EPEN East Penn Finl Corp (MM)

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.