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Peoples
Financial has been the primary lender to the seafood industry since 1896 and currently
holds about a 75% market share of the casino industry on the Mississippi Gulf Coast
Financial
Regional Banks
(NASD: PFBX)
Peoples Financial Corporation
152 Lameuse Street
Biloxi, MS 39530
Phone: 228-435-5511
Fax: 228-465-8418
Chevis C. Swetman
Chairman, President and
Chief Executive Officer
Interview conducted by:
Lynn Fosse
Editor
CEOCFOinterviews.com
February 2003
Bio of CEO,
Chevis C. Swetman
Chairman, President and
Chief Executive Officer
Chevis C. Swetman is President of The Peoples Bank, founded in 1896 and
headquartered in Biloxi, Mississippi. Mr. Swetman is the third generation Swetman to
be elected President of the bank. Under his leadership, The Peoples Bank is one of
the most successful community banks in the southeast United States. He received his
MBA from The University of Southern Mississippi College of Business Administration where
he now serves on the Business Advisory Council and the USM Foundation Board.
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 and past President of Gulf Coast Community Foundation. He
is Chairman of Coast 21.
Chevis
and his spouse, Marcia, enjoy attending USM football and basketball games and playing
tennis in their spare time. They have one son, Tanner.
Company Profile:
Peoples Financial Corporation (NASD: PFBX) is the bank holding company for its wholly
owned subsidiary, The Peoples Bank, Biloxi, Mississippi (the Bank). Founded in 1896 with
$564 million in assets today, The Peoples Bank operates 15 full service branches and 50
ATMs along the Mississippi Gulf Coast in Hancock, Harrison, Jackson and Stone Counties.
The Bank is a state-chartered bank that offers a variety of loan and deposit services to
individuals and small- to middle-market businesses within its trade area. Deposit services
include interest-bearing and non-interest-bearing checking accounts, savings accounts,
certificates of deposit and individual retirement accounts (IRAs). The Peoples Bank also
offers a non-deposit funds management account, which is not insured by the Federal Deposit
Insurance Corporation (FDIC). Loan services include business, real estate, construction,
personal and installment loans, with an emphasis on commercial lending. The Bank also
offers a variety of other functions, including collection services, asset management and
trust services, wire services, safe deposit box facilities, night drop facilities, cash
management, automated teller machines (ATMs) and Internet or home banking.
The Peoples Bank provides services to customers in a wide variety of industries, including
seafood, retail, hospitality, gaming and construction. While the Company has pursued
external growth strategies on a limited basis, its primary focus has been on internal
growth through the establishment of new branch locations and an emphasis on strong
customer relationships. The Bank's Asset Management and Trust Services Department offers
personal trust, agencies and estate services, including living and testamentary trusts,
executorships, guardianships and conservatorships. Benefit accounts maintained by the
department primarily include self-directed IRAs. Escrow management, stock transfer and
bond paying agency accounts are available to corporate customers.
Foundation of the Bank:
The Swetman family of Biloxi has been associated with the bank since its inception in
1896. J.W. Swetman was one of the founders. His brother, Orcenith George Swetman joined
the bank as assistant cashier in 1903; he became the president and chief executive officer
in 1951, and served in that capacity until his death in 1963. Glenn L. Swetman, son of
O.G. Swetman, was elected president that year and served as president and chairman of the
board until succeeded by his son, Chevis C. Swetman, in December 1984.
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.
December 12, 2002
Swetman named Top 10 South Mississippi Community Leader
Chevis C. Swetman, President and Chief Executive Officer of The Peoples Bank, Biloxi,
Mississippi was named one of the Top 10 South Mississippi Community Leaders and one of the
first members to be inducted into the Roland Weeks Leadership Hall of Fame. The award
recognizes outstanding business and community leadership. During his 33 years as publisher
of The Sun Herald, Roland Weeks sought leaders who could make South Mississippi an even
better place. Chevis Swetman has been president of the bank since 1984, and is active in a
host of local, state and national organizations.
CEOCFOinterviews: Mr. Swetman, how long has Peoples Financial been
around and give us an idea of your growth over the years?
Mr. Swetman:
“Our bank was founded in 1896. We are what I consider a large community bank and we
are primarily a commercial lender. We do some consumer lending but our primary focus has
been in the commercial lending business. We are the lead bank for a number of
municipalities here on the Mississippi Gulf Coast and lead bank for several local
hospitals. We are also the lead bank for Harrison County, Mississippi. We have been the
primary lender to the seafood industry since 1896. One of our more recent initiatives is
the fact that we are the primary institution for the casinos here on the Mississippi Gulf
Coast. We have a 75% market share of the casino industry--nine of the twelve casinos do
business with us.
Our bank is one of the more heavily
capitalized banks in the southeast United States or even the United States. One of our
expressions is ‘you never can have enough capital.’ Our current
primary capital to average assets is 15.3% as compared to last year, which was 14.47%. We
are the second largest financial institution here on the Mississippi Gulf Coast; our
market share is about 18-19% and we are estimated to be the twelfth largest bank in the
state of Mississippi. Our primary trade areas include Harrison, Hancock, and Jackson
counties, and we have a branch in Wiggins, Mississippi, which is in Stone County. We
opened our fifteenth branch at the end of January in Gautier, MS. That will be our
second branch in Jackson County. In addition, we are upgrading another one of our
branches, which is in Long Beach. We sold the original property and we are now building a
new, larger facility in downtown Long Beach, MS.”
CEOCFOinterviews:
What is the economy like in your area and have you been affected by the overall downturn
in the economy?
Mr. Swetman:
“We were the primary banker for the casino industry, which was very beneficial to the
Mississippi Gulf Coast, in the early 1990s. The industry down here created some 16,000 new
jobs, and that is about where we are today with the number of jobs. Our market down here
was always known as a “rubber tire” market, basically automobile driven from
about a 350-mile radius. We seem to hold our own due to the fact that most of our
customers were already used to driving here, whereas other major gaming areas, such as Las
Vegas and Reno might have been effected by the severe downturn in the fly-in market.
I would describe the economy here as very slow growth to no growth.”
CEOCFOinterviews:
What are you doing right? What has allowed you to continue to be a viable and good
entity for so many years?
Mr. Swetman:
“We have tried to position ourselves for the future. Over the last decade, we have
expanded along the entire Mississippi Gulf Coast. We have a good infrastructure with
a good working staff. We have always been more of a conservative bank than most of our
other competitors. The influx of the casino industry created about 16,000 jobs, a good
portion of them filled by people from out-of-state. They might have come in from Atlantic
City, Las Vegas and Reno. All of a sudden they wanted the banking products that they were
used to having, such as the debit card, internet banking, twenty-four hour banking, and
the ability to pay bills online. Customers had not asked for these before, but we rapidly
added the new products, introduced the new services and were rewarded with a large share
of these new residents to our area.”
CEOCFOinterviews: Did the influx of casinos start a
competition for good employees?
Mr. Swetman: “When the casino industry came to the
Coast, we had to look at our employees, not as an expense item, but as an asset.
Unemployment on the Coast plunged, and we knew there was going to be extreme pressure to
retain our qualified personnel. We decided not to compete with the other financial
institutions for tellers or bookkeepers, because in fact we would have to compete with the
casino industry. Therefore, we used Atlantic City as a model. Before gaming came in,
Atlantic City was a tourist area that was deteriorating, the same thing that was happening
here in Biloxi. We visited with the primary bank of the casinos up there, did some
inspections of their vault operations and started asking questions.
After my team returned, as sort of an after-thought, we called back and asked them what
happened to their workforce when the casino industry came into town and what kind of
turnover they had on their teller line. The person who was the assistant at the vault said
“I was in-charge of the tellers back in the early 1970s, and I can tell you exactly
what happened” and I said, “What did you lose, 25 or 30% of your tellers”?
She replied “ Oh no, we lost 100% of our tellers; everybody left the bank. Tellers
who could handle money went to work in the casino cages.” I said, “ That’s
terrible, what could be worse than that?” She replied, “You know your
bookkeepers? Well, they know how to reconcile a bank statement; we lost half of them to
the casino industry.” I said, “This is terrible, what else can happen?” She
replied, “Do you know those surly customer service reps in your bank lobby?” I
answered “Oh yeah, I got a couple of them right now.” She said, “Pay
them about six or eight thousand more a year and they’re going to grin from ear to
ear.
It didn’t take us long to figure we were facing a monumental problem, and I asked,
“Is there anything else bad that you could tell me?” She answered, “Yeah,
you know those fifty or so teller positions we lost?” I said “yes
ma’am,” she said “well the casino deposits were wonderful but it got to the
point where all of a sudden we had to take raw people and throw them into the cage and
give them on-the-job training, Our shortage the first year after the casino was opened was
in excess of a half-a-million dollars.” I gulped, but I knew what I had to do.
CEOCFOinterviews: What did you do to meet the challenge to
maintain your base of employees?
Mr. Swetman: “Before the first casino opened up, we gave
about a 25% across-the -board pay increase to just about everybody in the bank. You
didn’t have to be a rocket scientist to know that if a casino had a job fair on a
Wednesday, and that three thousand people show up for a thousand jobs, and you have
fifteen to twenty of your people call in sick that day, that you are going to have some
people that might leave. What we decided was that whatever the casinos would try to do we
would do. When they increased their health benefits we couldn’t be too far
behind. When they started paying for college education, so did we. We had to meet
the competition, and I think our turnover rate has been much lower than our competition.
There was a cost, but you don’t mind paying more money if you’re going to make
more money.”
CEOCFOinterviews: How did you decide how to service this new
industry coming to town and get everything back under control?
Mr. Swetman: “We thought we would just be their
depository, and what we found out is the casino industry wanted more than just a
depository. They could put their money with anybody; they wanted somebody to partner with
them. The economy here has been flat and the competition for loans has been very
competitive. We are not making as much money as we think we should. It has taken us
six to eight quarters, but we have already addressed the funding sources. Up until about
March of 2000, our loan deposit ration was about 92 to 94% and that is when the Federal
Reserve was tightening and we had to be sure that we funded these loans, so we went out
and we bought about 30 million in brokered deposits. We then offset it in our fifteen-year
commercial loan that either floated with prime or something off of prime, or a fixed rate
at that particular time.
We thought we had a good asset liability match; then over the next year or so, when the
Federal Reserve began cutting the interest rate, all of a sudden we found that our assets
were re-pricing faster than our certificates of deposits were rolling off. We had to
borrow about 30 million dollars, at an average of about 7%. Interest rates kept dropping.
Customers would come to us and say “Look, we got this loan at eight and three-quarter
fixed, but the bank across the street has offered me this loan for six and-a-half or six
and three-quarter.” We had to make the hard decision whether to let the loan go or
refinance it and take the hit in the net interest margin. We chose to keep the
customer. It took us about two years to get everything back under control.
CEOCFOinterviews:
Looking back do you think you made the right decision?
Mr. Swetman:
“When someone is looking at anywhere from a fifteen to thirty year amortization on
some of these fixed mortgage loans where they can get them at five and a quarter, five
point five, or five point seven five, we are finding that the customer is rate conscious
now rather than relationship conscious. We hope what we did was the right thing.”
CEOCFOinterviews:
It sounds like you did the right things because nobody could have planned for those cuts.
Mr. Swetman:
“I have been in banking for about thirty-two years; I’m also in charge of the
investment side and it caught us totally flat. Never in my life have I seen action like
that. For us, it hasn’t been the most exciting two years but this year was better
than last year because our net interest margin did turn around and we are pleased with
that.”
CEOCFOinterviews:
Do you have many people using your trust services and other non-banking services?
Mr. Swetman:
“Yes. Our trust department is about 990 million dollars. It’s almost twice
the size of the bank. We have another area of expertise in our corporate trust in that we
are the registrar, trustee or paying agent for nearly 250 different state, county and
municipal organizations. We have been building on that relationship for about twelve
years; it’s been a good niche for our bank. We are probably the fourth or fifth
largest transfer agent in the state even though we are only about the twelfth largest
bank, because we have aggressively gone after this kind of business.”
CEOCFOinterviews:
How do you maintain the customer service and personal touch as you continue to grow?
Mr. Swetman:
“What we try to do is have a continuity with our branch managers. We went in-house
with our own computer system about four years ago in an effort to develop a better
customer relationship program. I remember when I first came to the bank thirty-one years
ago, to do a customer relationship you had to post at the end of the month the average
collected balance, which we did by hand on about 5,000 accounts. You had to get the
officer to write a memo to say that this account is related to something else. As time
went on, we secured more customer relationships and developed better central information
files. Since then, we have been able to build on those relationships.
Our next challenge is how to identify those customer relationships and measure their
profitability. I think the banking industry needs to understand its customer as well
as Procter & Gamble (P&G), understands its customer. Hopefully, we can
develop systems and programs that can be at a loan officer or branch manager’s desk
to call up a customer’s total relationship. The more relationships that we build with
the customer; the easier it will be to maintain the overall relationship.”
CEOCFOinterviews:
You’ve gotten your 50th consecutive five-star superior rating from Bauer Financial,
Inc. Will you tell us about this?
Mr. Swetman:
“We have always been a fairly conservative bank. We have always paid a dividend; even
during the depression, we paid a dividend. It is said “you can’t have
enough capital” and you always want to try to save that capital for a rainy day. We
have been conservative but we also have been very aggressive.
I would say that about five or six years ago we were behind the curve and we needed to get
the right people and get the right systems in place where we can identify our true
customer relationships. We have spent millions on developing facilities and products
that our customers can relate to and they actually want. Sometimes you get behind the
curve and in this particular case, we were probably a little behind the technology curve,
but we had enough capital to catch up. We are not on the what I call the
“bleeding” edge of technology, but hopefully we are not far behind the
leading-edge.”
CEOCFOinterviews:
What is your philosophy on community involvement?
Mr. Swetman:
“We have been involved in the community for a number of years. Our philosophy has
been that we are going to live or die by the success of our local community. If the
community thrives so do we. The Mississippi Gulf Coast consists of three counties:
Harrison, Hancock and Jackson. If things are good in these three counties, as they have
been in the last decade mainly because of the gaming industry, we are going to get the
benefit, and believe me, we got the benefit in the 1990s. When the economy slows down or
suffers, we are going to slow down with it. I think the economy has slowed down; it’s
not a negative growth but it is a slow growth. Compounding that, we also have larger
competitors out there.
It is a different environment and it is changing. With last year’s interest rate cuts
about every three or four weeks, I would have to go back and revise my budget and
re-calculate how that was going to affect my interest expense and every other aspect of
the bank. It has been challenging. I think the fact that we have saved for that rainy day
is always beneficial also.”
CEOCFOinterviews:
How do you go after new business?
Mr. Swetman:
“Much [TPB1] of our new business is from the casino industry.
Originally, I originated more loans than investment-banking firms did because we had many
of the “little river-boat companies” that were trying to make it big. Some of
these included: Casino Magic, which is now Pinnacle and Casino America, which is now
‘The Isle of Capri,’ and Park Place, which was Grand Casino. We had a bunch of
casinos down here and we decided that this was going to be economic development. If
you are going to help a community, it is going to be in economic development. Once the
industry started coming here, we started going to the industry shows out in Las Vegas. We
tried to follow the industry to find out what economic trends would help it, which is why
we were able to get about a 75% share of the casino industry.”
CEOCFOinterviews: Who are some of your customers besides the
casinos?
Mr. Swetman: “We think the casino industry is wonderful
but we have had a lot of allied developments along with it. We have had major restaurants
and hotels come in related to the casino industry. We are noted for our military
community, Keesler Air Force Base, Pascagoula Home Port, and the Gulfport Naval
Construction Battalion (SeaBee’s) base. Our military is a very important part of our
community. We have also been very actively engaged in trying to get four-year educational
status for the University of Southern Mississippi’s regional campus down here. That
was a 30–year battle that passed the state legislature this year. The best way to
help a community is through economic development--try and get more people, more jobs and
more money for housing and food and cars. This is how we try to approach it.”
CEOCFOinterviews:
Do you see acquisitions and additional branches in your future?
Mr. Swetman:
“We have a branch in Gautier, which opened at the end of January, and we are
upgrading our Long Beach branch. In 1998, we sold a major piece of property that we had
acquired through the casino industry for $6,000,000; as a result of that we went ahead and
bought about five or six sites that were potential branch bank sites. So far, we have
developed two as branch bank sites; we have a third that we will be looking at after these
two new facilities are up and running.
We don’t think there are many institutions that can be acquired. We acquired a bank
in 1988 and a Savings and Loan in 1993, and if the right opportunity comes along,
absolutely we will take a good hard look at it. Right now, we don’t know of anybody
in our trade area that is an acquisition candidate. Within our trade area now we will
probably go more to de novo or individual branch
banking. We will consolidate what we are doing in our area for the near-term and then we
might look outside of our area. We have what I consider a ‘Highway 49 strategy,’
which is one of the major arteries to our state capitol. On Highway 49 over in the Orange
Grove community, we have a branch, which is now part of the City of Gulfport. We built a
branch in 1999 up in Saucier and a year later up in Wiggins. The next step might be,
Hattiesburg, Mississippi, but I don’t see that anytime soon.”
CEOCFOinterviews:
You have a stock re-purchase plan that was recently authorized, why the decision to do
that?
Mr. Swetman:
“We have probably taken back five percent of our outstanding stock. We had a two
and-a-half percent plan, which just ran out this month. Back in November, because we were
getting close, we got another two and-a-half percent authorized to re-purchase. We think
that right now the market value of our stock is below the book value of our stock. We
think anytime we get that, the stock re-purchase plan is a good vehicle to maintain the
value of our shares for our shareholders.
We were listed on NASDAQ, about April of 2000. I think the day we were listed, NASDAQ
suffered about the sixth largest drop in the history of NASDAQ, and the prices kept
falling. We figured we had so much excess capital the stock re-purchase plan made sense
for the simple reason that we can help bring the market value of the stock at least back
to book value and try to maintain it at that level. The first two and-a-half percent has
already been acquired, which is only about 140,000 shares. Anytime your stock is below
book value, it just makes sense to redeem it.”
CEOCFOinterviews:
Is there anything shareholders and potential investors should know that might not be
readily apparent when they first look at your company?
Mr. Swetman:
“I think that the last couple of years have been fairly tough. I think we were
feeling our inefficiencies of operations. We have always been a far above average
financial institution; I used to always say that we should be able to open our doors and
make a minimum of 1% without even trying. The last couple of years have been an exception
to that.
CEOCFOinterviews:
What would you like to say in closing?
Mr. Swetman: “When
things get better in the community, we seem to do better than our competition. We are
hoping that what we have done in the community is going to pay dividends as time goes
on.”
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