GENERAL COUNSEL STRATEGIES FOR COMMUNITY BANKS By Cheryl Winokur Munk, ICBA General counsel is a must-have for any business, and community banks are no exception. But some community banks downplay the need, which can be a tactical and costly mistake. To be sure, larger community banks may derive additional benefits from having in-house counsel, but it’s something all community banks should also consider, according to bankers and attorneys who work within or alongside these institutions. This is especially true for community banks in growth mode or those that are trying to expand into new service lines, states or markets, as well as for those that have identified regulatory or compliance gaps. “It’s something I would consider and carefully evaluate. I think it makes more sense than sometimes people appreciate,” says Robert Messer, Chief Financial Officer and Chief Risk Officer of $5.5 billion asset American National Bank of Texas in Terrell, Texas, which has had an inside general counsel for decades. Here are four considerations for community banks when weighing these matters: 1. ANALYZE THE POTENTIAL COST BENEFITS OF IN‑HOUSE GENERAL COUNSEL. Community banks could spend hundreds of thousands of dollars per year on legal fees for outside counsel, depending on the services they need and the attorneys they work with. “In addition to carefully tracking their overall legal spend, community banks should delve into what they are spending their legal dollars on,” said Shelli Clarkston, an associate attorney at law firm Lathrop GPM in Kansas City, MO. She previously served as in-house general counsel for a financial services holding company, its three community banks and two insurance companies, and now represents banks as outside counsel. “By delineating whether the money is going mostly to collections, compliance-related matters, litigation, contract work or something else, the community bank can make more informed decisions about the expertise they might want to bring in-house and what might still be needed on a contractual or retainer basis,” Clarkston says. “The question then becomes: Can the community bank find someone in-house to lower these costs? If a $250 million-asset community bank is spending $1 million a year in outside legal fees, even if all the in-house attorney does is collections, it would still save the bank money,” Clarkston says. “Ideally, a community bank should review its legal spending as part of its annual strategic review or any time the bank is considering offering a substantial new product or service,” says Chris Mastrangelo, a former Bank Examiner and the Chief Compliance Officer at $600 million asset Grasshopper Bank in New York City. 2. INVESTIGATE OTHER POTENTIAL BENEFITS. Aside from monetary savings, there can be other advantages to in‑house counsel. “There’s value in having the ability to walk down the hallway when a loan officer or someone in the compliance department has questions,” says Having general counsel is critical for community banks, but what’s the right balance between in‑house and external counsel? Community bankers and legal experts weigh in on how to create the right strategy for your bank. 26 | INDEPENDENT REPORT
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