In banking these days it pays to think small.
I pointed this out in May but it still holds true. Small town banking, basic blocking-and-tackling, making loans and booking payments, is a much better business these days than running to the casino and trying to outsmart the dealers' computer.
So here is today's tip. Buy BancorpSouth (BXS).
BXS is a fairly sleepy Mississippi bank holding company - based in Elvis Presley's hometown of Tupelo - that just hired the master of the small bank acquisition, James Rollins, to succeed long-time CEO Aubrey Patterson.
If you don't know Rollins you should. Rollins is the fellow who built Prosperity Bank (PB) in Texas, through acquisitions, into a billion-dollar powerhouse.
That takes more than just banking, although executing any strategy is important. Rollins is an expert at getting a small-town banker, or a bank board, to hand over the keys to his bigger company. This is not the kind of job some city slicker can come in and steal. You have to speak the language, you have to promise that relationships will remain what they were, and you have to execute on that, or else the other bankers in other towns are going to resist.
The guess here is that Rollins is not done with Texas, even if he is moving to Mississippi. BXS took the resignation of Texas-based director George Middlebrook in October and my hunch is that removes an obstacle to BXS' expansion into East Texas.
Rollins didn't invent his way of banking, and Prosperity will still continue to sniff for deals, but in Mississippi Rollins faces a world of opportunity, a lot of small-town banks who suddenly see themselves at the heart of a biomass energy boom, surrounded by forests that are growing in value. Picking up on those opportunities, managing them conservatively, is going to make for good business.
Good conservative business would probably suit the shareholders in BXS just fine. The company was paying a dividend as high as 22 cents/share just three years ago, but is now paying just a penny. The stock price has fallen by half since those heady days of 2008. They need someone like James Rollins badly. Now that they have him, watch him perform.
Disclosure: I am long PB.