In a prelude to going public, Encore Bank in Houston plans to switch from a federal thrift to a federal bank charter.
Chief executive James D'Agostino said this week that he has had discussions with the Office of the Comptroller of the Currency, and that the $1.3 billion-asset thrift plans to file the necessary paperwork soon. He expects the charter conversion to be completed this year.
The thrift has been moving to a more bank-like loan portfolio, and Mr. D'Agostino said that the charter change is a logical next step.
Moreover, he said Encore is at a point where it likely needs to go public soon to provide some liquidity to shareholders and maintain its growth, and "the market perceives a national bank better than it does a thrift."
He did not say when he plans to take Encore public.
Mr. D'Agostino took over as the CEO in 2000, when the thrift was known as Guardian Savings and Loan Association and had branches in a number of far-flung cities, including Boston and Atlanta, but only two in its hometown. (The previous management sold 18 Texas branches in 1998.)
Over the next few years Mr. D'Agostino set out to remake the company by targeting wealthy baby boomers and retirees in Houston and Florida. It sold its branches in Boston, Atlanta, St. Louis, and Kansas City, Mo., changed its name in 2001, and opened seven branches in Houston and five on Florida's west coast over the next three years. This year it opened a branch in Sugar Land, Tex.
The things Encore has used to attract baby boomers and retirees include a Web site that dispenses advice on such topics as health and golf, and specially designed branches where customers interact with personal bankers, not tellers. It has hired one of the country's best-known senior citizens, the golfer Arnold Palmer, as a spokesman.
Encore has also been targeting more commercial customers in the last three years, as evidenced by its loan mix. Though still largely a mortgage and consumer lender, it has about $100 million of commercial and industrial loans in its portfolio, versus $6 million three years ago. On March 31 it had more than $122 million of construction loans on its books, versus less than $3 million in the first quarter of 2003.
Its branch design came after it did a marketing survey with about 200 people who had similar ideas about what they wanted in a bank, Mr. D'Agostino said. There are no tellers or lines to stand in, and each customer deals one-on-one with a personal banker who is cross-trained in all types of transactions.
"We think the people - business owners, professionals, and investors - are looking for more services than you would get at a typical bank, and they have more needs and larger balances," he said. "We provide a high level of service, and they provide us with good balances."
After selling the out-of-state branches, Encore essentially had to build a deposit base from scratch. On June 30 it had $913 million of deposits.
The branch atmosphere is closer to that of a living room than an office. There are leather sofas, chairs, and coffee tables, and each branch has a private conference room.
Dan Bass, the managing director with Carson Medlin Co. in Houston, works down the street from one of the Encore branches. He said the style of branches developed by Encore really set it apart for its target market.
"It is unique," he said. "They are really going after a niche market. It is a higher-end market that costs more to do, but the benefits are those clients pay more in fees and you can get more of their assets than a typical retail client."
Encore's Web site is set up to offer advice in areas outside banking. It includes a question-and-answer forum where customers can get advice about health concerns, golf swings, the Internet, technology, and financial matters.
Mr. D'Agostino said people often use the site as a portal to communicate with him.
"I get lots of questions from the Web site," he said. "This weekend I got a suggestion from one of our good customers on how to improve security."
As part of the strategy of catering to professionals, entrepreneurs, and investors, Encore has acquired a financial advisory firm, a trust company, and an insurance firm in the last two years.
"One of the exciting demographics that is happening right now is that baby boomers start reaching age 60 this year," he said, noting that he belonged to the 76 million-member group. "As those boomers have built up their estates, retirement assets, and have funds to invest, and as they inherit funds from the generation before them, then the need for investment management and trusts all grows dramatically."
Having a famous golfer as a pitchman hasn't hurt business, either. The 75-year-old Mr. Palmer has been to five of the thrift's branch openings, and he has attracted quite a crowd, Mr. D'Agostino said.
"We were inundated with folks who come and want to meet him and see our offices and have their picture taken with Arnold," he said. "It gets our name in the marketplace in a much more rapid way."
