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Three PA banks announce big losses on same day; one hints it is tied to Worley & Obetz

LANCASTER – Franklin Financial Services in Chambersburg, Fulton Financial Corporation in Lancaster and Univest Corp. of Pennsylvania in Souderton on Thursday all announced they expect multi-million dollar loses.  They made the announcements in SEC filings.

One filing from the parent company of Farmers and Merchants Trust Company of Chambersburg suggests it is tied to Worley & Obetz.

On May 31, 2018, the Board of Directors of Franklin Financial Services Corporation reported to the Securities and Exchange Commission that its bank subsidiary, Farmers and Merchants Trust Company of Chambersburg, “expects to recognize an impairment charge between $10.0 million and $11.5 million during the second quarter of 2018 on an aggregate loan participation interest of $14.4 million. The non-cash impairment charge relates to a loan participation interest by the Bank. The Bank is not the lead lender.”

The on-line SEC filing titled “2018 Worley Obetz Impairment” continued to read, “The loan participation interest represents the Bank’s portion of loans to a single, large commercial lending relationship with the lead lender. The Bank was notified by the lead lender, another Pennsylvania bank, that the loan relationship had become impaired due to fraudulent activities believed to be perpetrated by one or more executives employed by the borrower…. The Corporation has been informed that the lead lender is working with the borrower to preserve and recover assets.”

On May 31, 2018 Fulton Financial Corporation announced it expects its second quarter 2018 net income and net income to be adversely affected by, “a loss arising from a single, large commercial lending relationship at one of its banking subsidiaries.”   The their SEC filling continued, “The loss resulted from fraudulent activities believed to be perpetrated by one or more employees of the borrower and its related entities. As of May 30, 2018, the Corporation’s outstanding credit exposure to the borrower and its related entities was approximately $48 million, which is net of approximately $32 million of participation interests held by other financial institutions.”

The Chairman and CEO of Fulton Financial Corporation, E. Philip Wenger, would not comment if the loss was from Worley & Obetz, but did tell FOX43, “There is no danger to Fulton Financial, Fulton Bank, or the bank’s customers from this matter; even after this loss, Fulton will remain a very stable company with strong capital.”

On May 31, 2018 Univest Corporation of Pennsylvania’s wholly owned subsidiary, Univest Bank and Trust Co announced it was aware of,  “alleged fraudulent activities believed to be perpetrated by one or more employees of the borrower and its related entities. It is expected the Corporation’s second quarter 2018 net income and net income per share will be adversely affected by provision for loan and leases losses and professional fees arising from this commercial lending relationship.”

Their SEC filling continued to read,  “loan and leases losses related to this matter, which will be recorded in the Corporation’s second quarter 2018 financial results, could amount to the entire $13.0 million of the Bank’s participating interest… The Bank is continuing to investigate the matters described above and work with the lead bank. Based on the Bank’s review of the circumstances of the alleged fraudulent activities involving this borrower.”

Mike Keim, President, Univest Bank and Trust Co, tells FOX43, “We are unable to provide any additional information regarding this matter at this time, but can confirm that we are, and expect to remain, well capitalized, despite any issues with this commercial lending relationship. We also do believe that this is an isolated incident and is not indicative of a broader increase in exposure to fraud-related losses in connection with our lending businesses.”

FULL SEC FILINGS:
https://www.sec.gov/Archives/edgar/data/723646/000072364618000033/fraf-20180531x8k.htm
https://www.sec.gov/Archives/edgar/data/700564/000119312518180382/d596016d8k.htm
https://www.sec.gov/Archives/edgar/data/102212/000010221218000041/uvsp8kloanloss053118.htm