Banking industry in region realizes a surge in deposits because of shale

By Burton Speakman


As people look for evidence of an increase in the local economy due to shale, the banking industry stands as one example of a business that has been impacted.

The amount of deposits coming into local banks has increased due to the mineral-rights-lease bonus payments, said Kevin Helmick, vice president at Farmers National Bank.

“We’re in the $30 million- $40 million range in terms of new deposits,” he said. “The people who are coming in are depositing their money and then just sitting back and taking a breath.”

It is a good idea for people to understand their tax burden and if they will receive royalties and what the taxes on those might be before taking a long-term look at investing, Helmick said.

Farmers has a 10 percent share of the banking business in Columbiana County, and there has been a sizable increase in deposits there because of the investment by Chesapeake Energy in Columbiana, Stark and other nearby counties, he said.

Frank Hierro, regional president for Huntington Bank, said that deposits are up, but not way up.

“The actual disbursement of bonus payments has been primarily in southern Columbiana County,” he said.

The big influx should be when the larger landowners receive bonus payments from BP, Hierro said. BP invested more than $300 million in lease bonuses that should all be paid by the end of October.

Both Helmick and Hierro expect another boost in deposits as more people who signed leases a few months ago with BP receive their bonus payments.

“This is just starting in Trumbull County with the BP checks just starting to hit,” Helmick said.

The first BP leaseholders received bonus payments in the last week, he said.

“We feel that we’re well-positioned in Trumbull County,” Helmick said.

The shale industry has had an impact in general, but it has not skewed First National Bank’s deposit/lending ratio, said Vincent J. Delie Jr, CEO of First National Bank. First National Bank, due to its locations throughout Pennsylvania, has been involved with the Marcellus Shale for years.

“Regarding deposits, it is difficult to quantify the direct impact. There is a ripple effect that begins with the large gas companies and eventually impacts the entire supply chain including fabricators, transportation companies, the hospitality industry and other industries that supply ancillary services,” he said. “We have definitely seen more capital flowing into the region, and local businesses are taking advantage of expanded opportunities.”

Growth in the loans has been sluggish due to the economy and new regulations, Helmick said.

“It hasn’t risen as fast as deposits,” he said.

The expectation is that commercial loans will increase over the next few years as pipeline work and other supply companies need more capital for expansion, Helmick said.

Companies in the midstream operations, the process of getting oil and gas from the well to consumers, will need money to finance increases in business, he said. One example of this would be trucking companies who are hauling products.

Commercial loans are somewhere Huntington already has seen a difference locally due to companies working as suppliers within the shale industry, Hierro said.

“We have companies using a line of credit to pay employees knowing they will receive payment for completing work reasonably quickly, within about 60 days,” he said.

The companies are experiencing growth and have to finance additional employees and more equipment, and that requires them having the ability to borrow money, Hierro said.

“There are already companies working that have taken loans to expand,” he said.

There are a huge number of trucks needed to haul pipe, aggregate, concrete and other materials to a drill site to have it ready for production, Hierro said.

“The upside [of the shale boom] is something we’re still kind of getting used to,” Helmick said.

People in the Mahoning Valley are guardedly optimistic because of the past of this area, he said.

Helmick said Farmers is using the experience of Pennsylvania banks to help them determine what type of growth to expect.

In Pennsylvania, First National Bank primarily lends to small businesses and middle-market suppliers to the shale industry, Delie said.

“We are not a player in the development itself; many of those companies have capital outside of the region,” he said. “We provide financing to the supply chain, and many of these are local companies that are benefiting from increased economic activity.”

Don't Miss a Story

Sign up for our newsletter to receive daily news directly in your inbox.