Another year of bank migration?

More than a year has passed since the financial crisis prompted many Hoosier businesses to start looking for new bank relationships, and one observer thinks the trend will last for at least another year.

Steve Beck, a longtime Indianapolis banker before jumping into other pursuits, says businesses continue to worry about instability in the banking system, particularly if the banks are tied to institutions that accepted federal TARP money.

So the companies, many with a history of working with only one bank, are looking for a second in order to spread their risk, much like a manufacturer would diversify steel suppliers—just in case.

“It’s going to last awhile,” Beck says. “The business community isn’t sure what the rules of the game are. They aren’t sure the banks know what the rules of the game are.”

After a career spanning Huntington, Old National and other banks, Beck now manages Indiana, Kentucky and Ohio territories for Chicago-based Geneva Capital Group. The investment bank funds commercial real estate development and syndicates the loans to Midwestern banks.

In his discussions with bank executives, Beck finds the movement to diversify bank relationships benefiting mostly smaller banks. Small-bank officials tell Beck they’re so swamped with requests that they’re turning some away.

The businesses believe they will have an easier time developing a personal relationship with lenders in small banks. Sometimes that’s true and sometimes not, he adds, but the businesses seem convinced of it.

Incidentally, the migration stands to cost big and regional banks lots of customers. Many small banks are capable of handling upward of $7 million to $8 million in loans per business—plenty to support the vast majority of companies.

What do you think? Are you seeing the same trend?