin-based Westamerica Bank for $5 million. All three branches opened up under the Westamerica logo the following day.
Deposits are covered by the Federal Deposit Insurance Corporation, at least up to $250,000. Stockholders, however, have lost almost all their equity, with shares of Sonoma Valley BankCorp selling for $0.05 a share as of press time. Over 1,300 people, mostly local, owned those shares, which at one time sold for over $30.
The bank has been in financial trouble for nearly a year, after Federal regulators required the bank to revise its Third Quarter 2009 financial statement and transfer $22 million from capital to reserves to cover restated potential loan losses. Stock prices tumbled in February and did not recover, even after the bank posted a $2.2 million gain last quarter.
Barry Shone was both a stockholder and customer of Sonoma Valley Bank.
“When I worked at Shone’s Country Store, I used to say if I could do my banking (in Glen Ellen), I’d never leave. It was perfect. I was a stock holder and I’ve lost money. I come from a family that believes in local business and this comes as a blow to the community in that respect. The bank has been there to support my family from a personal and business perspective. I had a small vineyard management business we started with a home equity startup loan. It was easy. We were new to business and they walked us through the process. I don’t know if you are going to get that kind of service.”
Shone’s concern is on everybody’s mind: Will the branches stay open, will their employees keep their jobs, and will Westamerica continue to work closely with local businesses in these tough economic times?
Sonoma Valley Bank (SVB) is the only bank in Glen Ellen and has served business and townspeople alike in the north end of the Valley. The Kenwood Press has done business with Sonoma Valley Bank since 1995.
Pam and Bob Wagner have had their Glen Ellen Veterinary Hospital account at SVB for over 20 years.
“We banked there since it opened,” Pam said. “We hope that they stay. They are an integral part of our business. Our fear is that we are a small town and may not be able to support a big bank.” She said the new operators have been very kind.
“Sonoma Valley Bank has been fabulous to us, supportive, kind and covering any issues we’ve had. It was very personal service, above and beyond. Everybody loved that bank and still loves everybody who works there. I walk in and they say, ‘Hi, Pam.’ They know your name. It’s very special to have the tellers they have there who assist.”
Sonoma Valley Bank was a wholly owned subsidiary of Sonoma Valley BankCorp. The bank was founded by well-respected local business people in 1988, including Mel Switzer, Bob Nicholas, Suzanne Brangham, Dale Downing, Valerie Pistole and Bob Hitchcock, who encouraged early depositors to buy bank shares, offering 10 shares for $100 dollars and free checking.
Over the years, many people made money with those investments. Bank directors and officers held about 16 percent of the total shares, with most of them continuing to buy stock until this summer. No one bailed out.
The bank operated branches in Sonoma, Boyes Hot Springs, and a storefront at the Glen Ellen Market, which has been operating half days since 2007.
SVB’s directors have taken exception to the earnings restatement last year that required moving $22 million out of operating capital and California banking regulators insisting on their coming up with an additional $20 million in less than nine months.
SVB was a state chartered bank and it was the California Department of Financial Institutions (DFI) that ordered it closed and appointed the FDIC as receiver. The bank had approximately $329 million in total assets.
Westamerica bought only the Sonoma Valley Bank assets, but not those of the holding company, Sonoma Valley BankCorp, which issued the shares owned by the public.
SVB’s CEO and other directors have taken issue with the state’s insistence that it raise so much money in so little time. CEO and President Sean Cutting is on record saying that the bank had good potentials for finding the money within a reasonable period of time. In an Aug. 26 opinion piece in the Santa Rosa Press Democrat, Cutting – and the rest of the directors – said they firmly believed they could have resolved all the DFI’s issues by the end of this year.
Westamerica is headquartered in San Rafael and has $4.7 billion in assets. It is a regional community bank with over 90 branches and two trust offices in 21 Northern and Central California counties. It is a wholly owned subsidiary of Westamerica Bancorporation.
Rob Thorson, Chief Financial Officer of Westamerica, said in a press release that the entire SVB bank staff would be interviewed by Aug. 27. So far, results of those interviews are unavailable. He also said there were no plans to change the number of branches.
“It’s sad because you don’t know if they are going to stay there,” Roseann Fanucchi, owner of Roseanne’s Haircutting, said. “All those people may lose their jobs, or be fired and rehired. I’ve been banking there for 20 years and never had any bumps in my banking.”
Email: jay@kenwoodpress.com
