Peoples Financial Corp, Biloxi, MS (PFBX)

A Case of Sweating Bullets in Biloxi


As a humanitarian, I can't bring myself to label Chevis Swetman a "scoundrel," in spite of the pressure cooker conditions he has created for his Trust Department clients and other PFBX shareholders. Swetman is reported to have worked up an honest sweat helping people after Hurricane Katrina. And judging from the unusually high number of people he keeps on the bank's payroll, he appears to be motivated by a big heart. But as a Fiduciary, I have to ask Swetman to sell the bank.

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

Prospective Buyers
To win in Mississippi's Harrison and Hancock Counties, you gotta be able to sweat it out against Hancock Bank (HBHC). Peoples' branches could help any of these players stand a chance.
Bancorp South, Tupelo, MS (BXS)
First Bancshares, Hattiesburg, MS (FBMS)
Iberiabank, Lafayette, LA (IBKC)
Financial Snapshot
as of 06/30/2015

Total assets:
$680M
Tangible book value per share:
$17.99
NPAs to assets:
6.25%
Price to book:
54.1%
Market cap:
$50M
Dividend yield:
0%
Trailing 12-month return on assets:
- 1.9%
Trailing 12-month return on equity:
- 14%
The Crew
Chevis B Swetman, Chairman, President, and CEO
A Wes Fulmer, Executive VP and Chief Credit Officer
Laurie A Wood, Senior VP and CFO
The Skinny

If I'm right to infer that people are Swetman's calling, then maybe it would help to broaden his understanding of how real people are being negatively impacted by Peoples' Financial.

I'm most bothered what clients of the bank's Trust Department have experienced.
  • These people collectively own 5% of PFBX
  • In most Trust Departments, some clients are elderly, some are widowed, some are sick, and some have dependents whose futures are entirely reliant upon the entrusted investments
  • Surely, Swetman personally knows at least some of these people
Let's quantify the harm that has me sweating bullets on behalf of these folks and others:
  • Peoples' Trust Department clients have experienced PFBX stock decline by 70% since 2000
  • PFBX shareholders collectively have seen the value of their holdings drop by $110M in the same period
I really want to believe Swetman is a decent man, and I can forgive him if he changes course now to make amends. Question is, will he break into the sweat needed to do what it will take?
  • Drastically reduce redundancies in staff and other expenses
  • Close underperforming branches
  • Cut his own $354K annual compensation
  • Knock out NPAs, stubbornly holding at a high water mark of 6%
  • And, sell the bank to a more skilled operator
In short, Chevis Swetman could still leave a positive legacy here. The work to do is clear, the bank has good prospects for a sale, and at 66, he's still young enough to make a difference pursuing another calling. Let's hope he cares enough about people to do right by Peoples.
Sources