SONOMA--Sonoma Valley Bancorp announced that its subsidiary, Sonoma Valley Bank, reported increased capital levels and positive net income results during the second quarter of 2010.

Earnings were $2.23 million for the second quarter compared to a loss of $1.48 million in the same last year. The total assets of the Bank declined by 1.6 percent to $337.1 million and deposits fell 2.5 percent to $255.5 million compared to the same period in 2009.

In May, Sonoma Valley Bancorp that Sonoma Valley Bank entered into an agreement with its regulators to continue taking actions to strengthen its financial condition and operations.

At the time, Sean Cutting, president and chief executive officer said the bank had been working closely with the FDIC and the California Department of Financial Institutions since January.

The agreement required 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.

At the end of the second quarter, the bank’s capital ratios improved approximately 1 percent compared to one quarter ago, with the Total Risk Based Capital Ratio, Tier 1 Risk Based Capital Ratio, and Tier 1 Leverage Ratio now standing at 6.6 percent, 5.3 percent, and 4.2 percent respectively.

Mr. Cutting reported the bank added $2.3 million to the allowance for loan losses, leaving the account at a level of 4.8 percent of total loans.

The company said it continues to remain focused on improving profitability and reducing expenses as well as seeking strategic alternatives and solutions laid out in the Consent Order it entered into in May.

A freeze has been placed on all officer and employee salaries and bonuses were eliminated.

"We want to thank our shareholders and customers for their continued strong support and confidence in our Company," said Mr. Cutting.