Harvest Community Bank, Pennsville, NJ (HCBP)

A Case of Self-Dealing on the Banks of the Delaware River

Wouldn’t shareholders of Harvest Community be best served by a sale, e.g., at 120% of book value, $15/share? From a stock that’s trading at $3.5, looks to me like shareholders could make a 300% return if they could convince the bank board to do the right thing, instead of wallowing around between $3 and $5 per share while officers and directors line their own pockets.

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Disclosure: As of this posting, I own significant shares of HCBP and may subsequently either dispose of them or purchase more.

Prospective Buyers	Penn Bancshares, Pennsville, NJ (PEBA) In late 2005, the Fed gave PEBA permission to buy up to 24.89% of Harvest Community Bank Elmer Bancorp, Elmer, NJ (ELMA), a local bank that’s doing well for which this acquisition would represent a great in-market transaction Fulton Financial, Lancaster, PA (FULT), also has branch overlap that would make an acquisition like this logical
Financial Snapshot (as of 12/31/2011)	Total assets: $191,554,000 Tangible book value per share: $12.76 NPAs to assets: 6.7% Price to book: 37.6% Market cap: $5.5M Dividend yield: $0.00 Trailing 12-month return on assets: -1.05% Trailing 12-month return on equity: -12.6%
Scoundrels	Michael Williams, Chairman of the Board Dennis Engle, CEO Jenny Engle, CEO’s wife Entire Board of Directors, the 12 joint owners of Wheat Properties LLC
Red Flags	CEO Dennis Engle only owns 1050 shares of stock outright, and was paid $188K in 2011 Engle led shareholders to believe Harvest Community Bank was having a great Q4 2011, when in fact it lost $4.2M pretax, a loss greater than the previous five years' earnings combined The Directors as a group own an entity called Wheat Properties LLC, which purchased the branch building in Salem City on October 20, 2000 for $240,000, for which the bank pays $79,925 per year in rent — a nice fat 33% annual return for the Directors. Google searches for "Wheat Properties" suggest great efforts have taken to keep the entity under the radar, and reveal little, other than: Harvest Community used one of its Director’s law firms, which billed it $187,393 over the last two years. The bank also made payments to JKE Marketing—a company owned by Dennis Engle’s wife Jenny Engle—of $88,020 over the last two years. Is this President’s Message from the bank homepage the sort of thing Jenny Engle is getting $44,000 a year to produce for shareholders, I wonder?
Sources	Harvest Community Bank website 2011 Form 10-K* 2012 Proxy Statement* www.jkecommunications.com Confidential interviews with major investors * NOTE: Although public companies usually readily post their annual reports and proxy statements on their websites, Harvest chooses not to. If you'd like your own copy, you'll need to contact rturmol@harvestcommunitybank.com