LETTER: To Peoples Financial Corp, Biloxi, MS (PFBX)

Time step up the heat on Swetman.

It's not just the July weather that has me hot and bothered. Since my February 28, 2019 update on Peoples Financial Corp, new information has come to light revealing a serious lapse at the Board level and an urgent need to clean house at The People’s Bank.

Hence, I have decided to take a more proactive approach on behalf of all shareholders invested in PFBX.

Below is a letter I am sending to the Independent Directors of The People's Bank. If you are a shareholder who agrees with my assessment, I encourage you to send your own letter, too.

Letters may be emailed to gbatia@thepeoples.com

---

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

---

My Letter to Peoples Financial Corp

To the “Independent” Directors of Peoples Financial Corp

• T. Dan Magruder, Vice Chairman
• E. A. "Drew" Allen
• Rex E. Kelly
• Jeffrey H. O'Keefe Sr.
• George J. Sliman III

Howard and Lameuse Avenues
Biloxi, MS 39533


Dear Directors,

I am a long-term shareholder in Peoples Financial. I own more shares than any director not named Swetman.

It has been painful to witness the abysmal performance of the bank.

You owe shareholders the fiduciary duty to explore a merger. Your results will not justify a stock price anywhere near what you could obtain in a sale in any of our lifetimes. If you want Peoples to remain independent, you should pass the hat in the community, pay the outside shareholders a fair price, and go private.

Given recent prices paid for your neighbors, Charter Bank and First Florida Bank, and in spite of your lousy 0.06% ROA and 0.4% ROE, I believe you could garner as much as $30 per share in a sale, due to the cost savings an acquirer could achieve.

The recent SunHerald article highlighting loans The Peoples Bank made to crooked lawyers demonstrates the Board’s complete lack of control and failure to oversee inept management. And this is only what the reporter was able to find out. What other improper loans are there that we don’t know about? Further, what malfeasance did you commit to incur the June settlement payout of $200,000?

Since April 3, 1996 (the first date for which I can find a trade in PFBX stock), the value of PFBX — including dividends reinvested — has DECLINED by 8%. In contrast, the S&P has advanced by almost 600%. All on your and Chevis Swetman’s watch. In my opinion, the Board should fire Swetman for cause. What other publicly held bank CEO has made nefarious loans like this, spent 40 years destroying shareholder value, and still has a job? As “Independent" Directors, you are personally liable for your failure to properly govern Peoples Financial.

In conclusion, you have not earned the right to maintain control of this bank, and you are not abiding by your own corporate Code of Conduct. Please exercise your fiduciary duties to shareholders and sell The Peoples Bank to the highest bidder before any more value is dissipated.

Respectfully,

Philip J. Timyan
PFBX Shareholder

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: $617M† Tangible book value per share:    $17.59† NPAs to assets: 3.0%† Price to book: 66% Market cap: $57.6M Dividend yield: 0.17% Trailing 12-month ROA: 0.1%† Trailing 12-month ROE: 0.7%†
Scoundrels	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 Meanwhile... 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.
Sources	The Peoples Bank website Q4 2018 Earnings Release Q3 2018 Quarterly Report 2018 Proxy Statement  2005 American Banker Article S&P Global Market Intelligence Confidential interviews with management and analysts

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	The Peoples Bank website August 2015 10-Q Q2 2015 Quarterly Report April 2015 Shareholders Letter 2014 Proxy Statement SNL Financial Confidential interviews with shareholders and analysts