Bank's Commercial Loan Losses Delay Expansion

Losses from Millersburg, Pa.-based Mid Penn Bank’s commercial loans are putting the bank in a commercial property predicament of its own: Paying the rent on its 14 offices in the state’s Dauphin, Cumberland, Schuylkill, and Northumberland counties.

Mid Penn finished the year with a net loss because it was forced to cover losses for commercial loans that were greater than expected, the company reported in early January. The bank had expected as recently as December 7 that it would need $4 million to $5 million to cover its fourth quarter losses; that figure has increased to $7 million.

In a statement, Mid Penn assured investors and depositors that the bank is sound, remains well-capitalized, and exceeds all regulatory capital levels even after setting aside more money to cover the higher losses. However, the bank will rein in discretionary spending and make cuts in marketing, travel, entertainment, salary and benefits, and employee retirement contributions. In an effort to curb spending, Mid Penn also will delay branch office expansion that was to occur in 2010 for six months to a year to allow for earnings to build back up, although the delay will impact only expansion plans that have not been announced, says Rory G. Ritrievi, president and chief executive officer of Mid Penn and its parent company, Mid Penn Bancorp Inc .