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A steady stream of customers and shareholders filtered through Sonoma Valley Bank on Monday, asking regulators why they closed the bank and reopened it under the ownership of Westamerica Bank.

"It appears that not all shareholders were well informed about the condition of the bank," said Gordon Talbot, a spokesman with the Federal Deposit Insurance Corporation who was on hand to answer their questions.

While many customers were stunned by the bank's seemingly sudden closure on Friday night, its demise followed nearly a year of heavy scrutiny by federal regulators.

Sonoma Valley Bank had been forced by regulators to drastically restate how much it lost during the real estate downturn, and twice missed deadlines to raise additional money to meet federal guidelines.

The closure left some bank executives grumbling that regulators were overly aggressive and did not give them enough time to recover from the financial wounds received when a handful of large real estate loans soured with the economy in 2009.

Talbot said the government couldn't give the bank more time. The government had to take action, Talbot said, after Sonoma Valley Bank executives failed to raise about $20 million needed to meet federal guidelines — first failing to meet a May 13 deadline and then failing to meet an Aug. 15 deadline.

"Any bank that has run out of capital has effectively failed," Talbot said. "If a bank that doesn't have enough capital is allowed to continue operating, that means an undercapitalized bank is operating in the community. Ultimately that erodes confidence in banking in general."

Yet some banks with worse capital ratios are allowed to continue operating by regulators, said Philip Van Doorn, a senior banking analyst for TheStreet.com.

"Most of the banks that failed recently had lower capital ratios," Van Door said. "But I don't know if there is any basis for saying the FDIC was hasty."

Van Doorn said that in the current economic climate it was nearly impossible for Sonoma Valley Bank to raise the money it needed to avoid being seized.

"Investors are better off buying a failed bank (from the government) than an operating bank," Van Doorn said. "That's why it is hard for a bank like Sonoma Valley to raise capital."

Earlier this year Van Doorn had forecast a bleak picture for the bank, predicting it was likely to be seized.

The FDIC'S decision to close Sonoma Valley Bank effectively wiped out the value of investors' holdings.

Sonoma Valley Bank stock plunged to 9 cents a share on Monday, down from $1.11 at the close of trading Friday before regulators shuttered the bank.

Many of the bank's customers were also shareholders. Since its inception in 1988, the bank had encouraged depositors to take an ownership stake in the bank. As a result, the bank had more than 1,000 shareholders — many local Sonoma residents.

The official government report outlining why regulators declined to give Sonoma Valley Bank an extension and instead shut down operations will be released by the FDIC Inspector General in the coming months.

Still, government actions over the last year provide a paper trail that details the increasing concerns bank regulators had about the management and financial health of Sonoma Valley Bank.

The first major indiction the bank was in trouble came earlier this year when bank executives were forced to massively restate their earnings from 2009.

The bank had originally reported a small loss of $358,000 for the quarter that ended Sept. 30.

But when state and federal regulators examined the bank's books last December, they strongly disagreed with the bank's accounting.

Regulators forced the bank to restate its losses for that period by a whopping $18.5 million. As a result, the bank ended the year with a net loss of $19.2 million.

Bank executives said the massive discrepancy was an honest difference of opinion about how loans and collateral should be valued, according to public documents filed with the Securities and Exchange Commission.

But privately executives said they thought regulators were overly aggressive in making the bank recognize losses, according to people close to the situation.

Regulators forced the bank to set aside an additional $22 million as provisions to primarily cover seven real estate loans made for commercial and construction projects, according to public filings.

The bank never recovered.

Regulators issued two warnings that the bank needed to raise money or find another institution to buy it. The first warning came in March, and the second in April.

No other Sonoma County banks have received similar warnings.

"It is unfortunate, especially for a great little bank like this," Talbot said. "But they were unable to meet the standard that every other bank in the country is asked to meet."