SONOMA — The Federal Deposit Insurance Corp. has issued orders barring two officers of the failed Sonoma Valley Bank from working in banking, levying civil money penalties against both men for what the regulator called “a pattern of misconduct” involving “violations, reckless unsafe or unsound banking practices, and breaches of fiduciary duty,” according to an announcement by the FDIC.
Sean Cutting, president and CEO of the former bank, and Brian Melland, a loan officer, both waived their rights to a hearing of the alleged charges and consented to the penalties without admitting or denying any violations, according to the filing. Mr. Cutting was assessed a civil penalty of $10,000, and Mr. Melland was required to pay $2,500.
The orders, dated Dec. 20, do not specify the alleged violations, and do not attribute those actions as directly responsible for the closure of Sonoma Valley Bank. Yet those actions were considered to have damaged the bank and the interest of its depositors, demonstrating a “willful or continuing disregard for the safety or soundness of the bank,” according to the orders.
San Rafael-based Westamerica Bank assumed control of the 22-year-old Sonoma Valley bank in an FDIC-assisted acquisition on Aug. 20, 2010. The bank had three branches in Sonoma County, total assets of $337 million and $255.5 million in deposits.
Sonoma Valley Bank came under intense regulatory scrutiny in early 2010, including the FDIC’s determination on Feb. 1 that the bank was “undercapitalized” and a related order to develop a sufficient capital restoration plan.
Regulators reviewed the bank’s portfolio, and soon advised Sonoma Valley Bank to retroactively expand its reported losses for the third quarter of 2009 from $495,000 to $19 million. Those losses equaled $8.75 per share, up from 70 cents.
In an announcement of the revision, Mr. Cutting said that the losses were related to “a small number of relationships” and the declining value in commercial real estate collateral.
The FDIC ultimately rejected the bank’s capital restoration plan, and took further control through a supervisory action issued April 13, 2010.
Mr. Cutting joined Rabobank, N.A. as a senior relationship manager after the closure of Sonoma Valley Bank, helping to develop client relationships in the Sonoma Valley area. He left the bank in 2012, according to a bank spokesman. Mr. Melland had joined Sonoma Bank, and left in Aug. 2011, according to a spokeswoman.
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