Cole Taylor Bank in Chicago is aiming to pump up its business in a line that many larger banks have dropped: correspondent banking.
It has signed on as a correspondent customer First Choice Bank in Geneva, Ill., a $7 million-asset start-up that typifies the banks Cole Taylor is going after, those serving small to midsize businesses and needing help with cash management and participation loans.
Gregory B. Whipple, senior vice president and its head of correspondent banking at $2.3 billion-asset Cole Taylor, which provides correspondent services to about 50 banks, says its size will help it get business from smaller banks within 200 miles of Chicago. It is big enough to have done business throughout the market but not so big that it competes daily with these banks, he explained.
Most of the community banks here dont necessarily need a large money center for correspondent services, Mr. Whipple said.
And big banks, apparently, have little need for community banks. Kevin R. Koontz, senior managing partner with BNK Analytics in Northampton, Pa., said larger banks have gradually moved away from providing services to smaller ones in the last 10 years.
For the large correspondent banks, its like any business, he said. You give more of your attention and time to your larger customers.
It would appear that midsize banks have an opportunity to fill this void in correspondent banking, but Mr. Koontz said it has been filled mostly by bankers banks and Federal Home Loan banks.
Like many banks, Cole Taylors correspondent banking balances fell more than 50%, to $5.7 million, from 1998 to 2000, according to statistics compiled by Sheshunoff Information Services Inc. for American Banker.
Cole Taylor is not alone, home or elsewhere. At $4.1 billion-asset Amcore Financial Inc. in Rockford, Ill., they went from $58.9 million to $11.6 million. Nationwide they fell 7%, to $36.4 billion.
Mr. Koontz said he would not consider correspondent banking a growth industry, but that he thought it could pay off for some banks. The payoff comes from the fact that correspondent banking is more than just keeping balances it involves providing coin and currency, cash management, letters of credit, and bank stock loans that generate fee income, and that business is what Cole Taylor hopes to expand.
Mr. Whipple said his strategy is to solicit the large number of small independent banks and new banks in the Chicago market through networking and direct advertising. He is also getting Cole Taylors name out through banker associations, law firms, accounting companies, and consultants.
The correspondent banking group has a core group of 40 to 50 banks and has added 10 since Mr. Whipple took the helm in February 2000. In fact, he said, correspondent deposits have risen 35% since then.
