BSD Bancorp Seeks to Turn Bank of La Costa Into Branch

BSD Bancorp is seeking regulatory approval to convert its wholly owned Bank of La Costa subsidiary into a branch of the Bank of San Diego, an action that could lead to a “handful” of Bank of La Costa’s 16 employees being laid off.

BSD Bancorp, which also owns American Valley Bank and Coast Bank, earlier this year sold Borrego Springs Bank to an investor group led by the bank’s chairman, Ray D. Innocenti, for $1.2 million.

The Bank of La Costa, which has one office on El Camino Real, would become Bank of San Diego’s sixth branch office if the conversion is completed. Regulatory approvals are expected in about 90 days, at which time the bank will eliminate its board of directors, BSD Bancorp President Vito J. Guarino Jr. said Tuesday.

Guarino said that the conversion was not driven by financial problems at Bank of La Costa, which has $27 million in assets. Rather, Guarino said, BSD’s board has determined that the minimum size of its banks should be between $50 million and $100 million in assets.

Bank of San Diego now has $170 million in assets, and Coast Bank and and American Valley Bank each have total assets of about $110 million. “Those are great sizes for us,” Guarino said.

Guarino acknowledged that the proposed conversion of Bank of La Costa and the sale of Borrego Springs Bank runs counter to the multibank holding company’s oft-stated goal of owning several distinctively different banks.

Financial industry analysts said that small banks and S&Ls; have realized that institutions with about $100 million in assets can achieve economies of scale that are not available to smaller institutions.

“I can understand what they’re doing, and why they’re doing it,” said Jeff Gottfredson, an industry analyst with Cruttendon & Co. in Newport Beach. “The change could help control costs.”

BSD Bancorp recently reported that third-quarter net income rose to a record $1.2 million, up 10% from the same quarter last year. The bank holding company reported earnings that rose by 34% to a record $3.4 million for the nine-month period ended Sept. 30, up from $2.6 million during the corresponding period the previous year.