Financial Services Shape Business in Oh-Penn Region
Financial services is a top industry in the region, starting with the founding of First National Bank of Pennsylvania in Hermitage, Pa., in 1864
The roots of business in the Oh-Penn Region run green. Financial services is a significant industry in the region and has been since the mid-19th century, starting with the founding of First National Bank of Pennsylvania in Hermitage, Pa., in 1864.
"There were many small banks popping up around that time, possibly because of President Lincoln's encouragement of establishing rural banks," says Vincent J. Delie Jr., CEO of First National Bank of Pennsylvania, which serves 44 counties in three states from its headquarters in Hermitage.
As recently as the 1970s, "there were many more individual, mid-sized banks – those with total assets under $1 billion," says Ray Kaltenbaugh, president of Mercer County State Bank. "A lot of them grew aggressively, or merged and remerged."
"We survived 'merger mania' because our board made a deliberate decision to stay independent," Kaltenbaugh says. "We thought it was the best approach for our shareholders and our community."
The biggest advantage of being a locally based bank is, well, being local, Kaltenbaugh says.
"Our board members are from this area, and we make decisions here," he says. "And we can offer a certain degree of flexibility in our lending that you likely won't get from a national bank."
The approach has paid off. Mercer County State Bank currently operates 10 branches and maintains its own investment division and insurance agency. With $350 million in assets, the bank's goal is 5 to 10 percent growth per year.
"We pay dividends twice a year," Kaltenbaugh notes, "and the payments go up a bit each year."
Headquartered in Ellwood City, ESB Bank has also been growing, opening branches in New Castle as well as several other counties throughout western Pennsylvania.
Coming Bank from the Recession
The region's financial services sector has been battered by the same economic forces as the rest of the country, but the tough perseverance of area firms has allowed many of them to weather the storm.
One example is Home Savings and Loan Co., headquartered in Youngstown, Ohio.
"When the recession hit in 2007, the real estate market was devastated," says President and CEO Patrick W. Bevack. "We were declared a troubled institution and subjected to regulators' cease-and-desist orders."
The company received nearly two dozen provisions for improving its performance, Bevack says.
"It was a difficult, years-long process, but we turned things around," he says.
Home Savings is now the third-largest publicly held savings bank in Ohio, with assets of about $1.8 billion. Bevack credits the bank staff's dedication and the region's economic resurgence for the turnaround.
He cites Youngstown's $69 million National Additive Manufacturing Innovation Institute for invigorating industry in the community. And in 2012, Vallourec S.A. and Mannesmann Tubes stirred up even more excitement by opening a 1-million-square-foot pipe mill to service natural gas exploration in the nearby Marcellus Shale formation.
"I've never been more confident in the future of our region and of our institution," Bevack says.
New Avenues for Growth
That confidence is also reflected in the growth of First National Bank of Pennsylvania. In the 44 counties where it operates branches, the bank holds the No. 3 market share in each one.
"We're able to drive good results through investments in our sales management system, our infrastructure, and our ability to manage our branches," Delie says. "And we use capital efficiently. If it's not being deployed for growth, it goes back to our shareholders as dividends."
The firm also capitalizes on emerging trends. With the growth of electronic banking and bill paying, First National has been reevaluating the mission of its branches.
"We want them to become financial centers – places where customers can learn about new products and consult with financial professionals," Delie says.
The bank also recently rolled out its Mobile Deposit smartphone app. Customers can deposit checks directly to their accounts by simply keying in the amount, photographing both sides of the check and pushing a "confirm" button.
"First National was the first banks in our region to offer that service," Delie says. "And it's not just for business accounts; individual customers can use it too. We expect its use to spread. It's one way we can compete with larger institutions."
In 2013, FNB plans to introduce customized account alerts and extend the capabilities of its person-to-person payment capability. Online banking customers will also be able to access an interactive budget center and a single-view financial dashboard.
"The rich history of the region brought banks here," Delie says. "Although we've gone through periods of great difficulty, we're back on the rebound."