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Peoples Financial Corporation (PFBX) |
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CEOCFO Current
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"To print this page go to file and left click on print" Economic
growth and the building of two new casinos in the Mississippi Gulf Coast have Peoples
Financial positioned for continued increase in revenues from this next wave of development
Mr. Swetman serves as Chairman of the Board of
Directors for Peoples Financial Corporation and The Peoples Bank, Biloxi, Mississippi.
He is also Chairman of the Board for Cruisin’ The Coast which won the
Southeast Tourism Award for Festival of the Year. Mr. Swetman is a past member of
the Governor’s Task Force for Economic Development, the past President of the Gulf
Coast Chamber of Commerce, past President of Gulf Coast Community Foundation and
past Chairman of Coast 21. He is currently the President of the Mississippi
Gulf Coast Economic Development Council. Chevis and his spouse, Marcia, enjoy attending USM
football and basketball games and playing tennis in their spare time. They
have one son, Tanner. Since 1896, the institution has played an active role in developing and supporting the community. The bank has been the driving force behind the preservation and restoration of several local structures of historical significance. Some notable accomplishments include: the refurbishing of the Old Magnolia Hotel, built in 1845; the renovation and restoration of one of the five oldest libraries in Mississippi; the restoration of the Saenger Theater of the Performing Arts; and the listing of The Peoples Bank's present main branch on the National Register of Historic Places. To ensure continued preservation efforts, in 1981 the bank established The Peoples Heritage Foundation, Inc. Some of the projects led by the foundation include the establishment of a Mardi Gras Museum and the formation of a Seafood Industry Museum. July 25,2003 CEOCFOinterviews: Mr.
Swetman, 2003 was a very good year for Peoples Bank, will you tell us what has happened
this past year? Mr. Swetman: “It finally looks like things have turned around for us. The year 2003 was a very good year for the bank; net income was up 57% over 2002. We went from $3,191,000.00 in 2002 to $5,018,000.00 in 2003. Our net interest margin has gone up for seven out of the eight last quarters that we have had and that is a very good and positive trend. We are excited that some of the plans and policies that we had implemented about two-and-a-half years ago have finally begun to pay off for us. A couple of years ago, we were like most banks in America - got caught when the Federal Reserve Board shifted direction and started cutting interest rates very substantially over the last fifteen to eighteen month period. It took a little time for us to come around but last year was our best year in the past four years; we look for the coming year to be even better.” CEOCFOinterviews: Is there anything you have learned in the process that could prove beneficial in the future? Mr. Swetman: “I would say that the big thing we found out was that we were probably more liability sensitive than we were asset sensitive. In the past, that never really was a problem, but then it did catch us by surprise. In addition, the interest rate was being pushed to 45 and 50 year lows by the Federal Reserve, I never had operated in that kind of environment before. I had to go back to some old college textbooks to see what the 91-day treasury bill was doing in relation to the prime rate during the Korean war for a comparable period.” CEOCFOinterviews: You have maintained your strong capital position and I know that is very important for Peoples; will you tell us about that? Mr. Swetman: “You can’t have too much capital; I guess I inherited that from my father and my grandfather. Last year, when we did the interview, our primary capital average assets were about 15.3%. This year at year-end, it was 15.84%. Some of that was due to the fact that we had a good year. I think it can also be attributable to the fact that the economy is truly getting better down here, which I think is a good thing.” CEOCFOinterviews: Is the economy outside of the casino business a prime driver for you? Mr. Swetman: “The economy for the casinos has been good for us, but it isn’t the only thing we have. It is one of our primary factors that cannot be overlooked. The casino industry helps drive the tourism industry, and over the last two or three years, with 9/11, things have been a little tough, but we have been primarily a drive-in or rubber tire market, so we were not hurt as bad as what I consider, other competing casino venues. We were not hurt as bad as Las Vegas, Reno or places like that, which depend a little bit more on the fly in market. One of the things we have noticed down here is, even though our total gross gaining revenues are flat on the coast, they haven’t been declining, so that is a good sign. Now we have some exciting things happening here; just over four weeks ago, they have the announcement of the ground-breaking for the Hard Rock Hotel and Casino, here in Biloxi, and that might not sound like much, but for us here in Biloxi, it is another $235,000,000 resort, which is going to open up next Summer.” CEOCFOinterviews: Are they going to be customers of yours? Mr. Swetman: “We sure hope so!” CEOCFOinterviews: Is there much competition for the casino business? Mr. Swetman: “We
have a 75% market share, but what we have found out in the casino industry is that there
is an environment of “what have you done for me lately” so we recognize and
understand that. We go out and try to stay close to our casino customers, we get to know
who the general managers are and we like to participate in anything that is good for the
casino industry. We think that it is going to benefit our entire Gulf Coast. We think that
there are opportunities for joint marketing and ventures and things like that where
everyone down here can benefit from the industry. The casino industry has been a very good
participant in our community; they are always there for the community and they are always
a part of the community and we are glad to have that influence down here.” CEOCFOinterviews: Do you think that the Hard Rock would bring people that wouldn’t have come otherwise, perhaps a different demographic? Mr. Swetman: “Yes,
you hit the nail on the head! The Hard Rock is a different demographic, and a younger
crowd. I think they just opened one up in the Tampa/St. Pete area in Florida and we are
excited about that because it is going to bring a new dimension. We think that is going to
be good for us because it will not be cannibalizing the existing business, but we think it
will bring in a different crowd to Biloxi. We are very excited about this. An important
aspect for us is the jobs that it creates. Hard Rock will create a thousand jobs and the
one across the bay creates 800 jobs, that is 1,800 jobs and people have to have a place to
stay so there will be new homes built. We are more of a commercial bank than anything
else. Mr. Swetman: “We are primarily a commercial bank and we think the new casinos are going to be good for our economic development. First of all, there’s the 235 million dollars - they have to have a checking account somewhere and that money has to flow through some financial institution and we hope we have a good portion of that as the money starts flowing through our economy. You have what is known as a turnover of the dollar, where the construction workers get paid and they are living here, they have to eat, they have to have places to stay. So, when you look at the multiplier and the velocity of money and the turn-over of the community; we think that is good. We hope to get a good portion of that. Then the thousand jobs that are going to be created here, means that there will be more homes that need to be built and financed; perhaps we can get some of that business. More people have more jobs; hopefully there will be more automobiles to get financed, and more home equity loans. We just think the normal run of all this flowing through our economy is going to be great for everybody. If there are two casinos, then that is twice the effect.” CEOCFOinterviews: Clearly, growth is there for Peoples! Mr. Swetman: “Yes Ma’am, there is no question about that!” CEOCFOinterviews: Are there new products and services that you need to roll out, or are you where you want to be? Mr. Swetman: “We feel like we are right where we have to be. We have come out with our image statements and we have had that going back to about four or five years. We are looking strongly at this new Check 21 Legislation that goes into effect October 28th (2004). We are looking at how to educate our customers because they may not be getting the same documents that they have had in the past, because they may get one of these replacement documents, so we are sort of looking at ways to work our way through this. We need to be up-to-speed three or four months before this legislation actually goes into effect. We think we are going to be there. Other products and services such as debit cards, online banking, these are some of the by-products of our image program, that people can call in and get whatever financial information they need. We did a focus group five or six years ago and we had all the services that we thought our customers wanted. Two or three years later, we had a bunch of people coming in to our area and they wanted something like they had in Las Vegas or Atlantic City. We thought everybody was happy with the products and services that we were providing, but we found out they wanted more control of their checking accounts, they wanted it 24/7 and they wanted to be able to go out on the internet to see what checks have cleared and how much they have in their checking account. We are providing much of that; we think we have the products out there; we just have to refine them and make sure everybody knows we have these capabilities.” CEOCFOinterviews: Tell us about your fee income. Mr. Swetman: “We are like most financial institutions. With the casino environment, we have had a much larger increase in fee income than we have had in the past. However that is one area where we anticipated fee income dropping as new products and services become available to the casino industry as they offer three-in-one-service, which is where you can get an ATM card, use your debit or credit card. They have non-bank institutions offering these type services. We are going to see a decline there. We have also had overdraft protection for three years, which has become successful. The customers like it and they don’t have to worry about their checks bouncing or their credit being adversely affected. The questions most people have are what are you doing on the trust side, which is a very competitive area. Many people have self-directed IRAs; I think people are reading a lot about what is happening on some of these mutual funds and they are not sure that they are getting a fair shake. Banks have always charged for those services but you have always known what those charges were going to be. We do have the fee income like most financial institutions. I think you will see that it will not change in the next five years but we won’t go out and offer brokerage services or insurance services.” CEOCFOinterviews: Do you do much advertising? Mr. Swetman: “We do a lot of advertising; in fact, we came out with a major ad campaign around four months ago, and we helped to follow through on that. The question is when is the right time to advertise? Is it when things are going good or when things are going bad? We looked at where we were and a lot of our marketing themes and we found out we had some stale advertising and stuff that should have been refreshed a long time ago, so we brought in an outside consultant to come up with an ad campaign for us and came up with ‘Our people are our greatest asset’. That is what our current theme is right now.” CEOCFOinterviews: For a bank with Peoples long history you seem attuned to change, and making you are ahead of the game! Mr. Swetman: “Oh yeah! We think that when you have hung around since 1896, you have to change and the only thing certain is you can’t fight progress, you have to be part of it.” CEOCFOinterviews: You were given an award in July, from Mississippi Economic Development Council, will you tell us about the award and how working with groups like that helps the community and the bank? Mr. Swetman: “If you are a community bank, you are engaged in the community and your fortunes are going to rise or fail based on community involvement and there are so many things that you have to be a part of down here. There are so many opportunities and so many challenges. We try to get our people involved in the Chamber of Commerce, and the Gulf Coast Community Foundation. Economic development is really the lifeblood of the community. You have to be promoting the community day-in-and-day-out. When we had a lock on the tourist market about 20 years ago, we used to tell everybody that Mississippi was the hospitality state and that got a little bit blasé and it came back to haunt us because it is a lot easier to retain that reputation than it is to regain it. We try to encourage our people to be actively involved whether it is the Boy Scouts, a church organization, economic development opportunities, getting involved with the University. Those communities that have independent community banks that get involved, I think generally do better than anybody else.” CEOCFOinterviews: With all the growth and anticipated growth, do you see the need for more branches? Mr. Swetman: “You hear people saying “maybe now isn’t the time to expand” and I think now is the time to expand. Last year, we opened up two new facilities, our Gautier branch in January of last year and in October, we sold our Long Beach branch and built a new one that opened in October of last year, so we had one new brand new facility and we upgraded another facility that we bought from the Resolution Trust Company over a decade ago. For 2004, we are just about in the process of renovating our Bay St. Louis branch and getting it a good makeover. We have also announced that we are going to construct two more branches this year; one in Waveland, Mississippi and the other is in Cedar Lake (Biloxi), which is a temporary branch facility and we are going to be building a brand new facility, which will probably be coming on line in either September or October of this year.” CEOCFOinterviews: What do you do physically in a new facility to make it more customer-friendly? Mr. Swetman: “What we try to do in branch facility, which is most important and sort of like real estate, is location, location, location; you want to make sure you are in the right place. That is one of the hardest components but when you are dealing with a branch bank, you could be dealing with a branch facility of 2,100 or 2,600 square feet. You know you will have a couple of offices, vaults and a teller area. After location is personnel and staffing of these facilities. The question is who is going to have most of your customer contact and that is going to be those people at that facility and we want each of our facilities to be representative of The Peoples Bank in that community whether it is in Wiggins, Mississippi, Bay St. Louis, Mississippi, Gautier, or D’lberville, Mississippi. We want all of our personnel in that facility to be known as the bank’s representative. They don’t know who I am and they don’t care, but the teller who handles their work on a weekly basis and they say ‘how did Johnny do on his baseball game last night?’ We think that is the real key to success.” CEOCFOinterviews: Has the increased good economy brought more competition for you, and why are people continuing to come to Peoples? Mr. Swetman: “Competition is good for the soul; sometimes it causes you to sharpen that pencil a little bit sharper than you want to. There has been a lot that has been going on in banking today and everything is changing, like what is the difference between 1% and 1.15%? There is not much. In the difficult times and the current interest rate environment, it is always good to be sure that you have the personal contact with your customer, or why else does that customer keep coming back? Hopefully you have trained your people enough that you are treating your customer right and they will come back for more if they need that home loan or education loan or if they need that car loan. Hopefully, in the long-run, it is all relationship banking.” CEOCFOinterviews: Why should investors be looking at Peoples Financial today? Mr. Swetman: “We are a commercial bank and when the economy’s good fortunes increase, so do our good fortunes. In a shareholders meeting last year, we said one of the two things is that we are a heavily capitalized bank, about 15.84% and that is excess capital. As we get bigger, we don’t necessarily need to have all that capital, so we very strongly supported President Bush’s dividend tax cut plan; he cut the taxes and when he cut the taxes, we started increasing the dividends. We think that was a good thing and we think it was terrible for corporations to be taxed at 33-35% level and then individuals to be taxed from anywhere from a 15-30% level, now you are looking at a tax rate on dividends that is close to 60-65% and that is just not right. You can take that same money and re-deploy it back to your shareholders at a much lesser tax rate, we are doing that and this is why we increased our dividends. One of our goals is to increase our dividend to about 35% of earning so if we had six million dollars in earnings this coming year. That means we pay out about two million one in dividends. We hope that would be an incentive for people to look at Peoples Financial Corporation.” CEOCFOinterviews: What challenges do you see in this next wave of development and how are you ready? Mr. Swetman: “One of the challenges will be how to operate in a low interest rate environment, where interest rates are going, which we touched on earlier. There is a Federal Open Market Operations Committee tomorrow: When will the Feds tighten up on interest rates? Everything I read at the end of last year said that it was going to be in the first half of this year and now everything says they will probably tighten up on interest rates on early 2005. I think that is a challenge, operating in a low interest rate environment. Sooner or later the interest rates have to go back up, the question is when is it going to happen; people have been saying this for about two years now. A lot of it will be good customer service and letting the customer know what products and services you have and try to match our products and services to what the customer needs.” CEOCFOinterviews: Last year you told me that when things get better in the community, you seem to do better than your competition, what do you still feel that way? Mr. Swetman: “That is our hope! Our earnings went up 57% last year; we are still not satisfied with that; we can do better than that but we will take that as a good first step.” CEOCFOinterviews: In closing, what would you like readers to remember? Mr. Swetman: “Our trust department last year was about 990 million, and now we have assets under management of a billion, three hundred and fifty nine million. Some of the things that we look at is expanding where our market is going to be. We want to maintain our market share as the second largest financial institution on the Gulf Coast with a 19-20% market share and we would like to keep it that way, but our competition is always going to be there so we will have to work harder and smarter and I think we will accomplish our goal.” disclaimers |
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