For the second year in a row Chase Manhattan Bank Corp. was the top correspondent banker in the United States in the 12 months through June 30, but it lost some ground to two California banks.

Chase's average correspondent balance for the period was $3.1 billion, according to American Banker's annual survey of the largest correspondent banks.

That balance was 10% lower than a year earlier, however. BankAmerica Corp. held on to the No. 2 position, with a balance that was up 8%, to $2.6 billion. Wells Fargo & Co. jumped into third place, from fifth, its balance up 181%, to $2.4 billion.

The Wells increase reflects its merger with First Interstate Bancorp. Company officials said the bank does not focus on correspondent banking.

As competition is increasing, the business of correspondent banking is changing, said William P. Garry, senior vice president and head of global treasury management at Chase. "Clearly, it's a business you cannot take for granted," Mr. Garry said. "It's being reinvented as we speak."

Mr. Garry noted that loan participation is only a part of correspondent banking. Additional services include check cashing for other banks and data processing. "Other elements are beginning to play a bigger part," said Mr. Garry. But he said loan syndication continues to be a big business.

Many of the smallest community banks, however, say the nation's leading correspondents aren't meeting their needs. Most of the small banks' traditional correspondents have been acquired, and the big banks don't want to service community banks.

"If you're looking for someone to handle a $50 million credit, Chase isn't interested in that," said Kerby Crowell, chief financial officer at the $950 million Stillwater (Okla.) National Bank and Trust.

But Chase's Mr. Garry said that wasn't true. He noted there is no minimum loan at Chase. Moreover, "we probably bank a greater number of financial institutions than anyone else, and we have no plans to change that," Mr. Garry said.

But another correspondent banker said as a practical issue, bigger banks have to justify the cost of doing business with smaller ones. "We can't justify a whole army of itty-bitty banks that just want to maintain an account with us," the banker said.

Other community bankers said they don't want to establish a correspondent relationship with a larger competitor.

Frank A. Ahrens, president of Home Trust and Savings Bank, Osage, Ia., said he chose not to use Norwest Corp.'s correspondent credit card product after Norwest moved into Iowa, because Home Trust and Savings didn't want to feed business to the competition.

The small banks increasingly are turning to one of the 17 "bankers' banks," specialty lenders set up exclusively to provide correspondent services, said Vivica Ware, director of payment systems at the Independent Bankers Association of America.

Other banks have established correspondent relationships with noncompeting community banks. Liberty National Bank, Longwood, Fla., does all of its loan sharing with other Florida community banks, said William Gossett, president of the $50 million-asset bank.

Stillwater National Bank and Trust shares some of its loans with larger out-of-state community banks that are not serving the Oklahoma market, Mr. Crowell said.

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