capitalize on the planned Fleet/BankBoston merger.
The only bankers' bank in the Northeast, the year-old institution is hoping to get a strong infusion of new business after the two giants -- and the region's largest providers of correspondent services to small banks -- combine this year.
The bankers' bank, which is based in Glastonbury, Conn., currently serves only the 35 Massachusetts and Connecticut institutions it counts as shareholders. But it is running advertisements on the Internet and in Boston-area newspapers seeking an experienced correspondent banker to help build its business in New England and eastern New York. It has set a goal of eventually serving 60% of the region's nearly 600 community banks and thrifts.
"When I started in this business 30 years ago, there were at least a dozen banks in New England that offered correspondent banking," said Peter J. Sposito, president and chief executive officer of Bankers' Bank Northeast.
Today, Fleet Financial Group Inc. and BankBoston Corp. are the only New England banking companies that rank among American Banker's 50 largest correspondent banks. Their $16 billion merger would leave small banks in the region with just one option for services such as check clearing, coin and currency delivery, and federal funds transfers.
"We think our timing is perfect," said Mr. Sposito, a former correspondent banker at Shawmut National Corp., which was acquired by Fleet in 1995.
Not that community banks are particularly concerned about the disappearance of a major correspondent.
Donald Glass, president of the Community Bank League of New England, said many of his group's members use correspondent banks far less frequently than in the past because the Federal Reserve Bank offers many of the same services, particularly check clearing.
Moreover, small banks no longer rely heavily on large banks to hold their cash. Instead, many place balances in government securities, which typically pay higher returns.
"Correspondent banking is not what it used to be," said Mr. Glass.
Still, Mr. Glass said he expects Bankers' Bank Northeast will pick up some business, especially coin and currency delivery. Many bankers view that business as the most important correspondent service.
Bankers' Bank Northeast was founded a year ago by a group of banks and thrifts that were reluctant to do business with larger banks that they viewed as competitors. Though the bank only provides correspondent services to the institutions that ponied up the $5.8 million to capitalize it, Mr. Sposito said his institution would offer one service to any institution that is not a Bankers' Bank shareholder.
Banks seeking additional services would be asked to make a capital investment, he said.
"We think small banks would rather deal with a bank they own," Mr. Sposito said.