Correspondent banking: Vt.'s Chittenden Offers Small Banks Loan

Taking advantage of small banks' wariness of big correspondents, Vermont's Chittenden Corp. is trying to help small community banks boost their loan portfolios.

During the past two years, the $1.5 billion-asset Burlington-based bank has been cultivating correspondent ties to about 20 smaller community banks throughout northern New England.

Shunning traditional correspondent businesses that stress data processing and check processing, the Burlington-based bank has focused on commercial loan participations and auto loan purchasing. Currently, Chittenden has about $50 million in loan participations with downstream banks on its books.

"Our location really makes it difficult for us to be the broad-based traditional correspondent," said president and chief executive Paul A. Perrault. "It's really more at the customer end than at the operations end that we feel we can do a really good job and book a nice little business."

Officials decided to explore the loan participations about two years ago, when consolidation in the Northeast began to pick up. As the traditional correspondent providers, such as Fleet Financial Group, Providence, and Bank of Boston, grew, small community banks became more concerned about obtaining correspondent services from large banks that were also tough competitors.

"We thought that that was a great opportunity for us, and it has turned out to be good," Mr. Perrault said. "We can be a reliable and easy-to- access partner for them, which is what seems to be part of the issue for some of the large banks."

Most of its clients are located outside its home market, particularly in upstate New York, western Massachusetts, New Hampshire, and even Maine. Mr. Perrault said Chittenden appeals to these banks because it isn't trying to directly solicit business in their markets.

For reprint and licensing requests for this article, click here.
MORE FROM AMERICAN BANKER