Appalachian Basin

Banking In (and On) the Marcellus Shale

nicole-portraitIt’s no secret the Marcellus Shale is providing an economic boost for economies across the Northern Tier, and one great indicator of this is the performance of banks in the area.

The banking industry in Pennsylvania has had to ride out the same depressed economy as every other financial institution across the country. Back in 2008, when the federal government took over Fannie Mae and Freddie Mac after the housing bubble burst, institutions in Pennsylvania were also experiencing lows in their deposits, which makes lending difficult. Many banks even ended up taking bailout money to remain afloat in tumultuous times, although most smaller rural banks rode out the storm without help from the government.

You’re probably asking: What in the world does this have to do with the natural gas industry?

Well, about the time all of this was occurring, development of the Marcellus Shale was beginning in Northeastern Pennsylvania, and as recent reports are showing, banks in our region have experienced incredible growth in the last five years as a result of this industry. That means while the rest of the country was discussing how taxpayers may end up giving a lifeline to the nation’s banks, some institutions here in Pennsylvania have gotten a lifeline the old fashioned way – increased economic activity.

 Early Predictions on Marcellus Shale

In 2009, the Marcellus Shale was slowly becoming a household name in the Northern Tier. While the first wells in the area were drilled in 2007-08, it wasn’t until 2009 when things really began to pick up in a noticeable way. As you can see in the chart below, the number of unconventional wells permitted and drilled soared between 2007 and 2012.permit-drill07-12It was also in 2009 when James E. Thorne , Ph.D., a chief investment officer for the M&T Bank, made predictions before the the Greater Wilkes-Barre Chamber of Business and Industry as to the impact the development of natural gas in the region would have locally.  He was quoted in the Times Leader telling attendees, “that the region will get “a huge shot in the arm” from natural gas drilling. “The economic forecast is very bright.” And also from the Times Leader article:

The Marcellus Shale gas play will be “a game changer” for Northeastern Pennsylvania, bringing a “huge economic injection” and making life here very different a decade from now, an economist said Wednesday.

In the time since Dr. Thorne made his predictions, we’ve seen them come to fruition across the region – including in the banking industry.

Predictions on Marcellus Shale Become Reality

Incredibly, one year after these predictions were made, one bank in the area, First Liberty Bank & Trust, had banners hanging advertising their services as a result of the economic boom from development happening locally. From the Philadelphia Inquirer, December 2010 (emphasis added):

A banner hangs outside First Liberty Bank & Trust: “Gas Rights? We can help.”

“People used to call Towanda a ghost town,” said Shannon Clark, a Borough Council member and real estate agent. “No more.”

That banner still hangs at the branch just outside of Tunkhannock on Route 309.

March also marked the first time ever that Marcellus Shale was mentioned in the Federal Reserve’s Beige Book, which provides a snapshot of business conditions in the 12 regional banking districts of the agency. From Fuel Fix:

A Federal Reserve survey of regional economic trends says activity coinciding with the Marcellus Shale natural gas boom in Pennsylvania has been robust.

The Fed’s latest Beige Book, a snapshot of business conditions in the agency’s 12 regional bank districts, notes that eastern and central Pennsylvania banks in shale gas areas in the agency’s Third District “described customers paying down loans with royalty money and avoiding further debt by paying cash.”

In the Fourth District, which includes western Pennsylvania and Ohio, the survey says shale gas activity is expanding at a robust pace, while conventional oil and gas was steady. “Shale gas producers expanded payrolls, while employment at conventional oil and gas firms was flat,” the Fed noted.

The survey uses anecdotal (albeit also instructive) information, but let’s take a moment to examine some of the hard numbers from a few banks in the region.

Hard Numbers Coincide with Snapshot

We picked a few local banks in the Northeastern region of the Marcellus Shale and compared their deposit records based on FDIC data from 2007 to 2012.

Peoples Neighborhood Bank

Peoples Neighborhood Bank is headquartered in Hallstead, Susquehanna County, Pa. In 2007, the bank had branches in Susquehanna and Wyoming Counties in Pa. and Broome County, NY, and it opened a branch in Lackawanna County, Pa. in 2009. The rural bank has recently made headlines with its intent to open yet another branch in Lackawanna County to serve the community as a commercial lender, with potential to become a full-service branch in the future.

How did a small, rural bank gain the ability to place a branch in a highly competitive location in Scranton? From the above Times Tribune article:

The stable, if long sleepy, country bank has grown fast over the past four years, fueled by Marcellus Shale royalty deposits and related economic activity in the counties where it does business. One of the bank’s challenges has been lending out the money that comes in – the chief way banks earn money.

Now let’s take a look at the deposit information from 2007-2012 for Peoples Neighborhood and see how those coincide with the regional increase in natural gas development. Keep in mind, Susquehanna County’s natural gas activity became more pronounced in 2009 and Wyoming County’s in 2010. Lackawanna County has yet to see much activity, aside from companies establishing offices in the county, and Broome County is currently under a natural gas moratorium in New York.


As you can see, there is a major difference in increase in deposits between Marcellus and non-Marcellus counties. Lackawanna County grew in deposits as the branch became established in the community and Broome County in New York remained fairly steady with no significant increases as the banking industry has begun to bounce back since 2007. Compare that with Susquehanna and Wyoming Counties, which each experience significant jumps in deposits, coinciding with more natural gas wells being developed, hooked up to pipelines, and thus more royalty payments being made.

The combined increase of deposits in the non-Marcellus counties, which both border counties with natural gas development, from 2007-2012 was $53,736. Wyoming County’s total increase was $65,604, Susquehanna County’s was $92,650, for a combined total increase of $158,254 from 2007-2012, nearly triple the amount of increase in Lackawanna and Broome Counties combined.

Muncy Bank & Trust

Muncy Bank & Trust, another local rural bank has experienced successes similar to Peoples Neighborhood, and likewise made headlines in March because of it. Muncy Bank is a little different in that it only had one branch in Lycoming County (Marcellus) from 2007 until 2010 when it opened its doors in Montour County (non-Marcellus).

The bank was ranked number one for their 2012 Performance Rating out of 198 banks headquartered in Pennsylvania — beating out even Citizens Bank in Philadelphia — and recently made the decision to expand their Muncy branch in Lycoming County.

Muncy Bank & Trust President, Dan Berninger, attributes the bank growth to a variety of factors including great staff, but also the growth occurring in the immediate community. From the Muncy Luminary:

“There has been a lot of growth over the last few years in this immediate area,” Berninger said referring to the East Lycoming area, “and that has a lot to do with our success.”

It should come as no surprise to residents of the East Lycoming community that much of the growth in our chunk of the county can be attributed to Marcellus Shale development, including new businesses establishing offices, new leasing, and revenues from royalty payments.

Muncy Bank has been involved in Marcellus from the beginning and has been a leader in educating the community on natural gas development, hosting town hall style meetings each year with company representatives, educators and elected officials each year. Also from the Luminary article:

Last month the bank hosted an informational program for the public, customers and land owners on ‘Marcellus Shale 2013, A Look Forward’ which was held at the Hughesville Fire Hall and was well attended. Representatives from EXCO Resources and XTO Energy were available to discuss the impacts of natural gas exploration in the region. Also Representative Garth Everett and Senator Eugene Yaw discussed the new Impact Fee, Act 13.

Below is a chart of Muncy Bank’s deposits from 2007-2012.


Muncy Bank’s total increase in deposit monies at its branch in Lycoming County is actually more than any single branch at Peoples Neighborhood at $110,004, and it has experienced growth to a much lesser extent at its newer Montour County branch outside of the Marcellus Shale development area.

Other Banks Trending with Marcellus Activity


JerseyShoreWoodlands*Note: Woodlands Bank only has one branch located in Loyalsock Township (Williamsport area).

The charts above also show similar deposit data to that of Peoples Neighborhood and Muncy Bank, namely an increase in monies that trends with the natural gas activity within the counties. In all cases, counties with active development show greater increases than those without.

While a variety of factors play into the success of a financial institution, there is no denying Marcellus Shale development in Northeastern Pennsylvania has played a role in these figures in incredible amounts for some of the banks in our region. Amazingly, that’s only four years into Thorne’s decade long prediction; just imagine what the next six years will look like for these local institutions as activity continues.

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