Rural PA Bank has Too Much Cash from Marcellus Customers

money When was the last time you heard about a country bank that had so much money, it was having problems finding enough people and businesses to lend it to? Yeah, we’ve never heard of that either.

Until now…

Peoples Neighborhood Bank of rural Susquehanna County, PA (northeastern part of the state) has a ton of money from its customers who are flush with Marcellus cash from lease and royalty payments. PNB simply doesn’t know what to do with all the money, so they’re opening branch offices to lend it out. The latest branch will be their first in the Scranton, PA market. They’ve decided to go up against some of the bigger banks in the state:

A Hallstead-based community bank is setting down roots in downtown Scranton, joining a competitive banking landscape.

The newest Peoples Neighborhood Bank office planned for Mulberry Street and Penn Avenue at the site of PDQ Print Center won’t be a full-fledged retail banking office. The modest 2,200-square-foot office will be for commercial lending and administration.

The Electric City outpost of the bank whose center of gravity is firmly in the Endless Mountains may eventually evolve into a branch with tellers and an ATM, said Joe Ferretti, Peoples Neighborhood Bank chief lending officer, but for now, the plans call for some administration function and commercial lending.

The bank hopes to use the office to set a new marker in its service area, Mr. Ferretti said, with a Binghamton, N.Y. branch to the north and now Scranton in the south.

The Federal Deposit Insurance Corp.’s approval for the office is still pending, but Mr. Ferretti is hoping to have the bank ready to lend in June.

The bank is doing business in Lackawanna and Luzerne counties, he said, and the hopes the office will help better serve those customers.

Banking observers say the move is as much about getting new customers as it is about serving existing customers.

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.

Fred Hickman, who led the Scranton-based North Penn Bank until its acquisition by Norwood Financial in 2011, said Peoples’ move into Scranton appears to be a wise one for the deposit-rich bank to put its assets to work.

"They are getting all this deposit money, and it’s difficult for them to put it out there safely in their current market area," he said. "Why not try to do it in the biggest city in the Northeast?"*

*Scranton (PA) Times Tribune (Mar 15, 2013) – Susquehanna County bank pushes into downtown Scranton