Three community banks owned by Capital Bancorp plan to merge into a single entity and reduce staffing by a third, or 20 workers, according to local banking industry sources.
Scott Andrews, Capital Bancorp’s California regional president, said he was unable to comment on the consolidation of the three: the Bank of Escondido, Point Loma Community Bank and Sunrise Bank of San Diego.
“We have no comment at this time,” said Andrews, who is also chairman of Point Loma Community and Sunrise banks.
Rick Levenson, president of Western Financial, a private investment firm that specializes in community banks, said he had heard news of the merger, and noted that the move would reduce costs.
“Instead of having to pay the salaries of three CEOs and three chief financial officers and three chief credit officers, you’d have to pay for only one,” Levenson said. “It makes sense in this environment to do what they appear to be doing.”
Capital Bancorp, based in Lansing, Mich., and Phoenix, with $5.7 billion in assets, operates a holding company that owns 51 percent majority stakes in community banks in 17 states. This year, Capital announced similar consolidations of local banks in Arizona, Washington, Nevada and Michigan as it struggles to deal with escalating problem loans.
For the first six months of this year, Capital Bancorp reported a net loss of $34.4 million compared with a net profit of $2.8 million for the first half of 2008.
For the first half of this year, the three San Diego County banks under the Capital umbrella, which have an aggregate of $265 million in assets, reported a combined net loss of $2 million, compared with a combined net profit of $456,000 for the first half of 2008, according to call reports filed with the Federal Deposit Insurance Corp.
Calls Not Returned
Two of the presidents of the affected banks didn’t return calls and a third declined to answer questions and said Andrews was handling the matter.
Like nearly all lenders, the local banks had to put aside higher amounts into their reserve balances to cover actual and potential losses from defaulting loans.
Despite the losses, all three banks enjoy above average capital ratios, a key measure of a bank’s safety. As of June 30, the total risk-based capital ratios at all three were above 12 percent, meaning all were considered well-capitalized.
A consolidation by the three banks is clearly a way to cut their labor costs, and could result in 20 staffers being laid off from a combined head count at the three banks of 65 employees, sources said.
At Sunrise Bank, the single-office bank already reduced employment from 25 to 19 workers, according to the most recent FDIC report.
Last month, Capital Bancorp announced consolidating four separate banks in the Las Vegas area into the Bank of Las Vegas. Capital also announced a similar merger of four banks in the Seattle region into a single entity called the Bank of the Northwest, and four lenders in the Phoenix area into Sunrise Bank of Arizona.
“Each one of those banks is struggling, and they were unsuccessful in their attempt to sell the banks,” a source said. “This is an obvious way for them to reduce the bleeding and right the ship.”
Under a proposed reorganization of the banks, Andrews would assume the title of chief executive, while Mike Peters, now CEO at the Bank of Escondido, would become the president. Tony Calabrese, chief executive at Point Loma Community Bank, and Randy Cundiff, chief executive at Sunrise Bank of San Diego, would become branch managers, a source said.
