Rarely are bankers eager for a bunch of regulators to show up at their door, but BancorpSouth's Dan Rollins has his reasons.

The BancorpSouth chief executive wants to demonstrate to the examiners due there next month that the Tupelo, Miss., company has fixed its Bank Secrecy Act problems and should be allowed back on the M&A trail. To underscore the point, he will greet them with a team of nearly 40 employees dedicated to BSA matters.

"The image … is doing to be different," Rollins said. "Clearly, we believe our program is compliant. We wouldn't have invited the regulators back in if we thought we weren't ready. Frankly we're excited they will be back."

The January examination could have major implications for other large community banks keen on making acquisitions, which is why Rollins is one of American Banker's five community bankers to watch in the new year.

A consent order imposed on the $13 billion-asset BancorpSouth in September "put a real chill on midcap bank M&A," said Kevin Fitzsimmons, an analyst at Hovde Group. "People were wondering if it was something isolated or were regulators sending a bigger message. If they can get it settled fairly quickly, there is no reason why other banks should fear the process."

It would be a major accomplishment for BancorpSouth if the company can persuade the Federal Deposit Insurance Corp. and state regulators to terminate the consent order after less than six months. Doing so would allow Rollins to resubmit applications for two bank acquisitions; the Federal Reserve Board refused to review the original paperwork until BancorpSouth addressed the FDIC's concerns about its compliance with anti-laundering and other BSA rules.

BancorpSouth seems to have acted quickly to restructure its approach to BSA compliance. The company used to have three or four people focused on the issue, with employees in other departments contributing as needed. In recent months, Rollins has moved people from other parts of the bank to enlarge its BSA-related staff more than tenfold.

The company also invested $3 million in the third quarter alone to beef up its compliance operations. Management expects to spend $3 million annually to maintain the systems and practices it put in place, including software enhancements. (BancorpSouth stuck with its software vendor throughout the upgrade.)

A passing grade from regulators would allow BancorpSouth to get its deals to buy Ouachita Bancshares in Monroe, La., and Central Community Corp. in Temple, Texas, back on track. Both deals have had their termination deadlines extended to mid-2015.

So BancorpSouth has been forced to sit idle as other competitors along the Gulf Coast line up acquisitions. Iberiabank in Lafayette, La., has four deals in the works, while Renasant in Tupelo recently announced plans to enter Atlanta via acquisition. "Renasant's deal looks like a great one for them," Rollins said.

"Iberia has done a great job stringing together acquisitions," he added. "They seem to have their house in order. We'd like to get out there and play in the game with everyone else, but sometimes you stub your toe. It is highly frustrating when you can't get in the pool."

Still, Rollins' team continues to have conversations with counterparts at Ouachita and Central Community as they progress with things on the to-do list that are separate and apart from regulatory approval. "We've done a lot of work on the operational side, and we have kept the engine running," Rollins said.

Quickly resolving the compliance issue will help Rollins, who joined BancorpSouth in November 2012 after serving for years as David Zalman's chief lieutenant at Prosperity Bancshares in Houston, as he approaches other banks about sellin g themselves.

"There are a lot of relationships in Texas that BancorpSouth could cultivate by acquiring smaller community banks that lack the product depth or capacity to move upstream in areas like insurance and mortgage banking," said David Bishop, an analyst at Drexel Hamilton.

"It is critical for them to get the BSA issues addressed, because these things can linger," Bishop added. "They'll have to convince sellers that they've done their job. Deals are about more than just taking a currency and having a cultural fit. They are also about getting a deal done in one or two quarters."

Rollins has found other ways to expand BancorpSouth as he awaits the visit from regulators. In recent months, BancorpSouth has opened lending offices in Houston; Austin, Texas; and Lake Charles, La. It has also bulked up in insurance and mortgage lending. Meanwhile, Rollins, an experienced cost-cutter, has been shutting down less-profitable branches.

"I think we'll be a leaner, cleaner machine than where we are today," he said when asked about his expectations for 2015.

"We continue to drive costs out of the system" by challenging employees to find ways to run branches more efficiently, Rollins added. "And I'm pretty proud of the loan growth we've produced this year, and I expect more next year. We'll have to start getting some deposit liquidity, but we're making sure we're getting both sides of the balance sheet growing."

BancorpSouth's efficiency ratio, or noninterest expenses as a percentage of revenue, declined to 76% at Sept. 30 from nearly 80% a year earlier, indicating a more streamlined organization in spite of the compliance spending. Total loans rose nearly 9%, to $9.5 billion. Deposits fell 0.5%, to $10.7 billion.

Overall, analysts have given Rollins considerable credit for how he has handled the consent order. The big question is whether the company's response was appropriate and, if not, how Rollins will improve operations if issues linger.

Rollins "got blindsided right before third-quarter earnings," Fitzsimmons said. "He took it in stride as best he could and took a very straightforward approach to it. The fact that regulators aren't putting them in an extended endless penalty box is encouraging."

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