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

6 comments :

  1. When HBHC purchased Whitney, Swetman made several comments in his following quarterly letters about how the Gulf Coast lost a longstanding institution, I took that as he would be reluctant to sell. Hopefully he is feeling a lot more pressure now than he was 5 yrs ago.

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    Replies
    1. Dear TSJ,

      Thanks for reading and commenting. Sorry it has taken me so long to reply!

      I agree, Swetman does not want to sell. My wife was right: he's a scoundrel. He should sell. I feel badly for all the Peoples' Trust Department clients who were sold PFBX shares that are under water. Peoples does not earn a good enough return to remain independent. It is as simple as that.

      Best, Phil

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  2. I find it telling that bank activist Joseph Stilwell reported a position in PFBX at the end of 3Q2014 but had sold out by the next quarter. As someone usually willing to engage undisciplined management (witness his ongoing fight with NECB) his pull out from PFBX speaks volumes about any hopes of working with Swetman to unlock the value. With institutional ownership under 10% and no sign of other activists getting engaged, there doesn't appear to be any catalyst to persuade Swetman to goose the stock price (although as a holder of +278k shares, he would benefit handsomely).

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    Replies
    1. Dear Rredwings71,
      Very belated thanks for reading and commenting. I apologize for the late reply. I agree with you. There is a low chance for an activist to get involved and convince the inbred scoundrels at Peoples to do the right thing by selling PFBX to bankers who know how to run a bank. Chevis whines about Katrina, the BP oil spill and the Great Recessionand blames them for his dismal performance, but many banks in his markets, eg Hancock Bank & Trust, Bank of Wiggens, Community Bancshares of Mississippi and Trustmark have all weathered those storms without reporting losses like PFBX does.
      Best,
      Phil
      PS LGRW

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  3. I find it telling that bank activist Joseph Stilwell reported a position in PFBX at the end of 3Q2014 but had sold out by the next quarter. As someone usually willing to engage undisciplined management (witness his ongoing fight with NECB) his pull out from PFBX speaks volumes about any hopes of working with Swetman to unlock the value. With institutional ownership under 10% and no sign of other activists getting engaged, there doesn't appear to be any catalyst to persuade Swetman to goose the stock price (although as a holder of +278k shares, he would benefit handsomely).

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    Replies
    1. This comment has been removed by the author.

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