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death, Peoples tried to start a Small Business Administration
(SBA) loan program, but was unsuccessful in submitting loan
applications to the SBA because of inadequate documentation.
In sum, although Peoples' charter permitted it to offer a
broad range of lending products to consumer and commercial
borrowers, Peoples in practice generally failed to serve all but
a select class of home buyers who were not discouraged by
Peoples' LTV, loan limit, 20-year maximum term, and lack of
ARM's.
b. Loan-To-Asset Ratio
The effects of Peoples' narrowly defined market and
conservative lending practices are readily apparent. During the
4-year period ending on the valuation date, Peoples' net loans as
a percentage of assets averaged 30 percent. Peoples' peers, in
comparison, averaged 52 to 55 percent. After Mark became
president of Peoples, he tried to raise Peoples' loan-to-asset
ratio significantly and set a goal of 60 to 70 percent for 1993,
a rate that had not been achieved as of the date of trial. Aside
from adopting a more aggressive stance in the market, Peoples
could also have achieved an increased loan-to-asset ratio by
reducing its assets by declaring a substantial dividend.
On March 1, 1992, Joe Melhiser was hired as an assistant
vice president from another bank in an effort to increase
lending. As part of the effort to increase lending, Peoples
raised its LTV to 80 percent in 1993. Although the increased LTV
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