UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                    FORM 10-Q

(X)   Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
      Exchange Act of 1934

      For the quarterly period ended September 30, 2005

or

( )   Transition Report Pursuant to Section 13 or 15(d) of the Securities
      Exchange Act of 1934

      For the transition period from ________________ to ________________.

                                    000-50330
                                    ---------
                             Commission File Number

                         EAST PENN FINANCIAL CORPORATION
                         -------------------------------
              (Exact name of registrant as specified in it charter)

             Pennsylvania                                  65-1172823
    -------------------------------                  ----------------------
    (State or other jurisdiction of                      (IRS Employer

          731 Chestnut Street, P.O. Box 869, Emmaus, Pennsylvania 18049
                    (Address of principal executive offices)

                   Registrant's telephone number: 610-965-5959

      Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

YES  X  NO
    ---    ---

      Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).

YES     NO  X
    ---    ---
                      APPLICABLE ONLY TO CORPORATE ISSUERS:

      Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.

6,304,212 shares of common stock, par value $0.625 per share, outstanding as of
October 31, 2005.

<PAGE>

                         EAST PENN FINANCIAL CORPORATION

                                      INDEX
                          QUARTERLY REPORT ON FORM 10-Q

<TABLE>
<CAPTION>
                                                                                    Page
<S>                                                                                  <C>
Part I.  FINANCIAL INFORMATION

         Item 1.  Financial Statements

                  Consolidated Balance Sheets                                         3
                     September 30, 2005 (Unaudited) and December 31, 2004

                  Consolidated Statements of Income (Unaudited)                       4
                     Three and nine months ended September 30, 2005
                     and September 30, 2004

                  Consolidated Statements of Stockholders' Equity (Unaudited)         5
                     Nine months ended September 30, 2005 and September 30, 2004

                  Consolidated Statements of Cash Flows (Unaudited)                   6
                     Nine months ended September 30, 2005 and September 30, 2004
                  Notes to Interim Consolidated Financial Statements (Unaudited)      7

         Item 2.  Management's Discussion and Analysis of Financial Condition        12
                   and Results of Operations

         Item 3.  Quantitative and Qualitative Disclosures About Market Risk         22

         Item 4.  Controls and Procedures                                            23

Part II. OTHER INFORMATION

         Item 1.  Legal Proceedings                                                  23

         Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds        23

         Item 3.  Defaults Upon Senior Securities                                    23

         Item 4.  Submission of Matters to a Vote of Security Holders                23

         Item 5.  Other Information                                                  23

         Item 6.  Exhibits                                                           23

SIGNATURES                                                                           25

EXHIBIT INDEX                                                                        26
</TABLE>


                                     Page 2
<PAGE>

ITEM 1. FINANCIAL STATEMENTS

                         EAST PENN FINANCIAL CORPORATION
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                     September 30,  December 31,
(In thousands, except share data)                        2005          2004
                                                      (Unaudited)    (Audited)
                                                       ---------     ---------
<S>                                                     <C>           <C>
 ASSETS
 Cash and due from banks                                  $8,636        $7,334
 Interest bearing deposits                                    39         1,234
 Federal funds sold                                        4,344           214
                                                       ---------     ---------
   Cash and cash equivalents                              13,019         8,782
 Interest bearing time deposits                              500            --
 Securities available for sale                            81,242        87,609
 Securities held to maturity                               1,038         1,040
                                                       ---------     ---------
   Total securities                                       82,280        88,649
 Mortgages held for sale                                   2,598         1,146
 Loans, net of unearned income                           271,655       240,669
  Less: allowance for loan losses                         (3,055)       (2,838)
                                                       ---------     ---------
   Total net loans                                       268,600       237,831

   Bank premises and equipment, net                        8,919         7,510
   Investment in restricted stock                          3,403         2,986
   Other real estate owned                                    20            20
   Bank owned life insurance                               7,435         7,224
   Accrued interest receivable and other assets            6,073         5,266
                                                       ---------     ---------

      Total assets                                      $392,847      $359,414
                                                       =========     =========

LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
 Deposits:
   Noninterest bearing                                   $40,830       $42,029
   Interest bearing                                      266,654       256,236
                                                       ---------     ---------
   Total deposits                                        307,484       298,265
Securities sold under agreements to repurchase             3,366         2,349
Short-term borrowings                                      4,950         3,000
Long-term debt                                            45,000        25,000
Junior subordinated debentures                             8,248         8,248
Accrued interest payable and other liabilities             1,357           885
                                                       ---------     ---------

      Total liabilities                                  370,405       337,747

STOCKHOLDERS' EQUITY
 Preferred stock, no par value; authorized
   16,000,000 shares; none issued                             --            --
 Common stock, par value $0.625 per share
   authorized 40,000,000 shares; issued 2005
   6,612,504 shares; 2004 6,608,552 shares;
   outstanding 2005  6,304,212 shares; 2004
   6,300,260 shares                                        4,133         4,131
 Surplus                                                   9,246         9,225
 Retained earnings                                        11,374         9,887
 Accumulated other comprehensive income                     (461)          274
 Less: Treasury stock - at cost, 308,292 shares           (1,850)       (1,850)
                                                       ---------     ---------
      Total stockholders' equity                          22,442        21,667
                                                       ---------     ---------

      Total liabilities and
       stockholders' equity                             $392,847      $359,414
                                                       =========     =========
</TABLE>

See Notes to Consolidated Financial Statements


                                     Page 3
<PAGE>

                         EAST PENN FINANCIAL CORPORATION
                        CONSOLIDATED STATEMENTS OF INCOME
         Three Months and Nine Months Ended September 30, 2005 and 2004
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                      Three Months Ended      Nine Months Ended
                                                     --------------------    --------------------
(In thousands, except share data)                      2005        2004        2005        2004
                                                     --------    --------    --------    --------
<S>                                                    <C>         <C>        <C>          <C>
Interest income
  Interest and fee income on loans                     $4,210      $3,269     $11,665      $9,266
  Securities:
    Taxable                                               748         856       2,341       2,718
    Tax-exempt                                            157         127         459         386
  Other                                                    79          18         140          59
                                                     --------    --------    --------    --------
         Total interest income                          5,194       4,270      14,605      12,429
                                                     --------    --------    --------    --------

Interest expense
  Deposits                                              1,454         905       3,665       2,748
  Federal funds purchased and securities
    sold under agreements to repurchase                    19          22         133          44
  Long-term debt                                          394         200         907         597
  Junior subordinated debentures                          136         136         408         408
                                                     --------    --------    --------    --------
         Total interest expense                         2,003       1,263       5,113       3,797
                                                     --------    --------    --------    --------

         Net interest income                            3,191       3,007       9,492       8,632

  Provision for loan losses                                84         129         336         412
                                                     --------    --------    --------    --------

         Net interest income after
           provision for loan losses                    3,107       2,878       9,156       8,220
                                                     --------    --------    --------    --------

Other income
  Customer service fees                                   386         240       1,009         700
  Mortgage banking activities, net                         86         117         299         342
  Net realized gains on sale of securities                 --          12          --          37
  Income from investment in life insurance                 70          73         211         224
  Net realized gains on sale of other real estate          --          --          16          61
  Other income                                             70          53         245         192
                                                     --------    --------    --------    --------
         Total other income                               612         495       1,780       1,556
                                                     --------    --------    --------    --------

Other expense
  Salaries and wages                                    1,004         937       2,930       2,726
  Employee benefits                                       343         283       1,000         843
  Occupancy                                               243         183         668         540
  Equipment                                               208         182         611         537
  Other operating expenses                                761         686       2,239       1,982
                                                     --------    --------    --------    --------
         Total other expense                            2,559       2,271       7,448       6,628
                                                     --------    --------    --------    --------

  Income before income taxes                            1,160       1,102       3,488       3,148

  Federal income taxes                                    261         271         803         756
                                                     --------    --------    --------    --------

         Net income                                      $899        $831      $2,685      $2,392
                                                     ========    ========    ========    ========

Basic earnings per share                                $0.14       $0.13       $0.43       $0.38

Diluted earnings per share                              $0.14       $0.13       $0.42       $0.38

Cash dividends per common share                         $0.10       $0.08       $0.19       $0.16
</TABLE>

See Notes to Consolidated Financial Statements


                                     Page 4
<PAGE>

                         EAST PENN FINANCIAL CORPORATION
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                            For the Nine Months Ended
                    September 30, 2005 and September 30, 2004
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                   Accumulated
                                                                                      Other
                                             Common                   Retained    Comprehensive  Treasury
(In thousands, except share data)            Stock       Surplus      Earnings    Income (Loss)    Stock        Total
-----------------------------------------------------------------------------------------------------------------------
<S>                                          <C>          <C>          <C>             <C>        <C>           <C>
Balance, December 31, 2003                   $4,130       $9,218       $7,645          $400       ($1,850)      $19,543
                                                                                                               --------
 Comprehensive income:
 Net income                                      --           --        2,392            --            --         2,392
 Changes in net unrealized gains
   (losses) on securities available
   for sale, net of tax effect                   --           --           --           (36)           --           (36)
                                                                                                               --------

     Total comprehensive income                                                                                   2,356
                                                                                                               --------

Exercise of 1,100 common stock options           --            6           --            --            --             6

Cash dividends ($0.16 per share)                 --           --       (1,008)           --            --        (1,008)
                                           ----------------------------------------------------------------------------

   Balance, September 30, 2004               $4,130       $9,224       $9,029          $364       ($1,850)      $20,897
                                           ============================================================================

Balance, December 31, 2004                   $4,131       $9,225       $9,887          $274       ($1,850)      $21,667
 Comprehensive income:
 Net income                                      --           --        2,685            --            --         2,685
 Changes in net unrealized gains
   on securities available for sale,
   net of tax effect                             --           --           --          (735)           --          (735)
                                                                                                               --------

     Total comprehensive income                                                                                   1,950
                                                                                                               --------

Exercise of 3,652 common stock
   options                                        2           21           --            --            --            23

Cash dividends ($0.19 per share)                 --           --       (1,198)           --            --       ($1,198)
                                           ----------------------------------------------------------------------------

   Balance, September 30, 2005               $4,133       $9,246      $11,374         ($461)      ($1,850)      $22,442
                                           ============================================================================
</TABLE>

See Notes to Consolidated Financial Statements


                                     Page 5
<PAGE>

                         EAST PENN FINANCIAL CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                  Nine Months Ended September 30, 2005 and 2004
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                   Nine Months Ended September 30,
(In thousands)                                                         2005            2004
                                                                    ----------      ----------
<S>                                                                     <C>             <C>
CASH FLOWS from OPERATING ACTIVITIES
  Net income                                                            $2,685          $2,392
  Adjustments to reconcile net income to net cash
    provided by operating activities:
  Provision for loan losses                                                336             412
  Provision for depreciation and amortization                              572             481
  Net amortization of securities premiums and discounts                    179             243
  Net realized gain on sale of foreclosed real estate                      (16)            (61)
  Net realized gain on sale of securities                                   --             (37)
  Proceeds from sale of mortgage loans                                  20,880          23,581
  Net gain on sale of loans                                               (299)           (342)
  Loans originated for sale                                            (22,033)        (25,077)
  Earnings on investment in life insurance                                (211)           (224)
  Decrease in accrued interest receivable
    and other assets                                                      (141)            (44)
  Increase (decrease) in accrued interest payable
    and other liabilities                                                  472            (109)
                                                                    ----------      ----------

         Net Cash Provided by Operating Activities                       2,424           1,215
                                                                    ----------      ----------

CASH FLOWS from INVESTING ACTIVITIES
  (Increase) decrease in interest bearing time deposits                   (500)            200
  Purchases of available for sale securities                            (5,097)         (7,132)
  Proceeds from maturities of and principal repayments
    on available for sale securities                                    10,171          15,869
  Proceeds from sales of available for sale securities                      --           5,991
  Proceeds from maturities of and principal repayments
    on held to maturity securities                                           2               6
  Proceeds from the sale of other real estate owned                         31             317
  Net increase in loans                                                (31,120)        (24,406)
  Net increase in restricted stock                                        (417)           (987)
  Purchases of bank premises and equipment                              (1,981)         (1,822)
  Investment in Berkshire Bank                                            (287)             --
  Purchase of life insurance                                                --          (1,500)
                                                                    ----------      ----------

         Net Cash Used in Investing Activities                         (29,198)        (13,464)
                                                                    ----------      ----------

CASH FLOWS from FINANCING ACTIVITIES
  Net increase in deposits                                               9,219           4,781
  Net increase in federal funds purchased and
    securities sold under agreements  to repurchase                      2,967           8,389
  Increase in long-term borrowings                                      20,000              --
  Proceeds from the exercise of stock options                               23               6
  Dividends paid                                                        (1,198)         (1,008)
                                                                    ----------      ----------

         Net Cash Provided by Financing Activities                      31,011          12,168
                                                                    ----------      ----------

         Net (Increase) Decrease in Cash and Cash Equivalents            4,237             (81)

  Cash and cash equivalents - Beginning                                  8,782           8,593
                                                                    ----------      ----------

  Cash and cash equivalents - Ending                                   $13,019          $8,512
                                                                    ==========      ==========

SUPPLEMENTARY CASH FLOW INFORMATION

  Interest paid                                                         $4,796          $3,879
                                                                    ==========      ==========
  Federal income taxes paid                                               $850            $742
                                                                    ==========      ==========

SUPPLEMENTAL SCHEDULE of NON-CASH INVESTING
  and FINANCING ACTIVITIES

  Other real estate acquired in settlement of loans                        $15              $0
                                                                    ==========      ==========
</TABLE>

See Notes to Consolidated Financial Statements


                                     Page 6
<PAGE>

                         EAST PENN FINANCIAL CORPORATION
               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2005
                                   (Unaudited)

1.    Basis of Presentation

            East Penn Financial Corporation (the "Company") was incorporated on
      January 27, 2003 for the purpose of forming a bank holding company. On
      July 1, 2003, the Company completed the reorganization and merger with
      East Penn Bank (the "Bank") and its wholly owned subsidiary, East Penn
      Mortgage Company, into the holding company form of ownership. In the
      reorganization, the Bank became a wholly owned banking subsidiary of the
      Company. On July 31, 2003, the Company formed East Penn Statutory Trust I
      (the "Trust"), a Connecticut statutory business trust, for the purpose of
      issuing $8 million in capital pass-through securities to investors.

            The consolidated financial statements include the accounts of the
      Company, and its wholly owned subsidiary, the Bank. All significant
      intercompany accounts and transactions have been eliminated.

            The accompanying unaudited consolidated financial statements have
      been prepared in accordance with accounting principles generally accepted
      in the United States of America for interim financial information.
      Accordingly, they do not include all of the information and footnotes
      required by generally accepted accounting principles for complete
      financial statements. In the opinion of management, all adjustments
      considered necessary for fair presentation have been included.

            Operating results for the nine-month period ended September 30,
      2005, are not necessarily indicative of the results that may be expected
      for the year ended December 31, 2005. For further information, refer to
      the financial statements and footnotes thereto included in the Company's
      Annual Report on Form 10-K for the year ended December 31, 2004.

2.    Investment in Bank

            On September 23, 2003, the Company made an initial purchase of
      141,300 shares of common stock of a newly formed de novo bank, named
      Berkshire Bank, located in Wyomissing, Berks County, Pennsylvania. Upon
      the completion of Berkshire's initial stock offering, the Company
      purchased an additional 12,123 shares, which resulted in increasing the
      Company's investment to $1,534,000 of Berkshire Bank's outstanding common
      stock as of December 31, 2003. In consideration of the Company's and its
      director's and officer's combined ownership of Berkshire Bank common
      stock, the aggregate percentage ownership was 19.9% as of the 2003 year
      end, which is in line with the terms of a Stock Subscription and Purchase
      Agreement between the Company and Berkshire Bank. Under this agreement,
      the Company is also entitled to purchase from Berkshire Bank up to 5% of
      additional stock at any time beginning on the date of the warrant and for
      10 years thereafter at an exercise price of $6.40 per share, which is
      adjusted in consideration of two 5-for-4 stock splits. The total number of
      shares that are subject to purchase under all of the Company's warrants,
      options or rights shall not exceed 25% of the total number of shares of
      Berkshire Bank common stock.

            During 2004 Berkshire Bank announced a 5-for-4 stock split, effected
      in the form of a 25% stock dividend, payable July 22, 2004, which resulted
      in the Company receiving an additional 38,355 shares. As part of a
      three-phase stock offering, which began on September 1, 2004 and was
      effective through March 31, 2005, the Company purchased an additional
      57,119 shares of common stock. On July 21, 2005, Berkshire Bank announced
      the payment of a 5-for-4 stock split, effected in the form of a 25% stock
      dividend, payable August 19, 2005, which resulted in an additional 62,224
      shares. As of September 30, 2005, the Company's total investment in
      Berkshire Bank was $2,147,000, represented by 311,121 shares, resulting in
      a 19.9% aggregate ownership in consideration of the combined ownership of
      the Company, its directors and its officers. The investment is carried at
      cost and is included in the other assets category on the balance sheet.


                                     Page 7
<PAGE>

            In August 2003, the Company entered into an agreement that was
      approved by the Federal Reserve Bank of Philadelphia in September 2003.
      This agreement imposes certain restrictions where the Company has agreed
      not to:

      o     solicit proxies with respect to any voting securities of Berkshire
            Bank or influence the manner in which any other shareholder of
            Berkshire Bank votes any voting securities of Berkshire Bank;

      o     cause any voting securities of Berkshire Bank to be subject to a
            voting trust;

      o     cause Berkshire Bank to become a subsidiary of the Company;

      o     have any designated representative serve or act as an officer,
            director, employee or agent of Berkshire Bank;

      o     propose any person for election as a director of Berkshire Bank;

      o     attempt to influence the dividend policies or practices of Berkshire
            Bank; the investment, loan or credit decision policies; the pricing
            of services; personnel decisions; operations activities;

      o     exercise or seek to exercise any controlling influence over the
            management of Berkshire Bank;

      o     enter into any banking or non-banking transactions with Berkshire
            Bank, except that the Company may establish and maintain deposit
            accounts with Berkshire Bank, provided the aggregate balance of all
            such accounts does not exceed $500,000 and that the accounts are
            maintained on substantially the same terms as those prevailing for
            comparable accounts of persons unaffiliated with Berkshire Bank.

            Based upon the limitations imposed by this agreement, the Company is
      considered to be a passive investor.

3.    Earnings per Share

            The following table sets forth the computation of basic and diluted
      earnings per share:

<TABLE>
<CAPTION>
                                                            Nine Months Ended          Three Months Ended
                                                        ------------------------    ------------------------
                                                              September 30,               September 30,
                                                           2005          2004          2005         2004
                                                        ------------------------    ------------------------
<S>                                                     <C>           <C>           <C>           <C>
      Net income applicable to common stock             $2,685,000    $2,392,000    $  899,000    $  831,000
                                                        ========================    ========================

      Weighted-average common shares outstanding         6,302,452     6,299,523     6,303,560     6,299,935
      Effect of dilutive securities, stock options          20,073        17,476        19,288        16,344
                                                        ------------------------    ------------------------
      Weighted-average common shares outstanding
        used to calculate diluted earnings per share     6,322,525     6,316,999     6,322,848     6,316,279
                                                        ========================    ========================

      Basic earnings per share                          $     0.43    $     0.38    $     0.14    $     0.13
                                                        ========================    ========================
      Diluted earnings per share                        $     0.42    $     0.38    $     0.14    $     0.13
                                                        ========================    ========================
</TABLE>

4.    Comprehensive Income

            The components of other comprehensive income (loss) and related tax
      effects for the three and nine months ended September 30, 2005 and 2004
      are as follows:

<TABLE>
<CAPTION>
                                                Nine Months Ended        Three Months Ended
                                              ---------------------     --------------------
                                                  September 30,             September 30,
                                                2005         2004         2005        2004
                                              ---------------------     --------------------
<S>                                            <C>             <C>        <C>         <C>
      (In thousands)

      Unrealized holding gains (losses) on
        available for sale securities          ($1,114)        ($17)      ($898)      $1,897
      Less reclassification adjustments for
        gains included in net income                --           37          --           12
                                              ---------------------     --------------------

      Net unrealized gains (losses)             (1,114)         (54)       (898)       1,885
      Tax effect                                   379           18         302         (641)
                                              ---------------------     --------------------
              Net of tax amount                  ($735)        ($36)      ($593)      $1,244
                                              =====================     ====================
</TABLE>


                                     Page 8
<PAGE>

5.    Stock Option Plan

            The Company has adopted the disclosure-only provisions of Statement
      of Financial Accounting Standards (SFAS) No. 123, "Accounting for
      Stock-Based Compensation". Accordingly, no compensation costs have been
      recognized for options granted in 2005 and 2004. Had compensation costs
      for stock options granted been determined based on the fair value at the
      grant date for awards under the plan consistent with the provisions of
      SFAS No. 123, the Company's net income and earnings per share for the
      three and nine months ended September 30, 2005 and 2004, would have been
      reduced to the pro forma amounts indicated below:

<TABLE>
<CAPTION>
                                                              Nine Months Ended        Three Months Ended
                                                            ---------------------    ----------------------
                                                                September 30,             September 30,
                                                              2005         2004         2005         2004
                                                            ---------------------    ----------------------
                                                                   (In Thousands, except Per Share Amounts)
<S>                                                           <C>          <C>            <C>          <C>
      Net income as reported                                  $2,685       $2,392         $899         $831
      Total stock-based compensation cost, net of tax,
                that would have been included in the
                determination of net income if the fair
                value based method had been applied
                to all awards                                     84           99            6           96
                                                            ---------------------    ----------------------

      Pro forma net income                                    $2,601       $2,293         $893         $735
                                                            =====================    ======================

      Basic earnings per share:
                As reported                                    $0.43        $0.38        $0.14        $0.13
                Pro forma                                      $0.41        $0.36        $0.14        $0.12
      Diluted earnings per share:
                As reported                                    $0.42        $0.38        $0.14        $0.13
                Pro forma                                      $0.41        $0.36        $0.14        $0.12
</TABLE>

6.    Guarantees

            The Company does not issue any guarantees that would require
      liability recognition or disclosure, other than its standby letters of
      credit. Standby letters of credit that are written are conditional
      commitments issued by the Bank to guarantee the performance of a customer
      to a third party. Generally, all letters of credit, when issued, have
      expiration dates within one year. The credit risk involved in issuing
      letters of credit is essentially the same as those that are involved in
      extending loan facilities to customers. The Bank, generally, holds
      collateral and/or personal guarantees supporting these commitments. The
      Bank had $1,034,000 in standby letters of credit as of September 30, 2005.
      Management believes that the proceeds obtained through liquidation of
      collateral and the enforcement of guarantees would be sufficient to cover
      the potential amount of future payments required under the corresponding
      guarantees. The current amount of the liability as of September 30, 2005
      for guarantees under standby letters of credit is not material.

7.    New Accounting Standards

            In December 2004, the FASB issued Statement No. 123(R), "Share-Based
      Payment'. Statement No. 123(R) revised Statement No. 123, "Accounting for
      Stock-Based Compensation", and supercedes APB Opinion No. 25, "Accounting
      for Stock Issued to Employees", and its related implementation guidance.
      Statement No. 123(R) will require compensation costs related to
      share-based payment transactions to be recognized in the financial
      statements (with limited exceptions). The amount of compensation cost will
      be measured based on the grant-date fair value of the equity or liability
      instruments issued. Compensation cost will be recognized over the period
      that an employee provides service in exchange for the award.

            On April 14, 2005, the Securities and Exchange Commission ("SEC")
      adopted a new rule that amends the compliance dates for Statement No.
      123(R). Under the new rule, the Company is required to adopt Statement No.
      123(R) in the first annual period beginning after June 15, 2005. The


                                     Page 9
<PAGE>

      Company has not yet determined the method of adoption or the effect of
      adopting Statement No. 123(R), and it has not determined whether the
      adoption will result in amounts that are similar to the current pro forma
      disclosures under Statement No. 123(R).

            In December 2003, the Accounting Standards Executive Committee
      issued Statement of Position 03-3 (SOP 03-3), "Accounting for Certain
      Loans or Debt Securities Acquired in a Transfer." SOP 03-3 addresses
      accounting for differences between contractual cash flows and cash flows
      expected to be collected from an investor's initial investment in loans or
      debt securities acquired in a transfer, including business combinations,
      if those differences are attributable, at least in part, to credit
      quality. SOP 03-3 is effective for loans for debt securities acquired in
      fiscal years beginning after December 15, 2004. The Company adopted the
      provisions of SOP 03-3 on January 1, 2005.

            In March 2005, the SEC issued Staff Accounting Bulletin No. 107
      ("SAB No. 107"), "Share-Based Payment", providing guidance on option
      valuation methods, the accounting for income tax effects of share-based
      payment arrangements upon adoption of SFAS No. 123(R), and the disclosures
      in MD&A subsequent to the adoption. The Company will provide SAB No. 107
      required disclosures upon adoption of SFAS No. 123(R) on January 1, 2006.

            In March 2005, the FASB issued Interpretation No. 47 ("FIN 47"),
      "Accounting for Conditional Asset Retirement Obligations," that requires
      an entity to recognize a liability for a conditional asset retirement
      obligation when incurred if the liability can be reasonably estimated. FIN
      47 clarifies that the term Conditional Asset Retirement Obligation refers
      to a legal obligation to perform an asset retirement activity in which the
      timing and/or method of settlement are conditional on a future event that
      may or may not be within the control of the entity. FIN 47 also clarifies
      when an entity would have sufficient information to reasonably estimate
      the fair value of an asset retirement obligation. FIN 47 is effective for
      all fiscal years ending after December 15, 2005 (December 31, 2005, for
      calendar-year companies). Retrospective application for interim financial
      information is permitted but is not required. Early adoption of this
      Interpretation is encouraged. We do not expect the adoption of FIN 47 to
      materially impact our consolidated financial statements.

            In May 2005, FASB issued SFAS 154, "Accounting Changes and Error
      Corrections". The Statement requires retroactive application of a
      voluntary change in accounting principle to prior period financial
      statements unless it is impracticable. SFAS 154 also requires that a
      change in method of depreciation, amortization, or depletion for
      long-lived, non-financial assets be accounted for as a change in
      accounting estimate that is affected by a change in accounting principle.
      SFAS 154 replaces APB Opinion 20, "Accounting Changes", and SFAS 3,
      "Reporting Accounting Changes in Interim Financial Statements". SFAS 154
      will be effective for accounting changes and corrections of errors made in
      fiscal years beginning after December 15, 2005. Management currently
      believes that adoption of the provisions of SFAS 154 will not have a
      material impact on the Company's consolidated financial statements.

            In July 2005, the FASB issued a proposed interpretation of FAS 109,
      "Accounting for Income Taxes", to clarify certain aspects of accounting
      for uncertain tax positions, including issues related to the recognition
      and measurement of those tax positions. If adopted as proposed, the
      interpretation would be effective in the fourth quarter of 2005, and any
      adjustments required to be recorded as a result of adopting the
      interpretation would be reflected as a cumulative effect from a change in
      accounting principle. The Company is currently in the process of
      determining the impact of the adoption of the interpretation as proposed
      on its financial position or results of operation.

            In December 2004, the FASB issued Staff Position No. FAS 109-1 ("FSP
      109-1"), "Application of FASB Statement No. 109, Accounting for Income
      Taxes, to the Tax Deduction on Qualified Production Activities Provided by
      the American Jobs Creation Act of 2004". FSP 109-1 clarifies SFAS No.
      109's guidance that applies to the new tax deduction for qualified
      domestic production activities. The Company has adopted the standard at
      the beginning of 2005. This standard did not have a material impact to the
      Company's consolidated financial statements.


                                    Page 10
<PAGE>

            In December 2004, the FASB issued Staff Position 109-2 ("FSP
      109-2"), "Accounting and Disclosure Guidance for the Foreign Earnings
      Repatriation Provision within the American Jobs Creation Act of 2004". FSP
      109-2 provides that an enterprise is allowed time beyond the financial
      reporting period of enactment to evaluate the effect of the new tax law on
      its plan for applying SFAS No. 109. This standard did not have a material
      impact to the Company's consolidated financial statements.

            In June 2005, the FASB's Emerging Issues Task Force (EITF) reached a
      consensus on Issue No. 05-6, "Determining the Amortization Period for
      Leasehold Improvements Purchased after Lease Inception or Acquired in a
      Business Combination" ("EITF 05-6"). This guidance requires that leasehold
      improvements acquired in a business combination or purchased subsequent to
      the inception of a lease be amortized over the shorter of the useful life
      of the assets or a term that includes required lease periods and renewals
      that are reasonably assured at the date of the business combination or
      purchase. This guidance is applicable only to leasehold improvements that
      are purchased or acquired in reporting periods beginning after June 29,
      2005. The Company is evaluating the impact, if any, of EITF 05-6 on its
      financial statements.

            In October 2005, the FASB issued FASB Staff Position FAS 13-1 ("FSP
      FAS 13-1"), which requires companies to expense rental costs associated
      with ground or building operating leases that are incurred during a
      construction period. As a result, companies that are currently
      capitalizing these rental costs are required to expense them beginning in
      its first reporting period beginning after December 15, 2005. FSP FAS 13-1
      is effective for the Company as of the first fiscal quarter of 2006.
      Management currently believes that adoption of the provisions of FSP FAS
      13-1 will not have a material impact on the Company's financial condition
      or results of operations.


                                    Page 11
<PAGE>

ITEM 2.

           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS
                               September 30, 2005

      The following is management's discussion and analysis of the significant
changes in the consolidated results of operations, capital resources and
liquidity presented in the accompanying unaudited consolidated financial
statements for the Company. This discussion should be read in conjunction with
the preceding consolidated financial statements and related footnotes, as well
as, the Company's December 31, 2004 Annual Report on Form 10-K. Current
performance does not guarantee and may not be indicative of similar performance
in the future.

      In addition to historical information, this quarterly report on Form 10-Q
contains forward-looking statements. The forward-looking statements contained in
this report are subject to certain risks, assumptions and uncertainties. Because
of the possibility of change in the underlying assumptions, actual results could
differ materially from those projected in the forward-looking statements.
Additional factors that might cause actual results to differ materially from
those expressed in the forward-looking statements include, but are not limited
to:

      -     operating, legal and regulatory risks,

      -     economic, political and competitive forces affecting the Company's
            services, and

      -     the risk that management's analyses of these risks could be
            incorrect and/or that the strategies developed to address them could
            be unsuccessful.

      The Company's forward-looking statements are relevant only as of the date
on which the statements are made. By making forward-looking statements, the
Company assumes no duty to update them to reflect new, changing or unanticipated
events or circumstances. Readers should carefully review the risk factors
described in other periodic reports and public documents that the Company files
from time to time with the Securities and Exchange Commission.

CRITICAL ACCOUNTING POLICIES

      Disclosure of the Company's significant accounting policies is included in
Note 1 to the consolidated financial statements of the Company's Annual Report
on Form 10-K for the year ended December 31, 2004. Some of these policies are
particularly sensitive requiring significant judgments, estimates and
assumptions to be made by management. Additional information is contained on
pages 14 and 17 of this report for the provision and allowance for loan losses.

OVERVIEW

      Net income for the nine months ended September 30, 2005 and 2004 was
$2,685,000 and $2,392,000. The increase of $293,000, or 12.2%, is attributable
to the Company's core banking business, where net interest income increased
10.0%, other income increased 14.4% and the provision for loan losses decreased
18.4%. On a basic earnings per share basis, net income for the nine months ended
September 30, 2005 was $0.43 as compared with $0.38 for the nine months ended
September 30, 2004. Diluted earnings per share for the nine months ended
September 30, 2005 was $0.42 per share as compared with $0.38 per share for the
same period in 2004. Net income as a percentage of average assets on an
annualized basis, also known as return on average assets, increased to 0.95% for
the first nine months of 2005 from 0.93% for the first nine months of 2004 as a
result of increased net income. Net income as a percentage of total average
stockholders' equity on an annualized basis, also known as return on average
equity, was 16.40% and 16.12% for the first nine months of 2005 and 2004,
respectively. The increase in this ratio is also attributable to the increased
level of net income.

      During the first nine months of 2005, the Company's assets grew
$33,433,000, or 9.3%, to $392,847,000 as of September 30, 2005 from $359,414,000
as of December 31, 2004. This increase is primarily attributable to strong loan
growth, which increased to $271,655,000 as of September 30, 2005


                                    Page 12
<PAGE>

from $240,669,000 as of December 31, 2004, offset by a decline of $6,369,000, or
7.2%, in the investment securities portfolio, the proceeds of which were
reinvested to fund loans. Total deposits increased by $9,219,000, or 3.8%,
during the first nine months of 2005 to $307,484,000 as of September 30, 2005
from $298,265,000 as of December 31, 2004. This compares to an increase of
$4,781,000, or 1.7%, to $284,679,000 at September 30, 2004 from $279,898,000 as
of December 31, 2003. The growth in total deposits during the first nine months
of 2005 was higher than the growth in deposits during the same period in 2004 as
a result of the Bank's continued focus to be competitive in the market by
offering competitive interest rates and providing quality customer service.
Although there was an increase in deposit growth, it was not sufficient enough
to fund the increased loan demand. To cover this shortfall, long-term borrowings
were used, which account for the $20,000,000 increase in long-term borrowings to
$45,000,000 as of September 30, 2005 from $25,000,000 as of December 31, 2004.

RESULTS OF OPERATIONS

Net Interest Income

      For the three months ended September 30, 2005, total interest income
increased by $924,000, or 21.6%, to $5,194,000 as compared with $4,270,000 for
the three months ended September 30, 2004. This increase is primarily due to
loan growth, which is the Company's highest yielding asset, and three 25-basis
point increases in the prime rate, which occurred during the third quarter of
2005.

      Total interest expense increased $740,000, or 58.6%, to $2,003,000 for the
three months ended September 30, 2005 from $1,263,000 for the three months ended
September 30, 2004. This increase is attributable, in part, to deposit volume
growth and the increased costs associated with attracting deposits at a time
when short-term interest rates are rising. This increase is also due to the
Company's need to borrow, which, with deposit growth, was used to fund loan
growth. There is a higher cost associated with borrowings since interest rates
to borrow have been higher than interest rates paid on deposits.

      Net interest income increased by $184,000, or 6.1%, to $3,191,000 for the
three months ended September 30, 2005 from $3,007,000 for the three months ended
September 30, 2004.

      For the nine months ended September 30, 2005, total interest income
increased $2,176,000, or 17.5%, to $14,605,000, compared with $12,429,000 for
the nine months ended September 30, 2004. This increase is the result of a 9.5%
increase in average interest-earning assets, which grew to $350,369,000 for the
first nine months of 2005, from $319,903,000 for the first nine months of 2004.
The growth in average interest earning assets was attributable to increased loan
volume, which was funded from the cash flow generated from the investment
securities portfolio, long-term borrowings and deposit growth. Further impacting
interest income were six 25-basis point increases in the prime rate during the
first nine months of 2005 that resulted in better than anticipated yields on
interest earning assets. The yield on average interest earning assets increased
to 5.57% for the nine months ended September 30, 2005 from 5.19% for the same
period in 2004.

      Total interest expense increased by $1,316,000, or 34.7%, to $5,113,000
for the nine months ended September 30 2005, from $3,797,000 for the nine months
ended September 30, 2004. This increase is attributable to the growth in average
interest bearing liabilities, which increased to $312,276,000 for the first nine
months of 2005 from $284,992,000 for the first nine months of 2004. The need to
increase long-term borrowings to complement deposit growth in order to fund loan
volume, contributed to the increase in average interest bearing liabilities.
However, due of the higher costs associated with long-term borrowings as well as
the need to increase interest rates to remain competitive in maintaining and
attracting deposits, cost of funds increased to 2.19% for the nine months ended
September 30, 2005 from 1.78% for the same period in 2004.

      Net interest income increased by $860,000, or 10.0%, to $9,492,000 for the
nine months ended September 30, 2005 from $8,632,000 for the nine months ended
September 30, 2004. This increase is attributable to the growth of interest
sensitive assets, prime rate increases and ongoing efforts to proactively manage
and minimize the impact of increased costs associated with funding sources. In
addition, the shift in the composition of the Company's interest sensitive
assets, where cash flow from investment securities


                                    Page 13
<PAGE>

was reinvested in loans, which are a higher yielding asset, helped to minimize
further compression of the net interest rate spread and margin. For the first
nine months of 2005, the net interest spread decreased 3 basis points to 3.38%
for the first nine months of 2005 from 3.41% for the first nine months in 2004,
while the net interest margin increased to 3.62% from 3.60% for the nine-month
periods ending September 30, 2005 and 2004. Although interest rates started to
rise during 2004 and continued into 2005, the Bank proactively managed the
potential compression of its net interest rate spread and margin in
consideration of the growth of its interest sensitive assets and liabilities.

Provision for Loan Losses

      The provision for loan losses was $84,000 for the three months ended
September 30, 2005 compared with $129,000 for the three months ended September
30, 2004.

      For the nine months ended September 30, 2005, the provision for loan
losses was $336,000, a decrease of $76,000, or 18.40%, compared with $412,000
for the nine months ended September 30, 2004. The decrease in the provision is
attributable to the consistency in the high quality of the loan portfolio.

      The allowance for loans losses represented 1.12% of total loans at
September 30, 2005, compared with 1.18% as of December 31, 2004 and 1.20% as of
September 30, 2004. Management performs ongoing assessments of the loan loss
reserve in relation to loan portfolio growth, credit exposure to individual
borrowers, overall trends in the loan portfolio and other relevant factors.
Based upon these factors, management believes that as of September 30, 2005, the
reserve is reasonable and sufficient to support the increased loan growth in
light of the strong asset quality as supported by the ratios reflected in Table
2 on page 17.

Other Income

      For the three months ended September 30, 2005, other income was $612,000,
an increase of $117,000, or 23.6%, compared with other income of $495,000 for
the three months ended September 30, 2004. The increase was primarily due to an
increase of $146,000 in customer service fee income, which was attributable to
the implementation of an overdraft privilege product introduced during the
second quarter of 2005 and a $17,000 increase in other miscellaneous income.
Other income was negatively impacted by decreases of $31,000 in fee income from
mortgage banking activities, $12,000 in less gains from sales of available for
sale investment securities since no securities were sold during 2005 as compared
with 2004 and $3,000 in less income from the investment in life insurance.

      Other income for the nine months ended September 30, 2005 increased
$224,000, or 14.4%, to $1,780,000 from $1,556,000 for the first nine months
ended September 30, 2004. This increase was due to a $309,000 increase in
customer service fees and a $53,000 increase in other miscellaneous income that
occurred from a higher than normal volume of processing merchant credit card
transactions earlier in 2005. Offsetting these increases were declines in income
as a result of there being $43,000 in less income from mortgage banking
activities, $37,000 in less income as a result of there being no sales of
available for sale securities during 2005, $13,000 decline in income associated
with the investment in life insurance, and a $45,000 decline in income as a
result of there being fewer sales of other real estate in 2005 as compared with
2004.

Other Expenses

      Other expenses, which include salary, occupancy, equipment and all other
expenses incidental to the operation of the Company, increased to $2,559,000 for
the third quarter of 2005 from $2,271,000 for the third quarter of 2004. The
$288,000, or 12.7%, increase is not only due to the Company's continued growth,
but is attributable to increased occupancy and equipment costs associated with
the renovation, occupancy and full utilization of a 3-story brick building
purchased in 2004 to house administrative, operational and executive offices.

      Salaries and employee benefit expenses, which make up the largest
component of other expenses,


                                    Page 14
<PAGE>

increased $127,000, or 10.4%, to $1,347,000 for the third quarter of 2005 from
$1,220,000 for the third quarter in 2004. The increase is primarily attributable
to the increase in normal salary and benefit costs.

      Occupancy expenses increased $60,000, or 32.8%, to $243,000 for the three
months ended September 30, 2005 from $183,000 for the three months ended
September 30, 2004. The increase is due to the cost associated with the
renovation, occupancy and full utilization of a 3-story brick building purchased
in 2004 to house administrative, operational and executive offices.

      Equipment expense increased $26,000, or 14.3%, to $208,000 for the three
months ended September 30, 2005 from $182,000 for the three months ended
September 30, 2004. This increase is the result of additional costs and
depreciation associated with equipment purchased to accommodate the Company's
growth and its occupancy of the newly renovated 3-story brick building purchased
in 2004 to house administrative, operational and executive offices.

      Other operating expenses during the second quarter of 2005 increased
$75,000, or 10.9%, to $761,000 from $686,000 during the third quarter of 2004.
The increase is primarily associated with the continued growth of the Company.

      For the nine months ended September 30, 2005, total other expenses
increased $820,000, or 12.4%, to $7,448,000 from $6,628,000 for the nine months
ended September 30, 2004. The increase is the result of the Company's growth and
the additional occupancy and equipment expenses associated with the renovation,
occupancy and full utilization of a 3-story brick building purchased in 2004 to
house administrative, operational and executive offices.

      Salary expenses and related employee benefits were $3,930,000 for the nine
months ended September 30, 2005, an increase of $361,000, or 10.1%, compared
with $3,569,000 for the nine months ended September 30, 2004. The increase is
attributable to staff additions and increases in normal salary and benefit
related expenses.

      Occupancy expenses for the first nine months of 2005 increased to $668,000
from $540,000 for the first nine months of 2004. The increase of $128,000, or
23.7%, is attributable to the costs associated with the renovation, occupancy
and full utilization of a 3-story brick building purchased in 2004 to house
administrative, operational and executive offices.

      Equipment expenses increased $74,000, or 13.8%, to $611,000 for the first
nine months of 2005 from $537,000 for the first nine months of 2004. The
increase in this expense category is due to the added depreciation expense from
the additions made to equipment to support the growth of the Company and its
renovation, occupancy and full utilization of a 3-story brick building purchased
in 2004 to house administrative, operational and executive offices.

      Other operating expenses increased $257,000, or 13.0%, to $2,239,000 for
the nine months ended September 30, 2005 from $1,982,000 for the nine months
ended September 30, 2004. This increase was primarily the result of the
Company's growth and increased transactional volume, which impacted certain
volume driven expenses.

Income Taxes

      Income tax expense was $261,000 for the three months ended September 30,
2005, an decrease of $10,000, or 3.7%, compared with $271,000 for the three
months ended September 30, 2004. The decreased tax expense is due to achieving a
higher level of tax-exempt net income in proportion with pre-tax net income.

      For the nine months ended September 30, 2005, the tax provision was
$803,000 compared with $756,000 for the nine months ended September 30, 2004.
This increase of $47,000, or 6.2%, is the result of achieving a higher level of
pre-tax net income with a level amount of tax-exempt income during the first
nine months of 2005 as compared with the first nine months of 2004. Income tax
expense as a percentage of pretax income was 23.0% for the nine months ended
September 30, 2005 as compared with 24.0%


                                    Page 15
<PAGE>

for the same period in 2004.

Net Income

      Net income for the three months ended September 30, 2005 was $899,000, an
increase of $68,000, or 8.2%, compared with $831,000 for the three months ended
September 30, 2004. The increase in net income is the result of increases of
$184,000 in net interest income, $117,000 in other income, and decreases of
$45,000 in the provision for loan losses and $10,000 in the tax provision,
offset by an increase of $288,000. Basic and diluted earnings per share for the
three months ended September 30, 2005 were each $0.14 per share as compared with
$0.13 per share for the three months ended September 30, 2004.

      Net income for the nine months ended September 30, 2005 was $2,685,000, an
increase of $293,000, or 12.2%, compared with $2,392,000 for the nine months
ended September 30, 2004. The increase in net income is the result of increases
of $860,000 in net interest income, a decrease of $76,000 in the provision for
loan losses, and an increase of $224,000 in other income, offset by increases of
$820,000 in other expenses and $47,000 in taxes. Factors contributing to the
increased level of net income include increased interest income from loan growth
and the impact of prime rate increases, as well as the Bank's efforts to manage
its cost of funds. Increased other income, derived from increased customer
service fees and credit card processing, further enhanced net income. Basic
earnings per share for the nine months ended September 30, 2005 were each $0.43
per share compared with $0.38 per share for the nine months ended September 30,
2004, while diluted earnings per share increased to $0.42 per share from $0.38
per share for the same periods in 2005 and 2004.

FINANCIAL CONDITION

Securities

      The Company's securities portfolio is comprised of securities that not
only provide interest income, including tax-exempt income, but also provide a
source of liquidity, diversify the earning assets portfolio, allow for the
management of risk and tax liability, and provide collateral for repurchase
agreements and public fund deposits. Policies are in place to address various
aspects of managing the portfolio, including but not limited to, concentrations,
liquidity, credit quality, interest rate sensitivity and regulatory guidelines.
Adherence to these policies is monitored by the Company's Asset/Liability
Committee on a monthly basis.

      Although the Company generally intends to hold its investment securities
to maturity, a significant portion of the securities portfolio is classified as
available for sale, with new purchases generally categorized as such. Securities
in the available for sale category are accounted for at fair value with
unrealized appreciation or depreciation, net of tax, reported as a separate
component of stockholders' equity. Securities in the held to maturity category
are accounted for at amortized cost. The Company invests in securities for the
yield they produce and not to profit from trading. The Company holds no trading
securities in its portfolio.

      The securities portfolio at September 30, 2005 was $82,280,000, compared
to $88,649,000 at December 31, 2004, a decrease of $6,369,000, or 7.2%. The
decline is attributable to repayments of principal, which were used to fund the
Company's strong loan growth. Securities available for sale decreased to
$81,242,000 at September 30, 2005 from $87,609,000 at December 31, 2004, while
securities held to maturity were $1,038,000 at September 30, 2005 as compared
with $1,040,000 at December 31, 2004.

      The carrying value of the available for sale portion of the portfolio at
September 30, 2005 includes an unrealized loss of ($698,000) (reflected as an
accumulated other comprehensive loss of ($461,000) in stockholders' equity, net
of a deferred income tax liability of $237,000). This compares with an
unrealized gain at December 31, 2004 of $416,000 (reflected as accumulated other
comprehensive income of $274,000 in stockholders' equity, net of a deferred
income tax liability of $142,000).


                                    Page 16
<PAGE>

Loans

      The loan portfolio comprises the major component of the Company's earning
assets and generally is the highest yielding asset category. Gross loans
receivable, net of unearned fees and origination costs, increased $30,986,000,
or 12.9%, to $271,655,000 at September 30, 2005 from $240,669,000 at December
31, 2004. Gross loans represented 88.3% of total deposits at September 30, 2005
as compared with 80.7% at December 31, 2004, since loan growth has outpaced
deposit growth. Loan growth was most significant in commercial lending, where
the Bank's general business development program and specific focus on
municipal/tax-free lending have led this effort. Outstanding retail loans have
grown as well, although to a lesser extent than commercial loans. Residential
mortgage lending has remained active. However, the Bank continues to sell the
majority of its mortgage loans into the secondary market in order to effectively
manage long-term interest rate risk.

Credit Risk and Loan Quality

      The Company continues to be prudent in its efforts to minimize credit
risk. The Bank's written lending policy requires underwriting, loan
documentation and credit analysis standards to be met prior to the approval and
funding of any loan. In accordance with that policy, the internal loan review
process monitors the loan portfolio on an ongoing basis. The Credit
Administration area then prepares an analysis of the allowance for loan losses
on a quarterly basis, which is then submitted to the Board of Directors for its
assessment as to the adequacy of the allowance. The allowance for loan losses is
an accumulation of expenses that has been charged against past and present
earnings in anticipation of potential losses in the loan portfolio.

      The allowance for loan losses at September 30, 2005 and December 31, 2004
was $3,055,000 and $2,838,000, respectively, compared to $2,772,000 at September
30, 2004. Although less of a provision was made to the allowance for the first
nine months of 2005 as compared with the same period in 2004, there was an
increase in the allowance since the provision exceeded net charge-offs. The
allowance increased in consideration of the growth in the loan portfolio and the
shift in the loan mix, where there has been continued growth in commercial
loans, which generally carry a higher level of credit risk. At September 30,
2005, the allowance for loan losses represented 1.12% of the gross loan
portfolio, compared with 1.18% at December 31, 2004. This compares to 1.20% at
September 30, 2004. At September 30, 2005, in consideration of the strong asset
quality, management believes the allowance for loan loss reserve to be
reasonable and adequate to support the loan growth and to address any potential
losses.

      Table 1 - "Analysis of Allowance for Loan Loss" - details the activity,
which occurred in the allowance over the first nine months of 2005 and 2004.

      Table 1 - Analysis of Allowance for Loan Loss(1)
--------------------------------------------------------------------------------
      (in thousands)
                                                           2005         2004
                                                         --------     --------
      Balance, beginning of year                         $  2,838     $  2,403
      Provision charged to operating  expense                 336          412
      Charge-offs:
        Commercial                                             (8)           0
        Real estate                                           (36)           0
        Consumer                                              (90)         (56)
                                                         --------     --------
        Total charge-offs                                    (134)         (56)

      Recoveries:
        Commercial                                              0            3
        Real estate                                             3            0
        Consumer                                               12           10
                                                         --------     --------
        Total recoveries                                       15           13

      Net (charge-offs)                                      (119)         (43)
                                                         --------     --------

                                                         $  3,055     $  2,772
                                                         ========     ========

      Net (charge-offs) recoveries to average net loans     (0.05)%      (0.02)%

      (1)   Bank's loan portfolio is entirely domestic
--------------------------------------------------------------------------------


                                    Page 17
<PAGE>

      The Bank's lending policy is executed through the assignment of tiered
loan limit authorities to individual officers of the Bank, the Officer's Loan
Committee, the Board Loan Committee and the Board of Directors. Although the
Bank maintains sound credit policies, certain loans may deteriorate for a
variety of reasons. The Bank's policy is to place all loans on a non-accrual
status upon becoming 90 days delinquent in their payments, unless there is a
documented and reasonable expectation of the collection of the delinquent
amount. Loans are reviewed monthly as to their status, and on a quarterly basis,
a Watch List of potentially troubled loans is prepared and presented to the
Board of Directors. Management is not aware of any material potential loan
problems that have not been disclosed in this report.

      Table 2 - "Asset Quality Ratios" - summarizes pertinent asset quality
ratios at September 30, 2005 and December 31, 2004.

      Table 2 -Asset Quality Ratios

      --------------------------------------------------------------------------

                                                           9/30/05      12/31/04
                                                           -------      --------
      Non-accrual loans/Total loans                          0.27%         0.41%

      Non-performing assets (1) /Total loans                 0.46%         0.45%

      Net charge-offs/Average loans                          0.05%         0.03%

      Allowance/Total loans                                  1.12%         1.18%

      Allowance/Non-accrual  loans                         422.54%       287.83%

      Allowance/Non-performing loans (1)                   249.80%       267.48%

         (1) - Includes non-accrual loans.
      --------------------------------------------------------------------------

      At September 30, 2005, the Company had other real estate owned as acquired
through foreclosure, in the amount of $20,000, which the same amount outstanding
at December 31, 2004. The Company expects to dispose of the remaining properties
with minimal or no loss.

      Loan concentrations are considered to exist when the total amount of loans
to any one or a multiple number of borrowers engaged in similar activities or
having similar characteristics exceeds 10% of loans outstanding in any one
category. The majority of the Bank's lending is made within its primary market
area, which includes Emmaus and other adjacent communities in Lehigh County,
Pennsylvania.

Bank Owned Life Insurance

      The Company has Bank Owned Life Insurance ("BOLI") for a chosen group of
employees, namely officers, where the Bank is the owner and beneficiary of the
policies. The Bank's deposits and proceeds from the sale of investment
securities funded the BOLI. Earnings from the BOLI are recognized as other
income. The BOLI is profitable from the appreciation of the cash surrender
values of the pool of insurance, and its tax advantage to the Company. This
profitability is used to offset a portion of current and future employee benefit
costs and a Nonqualified Supplemental Executive Retirement Plan for the
Company's Chief Executive Officer.

         The Company had $7,435,000 and $7,224,000 in BOLI as of September 30,
2005 and December 31, 2004. Although the BOLI is an asset that may be
liquidated, it is the Company's intention to hold this pool of insurance because
it provides tax-exempt income that lowers the Company's tax liability, while
enhancing its overall capital position.

Investment in Bank

      On September 23, 2003, the Company purchased 141,300 shares for $1,413,000
of common stock outstanding of a newly formed de novo bank, named Berkshire
Bank, located in Wyomissing, Berks County, Pennsylvania. On October 22, 2003,
the Company purchased an additional 12,123 shares for $121,000, which resulted
in increasing the Company's investment to $1,534,000, or 18.3%, of Berkshire
Bank's outstanding


                                    Page 18
<PAGE>

common stock as of December 31, 2003. In consideration of the Company's and its
director's and officer's combined ownership of Berkshire Bank common stock, the
aggregate percentage ownership was 19.9% as of the 2003 year end, which is in
line with the terms of a Stock Subscription and Purchase Agreement between the
Company and Berkshire Bank.

      During 2004 Berkshire Bank announced a 5-for-4 stock split, effected in
the form of a 25% stock dividend, payable July 22, 2004, which resulted in the
Company receiving an additional 38,355 shares. On September 1, 2004, Berkshire
Bank commenced a three-phase common stock offering effective through March 31,
2005. In order to maintain its level of investment in Berkshire Bank, the
Company purchased an additional 57,119 shares. On July 21, 2005, Berkshire Bank
announced the payment of a 5-for-4 stock split, effected in the form of a 25%
stock dividend, payable August 19, 2005, which resulted in an additional 62,224
shares. As of September 30, 2005, the Company's total investment in Berkshire
Bank was $2,147,000, represented by 311,121 shares, resulting in a 19.9%
aggregate ownership in consideration of the combined ownership of the Company,
its directors and its officers.

Deposits

      Deposits are the major source of the Company's funds for lending and
investment purposes. Total deposits at September 30, 2005 were $307,484,000, an
increase of $9,219,000, or 3.1%, from total deposits of $298,265,000 at December
31, 2004. The increase in deposits is due to increases of $23,999,000 in time
deposits and $1,580,000 in savings accounts, offset by declines of $15,161,000
in interest bearing demand deposit accounts and $1,199,000 in non-interest
bearing demand deposit accounts. In addition to the growth, there was a shift
between deposit categories, where customers invested more funds in longer-term
deposits as rates on time deposits have been increasing due to competitive
pressures. This trend impacted the cost of deposits, which increased to 1.88% as
of September 30, 2005 from 1.57% as of December 31, 2004 and 1.49% as of
September 30, 2004.

Securities Sold under Agreements to Repurchase

      Securities sold under agreements to repurchase increased $1,017,000, or
43.3%, to $3,366,000 at September 30, 2005 from $2,349,000 at December 31, 2004
due to an increase in the interest rate paid on this product, which attracted
additional investors. Securities sold under agreements to repurchase generally
mature in one business day and roll over under a continuing contract.

Short-Term Borrowings

      Short-term borrowings in the form of overnight federal funds purchased
were $4,950,000 as of September 30, 2005 as compared with $3,000,000 at December
31, 2004. The Bank has a $5,000,000 federal funds line of credit with its main
correspondent bank, Atlantic Central Bankers Bank, Camp Hill, Pennsylvania
("ACBB") as well as a short-term/overnight line of credit of $35 million with
the Federal Home Loan Bank of Pittsburgh ("FHLB"), which is part of its overall
maximum borrowing capacity of $174,883,000.

Long-Term Debt and Borrowing Capacity

      There were $45 million outstanding in fixed rate term loans with the FHLB
at September 30, 2005, an increase of $20 million as compared with the $25
million that was outstanding at December 31, 2004. The $45 million borrowing is
comprised of the following fixed rate borrowings (in thousands):


                                    Page 19
<PAGE>

                  Maturity               Amount         Rate
              -----------------         --------      --------
              November 28, 2005           $5,000          2.22%
              February 6, 2006             5,000          3.55%
              May 5, 2006                  5,000          3.64%
              November 28, 2006            6,000          2.80%
              May 7, 2007                  5,000          3.89%
              November 28, 2007            7,000          3.43%
              May 5, 2008                  5,000          4.03%
              November 28, 2008            7,000          3.78%
                                        --------      --------

                  Total                  $45,000          3.42% weighted average
                                        ========      ========

      Because loan growth outpaced deposit growth during the first nine months
of 2005, short-term overnight borrowings were initially used as an alternate
source of funding the strong loan demand. However, as the amount of short-term
overnight borrowings increased, short-term interest rates were rising as well.
In the early part of May 2005, management decided to shift $20 million from
short-term overnight borrowings into four term loans with laddered maturities
ranging from 9 months to 36 months, which are included in the above table. The
purpose for this transaction was to proactively manage the potential interest
rate risk associated with borrowing $20 million on an overnight basis at a time
when short-term rates were rising. This strategy allowed the Bank to control its
borrowing costs by locking into fixed rates, which, over time, would help to
minimize the impact that future short-term interest rate increase could have on
its net interest spread and margin.

      The Bank has a total maximum borrowing capacity for both short and
long-term borrowings of approximately $174,883,000 with the FHLB, out of which
$45 million represents fixed rate term loans that were outstanding at September
30, 2005, and resulted in an unused borrowing capacity of $132,883,000.

Mandatory Redeemable Capital and Junior Subordinated Debentures

      As of September 30, 2005, the Company had $8,248,000 outstanding in junior
subordinated debentures, which were issued on July 31, 2003 to investors as
capital trust pass-through securities by East Penn Statutory Trust I ("Trust"),
a Connecticut statutory business trust and wholly owned subsidiary of the
Company. The securities have a fixed rate of 6.80% through September 17, 2008.
The capital securities are redeemable by the Company on or after September 17,
2008, at par, or earlier, if the deduction of related interest for federal
income taxes is prohibited, classification as Tier I Capital is no longer
allowed, or certain other contingencies arise. The capital securities must be
redeemed upon final maturity of the subordinated debentures on September 17,
2033. Proceeds totaling $4.3 million were contributed to the capital at the
Bank. The Company chose to utilize the multi-issuer trust preferred alternative,
which proved to be a less expensive and more flexible resource of regulatory
capital.

Asset/Liability Management

      Interest rate risk is the risk to interest income that is attributed to
the repricing characteristics of interest sensitive assets and liabilities. An
interest sensitive asset or liability is one that experiences changes in cash
flows as a direct result of changes in market interest rates. The management of
interest rate risk involves analyzing the maturity and repricing of interest
sensitive assets and liabilities at specific points in time. The imbalance
between interest sensitive assets and liabilities is commonly referred to as the
interest rate gap. The interest rate gap is one way of assessing the risk
inherent in the existing balance sheet as it relates to potential changes in net
interest income.

      The Company manages its balance sheet with the intent of maximizing net
interest income, while maintaining an acceptable level of risk to minimize the
impact that changing interest rates may have on its net income and changes in
the economic value of its equity. The overall interest rate risk position and
strategies for the management of interest rate risk are reviewed by senior
management and the Asset/ Liability Committee ("ALCO") of the Board of Directors
on an ongoing basis. The Company utilizes a variety of methodologies and
resources to measure its interest rate risk. It also has the ability to effect
strategies to manage interest rate risk, which include, but are not limited to,
selling newly originated


                                    Page 20
<PAGE>

residential mortgage loans, controlling the volume mix of fixed/variable rate
commercial loans and securities, increasing/ decreasing deposits via interest
rate changes, borrowing from the FHLB, and buying/selling securities.
Adjustments to the mix of interest sensitive assets and liabilities are made
periodically in an effort to give the Company dependable and steady growth in
net interest income, while at the same time, managing the related risks.

Liquidity

      Liquidity represents the Company's ability to efficiently manage cash
flows at reasonable rates to fund growth of earning assets, to meet the cash
needs of its customers, who may want to borrow or withdraw funds, and to meet
operating requirements. Liquidity is essential to compensate for fluctuations in
the balance sheet and provide funds for growth and normal operating
expenditures. The Company derives its liquidity on a continuous basis from
scheduled and unscheduled principal and interest payments from outstanding loans
and investment securities and through the availability of deposits and
borrowings.

      Liquidity from asset categories is provided through cash, amounts due from
banks, interest-bearing deposits with banks and federal funds sold, which were
$13,019,000 at September 30, 2005, compared to $8,782,000 at December 31, 2004.
Additional asset liquidity sources include principal and interest payments from
securities in the Company's investment portfolio and cash flow from its
amortizing loan portfolio. Longer-term liquidity needs may be met by selling
securities available for sale, selling loans or raising additional capital. At
September 30, 2005, there was $65,731,000 in liquid securities as compared with
$72,232,000 at December 31, 2004. Liquid securities decreased by $6,501,000
since year-end as a result of reinvesting the cash flow generated from the
investment securities portfolio into loans.

      Liability liquidity sources include attracting deposits at competitive
rates. Deposits at September 30, 2005 were $307,484,000, compared to
$298,265,000 at December 31, 2004. In addition, the Bank has lines of credit
with its main correspondent bank, ACBB, and with the FHLB, which are reliable
sources for short and long-term funds.

      The Company's financial statements do not reflect various off-balance
sheet commitments that are made in the normal course of business, which may
involve some liquidity risk. Off-balance sheet arrangements are discussed in
detail below.

      Management is of the opinion that its liquidity position, at September 30,
2005, is adequate to respond to fluctuations "on" and "off" the balance sheet.
In addition, management knows of no trends, demands, commitments, events or
uncertainties that may result in, or that are reasonably likely to result in the
Company's inability to meet anticipated or unexpected liquidity needs.

Off-Balance Sheet Arrangements

      The Company's financial statements do not reflect various off-balance
sheet arrangements that are made in the normal course of business. These
commitments consist mainly of loans approved but not yet funded, unused lines of
credit and letters of credit made in accordance with the same standards as
on-balance sheet instruments. Unused commitments at September 30, 2005 were
$98,193,000, which consisted of $69,394,000 in unfunded commitments to existing
loans, $15,670,000 to grant new loans, $12,095,000 in unused lines for overdraft
privilege and $1,034,000 in letters of credit. Because these instruments have
fixed maturity dates, and because many of them will expire without being drawn
upon, they do not present a liquidity risk to the Company. Management believes
that any amounts actually drawn upon can be funded in the normal course of
operations. The Company has no investment in or financial relationship with any
unconsolidated entities that are reasonably likely to have a material effect on
liquidity or the availability of capital resources.


                                    Page 21
<PAGE>

Capital

      The following Table 3 presents the risk-based and leverage capital amounts
and ratios at September 30, 2005 for the Company and the Bank.

<TABLE>
<CAPTION>
                                                                                                           To be Well
                                                                                                        Capitalized under
                                                                           For Capital Adequacy         Prompt Corrective
                                                       Actual                    Purposes               Action Provisions
                                               ----------------------    ------------------------    ------------------------
                                                 Amount      Ratio         Amount        Ratio         Amount        Ratio
                                               ----------  ----------    ----------    ----------    ----------    ----------
                                                                          (Dollars in Thousands)
<S>                                              <C>          <C>         <C>            <C>         <C>            <C>
As of September 30, 2005:
    Total capital (to risk-weighted
        assets):
        Company                                  $33,951      11.6   %    =/>$23,415      =/>8.0   %       N/A         N/A    %
        Bank                                      31,399      10.8         =/>23,191      =/>8.0       =/>$28,989   =/>10.0
    Tier 1 capital (to risk-weighted assets):

        Company                                   30,528      10.4         =/>11,707      =/>4.0           N/A          N/A
        Bank                                      28,344       9.8         =/>11,596      =/>4.0       =/> 17,393   =/> 6.0
    Tier 1 capital (to average assets):
        Company                                   30,528       7.8         =/>15,688      =/>4.0           N/A          N/A
        Bank                                      28,344       7.3         =/>15,577      =/>4.0       =/> 19,471   =/> 5.0
</TABLE>

      These capital ratios continue to remain at levels, which are considered to
be "well-capitalized" as defined by regulatory guidelines.

      Banking laws and regulations limit the amount of cash dividends that may
be paid without prior approval from the Company's regulatory agencies. In
abidance with such requirements, on January 21, 2005, the Board of Directors
authorized and declared a semi-annual cash dividend for 2005 in the amount of
$0.09 per share, payable on February 28, 2005 to all shareholders of record as
of February 4, 2005. The payment of this semi-annual cash dividend decreased
retained earnings by $567,000. In addition, on July 21, 2005, the Board
authorized and declared a cash dividend for the second half of 2005 for $0.10
per share, payable on August 31, 2005 to all shareholders of record as of August
10, 2005. The payment of the second part of the semi-annual cash dividend
decreased retained earnings by $631,000.

      Restrictions under the Pennsylvania Banking Code of 1965 are placed on the
size of a Bank's investment in fixed assets as a percentage of equity.
Presently, the Bank exceeds the allowable limit of 25% of equity, as defined by
the Pennsylvania Department of Banking. The Bank's fixed assets as a percentage
of equity increased to 38.94% at September 30, 2005, as compared with 36.63% at
September 30, 2004. This increase is due to the increase in fixed assets
primarily associated with the Bank's newly renovated and occupied office space.
Generally, the Bank contacts the Department of Banking to obtain the
Department's approval before acquiring a fixed asset that is of a material
dollar amount. On an ongoing basis, compliance with this section of the Banking
Code is expected to occur through normal depreciation adjustments and retention
of earnings.

ITEM 3.

Quantitative and Qualitative Disclosures About Market Risk

      In the normal course of conducting business activities, the Company is
exposed to market risk, principally interest risk. Interest risk arises from
market driven fluctuations in interest rates that affect cash flows, income,
expense and values of financial instruments. The Asset/Liability Committee,
using policies and procedures approved by the Board of Directors, is responsible
for managing the rate sensitivity position.

      No material changes in the market risk strategy occurred during the
current period. No material changes have been noted in the Company's equity
value at risk. A detailed discussion of market risk is provided in the Form 10-K
for the period ended December 31, 2004.


                                    Page 22
<PAGE>

ITEM 4.

Controls and Procedures

      (a)   Evaluation of disclosure controls and procedures

            As of September 30, 2005, the Company carried out an evaluation,
            under the supervision and with the participation of the Company's
            management, including the Company's Chief Executive Officer and
            Chief Financial Officer, of the effectiveness of the design and
            operation of the Company's disclosure controls and procedures
            pursuant to Exchange Act Rule 13a-15(e). Based upon that evaluation,
            the Chief Executive Officer and Chief Financial Officer concluded
            that the Company's disclosure controls and procedures are effective
            in timely alerting them to material information relating to the
            Company (including its consolidated subsidiary) required to be
            included in the Company's periodic filings.

      (b)   Changes in internal control over financial reporting

            The Company made no significant changes in its internal control over
            financial reporting or in other factors that could significantly
            affect these controls during the quarter ended September 30, 2005,
            including any corrective actions with regard to significant
            deficiencies and material weaknesses.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings
-------
            In the opinion of the Company, after review with legal counsel,
            there are no proceedings pending to which the Company is a party or
            to which its property is subject, which, if determined adversely to
            the Company, would be material in relation to the Company's
            financial condition. There are no proceedings pending other than
            ordinary, routine litigation incident to the business of the
            Company. In addition, no material proceedings are pending or are
            known to be threatened or contemplated against the Company by
            governmental authorities.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
-------
            Nothing to report.

Item 3. Defaults upon Senior Securities
-------
            Nothing to report.

Item 4. Submission of Matters to a Vote of Security Holders
-------
            Nothing to report.

Item 5. Other Information
-------
            Nothing to report.

Item 6. Exhibits
-------
            3(i)  Registrant's Articles of Incorporation, as amended, are
                  incorporated herein by reference to Annex B to the
                  Registrant's Registration Statement on Form S-4 (Registration
                  No. 333-103673) as filed with the Securities and Exchange
                  Commission on March 7, 2003.

            3(ii) Registrant's By-Laws are incorporated herein by reference to
                  Annex C to the


                                    Page 23
<PAGE>

                  Registrant's Registration Statement on Form S-4 (Registration
                  No. 333-103673) as filed with the Securities and Exchange
                  Commission on March 7, 2003.

            10.1  East Penn Financial Corporation's 1999 Stock Incentive Plan
                  for the benefit of officers and key employees is incorporated
                  by reference to Exhibit 10.2 to the Registrant's Registration
                  Statement on Form S-4 (Registration No. 333-103673) as filed
                  with the Securities and Exchange Commission on March 7, 2003.

            10.2  East Penn Financial Corporation's 1999 Independent Directors
                  Stock Option Plan for the benefit of non-employee directors is
                  incorporated by reference to Exhibit 10.1 to the Registrant's
                  Registration Statement on Form S-4 (Registration No.
                  333-103673) as filed with the Securities and Exchange
                  Commission on March 7, 2003.

            10.3  Executive Employment Agreement between East Penn Bank and
                  Brent L. Peters, dated April 12, 2001, is incorporated by
                  reference to Exhibit 10.3 to the Registrant's Registration
                  Statement on Form S-4 (Registration No. 333-103673) as filed
                  with the Securities and Exchange Commission on March 7, 2003.

            10.4  The Supplemental Executive Retirement Plan ("SERP") between
                  East Penn Bank and Brent L. Peters, dated May 31, 2001, is
                  incorporated herein by reference to Exhibit 10.4 to the
                  Registrant's Registration Statement on Form S-4 (Registration
                  No. 333-103673) as filed with the Securities and Exchange
                  Commission on March 7, 2003.

            10.5  East Penn Financial Corporation's Dividend Reinvestment and
                  Stock Purchase Plan is incorporated by reference to the
                  Registrant's Registration Statement on Form S-3 (Registration
                  No. 333-116754) as filed with the Securities and Exchange
                  Commission on June 23, 2004.

            11    Statement re: Computation of per share earnings is
                  incorporated by reference herein to Note 3 on page 8 of this
                  Form 10-Q.

            31.1  Certification of Chief Executive Officer pursuant to Rule
                  13a-15(e)/15d-15(e).

            31.2  Certification of Chief Financial Officer pursuant to Rule
                  13a-15(e)/15d-15(e).

            32.1  Certification of Chief Executive Officer pursuant to Section
                  1350 of the Sarbanes Oxley Act of 2002.

            32.2  Certification of Chief Financial Officer pursuant to Section
                  1350 of the Sarbanes Oxley Act of 2002.


                                    Page 24
<PAGE>

SIGNATURES

      Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.

                               EAST PENN FINANCIAL CORPORATION
                               (Registrant)


                               By: /s/ Brent L. Peters
                                   ----------------------------------------
                                   Brent L. Peters
                                   President and Chief Executive Officer
                                   (Principal Executive Officer)

                               Date: November 8, 2005


                               By:  /s/ Theresa M. Wasko
                                   ----------------------------------------
                                   Theresa M. Wasko
                                   Treasurer and Chief Financial Officer
                                   (Principal Financial and Accounting Officer)

                               Date: November 8, 2005


                                    Page 25
<PAGE>

                                  Exhibit Index

3(i)  Registrant's Articles of Incorporation, as amended, are incorporated by
      reference to Annex B to the Registrant's Registration Statement on Form
      S-4 (Registration No. 333-103673) as filed with the Securities and
      Exchange Commission on March 7, 2003.

3(ii) Registrant's By-Laws are incorporated by reference to Annex C to the
      Registrant's Registration Statement on Form S-4 (Registration No.
      333-103673) as filed with the Securities and Exchange Commission on March
      7, 2003.

10.1  East Penn Financial Corporation's 1999 Stock Incentive Plan for the
      benefit of officers and key employees is incorporated by reference to
      Exhibit 10.3 to the Registrant's Registration Statement on Form S-4
      (Registration No. 333-103673) as filed with the Securities and Exchange
      Commission on March 7, 2003.

10.2  East Penn Financial Corporation's 1999 Independent Directors Stock Option
      Plan for the benefit of non-employee directors is incorporated by
      reference to Exhibit 10.2 to the Registrant's Registration Statement on
      Form S-4 (Registration No. 333-103673) as filed with the Securities and
      Exchange Commission on March 7, 2003.

10.3  Executive Employment Agreement between East Penn Bank and Brent L. Peters,
      dated April 12, 2001, is incorporated by reference to Exhibit 10.1 to the
      Registrant's Registration Statement on Form S-4 (Registration No.
      333-103673) as filed with the Securities and Exchange Commission on March
      7, 2003.

10.4  Supplemental Executive Retirement Plan ("SERP") between East Penn Bank and
      Brent L. Peters, dated May 31, 2001, is incorporated by reference to
      Exhibit 10.4 to the Registrant's Registration Statement on Form S-4
      (Registration No. 333-103673) as filed with the Securities and Exchange
      Commission on March 7, 2003.

10.5  East Penn Financial Corporation's Dividend Reinvestment and Stock Purchase
      Plan is incorporated by reference to the Registrant's Registration
      Statement on Form S-3 (Registration No. 333-116754) as filed with the
      Securities and Exchange Commission on June 23, 2004.

11    Statement re: Computation of per share earnings is incorporated by
      reference herein to Note 3 on page 8 of this Form 10-Q.

31.1  Certification of Chief Executive Officer pursuant to Rule
      13a-15(e)/15d-15(e).

31.2  Certification of Chief Financial Officer pursuant to Rule
      13a-15(e)/15d-15(e).

32.1  Certification of Chief Executive Officer pursuant to Section 1350 of the
      Sarbanes Oxley Act of 2002.

32.2  Certification of Chief Financial Officer pursuant to Section 1350 of the
      Sarbanes Oxley Act of 2002.


                                    Page 26