OCC document promotes community bank collaboration

The Office of the Comptroller of the Currency acknowledges a trend toward collaboration among community banks in a 10-page paper it published on the subject Jan. 13. The paper is available online at OCC.gov..The document, "An Opportunity for Community Banks: Working Together Collaboratively," describes how community banks can pool resources to obtain cost efficiencies and leverage specialized expertise. It explores the benefits of collaboration, outlines how community banks can structure collaborative arrangements, and emphasizes the need for effective oversight of collaborative arrangements..Community banks "face challenges in providing the competitive products and services their customers expect, while they compete with larger banks, credit unions and nonbank firms that are expanding their banking activities," commented Thomas Curry, Comptroller of the Currency, in a press release. "Collaboration can help unlock opportunities.".In the document, the OCC says banks often turn to outsourcing for help in areas outside their immediate expertise. "The OCC sees an additional option, one in which community banks work together to support each other to tackle growing external pressures," the regulatory agency says. "Together, community bankers can be a 'community' of organizations that look to each other, and thereby support each other, as they explore ways to face today's challenges.".The OCC says it has been asked by community bankers whether they can share back-room operations, establish a compliance consortium or collaborate to offer a new product. This paper provides a resounding affirmative answer, only cautioning that banks comply with antitrust laws and exercise prudence in terms of expectations, governance and planning..Several community banks are sharing services. For example, Harvest Bank in Kimball, Minn., and Security Bank USA, Bemidji, Minn., both offer compliance services to other banks. Harvest Bank has two attorneys on staff who manage the bank's compliance issues, as well as service other banks. Security Bank USA hires out its on-staff CPA to other banks that want help preparing for audits or need other professional accounting services..The $387 million West Gate Bank, Lincoln, Neb., and the $81 million Iowa State Bank, Wapello, Iowa, both have a side business helping other banks with mortgage processing. Focus Bank in Charlestown, Mo., trains other banks to offer lease products..In still another example, eight Wisconsin banks are organizing a shared services corporation after the state passed a law permitting the incorporation of such enterprises. Under the updated Wisconsin law, shared services corporations can provide compliance, loan documentation and review, human resources and technology services. The Premier Community Bank of Marion, Wis., is one of the shared services' corporation's organizers; Tom Pamperin, president of the bank, said the corporation will remove from the bank some of the detail work that can prevent it from focusing on customer service. The corporation, he said, will help the bank focus on its strengths. The corporation is expected to be up and running by this summer..The OCC said: "There are some basic operational requirements for community banks that lend themselves to more cost-efficient execution, such as compliance, audit and appraisal reviews. Rethinking past operating paradigms can lead to creative solutions, such as cost sharing." The OCC said it is open to discussing ideas about collaborative approaches for sharing operations.."Collaboration is an opportunity for a community bank to take advantage of core efficiencies," the OCC said in the conclusion of its paper. "If a community bank has the expertise to provide quality services in one area, it has an opportunity to provide these services to other community banks. Where a community bank may have less-developed staff expertise, it could partner with more experienced staff at another bank. Through collaboration, community banks can potentially achieve better outcomes of less costly services, greater range of services, and increased expertise. The OCC believes that when conducted with appropriate strategic planning, strong risk management, and effective oversight, collaboration can help community banks thrive."