SONOMA – Sonoma Valley Bancorp today announced that its subsidiary, Sonoma Valley Bank, has entered into an agreement with its regulators to continue taking actions to strengthen its financial condition and operations.

"Sonoma Valley Bank has been working closely with the FDIC and the California Department of Financial Institutions since January, 2010. On May 18, we entered into a Consent Order with our regulators that formalizes steps which are already under way and that we and our regulators feel are necessary to maintain the bank's financial health and its ability to provide high levels of service to our customers," said Sean Cutting, president and chief executive officer of Sonoma Valley Bank.

The agreement requires Sonoma Valley Bank to increase and to and maintain a Tier 1 Capital Ratio of at least 10 percent and  a Total Risk Based Capital Ratio of at least 12 percent by Aug. 15 of this year; to take specific actions to improve the quality of the bank's loan portfolio, including adoption of new policies and procedures to monitor risk in the loan portfolio, have and retain qualified management and prepare and submit quarterly progress reports while the order is in effect.

This comes just three months after the bank announced it would have to significantly expand its third-quarter and nine-month reported losses following a regulatory review of bank filings.

Federal regulators had advised the bank’s board of directors in February to expand loan and lease loss provisions because the value of underlying collateral had declined with the economy.

At the time, Mr. Cutting  said the problem largely comes from “a small number of relationships.”

Customer deposit accounts are unaffected by the regulatory agreement. Deposits remain fully covered by FDIC insurance to at least $250,000 per depositor.