The surge of oil and gas companies coming to Ohio to tap into the Utica Shale has also brought an infusion of cash. Many eastern Ohio landowners have become instant "shaleionaires" from the thousands - sometimes millions of dollars - in upfront payments they've received from leasing their land for drilling. As ideastream's Michelle Kanu reports, all that dough is providing a nice cushion for some area banks.
On a bustling stretch of East Lincolnway in the heart of Minerva, Consumers National Bank serves customers in southern Stark county. From his large the office window, CEO Ralph Lober has a prime view of the big rigs and equipment trucks that whiz down this two lane road to drilling sites across eastern Ohio. Lober says all the drilling activity in the area over the last 18 months has been good for business.
Lober: "We've had customers come in with million dollar checks, half a million dollar checks. We've had customers come in with photocopies of checks because, you know, the check is at home in the vault. They didn't know what to do with it so they just lock it up and bring it to the bank."
Lober says the flood of landowners has dissipated now that much of the prime drilling spots in neighboring Columbiana and Carroll Counties have been leased up by Chesapeake Energy. Now, he's looking forward to the next wave of payments landowners will get from whatever natural gas is produced on their land.
Lober: "The royalties-some of those are starting to come in and we expect that to be pretty significant."
Lober is just one of the bankers reeling from the influx of money in the region.
In the Youngstown area, PNC Bank has also been riding the wave.
Karen Segesto-Hauser manages PNC's wealth management advisors in Mahoning, Harrison, and Belmont Counties. A big part of Segesto's job is helping landowners figure out what to do with the leasing money. She says the activity has given the bank a chance to broaden their relationships with customers.
Segesto: "They're coming in to us, talking to the teller they've dealt with for the last 20 years, or the manager for the last 30 years. And they're utilizing us as a trusted advisor. They're coming in and they're getting exposed to additional services."
A sudden cash windfall can be overwhelming for anyone who has never seen so many zeros on one check.
At Farmers National Bank in Howland, CEO John Gulas says employees were getting so many questions from Trumbull County landowners about how to manage their newfound wealth, that the bank decided to offer a new product.
Gulas: "We created a 90 day CD and we paid them a one percent rate. And the whole purpose behind that is that we wanted people to take 90 days, think about what they wanted to do, and make sure that they got advice and counseling about the right steps to take."
Since shale drilling has only been around the last decade or so, research is still developing on how the exploration impacts nearby communities. But eastern Ohio banks aren't the first to experience a boost from nearby drilling.
Erik Gilje is a researcher with Boston College. He's one of the few who have examined how shale exploration has affected banks in Texas, Oklahoma, North Dakota, and Arkansas. He says it's not uncommon for bank branches in counties with widespread drilling to see their total deposits grow by eight percent.
Gilje: "To put that into context, the banks in these counties experience deposit increases of roughly three times greater than what they would ordinarily experience in terms of their average annual deposit growth."
But Gilje says the impact isn't just limited to deposits. With more money on hand, banks have more capital to lend.
Gilje: "Small banks are typically more reliant on local deposits than large banks. So, if you're in a county, a rural county, with a lot of small banks that may not have access to the same sort of capital markets that a Citi Bank or a bank of America has access to, this deposit increase is going to mean a lot more for you in terms of expanding the local credit supply."
Back at Consumers Bank in Minerva, CEO Ralph Lober says the bank has had more local manufacturers, electricians, and other small business owners seeking loans. The interest is good he says, but the bank is still being cautious.
Lober: "It could be easy to just make the loans because we have the cash, but you need to be as diligent, or more diligent than you were before. Just because the business is here right now, we try to look long term. The drilling-the lease payments are gone-but the drilling will be here a long time, but it's not going to be here forever."
Several studies published by the state and the oil and gas industry predict that the drilling will make an economic impact for decades. Lober says his challenge is making sure the bank doesn’t grow too fast, or invest in loans that may not be sustainable once the drillers leave.