BILOXI, Miss. -- Driving around Biloxi's Back Bay, a neighborhood of run-down houses and boarded-up seafood processing plants, Chevis C. Swetman points out the signs heralding new casino development.
Unlike some bankers, he's unapologetic about his support for organized gambling -- or "gaming" as the polite prefer to call it around here.
"I've looked at gaming as economic development, pure and simple," says Mr. Swetman, chairman and president of Peoples Bank of Biloxi, which has $360 million of assets.
The city's more attractive coastal strip is already home to six casinos, and Mr. Swetman hopes this inland stretch along the Bay of Biloxi will be next to draw the gambling industry, bringing jobs, jobs and more jobs.
His sentiments aren't entirely altruistic. If developers do make good on their promises to build casinos on Back Bay, it will be a big win for Mr. Swetman's bank, because Peoples Bank holds many of these plots as foreclosed real estate.
The shrinkage of Mr. Swetman's nonperforming assets portfolio is just one illustration of how the Mississippi coast's new boom industry has helped local banks.
"Since the advent of dockside gaming, our fortunes have been spectacular," Mr. Swetman says.
Biloxi's first casino the Isle of Capri, opened in August 1992. It produced an immediate improvement in Peoples Bank's bad loans via the alchemy of rising property values.
The bank used to get $1.10 for every dollar in forceclosed properties it carried on its books. Now those same properties go for $2.19. The book value of the nonperforming portfolio has plummeted from $2.6 million to $1.5 million during the same period.
Deposits at Mr. Swetman's bank are up 18% this year. Peoples Bank has established depository and lending relationships with five casinos so far, making it the most active casino bank on the coast.
The loan portfolio has balooned by 13%, much of it involving lines of credit for the casinos and funding for related real estate projects, such as hotels.
As a result, earnings at Peoples Bank for the first nine months of 1993 soared 150% over the 1992 period to $4 million, boosting return on assets to 1.5%, up from 0.68% in the year-ago period, and return on equity to 13% from 5.71%.
Despite the obvious benefits, gambling remains a controversial issue for bankers on Mississippi's gulf coast.
The seven "river boat" casinos built between Bay St. Louis and Biloxi, all moored along the Gulf of Mexico coast to comply with state requirements that they float on water, have brought $300 million in investments and 12,000 new jobs.
In August, the nine casinos then operating throughout the state reported $78 million in gross revenues.
There are some growth-related problems to the casino booom, like traffic congestion, for example, and rising crime. Bankers are also still wary of alienating customers who may view gambling as immoral.
Gaining from the Boom
Gulfport-based Hancock Holding Co. is the dominant bank on the coast, with $1.3 billion of assets and 55 branches. It has established a depository relationship with at least one casino, according to local bankers, but chief executive Leo W. Seal Jr. declined to be interviewed for this story.
W.R. Allison, president of Merchans Bank in Gulfport, which has $171 million of assets, describes himself as "a good old Baptist" who personally frowns on gambling.
At the same time, acknowledgeing that he's "still in business to make money," Mr. Allison hasn't let the boom bypass him entirely. Merchants Bank installed an automated teller machine at the Gulfport airport, which has experienced a 30% surge in traffic since late last year.
Jackson-based Deposit Guaranty Corp., Mississippi's largest bank loading company, is also hoping to get into the act, even though it has only one branch on the coast, in Gulfport.
Branch manager Ed L. Hilliard has not been able to break the hammer lock that Peoples Bank and Hancock have on casino-related business, but he has benefited from a surge in peripheral real estate development: assets at his one-branch bank, now $30 million, have gained 30% in the past year.
"Morally, you can argue about gaming, but economically, it's been a godsend," Mr. Hilliard says.
So powerful is the impact of gambling on the coastal economy that locals have taken to designating the post-August 1992 years with an "AB," for "After the Boats." Virtually no aspect of economic life has escaped the side effects of growth.
In 1 AB, or 1993, occupancy rates at local apartment complexes have shot up into the high 90% range and housing prices are nearly a third higher than the year before.
Mr. Hiliard spent months in an unsuccessful search for a suitable home after he moved to Gulfport from Alabama in April: He and his wife finally opted to build their own.
"Everybody says, 'You should have been here a year and a half ago -- you could have gotten it for nothing,''' says Mr. Hilliard in mock exasperation. "What could I do? The bank didn't hire me until March."
Booking a hotel room on the coat is no picnic either -- there are about 6,000 rooms available to serve an estimated 30,000 daily visitors.
Since the casinos have booked large blocks of hotel space for their chartered customers, it's nearly impossible for the average tourist to get a room during weekends, or anytime during the summer.
By driving the region's unemployment rate down to 4.8% from 8.2% a year ago, the casinos have actually made it more difficult to attract other kinds of industries to the area.
"People aren't willing to do what they used to do for minimum wage anymore," says Rebecca H. Montegomery, commercial development specialist with the Harrison County Development Commission in Gulfport.
And, this area, which had been accustomed to one or two bank robberies a year, has seen 13 since Jan. 1.
All of these problems can be overcome, or brought under control, with time. But what really has Gulf Coast bankers worried is the future. Casinos are already being built in Louisiana and may soon be seen in Alabama.
With both New Orleans and Mobile about an hour's drive from Biloxi, Mississipians worry about the effect of competition on their nascent gold rush. Put another way: how many casinos can the coast support?
"I don't think anybody knows the answer," says Mr. Swetman. "But I know one thing: You'd better make hay while the sun shines."