The Ephrata National Bank: a remarkable little bank

As I have been around Pennsylvania for several weeks, I have seen the TV ads (“You’ll feel the difference”), and even had occasion to use a local commercial bank called Ephrata National (ENB), which has been doing business in Pennsylvania since the late 19th century. (Pronounced EFF rah ta, or エフラータ for my friends in Japan.)

As you might have figured out, I like to know a thing or two more about places and people than the usual guy. So I did some reading about Ephrata National.

You can visit their website, and on it learn the following:

ENB has a 5-Star Rating with BauerFinancial, Inc. BauerFinancial is the nation’s leading independent bank rating and research company. Each quarter, BauerFinancial evaluates banks’ performance to determine their safety and soundness. For almost 20 consecutive years, ENB has been recognized as a 5-star bank. Additionally, we have been consistently recognized by BauerFinancial as an “Exceptional Performance Bank”. To achieve this honor, a bank must maintain its 5-star rating for 10 years or more.

Now, I don’t know who Bauer Financial is, and it really just sounds like one of those marketing companies that puffs up you if you puff up them. But the following did impress me:

ENB has not and does not participate in the subprime mortgage market. As we have written in our 2007 Annual Report, we did not pursue this type of mortgage.

Lancaster County did not have the housing bubble. Prices went up, but nowhere like parts of the East Coast east of here. I think if you want a mortgage in the Ephrata area, you better be ready either to put 20% down, or to have a really good application. In this way, you do not buy more house than you can afford.

Also, in this way, your bank’s solvency does not blow up the minute that the real estate market dips 10%.


ENB is extremely well-capitalized.
To protect the bank against potential losses, ENB maintains capital levels in excess of federal requirements. Our capital ratios are documented in our financial statements and regulatory filings, including our June 30, 2008 Quarterly Financial Statements and FDIC Call Reports. Based on these ratios, ENB’s capitalization ranks us in the 80th percentile compared to our peer group (national banks with assets between $300 million and $1 billion).

From my research as far as I can delve, Ephrata National did not need, and did not take the TARP money.

What this also says is that the runners of the bank are not greedy. Part of the reason financial houses like Lehman blew up, Merrill almost did, and even Citigroup and Bank of America were heading to shaky grounds was that they wanted to keep some tiny number around the place and leverage all the rest. (I think Merrill was at 3% capital, and Lehman—as we now all know—was insolvent (0% capital) weeks before it was admittedly bankrupt.)

They leveraged because they could make more money that way. A bank uses other people’s money to generate a bigger return for the owners. They lend at 6% and borrow at 2% and keep the difference, less operating expenses.

The more you can do this, the more money you make. The less you leverage, the less you get. But the much less likely that you sustain losses that wipe you out.

ENB has consistently paid dividends to our shareholders. By maintaining a stable and secure banking business, we have been able to reward shareholders with consistent dividends – even during the Great Depression! To date, ENB has never missed a dividend payment to shareholders.

Ephrata National paid dividends even throughout the Great Depression. And they obviously paid during this recent period where the TARPers cut theirs back to a nickel a share.

ENB participates in the FDIC insurance program. To be listed as an FDIC insured bank, a financial institution must meet high standards for financial strength and stability. Additionally, FDIC-insured institutions are regularly audited to ensure that they continue to meet the requirements to be FDIC insured.

This is less of a bragging right, but still important. Banks everywhere are FDIC insured—but that insurance is only on the principal in your account, not the interest. The bottom line is that Ephrata does not do business that would get them in trouble. That is a rarity in banking these days.

The head of the bank is Aaron Groff, Jr., who is, coincidentally, one of the nine members of the board of the regional Federal Reserve Bank of Philadelphia. Somewhere else I read that his salary as Chairman of Ephrata is $205,000, with a bonus of about $4,000. (Thousands, not millions.)

The bank has seven branches, but basically functions vastly better than a bank with 700 branches.

I would like to get a job there, but the website says “Openings – None”. There probably isn’t a lot of turnover, either. And a wait list.

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