East Penn Financial Corporation Announces Earnings for the First Quarter of 2007

  
    
  
  
    
      East Penn Financial Corporation (Nasdaq Capital Market:EPEN) 
      today announced solid performance for the first quarter of 2007. Net 
      income for the quarter ended March 31, 2007 was $898,000, or 8.2% higher 
      than net income of $830,000 for the quarter ended March 31, 2006. 
      Diluted earnings per share were $0.14 for the first quarter of 2007 or 
      7.7% higher than $0.13 per diluted earnings per share for the first 
      quarter of 2006. The first fiscal quarter of 2007 produced an annualized 
      return on average assets of 0.83% and an annualized return on average 
      equity of 14.66%. Increased capital, as a result of the retention of 
      earnings, had a positive impact on the Company’s 
      book value, which increased 12.9%, to $4.03 at March 31, 2007 as 
      compared with $3.57 at March 31, 2006.
    
    
      Brent L. Peters, Chairman, President and Chief Executive Officer, 
      commented, “Despite the flat yield curve that 
      continues to adversely impact our net interest income and margin, we are 
      pleased with our first quarter performance. In 2007 we continued to 
      emphasize balance sheet and expense management as a means of supporting 
      our profitability in this challenging interest rate environment and we 
      believe this strategy will position us well for future earnings growth.”
    
    
      The Company’s earnings continue to be driven 
      primarily from its core banking business. Net interest income for the 
      first quarter of 2007 decreased $57,000 to $3,239,000 from $3,296,000 
      for the first quarter of 2006. This decline was due to the fact that the 
      yield from interest earning assets did not increase as quickly as the 
      cost of funds associated with deposits. Other income for the first 
      quarter of 2007 declined 10.1% as a result of the recognition of a 
      one-time gain recorded during the first quarter of 2006 from the 
      redemption of an other asset. A decline in operating expenses 
      contributed to the bottom line for the quarter ended March 31, 2007 
      since they decreased 4.5% as a result of continued efforts to control 
      operating costs. The continued high quality of the Company’s 
      assets allowed it to appropriate less of a provision to its allowance 
      for loan losses for the current quarter.
    
    
      The Company continues to experience solid balance sheet growth with 
      assets increasing 12.7% to $451 million as of March 31, 2007 from $400 
      million as of March 31, 2006. Despite competition and the yield curve, 
      the growth in assets was attributable to a 10.9% increase in loans, 
      which are the Company’s highest yielding 
      assets. Further contributing to asset growth was an increase of $20 
      million in federal funds sold, the proceeds of which were from deposit 
      growth of 16.1%. The proceeds from the deposit growth were also used to 
      pay-off $11 million in other borrowings that matured during 2006. The 
      Company has not compromised loan quality for volume, and continues to 
      maintain high credit quality. The strength of the asset quality for the 
      first quarter of 2007 is supported by the fact that the percentage of 
      non-performing assets to total assets was 0.09% as compared with 0.19% 
      for the first quarter of 2006.
    
    
      East Penn Financial Corporation is the parent of East Penn Bank, a 
      community bank that serves the Lehigh Valley with nine branch locations. 
      The Company announced its plans to hold its annual meeting on May 10, 
      2007 at 7 p.m. at the Allen Organ Company located in Macungie, 
      Pennsylvania.
    
    
      Additional information about East Penn Financial Corporation is 
      available on its website at www.eastpennbank.com.
    
    
      This press release may contain forward-looking statements as defined by 
      the Private Securities Litigation Reform Act of 1995. Actual results and 
      trends could differ materially from those set forth in such statements 
      due to various factors. Such factors include the possibility that 
      increased demand or prices for the Company’s 
      financial services and products may not occur, changing economic and 
      competitive conditions, technological developments, and other risks and 
      uncertainties, including those detailed in East Penn Financial 
      Corporation’s filings with the Securities and 
      Exchange Commission.
    
    
      
        
          East Penn Financial Corporation
        
      
      
        
          Consolidated Selected Financial Information
        
      
      
        
          
             
          
        
        
        
        
          March 31,
        
      
      
        
          (in thousands, except share data)
        
        
        
        
          2007 
        
        
           
        
        
          2006 
        
      
      
        
        
        
        
        
          (Unaudited)
        
      
      
        
          Balance Sheet Data:
        
        
        
        
        
        
        
        
        
      
      
        
          Total assets
        
        
        
        
          $450,759 
        
        
        
        
          $399,996 
        
      
      
        
          Securities available for sale
        
        
        
        
          70,884 
        
        
        
        
          70,830 
        
      
      
        
          Securities held to maturity, at cost
        
        
        
        
          - 
        
        
        
        
          1,026 
        
      
      
        
          Mortgages held for sale
        
        
        
        
          606 
        
        
        
        
          321 
        
      
      
        
          Total loans (net of unearned discount)
        
        
        
        
          327,851 
        
        
        
        
          295,512 
        
      
      
        
          Allowance for loan losses
        
        
        
        
          (3,328)
        
        
        
        
          (3,151)
        
      
      
        
          Premises and equipment, net
        
        
        
        
          9,622 
        
        
        
        
          9,628 
        
      
      
        
          Non-interest bearing deposits
        
        
        
        
          47,592 
        
        
        
        
          44,674 
        
      
      
        
          Interest bearing deposits
        
        
        
        
          333,534 
        
        
           
        
        
          283,496 
        
      
      
        
          Total deposits
        
        
        
        
          381,126 
        
        
        
        
          328,170 
        
      
      
        
          Securities sold under agreements to repurchase
        
        
        
        
          9,077 
        
        
        
        
          3,996 
        
      
      
        
          Short-term borrowings
        
        
        
        
          - 
        
        
        
        
          808 
        
      
      
        
          Long-term debt
        
        
        
        
          24,000 
        
        
        
        
          35,000 
        
      
      
        
          Junior subordinated debentures
        
        
        
        
          8,248 
        
        
        
        
          8,248 
        
      
      
        
          Stockholders' equity
        
        
        
        
          25,431 
        
        
        
        
          22,502 
        
      
      
        
          Common shares outstanding
        
        
        
        
          6,305,262 
        
        
        
        
          6,304,262 
        
      
      
        
          Book value per share
        
        
        
        
          $4.03 
        
        
        
        
          $3.57 
        
      
      
        
        
        
        
        
        
        
        
        
           
        
      
      
        
        
        
        
        
          Three Months
        
      
      
        
        
        
        
        
          Ended March 31,
        
      
      
        
          (in thousands, except share data)
        
        
        
        
          2007 
        
        
           
        
        
          2006 
        
      
      
        
        
        
        
        
          (Unaudited)
        
      
      
        
          Statement of Income Data:
        
        
        
        
        
        
        
        
        
      
      
        
          Total interest income
        
        
        
        
          $6,340 
        
        
        
        
          $5,542 
        
      
      
        
          Total interest expense
        
        
        
        
          3,101 
        
        
           
        
        
          2,246 
        
      
      
        
          Net interest income
        
        
        
        
          3,239 
        
        
        
        
          3,296 
        
      
      
        
          Provision for loan losses
        
        
        
        
          45 
        
        
           
        
        
          90 
        
      
      
        
          Net interest income after provision
        
        
        
        
          3,194 
        
        
        
        
          3,206 
        
      
      
        
          Other income
        
        
        
        
          578 
        
        
        
        
          643 
        
      
      
        
          Other expenses
        
        
        
        
          2,676 
        
        
           
        
        
          2,801 
        
      
      
        
          
            Net income before taxes
          
        
        
        
        
          1,096 
        
        
        
        
          1,048 
        
      
      
        
          Income tax expense
        
        
        
        
          198 
        
        
           
        
        
          218 
        
      
      
        
          
            Net income
          
        
        
        
        
          $898 
        
        
           
        
        
          $830 
        
      
      
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Basic earnings per share (1)
        
        
        
        
          $0.14 
        
        
        
        
          $0.13 
        
      
      
        
          Diluted earnings per share (2)
        
        
        
        
          $0.14 
        
        
        
        
          $0.13 
        
      
      
        
          Cash dividends per common share
        
        
        
        
          $0.12 
        
        
        
        
          $0.11 
        
      
      
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Selected Financial Ratios:
        
        
        
        
        
        
        
        
        
      
      
        
          Return on average equity
        
        
        
        
          14.66%
        
        
        
        
          14.92%
        
      
      
        
          Return on average assets
        
        
        
        
          0.83%
        
        
        
        
          0.84%
        
      
      
        
          Net interest margin (3)
        
        
        
        
          3.43%
        
        
        
        
          3.78%
        
      
      
        
          Efficiency ratios:
        
        
        
        
        
        
        
        
        
      
      
        
          
            Operating expenses as a percentage of revenues
          
        
        
        
        
          69.26%
        
        
        
        
          71.10%
        
      
      
        
          
            Operating expenses as a percentage of average assets
          
        
        
        
        
          2.53%
        
        
        
        
          2.88%
        
      
      
        
          Tier 1 leverage capital
        
        
        
        
          7.76%
        
        
        
        
          7.93%
        
      
      
        
          Loans (4) as a percent of deposits
        
        
        
        
          86.02%
        
        
        
        
          90.05%
        
      
      
        
          Average equity to average assets
        
        
        
        
          5.67%
        
        
        
        
          5.64%
        
      
      
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Selected Asset Quality Ratios:
        
        
        
        
        
        
        
        
        
      
      
        
          Allowance for loan losses / Total loans (4)
        
        
        
        
          1.02%
        
        
        
        
          1.07%
        
      
      
        
          Allowance for loan losses /
        
        
        
        
        
        
        
        
        
      
      
        
          Non-performing assets (5)
        
        
        
        
          817.69%
        
        
        
        
          431.64%
        
      
      
        
          Non-accrual loans / Total loans (4)
        
        
        
        
          0.08%
        
        
        
        
          0.23%
        
      
      
        
          Non-performing assets / Total assets
        
        
        
        
          0.09%
        
        
        
        
          0.19%
        
      
      
        
          Net charge-offs (recoveries) / Average loans (4)
        
        
        
        
          (0.01%)
        
        
        
        
          0.00%
        
      
    
    
      
        
          
            (1) Based upon the weighted average 
            number of shares of common stock outstanding for the applicable 
            periods.
          
        
      
      
        
           
        
      
      
        
          
            (2) Based upon the weighted average 
            number of shares plus dilutive potential common share equivalents 
            outstanding for the applicable periods.
          
        
      
      
        
           
        
      
      
        
          
            (3) Calculated on a fully tax-equivalent 
            basis.
          
        
      
      
        
           
        
      
      
        
          
            (4) The term “loans” 
            includes loans held in the portfolio, including non-accruing 
            loans, and excludes loans held for sale.
          
        
      
      
        
           
        
      
      
        
          
            (5) Includes non-accrual loans.