December 31, 2009 (FinancialWire) — Mid Penn Bank, the wholly-owned subsidiary of Mid Penn Bancorp, Inc. (NASDAQ: MPB) expects to record a provision for loan and lease losses of approximately $7 million for the fourth quarter of 2009.

On December 7, 2009, Mid Penn disclosed that it expected to record a provision for loan and lease losses in the range of $4 million to $5 million for the fourth quarter of 2009. However, after further analysis, the company has determined that the amount of the expected provision is greater than previously disclosed. The increased provision will result in a net loss for the quarter and for the year ending December 31, 2009. After giving effect to the provision, Mid Penn Bank will continue to exceed all regulatory capital levels to be considered “well capitalized” at December 31, 2009.

The additional provision to the Allowance for Loan and Lease Losses (the “Reserve) is primarily due to several credits in the loan portfolio, all of which were originated prior to the appointment of the current management team. Due to a current period deterioration in the financial performance of the borrowers on these credits, and/or a devaluation in the collateral, the Bank needs to prepare for inherent losses by increasing the Reserve for these credits. Specifically, one large commercial participation loan has shown exceptional collateral devaluation and contributed greatly to the need to increase the Reserve in this fourth quarter. While Management believes that the Reserve will accurately reflect the condition of the portfolio at December 31, 2009, future credit deterioration cannot be ruled out.

In response to the large loan and lease loss provision expected to be taken for the fourth quarter of 2009, Management has again increased efforts to curtail discretionary expense spending. Current expense initiatives involve cuts in marketing, travel and entertainment, salary and benefits, employee retirement contributions, and a delay in new branch office expansion.

Management will continue to take the necessary measures to further strengthen capital and liquidity positions, improve profitability, and maintain shareholder value throughout this difficult economic period. Notwithstanding the anticipated net loss for 2009, Mid Penn Bank this year has achieved improved market share, with double-digit core deposit growth, and a strengthening net interest margin compared with 2008. According to Rory G. Ritrievi, president and CEO, these factors, coupled with the actions taken to strengthen the Reserve in the fourth quarter of 2009, position the Bank solidly to generate acceptable core earnings going forward.

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