In 1981, when I entered correspondent banking, most independent banks in California relied on a correspondent bank for assistance in proof, item processing, transit processing, cash vault, wires, cash management, investment and loan services, and organizational loans and issues.

Typically the bank that made the organizational loans also acted as the primary correspondent (until management changes occurred). Compensating balances were used to pay for services, and it was normal for clients to leave excess balances-so this was a very attractive business for provider banks.

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