Can a Shared Back Shop Stem Rising Costs? There Are Successes, but Many Question the Practicality of Such Alliances

[ILLUSTRATION OMITTED] While the impact of the financial crisis the recession haven't been as severe in Texas as else where in the country, Mark Long faces many of the same expenses that bankers all over the country face. And like many community bankers, he's wondered if there might not be strength in numbers savings in cooperation. I've talked to several bankers in our area about putting together consortiums, says Long, president CEO at $108.6 million-assets First Commercial Bank N.A., Seguin. Long wonders if getting a couple of banks together might be a way to save money on information technology compliance. This thinking was prompted in part by the passage of the Dodd-Frank Act, with all the regulations it will spawn. Long says it's very early, but he found the CEOs he's spoken with receptive. They're interested in at least talking about it, says Long, and they wouldn't have been, two years ago. Solution needs scrutiny Some state bankers associations already provide compliance services to their members, beyond seminars, others are known to be looking at the idea. At the Missouri Bankers Association, compliance veteran Chuck Lewis came aboard as vice-president, compliance services, offers MBA members compliance reviews, in-bank training, assistance on compliance projects. Some banks have been known to share compliance experts who shuttle from one timeshare employer to another on a schedule. On the operations technology side, there is a history of cooperatives being formed for mutual servicing. And associations naturally are well suited to providing member services. other banks considering partnering with others on their own raise the question of whether it's worth going down that road. It makes some sense, says Louisiana banker Mark Folse, president CEO of $356 million-assets Coastal Commerce Bank, Houma. Banks like his, in small towns, find it difficult to attract specialized technology expertise. Growing an expert in house can prove challenging. Outsourcing can be an answer to the need to cut costs, but the temptation to team up grows strong. But somebody has to be in charge, says Folse. Who gets the priority? In discussing the concept with bankers, consultants, experts, a picture emerges of a very attractive concept that may not necessarily work in practice. Any bank that hopes to find a solution in new cooperative ventures needs to make sure its partners its own management proceed with open eyes. It's great on paper, but it's really hard to make it work in reality, says Don Musso, president CEO at the FinPro, Inc., consulting firm. He others suggest a key question: When two banks have top priority needs, who is the shared expert going to take care of first? It's like three restaurants sharing the same kitchen, says Michelle Gula, president at Mrae Associates, Inc. Someone's always going to get the short end. Consultant Michael Cleary says that, other than some specialized functions types of processing provided by bankers banks similar ventures, he's rarely seen cooperative efforts work except in holding company environments. There, while banks using the shared expertise may have separate charters, they still ultimately dance to the tune of one central authority. [ILLUSTRATION OMITTED] By contrast, bankers may find it difficult to achieve consensus with their partners regarding what projects should receive priority from the co-op's developers, suggests Scott Hansen, executive vice-president, business development, at Harland Financial Solutions. History--pro con Bill Zayas, executive vice-president, sales, at Harland, says that in recent banking history about 15 bankowned technology cooperatives have been launched. A few still operate. One is COCC, which began in New England in 1967 with 15 companies receiving deposit processing. …