UPDATE: Peoples Financial Corp, Biloxi, MS (PFBX)

I no longer have reservations about calling management of The Peoples Bank "scoundrels." 

When I reviewed Peoples Financial Corp back in 2015, Chairman and CEO Chevis Swetman had some handy excuses — Hurricane Katrina, the BP oil spill. But what's the excuse for being a bloated, non-performing bank to this day?

Clearly, Swetman's not going to do the work it takes to turn The Peoples Bank around. The only folks sweating in this scenario are shareholders. And the only way out of this hot mess is for Swetman to do the right thing and sell this bank.

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

Prospective Buyers

Peoples Financial Corp has the same prospects for selling The Peoples Bank that it had when I reviewed it three years ago.

Bancorp South, Tupelo, MS (BXS)
First Bancshares, Hattisburg, MS (FBMS)
Iberiabank, Lafayette, LA (IBKC)

Financial Snapshot
as of 12/31/2018

Total assets:
Tangible book value per share:   
NPAs to assets:
Price to book:
Market cap:
Dividend yield:
Trailing 12-month ROA:
Trailing 12-month ROE:


Chevis B Swetman, Chairman, President, and CEO
A Wes Fulmer, Executive VP and Chief Credit Officer
Laurie A Wood, Senior VP and CFO

Red Flags

Want me to explain how bad this bank is? No sweat!
  • Swetman's 92% efficiency ratio is in the bottom 5% of all US banks
  • His 3% NPAs to assets ratio is in the bottom 5%, too
  • Loans at The Peoples Bank are down 24% in the last five years
  • Book value per share has declined by $1 in spite of stock buybacks at 70%
  • PFBX shareholders have seen the value of their holdings drop by $110M since 2000
  • Among the people who suffered this 70% decline in the value of their holdings since 2000 are the clients of Peoples' Trust Department, who collectively own 5% of PFBX
Enough already. In three years, Swetman has barely budged. He's now 69. The bank's not working and neither is he. Every stakeholder in PFBX and the bank's geographic area will be better served by new operators who will put some muscle into The Peoples Bank.


Highlands Bankshares, Abingdon, VA (HLND)

A Case of Time's Up

My shot clock expired for Highlands Bankshares.

This team has failed to perform under the auspicious conditions of the most recent banking cycle, so I don't see them improving enough to justify remaining independent.

If Highlands Union Bank steps up its game, HLND could earn 60 cents per share, have a book value of $7, and trade at $10 in three years. If the team sells sooner, they should be able to get close to that now and spare us the wasted time.

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

Prospective Buyers

Three banks have a small presence in HLND’s markets that would grow to a meaningful size with the acquisition of Highlands Union Bank.

Carter Bank & Trust, Martinsville, VA (CARE)
First Citizens BancShares, Raleigh, NC (FCNCA)
United Community Banks, Blairsville, GA (UCBI)

Since mergers of equals are sporty now, I should add: an MOE between Highlands Bankshares and New Peoples Bankshares (NWPP) could cut costs and produce an even more attractive $1.3 billion bank earning a decent return.

Financial Snapshot
as of 12/31/2018

Total assets:
Tangible book value per share:   
NPAs to assets:
Price to book:
Market cap:
Dividend yield:
Trailing 12-month ROA:
Trailing 12-month ROE:

The Crew

Robert W Moser Jr, Chairman
Timothy K Schools, President and CEO
Samuel L Neese Jr, Director, Consultant, and Former CEO

The Skinny

Highlands Union Bank has had ample time to perform.

It's been nearly five years since Highlands Bankshares raised capital to shore up its balance sheet and grow.

TNH Financial Fund alone put up $8.7M for that purpose, and holds a 24.4% stake. Their representative serves on the bank's board and waives his board fees.

As of today, the bank's assets are down, loans and deposits have barely moved, and profitability remains inadequate.

In fact, deposits in Highlands' home town of Abingdon are $30M lower than before the recap, while neighboring First Bank & Trust's have grown by $40M.

Highlands Bankshares' ROE in the 6% range and ROA in the 0.6% range are simply not enough to justify giving this team a new shot clock.

Typically, funds like TNH Financial are looking for a liquidity event within five years, so I have to presume I'm not alone in thinking along these lines.