Executive Summary

Western Pennsylvania banking markets – many remain fairly rural - are generally tied to the Pittsburgh metropolitan area economy, which has become far more diversified in recent years. Our highlighted region ranges eastward from the Ohio/West Virginia borders to Centre County and extends from New York on the north to Maryland/West Virginia borders on the south.

This report focuses on the 11 publicly-traded banks in Western PA with total assets between $800 million and $15 billion. We believe banks in this size range are large enough to operate fairly efficiently and small enough to deliver personalized services. These “under the radar” stocks are not widely followed by brokerages or institutional investors for several reasons, including relatively small market caps and low trading volumes.

COVID-19 impacts all economic activity and nearly every aspect of life throughout the U.S., including our highlighted market. On June 5, Western Pennsylvania emerged from state government-mandated restrictions on some “nonessential” businesses (yellow phase) to a much less limited environment (green phase). We believe that, in general, the pandemic will accentuate the divide between “haves” and “have nots” and hasten the evolution and/or demise of many industries and companies already struggling to compete effectively in the technology-driven 21st Century. Community banks are part of this “survival of the fittest” challenge; and thus, must consider strategies such as expanding niche-focused business models, better uses of fintech, and/or pursuing M&A in order to thrive.

The uncertain environment underscores that nothing is more significant to a bank’s capital and earnings than credit quality.  We expect credit costs will climb and stay elevated for quite some time due to the sudden and shocking increase in unemployment levels and government-mandated business closures.  PNC FIG Advisory believes banks, therefore, should consider all liquidity and capital options under various economic scenarios to construct stronger balance sheets.  Along with more dynamic trading strategies, there will be a need to vigorously assess capital raising options, cash dividends and stock repurchase programs. Included among the various capital raising options are subordinated debt (“sub debt”) and preferred stock issuances, both of which have been favorably received by the market.  Sensitivity models tailored to individual banks can best identify additional capital needs and, if so, what form of capital is best suited for current and longer-term strategic plans.


  • This Industry Report highlights key performance ratios and valuation metrics of 11 Western Pennsylvania community banks using March 2020 quarter data.
  • There are 128 depository institutions, including 80 which are publicly-traded, in Pennsylvania.  The top five banks have a combined deposit market share of approximately 53%.  PNC Financial Services (NYSE: PNC) is the market leader with a 24% deposit share. Of the top ten Pennsylvania banks in terms of market share, only PNC and F.N.B. Corporation (NYSE: FNB) are headquartered in-state.
  • Capital is king and issuing sub debt is a good option for many institutions. Debt markets have strengthened (that could change quickly!) and this form of financing remains relatively inexpensive due to attractive interest rates and favorable tax treatment. Community bank sub debt coupon rates generally range from 5.00% to 6.00%.

For more information, please visit pnc.com/fig or contact PNC FIG Advisory by calling 1-610-351-1633.

Flying under the Radar: Small and Micro-Cap Banks in Western PA