It’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.

It 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

Read more at http://eidmarcellus.org/marcellus-shale/banking-in-and-on-the-marce...