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Post# of 87366
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neilhk

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neilhk

Re: None

Thursday, 08/30/2007 1:27:13 AM

Thursday, August 30, 2007 1:27:13 AM

Post# of 87366
Bank Proposal: There follows quite a lot of info on HCPC's plans to become a (Community) Bank.


A. Background on HCPC and their current proposal to become a (Community) Bank

In the recent shareholders letter of 27th August 2007, Ms. Johnson stated:

"The Company plans to use a portion of its earnings to redeem shares and
the balance to form a bank and continue to originate BCLOC loans
through that bank. It should be noted that Heritage was founded in 1994
for the purpose of forming a bank."

A PR From 1999 ( see below, at end of message, for full PR), states that Heritage Capital Credit Corporation was once a subsidiary of Heritage Capital Investment Corporation. It was proposed in 1999 that Heritage Capital Investment Corporation would become Heritage Community Bank. This was before the involvement of Ms. Carol Johnson or what we now know as HCPC.

Extracts from PR:

"......Heritage Capital Investment Corporation's plan to raise $3 million to meet the Federal Deposit Insurance Corporation's capitalization requirement to start a new bank. The organization will change its name to Heritage Community Bank after completing the fund-raising phase."

and:

"For the last five years (i.e. 1994 as stated in Ms. Johnsons quote above), we have been building partnerships, educating the low- to moderate-income markets, and providing home equity and mortgage loans, through our subsidiary Heritage Capital Credit Corporation..."

This venture was not, however, successful and the business of Heritage was purchased (in structure only) in 2002 and Ms. Johnson then became involved. Subsequently, Heritage Capital Credit Corporation was made public in the reverse merger of 2004.

B. Banking, Regulation and the Community Reinvestment Act (CRA)

It appears now that HCPC plan is to use a large percentage of the funds that they receive from the BCLOC loan business to expand and become a (Community) Bank. They would then continue developing the BCLOC loan business as part of the bank structure. There are many examples of Community Banks both within the Pink Sheets, OTCBB and higher exchanges. It is important to note that in becoming a bank they would be strictly regulated by the banking regulators, including but not limited to the Office of Thrift Supervision, the Federal Deposit Insurance Corporation, and the Federal Reserve System. They would also need to be fully reporting to SEC. This would give much greater transparency and value to the company and shareholders imo.

The following article is a speech made by Chairman Bernanke to the Federal Reserve in October 2006.

http://www.federalreserve.gov/Boarddocs/Speeches/2006/20061016/default.htm

In it he discusses Bank Regulation and also the importance of Banks (including Community Banks) in supporting the CRA. A couple of extracts follow:

"Clearly, banks strengthen their local communities by providing a range of services and facilitating the flow of credit necessary to support economic development."

and:

"To address these possible market failures, to ensure that depository institutions help to meet the credit needs of their communities, and to achieve broader social goals such as expanding home ownership, the Congress in 1977 passed the Community Reinvestment Act (CRA). A key goal of the CRA is to induce banking institutions to invest in acquiring the knowledge and expertise needed to find profitable lending opportunities in lower-income neighborhoods, thereby removing an important barrier to the extension of credit in those neighborhoods."

C. HCPC Extensive Experience with the CRA and their plans to form a (Community) Bank

It is, therefore, very interesting to note that Ms. Johnson (Chairman and CEO of HCPC) has over 30 years of experience of the CRA through her career. This was stressed in Section 11 of the shareholders letter. The reason for the development of the BCLOC loan structure was in her words:

"The thought behind the BCLOC was the answer to the question: “How can community re-investment be made profitable to the commercial capital markets?”

In my opinion the pieces seem to be coming together. The development of the BCLOC loan business continues to build and use her expertise of the CRA and potential in the commercial capital markets. In developing into a (Community) Bank it looks as though they can continue the loan business and no doubt expand further, possibly even through a network of branches in due course. As mentioned at the beginning of this post, "It should be noted that Heritage was founded in 1994
for the purpose of forming a bank."

We will have to wait and see the detail on this as things unfold.

GLTA

PR from 1999 follows in full below:

First Union Pledges Initial $250,000 to Capital Fund for Minority-Owned Heritage Community Bank

WILMINGTON, Del., Dec. 21, 1999 /PRNewswire/ -- First Union Corporation
(NYSE: FTU) announced today that it has pledged to invest $250,000 to support
the startup of Heritage Community Bank, which is proposed to be Delaware's
first minority-owned bank.

First Union's investment advances Heritage Capital Investment
Corporation's plan to raise $3 million to meet the Federal Deposit Insurance
Corporation's capitalization requirement to start a new bank. The
organization will change its name to Heritage Community Bank after completing the fund-raising phase.

"We are excited to offer the first financial pledge to Heritage Community
Bank's capital fund," said Donn Scott, First Union's regional market
president. "First Union has a long history of support for and partnership
with minority-owned banks, which can help more effectively serve customers in
our communities. We hope our pledge today helps trigger additional capital
commitments from other investors."

Heritage Community Bank is designed to be a federally insured savings bank
serving residents of Wilmington and neighboring communities. The bank will
offer general financial services and focus on meeting the distinct needs of
lower-income and minority customers in Delaware.

"We are grateful to First Union for this first capital commitment as we
continue to work to finalize other commitments so that Heritage Community Bank
opens next year as a new beginning in our communities for the 21st century,"
said Edwin Smith, Chairman and CEO of Heritage Capital Investment Corporation.

"For the last five years, we have been building partnerships, educating
the low- to moderate-income markets, and providing home equity and mortgage
loans, through our subsidiary Heritage Capital Credit Corporation, in both
urban and rural Delaware," Smith said. "We also continued to forge ahead in
seeking capital investments from First Union, other leading banks,
corporations and institutional investors doing business in Delaware. These
socially responsible institutions are working through structural barriers to
help us establish Heritage Community Bank, which will meet the banking needs
of underserved communities throughout our state and the city of Wilmington."
Since 1996, First Union has committed more than $46 million in support for
community development financial institutions and minority-owned banks
throughout its operating region.

"We support the growth of community-based financial institutions that can
help serve lower-income and minority customers," said Robbin Moore, First
Union's community development investment manager. "First Union has invested
in other minority-owned banks throughout our marketplace, including
institutions in Atlanta, Richmond and Philadelphia, to better serve local
residents."

In 1998, First Union committed $95 million in community loans and
investments to customers and communities in Delaware, including $25 million in
mortgages for low- and moderate-income families and $52 million in small
business loans to support economic growth.

The nation's sixth largest bank holding company, First Union Corporation
is a leading provider of financial services to more than 16 million customers
throughout the East Coast and nation. The company has full-service offices in
Connecticut, Delaware, Florida, Georgia, Maryland, New Jersey, New York, North
Carolina, South Carolina, Pennsylvania, Tennessee, Virginia and Washington,
D.C.

For more information about Heritage Community Bank, please contact Edwin
Smith at (302) 658-2265 or by e-mail at HeritageCapital@aol.com








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