SONOMA — Regulators shut down troubled Sonoma Valley Bank on Friday, the first Sonoma County bank to collapse since the economic downturn began toppling financial institutions across the country in 2008.
Westamerica Bank, a well-heeled institution based in San Rafael, purchased all the deposits and most of the assets of Sonoma Valley Bank in a deal brokered by the Federal Deposit Insurance Corporation.
All three Sonoma Valley Bank branches will reopen today under the Westamerica name.
"There will be no losses to depositors," said Robert Thorson, chief financial officer of Westamerica Bank, who was in Sonoma on Friday night to meet with the bank's employees. "We will honor all the deposits."
Investors who owned shares of the bank's parent company, Sonoma Valley Bancorp, will likely not be so lucky.
"My broker said if they get taken over we're wiped out," said Joe Tonini, a shareholder of the bank. "I'm retired, and I was counting on that money. It's a shame."
Many customers of Sonoma Valley Bank were also shareholders.
The seizure shocked Tonini when he arrived late Friday night to withdraw money from the ATM machine.
"I'm totally disgusted," he said.
Dozens of sharply dressed federal regulators swarmed the bank's headquarters in Sonoma on Friday night to seize the bank and oversee its transition to new ownership.
"This all happens very quickly," FDIC spokesman Gordon Talbot said.
The takeover caught Sonoma Valley Bank employees by surprise earlier in the day when regulators told them the news in a companywide meeting hastily called by bank President Sean Cutting.
Cutting, who was told of the takeover Friday afternoon, declined comment Friday night.
But people at the meeting said federal regulators informed employees at about 6 p.m. that the bank had been seized. Cutting then addressed the tearful employees, thanking them for their hard work.
Founded in 1988, Sonoma Valley Bank operated three branches in Sonoma, Glen Ellen and Boyes Hot Springs.
It was one of eight banks shuttered on Friday, including three others in California: Butte Community Bank in Chico, Pacific State Bank in Stockton and Los Padres Bank in Solvang.
Regulators have now closed 118 banks across the country this year, on pace to break last year's high of 140.
Sonoma Valley Bank — the county's fifth-largest financial institution at the end of 2009 — found itself pushed to the brink of ruin late last year by a string of large losses.
When the real estate market tanked, several borrowers defaulted on loans for construction and commercial real estate projects. After regulators reviewed its books last year, the bank was required to write off those loans and set aside large loan-loss provisions in case other loans went bad.
The bank lost $19.2 million in 2009. It had been named on several national lists of undercapitalized banks, which led some to predict it would fail even after it received $8.7 million in government assistance, often referred to as TARP funds, in early 2009.
The bank posted a $2.2 million profit in the quarter ending June 30, but federal regulators wanted it to raise about $20 million from investors by Aug. 15 to meet critical capital requirements. The bank failed to do that.
Westamerica Bank paid the government about $5 million for Sonoma Valley Bank, according to the FDIC.