Sonoma Valley Bank reports first loss in more than 10 years

Sonoma Valley Bank reported a $1.5 million loss Monday, its first in more than 10 years, the result of a decision to build up cash reserves in anticipation of ongoing loan losses.

The bank placed $4.25 million into its loan loss reserve during the second quarter, compared to $310,000 during the same period last year.

?This higher reserve level puts the bank in a better position to deal with impaired assets as they arise,? said Sean Cutting, president and chief executive of Sonoma Valley Bank.

The bank?s non-performing assets jumped to 4.1 percent ? compared to 0.25 percent last year.

The increase was primarily the result of two loans to a single developer, Cutting said. The loans were issued for a commercial construction project and a separate residential development project in Sonoma County, Cutting said.

The bank declined to identify the borrower.

?This one relationship accounts for over two-thirds of the total nonperforming assets,? Cutting said. ?The bank is pursuing all options available to collect the full amount owed.?

An $8.5 million infusion from the U.S. Treasury Department helped significantly. Bolstered by the federal funds, Sonoma Valley Bank?s total assets rose to a record $343 million at the end of the first quarter, a 12.9 percent increase from a year ago.

The bank increased its rating for total risk-based capital to 13.4 percent in the second quarter, up from 11.8 percent one year ago ? but down from 14.3 percent in the first quarter.

Banks with a rating over 10 are considered well-capitalized by regulators.

The federal government purchased stock in banks across the nation to stimulate lending and cover losses as the recession worsens. Two other banks based in Sonoma County have also received the federal funds: Exchange Bank took in $43 million and Summit State Bank received $8.5 million.

Loans net of reserves rose to $278 million, up 10 percent from a year ago, while deposits grew 7.1 percent to $262 million.