Introduction to Encore Bank
The Encore Bank is a mid-sized bank whose main office is based in the state of Arkansas. The bank is primarily engaged in providing 1-4 family residential loans (mortgages) to its customers, but also provides commercial & industrial loans. The bank was founded in the year 1997. Encore Bank has been insured by the Federal Deposit Insurance Corporation since 1997 and the independent agency has provided insurance to the bank ever since. Mainly because of its relative size, geographic reach and presence, the bank is considered to be a community bank, instead of a national bank. Based on our estimates, we believe its asset base of $1,298 million ranks it in the 80th percentile of banks in the United States. Encore Bank is essentially a purely domestic bank from an operational standpoint. This is because the bank does not have offices outside of the United States. Within the U.S. the bank currently has 10 offices, all of which are located across multiple states in the country. As of this writing, the bank employed a total of 192 people.
Overview of the Bank’s Assets and Liabilities
The bank currently has total assets of $1,298 million, total net loans to customers of $993 million and total deposits outstanding of $1,021 million as of this writing. Domestic deposits currently represent (in terms of total size), 79% of the bank’s total assets, and 100% of the bank’s total deposits outstanding. Within these deposits 41% are insured based on the latest available information. Moving on to the components of the bank’s assets we can see that loans provided to customers represent 77% of the banks total assets. Of this amount, loans related to real estate activities comprised 80% of gross loans outstanding. Encore Bank has $197 million of outstanding 1-4 family residential loans (mortgages), which in total represents 20% of its loans outstanding. Loans to individuals and loans to commercial and industrial interests represent 0% and 18% of loans outstanding, respectively.
Contact Information For Encore Bank
- Main Office Address: 1801 Rahling Rd., Little Rock, AR 72223
- Website: http://www.bankencore.com
- Total Number of Branches: 10
- Total Number of International Branches: None
- Number of Employees: 192
- FDIC Certificate Number: 34562
- FDIC Community Bank: Yes
- FDIC Field Office: Little Rock
- Independent or Subsidiary Bank: Independent
- Federal Reserve ID Number: 2594240
- Bank Charter Class: SM
- Primary Regulator: FED
Encore Bank has total assets of $1,298 million which compares with $681 million in the prior year. This implies that over the past year, the bank’s asset base has shown an increase of 90.5%. Moving to the other side of the balance sheet, we see net loans of $993 million which compares with $433 million in the prior year. Therefore its clear that over the past year the bank’s net loans outstanding has reported an increase of 129.6%. Taking a closer look at the bank’s loan portfolio, we see that residential mortgages comprise 20% of the bank’s loan book. The bank has $197 million of residential mortgages outstanding, which compares with $105 million in the prior year. This implies an increase of 87.3% over the past year. In addition, the bank provides loans to commercial and industrial businesses, which represents 17.8% of its total lending and stood at $179 million based on the latest available information. The bank also provides loans for farm-related activities, which currently amounts to 0.9% of its total loan portfolio. Finally, the bank also engages in the provision of auto loans. These are loans provided to customers to help finance vehicle purchases. Auto loans represent 0.0% of the bank’s total lending.
Bank Liquidity and Funding
How a bank funds its activities is an important area to assess and monitor. As a depositor you want to make sure the bank is conservatively funded, and the same goes for customers. A large and growing deposit base is usually a good sign for a bank’s liquidity and funding. This is because customer deposits are often a cheap source of financing as many of those accounts do not pay interest or much interest. Looking at Encore Bank, they have total customer deposits of $1,021 million which over the past year has registered an increase of 111.7%. The average bank in the country has a loan to deposit ratio of approximately 82%. In comparison, Encore Bank has a loan to deposit ratio of 97% which is above the average. A lower ratio is generally better as it indicates that the lending activities of a bank are more comfortably covered by its deposit base. Deposits, as noted earlier, are usually a cost effective source of financing. All of the bank’s deposits are sourced from domestic depositors, which is helpful from a risk assessment standpoint.
Bank Performance and Capital Metrics
The above chart provides a brief summary of some of the key performance metrics for Encore Bank. Next to these metrics are the equivalent for the average U.S. bank. As a starting point, looking at the bank’s return on assets, over the past year it has declined. Importantly, on this metric we can also see that the bank is below the average bank. Return on assets tells us how productive a bank is being with its asset base. Next, looking at the bank’s return on equity, which tells us how much of a return the bank has generated for its owners, over the past year it has declined. In addition, we can also see that the bank is below the average bank on this metric. Another metric that is helpful in contextualizing a bank’s return on equity is its leverage ratio. A lower ratio means that the bank has a higher reliance on borrowing to deliver its return on equity. In this case, the total leverage ratio is currently above the average U.S. bank, and has improved over the past year. Finally, we could not find Encore Bank’s risk-weighted asset information for this period and therefore had to make some assumptions and estimates. We estimate that the bank had a tier 1 capital ratio of 17.5% which is above the average U.S. bank.
Concluding Comments on Encore Bank
In conclusion, when we look at all the various factors and data we give Encore Bank a 2.3 out of 5.0 rating, which we consider to be below average. Specifically, an area of strength for the bank would be its tier 1 capital which is above the national average. On the contrary, the bank’s net interest margin is one of the primary drawbacks on its rating as on this metric, the bank is below average. As a reminder, our rating is based on our proprietary scoring system which uses data from an in-depth nationwide bank study we performed. None of the work presented is intended to be investment advice or advice of any sort and is presented purely for informational purposes.