- 46 -
as the beta, which equaled the relevered20 average beta of the
banks on the VL bank list. As discussed, supra, there are
substantial differences in size and operations between Peoples
and the banks on the VL bank list; we do not believe that their
betas are representative of the greater business risks faced by
Peoples. For example, in comparison to the large banks on the VL
list, Peoples had limited opportunities for growth; less ability
to diversify risk, because of limited product offerings and
dependence on the economic conditions of a few counties; lacked
the ability to create the economies of scale available to large
banks; had greater interest rate risk because it could not sell
mortgages on the secondary market; had less control over credit
risk due to inadequate underwriting standards and a lack of
information technology support; and could not afford to employ
the personnel and technology used by large banks to protect and
pursue earnings through the management of interest rate risk.
Mr. Fuller did not otherwise adequately support his
selection of a beta of 1, a figure he admits is "approximately
equal to the overall market average of 1 based on the S&P 500."21
That statement, if anything, suggests that Mr. Fuller's beta is
20 Mr. Fuller did not explain why he used the relevered
beta, rather than the unlevered beta, when Peoples was not
leveraged.
21 The S&P 500 stock index includes 500 of the largest
stocks (by market value) in the United States.
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