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Business Observer Friday, Sep. 12, 2014 4 years ago

Staging an encore

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Loan growth at Encore Bank has boosted the Naples bank's profits. Real estate lending is leading the way.
by: Jean Gruss Contributing Writer

Tom Ray surprised some of his colleagues who gathered for their annual association meeting in Naples recently with his trim physique.

The CEO of Encore Bank in Naples chuckled and explained that he'd lost 30 pounds recently working out with a personal trainer and exercising six days a week. There's no going back; he's given his old suits away.

Like its CEO, Encore Bank is in fighting shape.

The bank is on track to produce $1 million in profits this year and double that amount next year thanks to loan growth fueled by the economic recovery.

The bank's solid growth of late has attracted attention from prospective acquirers. “I've gotten more calls from investment bankers,” Ray smiles.

But for now, Ray says Encore is focused on growing its lending business in Charlotte, Collier and Lee counties. The bank's total assets rose to $341 million as of June 30, according to the latest data from the Federal Deposit Insurance Corp. It has six offices and 52 employees.

Loans at Encore Bank stood at $197.6 million as of June 30, up 23% from that point in 2013. Real estate loans grew significantly, with residential lending rising 82% over that same period to $67 million. Three years ago, Encore's entire loan portfolio stood at just $67 million. (Although the bank is chartered in Port Charlotte, its corporate headquarters is in Naples.)

Population growth from northerners moving to Southwest Florida has spurred residential lending. “We have demographics working for us,” Ray says. “That drives a lot of the economic engine.”

In addition, competition has thinned. Ray counted 26 locally owned banks in Charlotte, Collier and Lee counties during the boom. “Today, there are nine,” he says. “We have fewer local decision-making banks.”

While the residential real estate loans have grown the fastest in percentage terms, Ray says the bank strives to maintain a balanced portfolio of one-third commercial real estate loans, one-third commercial and industrial lending and one-third residential lending.

Encore Bank sticks to making loans and has no plans to start ancillary businesses such as trust services. “It takes nine years to break even on those,” Ray says. Besides, he says the bank has established referrals from area trust companies. “We don't try to steal their business,” he says.

For commercial real estate lending, Ray says Encore prefers to finance existing buildings that have a record of producing income. “We don't like to play in the speculative commercial real estate sector too much,” he says.

Besides, rents and occupancies don't justify commercial real estate development in the area. “We don't need another shopping center on U.S. 41 for four or five years,” Ray says.

On the residential front, Collier County has rebounded the strongest. Lee County is improving, but there remains an excess of lots, particularly in areas such as Lehigh Acres and Cape Coral. Charlotte County has bottomed out and Punta Gorda shows promise, but the county lags behind Collier and Lee.

Ray says Encore Bank has enough capital to sustain growth for the next three years, but he's looking further ahead. “Sometime next year we're going to be looking for funding for that next level of loan growth,” he says.

Ray says he's cautious because raising capital will dilute the shares of current investors. They include Malachi Mixon, the Ohio entrepreneur behind the Dirt Devil vacuum cleaner, and others who invested $28 million in the bank in late 2010. “We try to run the bank for the first investors,” he says.

Follow Jean Gruss on Twitter @JeanGruss

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