East Penn Financial Corporation Reports Third Quarter 2006 Results

  
    
  
  
    
      East Penn Financial Corporation (Nasdaq Capital Market: EPEN) 
      today reported solid operating performance for the third quarter of 
      2006. Net income for the quarter ended September 30, 2006 was $900,018, 
      or $0.14 diluted earnings per share as compared with $898,400, or $0.14 
      diluted earnings per share for the same period in 2005.
    
    
      For the nine months ended September 30, 2006, East Penn’s 
      net income was $2,579,000, or $0.41 diluted earnings per share as 
      compared with $2,685,000, or $0.42 diluted earnings per share for the 
      nine months ended September 30, 2005. The annualized return on average 
      assets for the first nine months of 2006 was 0.84% with an annualized 
      return on average equity of 15.21%.
    
    
      Brent L. Peters, President and Chief Executive Officer, commented, “We 
      are again very pleased with our financial performance for the quarter. 
      The Bank continues to experience excellent loan and deposit growth, 
      which respectively increased 16.0% and 15.6% as of September 30, 2006 as 
      compared with September 30, 2005. Additionally the quality of our assets 
      continues to remain strong. Although we see competition in regard to 
      interest rates and terms on both the lending and deposit sides of our 
      business, we are retaining long-time significant customer relationships 
      while at the same time generating new business in new markets.”
    
    
      Mr. Peters further commented, “With regard to 
      our 2006 third quarter net income, we were able to deliver increased 
      earnings over the third quarter of 2005. Our earnings trend is moving in 
      the right direction and continues to be driven primarily from our core 
      banking business. While we intensify our management of non-interest 
      expenses to enhance efficiency, we continue to feel the impact of 
      increased salary, occupancy and equipment costs from our branch 
      expansion efforts, which is part of our strategic plan to grow and 
      enhance our bank.”
    
    
      For the third quarter of 2006 net interest income grew 6.1% to $3.4 
      million from $3.2 million for the third quarter of 2005. This increase 
      helped to mitigate the effects of a $13,000 decrease in other income and 
      an increase of $214,000 in other operating expenses. Balance sheet 
      growth continued to be strong with assets increasing 8.4% to $425.9 
      million as of September 30, 2006 from $392.8 million as of September 30, 
      2005. Despite competitive pressures, asset growth was primarily 
      attributable to an increase in loan balances. The Company has not 
      compromised quality for volume, and remains steadfast to maintain high 
      asset quality. The strength of the asset quality for the third quarter 
      of 2006 is supported by the fact that the percentage of non-performing 
      assets to total assets was 0.24% as compared with 0.32% for the third 
      quarter of 2005. Net charge-offs as a percentage of average loans were 
      0.06% for the third quarter of 2006, as compared with 0.05% for the 
      third quarter of 2005.
    
    
      East Penn Financial Corporation is the parent of East Penn Bank, a 
      locally owned community bank headquartered in Emmaus, Pennsylvania. The 
      Bank serves the Lehigh Valley through its nine branch locations.
    
    
      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
        
        
        
        
        
      
      
        
          
          
        
        
          September 30,
        
      
      
        
          (in thousands, except share data)
        
        
          2006 
        
        
          2005 
        
      
      
        
        
        
          (Unaudited)
        
      
      
        
          Balance Sheet Data:
        
        
        
        
        
      
      
        
          Total assets
        
        
          $425,945 
        
        
          $392,847 
        
      
      
        
          Securities available for sale
        
        
          69,213 
        
        
          81,242 
        
      
      
        
          Securities held to maturity, at cost
        
        
          - 
        
        
          1,038 
        
      
      
        
          Mortgages held for sale
        
        
          1,556 
        
        
          2,598 
        
      
      
        
          Total loans (net of unearned discount)
        
        
          315,140 
        
        
          271,655 
        
      
      
        
          Allowance for loan losses
        
        
          (3,235)
        
        
          (3,055)
        
      
      
        
          Premises and equipment, net
        
        
          10,010 
        
        
          8,919 
        
      
      
        
          Non-interest bearing deposits
        
        
          45,577 
        
        
          40,830 
        
      
      
        
          Interest bearing deposits
        
        
          310,003 
        
        
          266,654 
        
      
      
        
          Total deposits
        
        
          355,580 
        
        
          307,484 
        
      
      
        
          Federal funds purchased and securities sold under agreements to 
          repurchase
        
        
          
          
        
        
        
      
      
        
          6,183 
        
        
          8,316 
        
      
      
        
          Other borrowings
        
        
          30,000 
        
        
          45,000 
        
      
      
        
          Junior subordinated debentures
        
        
          8,248 
        
        
          8,248 
        
      
      
        
          Stockholders' equity
        
        
          24,044 
        
        
          22,442 
        
      
      
        
          Common shares outstanding
        
        
          6,304,262 
        
        
          6,304,212 
        
      
      
        
          Book value per share
        
        
          $3.81 
        
        
          
            $3.56 
          
        
      
    
    
    
    
      
        
        
        
          Three Months
        
        
        
        
          Nine Months
        
      
      
        
        
        
          Ended September 30,
        
        
        
        
          Ended September 30,
        
      
      
        
          (in thousands, except share data)
        
        
          2006 
        
        
          2005 
        
        
           
        
        
          2006 
        
        
          2005 
        
      
      
        
        
        
          
            (Unaudited)
          
        
        
        
        
          
            (Unaudited)
          
        
      
      
        
          Statement of Income Data:
        
        
        
        
        
        
        
        
        
        
        
      
      
        
          Total interest income
        
        
          $6,165 
        
        
          $5,194 
        
        
        
        
          
            $17,449 
          
        
        
          $14,605 
        
      
      
        
          Total interest expense
        
        
          2,780 
        
        
          2,003 
        
        
        
        
          7,436 
        
        
          5,113 
        
      
      
        
          Net interest income
        
        
          3,385 
        
        
          3,191 
        
        
        
        
          10,013 
        
        
          9,492 
        
      
      
        
          Provision for loan losses
        
        
          90 
        
        
          84 
        
        
        
        
          299 
        
        
          
            336 
          
        
      
      
        
          Net interest income after provision
        
        
          3,295 
        
        
          3,107 
        
        
        
        
          9,714 
        
        
          9,156 
        
      
      
        
          Other income
        
        
          599 
        
        
          612 
        
        
        
        
          1,809 
        
        
          1,780 
        
      
      
        
          Other expenses
        
        
          2,773 
        
        
          2,559 
        
        
        
        
          8,293 
        
        
          7,448 
        
      
      
        
          
            Net income before taxes
          
        
        
          1,121 
        
        
          1,160 
        
        
        
        
          3,230 
        
        
          3,488 
        
      
      
        
          Income tax expense
        
        
          221 
        
        
          261 
        
        
        
        
          651 
        
        
          803 
        
      
      
        
          
            Net income
          
        
        
          $900 
        
        
          $899 
        
        
        
        
          $2,579 
        
        
          $2,685 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Basic earnings per share (1)
        
        
          $0.14 
        
        
          $0.14 
        
        
        
        
          $0.41 
        
        
          $0.43 
        
      
      
        
          Diluted earnings per share (2)
        
        
          $0.14 
        
        
          $0.14 
        
        
        
        
          $0.41 
        
        
          $0.42 
        
      
      
        
          Cash dividends per common share
        
        
          $0.11 
        
        
          $0.10 
        
        
        
        
          $0.22 
        
        
          $0.19 
        
      
    
    
    
    
      
        
        
        
          Nine Months
        
      
      
        
        
        
          Ended September 30,
        
      
      
        
        
        
          2006 
        
        
        
        
          2005 
        
      
      
        
        
        
          (Unaudited)
        
        
        
        
          
            (Unaudited)
          
        
      
      
        
          Selected Financial Ratios:
        
        
        
        
        
        
        
      
      
        
          Annualized return on average equity
        
        
          15.21%
        
        
        
        
          16.40%
        
      
      
        
          Annualized return on average assets
        
        
          0.84%
        
        
        
        
          0.95%
        
      
      
        
          Net interest margin (3)
        
        
          
            3.71%
          
        
        
        
        
          3.82%
        
      
      
        
          Efficiency ratios:
        
        
        
        
        
        
        
      
      
        
          Operating expenses as a percentage of

          
            revenues (3)
          
        
        
          66.51%
        
        
        
        
          68.72%
        
      
      
        
          Operating expenses as a percentage of

          
            average assets
          
        
        
          2.71%
        
        
        
        
          2.82%
        
      
      
        
          Tier 1 leverage capital
        
        
          7.72%
        
        
        
        
          7.79%
        
      
      
        
          Net loans (4) as a percent of deposits
        
        
          88.63%
        
        
        
        
          88.35%
        
      
      
        
          Average equity to average assets
        
        
          5.39%
        
        
        
        
          5.81%
        
      
      
        
        
        
        
        
        
        
           
        
      
      
        
          Selected Asset Quality Ratios:
        
        
        
        
        
        
        
      
      
        
          Allowance for loan losses / Total loans (4)
        
        
          1.03%
        
        
        
        
          1.12%
        
      
      
        
          Allowance for loan losses /
        
        
        
        
        
        
        
      
      
        
          Non-performing assets (5)
        
        
          310.76%
        
        
        
        
          245.78%
        
      
      
        
          Non-accrual loans / Total loans (4)
        
        
          0.16%
        
        
        
        
          0.27%
        
      
      
        
          Non-performing assets / Total assets
        
        
          0.24%
        
        
        
        
          0.32%
        
      
      
        
          Net charge-offs / Average loans (4)
        
        
          0.06%
        
        
        
        
          0.05%
        
      
    
    
      
        
          
            (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.
          
        
      
    
    
    
    
    
    
    
  
East Penn Financial Corporation (Nasdaq Capital Market: EPEN)
today reported solid operating performance for the third quarter of
2006. Net income for the quarter ended September 30, 2006 was
$900,018, or $0.14 diluted earnings per share as compared with
$898,400, or $0.14 diluted earnings per share for the same period in
2005.

   For the nine months ended September 30, 2006, East Penn's net
income was $2,579,000, or $0.41 diluted earnings per share as compared
with $2,685,000, or $0.42 diluted earnings per share for the nine
months ended September 30, 2005. The annualized return on average
assets for the first nine months of 2006 was 0.84% with an annualized
return on average equity of 15.21%.

   Brent L. Peters, President and Chief Executive Officer, commented,
"We are again very pleased with our financial performance for the
quarter. The Bank continues to experience excellent loan and deposit
growth, which respectively increased 16.0% and 15.6% as of September
30, 2006 as compared with September 30, 2005. Additionally the quality
of our assets continues to remain strong. Although we see competition
in regard to interest rates and terms on both the lending and deposit
sides of our business, we are retaining long-time significant customer
relationships while at the same time generating new business in new
markets."

   Mr. Peters further commented, "With regard to our 2006 third
quarter net income, we were able to deliver increased earnings over
the third quarter of 2005. Our earnings trend is moving in the right
direction and continues to be driven primarily from our core banking
business. While we intensify our management of non-interest expenses
to enhance efficiency, we continue to feel the impact of increased
salary, occupancy and equipment costs from our branch expansion
efforts, which is part of our strategic plan to grow and enhance our
bank."

   For the third quarter of 2006 net interest income grew 6.1% to
$3.4 million from $3.2 million for the third quarter of 2005. This
increase helped to mitigate the effects of a $13,000 decrease in other
income and an increase of $214,000 in other operating expenses.
Balance sheet growth continued to be strong with assets increasing
8.4% to $425.9 million as of September 30, 2006 from $392.8 million as
of September 30, 2005. Despite competitive pressures, asset growth was
primarily attributable to an increase in loan balances. The Company
has not compromised quality for volume, and remains steadfast to
maintain high asset quality. The strength of the asset quality for the
third quarter of 2006 is supported by the fact that the percentage of
non-performing assets to total assets was 0.24% as compared with 0.32%
for the third quarter of 2005. Net charge-offs as a percentage of
average loans were 0.06% for the third quarter of 2006, as compared
with 0.05% for the third quarter of 2005.

   East Penn Financial Corporation is the parent of East Penn Bank, a
locally owned community bank headquartered in Emmaus, Pennsylvania.
The Bank serves the Lehigh Valley through its nine branch locations.

   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.

-0-
*T
East Penn Financial Corporation
Consolidated Selected Financial Information
                                                     September 30,
(in thousands, except share data)                   2006      2005
                                                  --------------------
                                                       (Unaudited)
Balance Sheet Data:
Total assets                                       $425,945  $392,847
Securities available for sale                        69,213    81,242
Securities held to maturity, at cost                      -     1,038
Mortgages held for sale                               1,556     2,598
Total loans (net of unearned discount)              315,140   271,655
Allowance for loan losses                            (3,235)   (3,055)
Premises and equipment, net                          10,010     8,919
Non-interest bearing deposits                        45,577    40,830
Interest bearing deposits                           310,003   266,654
                                                  --------------------
Total deposits                                      355,580   307,484
Federal funds purchased and securities sold under
 agreements to repurchase                             6,183     8,316
Other borrowings                                     30,000    45,000
Junior subordinated debentures                        8,248     8,248
Stockholders' equity                                 24,044    22,442
Common shares outstanding                         6,304,262 6,304,212
Book value per share                                  $3.81     $3.56
*T

-0-
*T
                                  Three Months         Nine Months
                               Ended September 30, Ended September 30,
(in thousands, except share
 data)                            2006      2005      2006     2005
                               ---------------------------------------
                                   (Unaudited)         (Unaudited)
Statement of Income Data:
Total interest income               $6,165 $5,194     $17,449 $14,605
Total interest expense               2,780  2,003       7,436   5,113
                               ------------------- -------------------
Net interest income                  3,385  3,191      10,013   9,492
Provision for loan losses               90     84         299     336
                               ------------------- -------------------
Net interest income after
 provision                           3,295  3,107       9,714   9,156
Other income                           599    612       1,809   1,780
Other expenses                       2,773  2,559       8,293   7,448
                               ------------------- -------------------
   Net income before taxes           1,121  1,160       3,230   3,488
Income tax expense                     221    261         651     803
                               ------------------- -------------------
 Net income                           $900   $899      $2,579  $2,685
                               =================== ===================

Basic earnings per share (1)         $0.14  $0.14       $0.41   $0.43
Diluted earnings per share (2)       $0.14  $0.14       $0.41   $0.42
Cash dividends per common share      $0.11  $0.10       $0.22   $0.19
*T

-0-
*T
                                                     Nine Months
                                                 Ended September 30,
                                                  2006        2005
                                               ----------- -----------
                                               (Unaudited) (Unaudited)
Selected Financial Ratios:
Annualized return on average equity                 15.21%      16.40%
Annualized return on average assets                  0.84%       0.95%
Net interest margin (3)                              3.71%       3.82%
Efficiency ratios:
  Operating expenses as a percentage of
revenues (3)                                        66.51%      68.72%
  Operating expenses as a percentage of
average assets                                       2.71%       2.82%
Tier 1 leverage capital                              7.72%       7.79%
Net loans (4) as a percent of deposits              88.63%      88.35%
Average equity to average assets                     5.39%       5.81%

Selected Asset Quality Ratios:
Allowance for loan losses / Total loans (4)          1.03%       1.12%
Allowance for loan losses /
   Non-performing assets (5)                       310.76%     245.78%
Non-accrual loans / Total loans (4)                  0.16%       0.27%
Non-performing assets / Total assets                 0.24%       0.32%
Net charge-offs / Average loans (4)                  0.06%       0.05%
*T

-0-
*T
(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.
*T