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demand, as no dividends were paid until 1996, when the board
declared a $4 million dividend. In 1998, the board declared a
dividend of around $1.5 to $2 million.
d. Excess Capital
As a result of not having paid dividends, Peoples, on the
valuation date, was overcapitalized, as measured by the ratio of
book equity to total assets. On the reporting date and the
valuation date, Peoples had an equity-to-asset ratio of
approximately 22 percent; at that time, the average equity-to-
asset ratio for Midwestern banks and thrifts with assets less
than $150 million was between 7 and 9 percent. On the valuation
date and the reporting date, a 9-percent equity-to-assets ratio
would have been a reasonable level of capitalization for Peoples.
On the reporting date, Peoples had equity of $19,918,000, of
which $12,919,000 was excess capital.
C. Governance and Management
As of the valuation date, Peoples was still incorporated in
the State of Indiana and was subject to applicable Indiana
corporate and banking law.
1. Shareholder Approval
The articles of incorporation and bylaws of Peoples contain
no provisions concerning shareholder voting requirements for
mergers, acquisitions, sales of assets, or liquidation.
Accordingly, under Indiana corporate law, a plan of merger or
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