BancorpSouth's CEO Hire Addresses Persistent Sale Rumors

BancorpSouth (BXS) spent half of this year searching for its next chief executive, leaving a number of outsiders wondering if the Tupelo, Miss., company might consider selling itself instead.

The company on Monday resolved the CEO issue, hiring Dan Rollins to succeed the retiring Aubrey Patterson. For some observers, the company made a statement by hiring the former president of Prosperity Bancshares (PB) in Houston: it isn't looking to sell anytime soon.

"This puts that rumor to bed," says Jeff Davis, a managing director at Mercer Capital.

Rollins will join BancorpSouth on Wednesday. Rollins, who had been Prosperity's president and chief operating officer since 2006, will join BancorpSouth's board, where Patterson will remain the chairman.

BancorpSouth raided one of the nation's strongest banks for its new CEO, says Matt Olney, an analyst at Stephens. "Picking off someone from a great bank like that is probably going to be a good move," he says.

BancorpSouth had sent several signals that it preferred independence, including a $115 million stock sale in January, Davis says. By hiring of Rollins from Prosperity, an active acquirer in Texas, BancorpSouth may be positioning itself to eventually make acquisitions.

"It's my assumption that [BancorpSouth] will be a consolidator," Davis says. Still, he says it is unlikely that the company will make acquisitions any time soon. "I'd be a little surprised," he says, though BancorpSouth could strike "if a good strategic fit" became available.

BancorpSouth hired Rollins because of his leadership skills, says Patterson, who would not discuss any M&A implications. "He has a great vision for what the industry is doing and how to compete effectively," Patterson says. "He's been the architect of much of the success of Prosperity Bank."

BancorpSouth, under Patterson's leadership, transformed from a small community bank in northwestern Mississippi into an aspiring regional bank with $13.2 billion in assets and roughly 300 branches in eight states.

Sale rumors have swirled around the company since credit issues emerged in 2010. A loss in the first quarter of 2011 made some investors nervous, though the company returned to profitability three months later.

BancorpSouth has made progress tackling credit issues, Olney says. Rollins must address the company's high expense ratio, which stood at nearly 75% at June 30. Fortunately, his former employer is "one of the most efficiently run banks," Olney says.

Internal growth and acquisitions are both on the table for the new CEO.

"We think we have a lot of options," Patterson says. "Growth is really a requirement in the kind of industry environment we're all operating in. Growth historically, in our company, has come from a combination of organic growth and acquisitions. Certainly Dan has a great track record in both areas."

Rollins could not be reached for comment. David Zalman, Prosperity's chairman and CEO, did not return a call seeking comment, though he used a press release to thank Rollins for "the many contributions he has made to the organization over the years."