Thumbs down: A big settlement with no admissions in Sonoma Valley Bank collapse

It’s a familiar scenario: Federal regulators seize an insolvent bank and sell its assets, file a complaint and eventually negotiate a multi-million settlement, with no one admitting responsibility for the bank’s failure, the associated losses for its shareholders or the cost of protecting insured deposits. Sonoma Valley Bank is the latest example.

With losses mounting from nonperforming commercial real estate loans and having failed to find new investors, the bank was shut down in 2010 with its remaining assets sold to Westamerica Bank. Shareholders lost an estimated $70 million and the federal government, which had given bailout money to the bank, lost $20 million, according to news accounts.

As Staff Writer Paul Payne reported, three former bank officers have agreed to a $5.4 million settlement with the Federal Deposit Insurance Corp., which initially asked for $12 million. No one admitted any wrongdoing, but two of the former bank officers are awaiting trial in a criminal case involving $55 million in bad loans that contributed to the bank’s demise.