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Hey Thenderson,

I hope your research is going well. There's nothing silly about wanting to invest in your community. Of course you'll have to know what you are getting into and have a reasonable expectation of a return on your investment.

I'm not keeping up with FBC, as I'm currently fully invested and happy with my portfolio. I think that there might also be easier investment decisions out there.

You're right on that an aggressive growth strategy would create low operating cash flow. Preferred shares usually don't technically mature with repayment of principal but there may be call, put, or conversion provisions that would allow the company to buy back the preferred, the holders to sell it back, or either to convert them.

The Wal-Mart in-store strategy sounds great. How did they land that deal?

Some questions I would ask:
-- Why is their growth strategy going to be successful? What is their edge? I think that they are right in the backyard of Bank of America and Bank One, how will they take business from these much larger rivals?

-- What is the risk? Your mention of higher yields on deposits reminded me of the S&L crisis -- where are these higher yields coming from? What does their loan portfolio look like? I remain concerned about the leverage. What circumstances would lead to a default, and how likely are they?

To expand a little on the yield question, I'd like to paraphrase an explanation of commercial banking someone once gave me. "You deposit money and the bank pays you 2% for it. Then the bank loans it out for 8%. They make the spread of 6%. Almost all of commercial banking can be explained this way." So higher yielding deposits are less profitable for the bank, although good for insured depositors (as the S&Ls revealed). If their only competitive advantage is price and yield, what's to stop a larger, better financed rival from entering a rate war and driving them out of business?

As I said before, I'm not keeping up on FBC, this post is just some of what I would do before investing. Certainly the company has bright points (such as strong growth) that I haven't focused on. I hope that your research goes well, let me know how it pans out. Good Luck!

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