***WELCOME TO OUR ANNUAL MEETING***

**May 10, 2007**

 

**Please rise for our National Anthem**

**East Penn Financial Corp.**

 

***MUSIC BYARAM BASMADJIAN***

 

***“WOODY” ROHRBACHLeadIndependent Director and Vice-Chairman***

 

****

***BRUCE R. KEILSECRETARY***

 

**Forrest “Woody” A. Rohrbach**

**East Penn Financial Corp.**

 

**Dale A. Dries**

**East Penn Financial Corp.**

 

**East Penn Financial Corp.**

**Tom R. Gulla**

 

**East Penn Financial Corp.**

**Allen E. Kiefer**

 

**East Penn Financial Corp.**

**Brent L. Peters**

 

**East Penn Financial Corp.**

**Gordon K. Schantz**

 

**East Penn Financial Corp.**

**Linn H. Schantz**

 

**East Penn Financial Corp.**

**Don R. Schneck**

 

**East Penn Financial Corp.**

**Peter L. Shaffer**

 

**East Penn Financial Corp.**

**“Harry” Tantaros**

 

**East Penn Financial Corp.**

**Dr. Geoff Toonder**

 

**East Penn Financial Corp.**

**Atty. Don S. Young**

 

****

***“WOODY” ROHRBACHLeadIndependent Director andVice-Chairman***

 

****

***BRUCE R. KEILSECRETARY***

 

****

***“WOODY” ROHRBACHLeadIndependent Director and Vice-Chairman***

 

***Motion to Waive the Reading of theMinutes of the 2006 Annual Meeting of Shareholders and to Approve the 2006 Minutes***

 

****

***DON PETERSONJUDGE OF ELECTION***

 

***Motion to Elect FourClass CDirectors***

**Allen E. Kiefer**

**Brent L. Peters**

**Forrest A. Rohrbach**

**Peter L. Shaffer**

 

**Beard Miller Company LLP**

**as**

**Independent Auditors for the yearending         December 31, 2007**

***Motion to ratify the selection of***

 

****

***“WOODY” ROHRBACHLeadIndependent Director and Vice-Chairman***

 

****

***BRENT L. PETERSCHAIRMAN, PRESIDENT & CEO***

 

***Forward–looking Statements***

**The Corporation has made forward-lookingstatements in this report that are subject to assumptions, risks and uncertainties.  Because of the possibility of changein the underlying assumptions, actual results could differ materially from these forward-lookingstatements.  In addition to these factors, the following could cause actual results to differ materiallyfrom those expressed in the forward-lookingstatements:**

**   operating, legal andregulatory risks,**

**   economic, political andcompetitive forces affecting our banking     business, and**

**   the risk thatmanagement’s analyses of these risks could be incorrect    and/or thatthe strategies developed to address them could be    unsuccessful.**

**When the Corporation uses words such as“believes,” “expects,” “anticipates,”  or other similar expressions, thenforward-looking statementsare being made.**

 

Historical Yields

Source: FactSet

*Week of May 7**th**, 2007*

 

**Net Interest Rate Spread**

**Liability costs have risen faster than asset yields**

**6.04%**

**6.22%**

**6.30%**

**6.37%**

**6.38%**

**6.48%**

**2.58%**

**2.72%**

**3.13%**

**3.33%**

**3.43%**

**2.87%**

4.00%

4.25%

4.50%

4.75%

5.00%

5.25%

5.50%

5.75%

6.00%

6.25%

6.50%

6.75%

7.00%

12/31/2005

3/31/2006

6/30/2006

9/30/2006

12/31/2006

3/31/2007

2.00%

2.25%

2.50%

2.75%

3.00%

3.25%

3.50%

3.75%

4.00%

Yield on Earning Assets

Cost of Funds

 

***Net Income******in millions***

 

**East Penn Financial Corporation**

**Income Statement - 2006 vs 2005**

**(in thousands)**

**$13,308**

**$11,107**

**$2,732**

**$389**

**$933**

**$3,611**

**$12,771**

**$10,345**

**$2,511**

**$420**

**$3,503**

**$1,014**

**$0**

**$2,000**

**$4,000**

**$6,000**

**$8,000**

**$10,000**

**$12,000**

**$14,000**

**Net interest income**

**Operating expenses**

**Other income**

**Provision for loan**

**losses**

**Tax provision**

**Net income, after**

**taxes**

12/31/2006

12/31/2005

 

**East Penn Financial Corporation**

**Balance Sheet Highlights - 2006 vs 2005**

**(in millions)**

**$439.5**

**$70.4**

**$319.5**

**$43.9**

**$379.4**

**$24.0**

**$25.2**

**$404.2**

**$75.2**

**$290.3**

**$328.0**

**$22.8**

**$0**

**$50**

**$100**

**$150**

**$200**

**$250**

**$300**

**$350**

**$400**

**$450**

**$500**

**Total Assets**

**Investments**

**Loans, net of ALLL**

**Deposits & CMA**

**Borrowings**

**Stkholder Equity**

12/31/2006

12/31/2005

 

***Net Outstanding Loans******in millions***

 

**LOAN PORTFOLIO COMPOSITION**

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

2004

2005

2006

Commercial

Commercial RE

Residential RE

RE Construction

Tax Exempt

Home Equity

Other Consumer

 

***Past Due Loans***

**1****st****Qtr.**

**Years Ended   December31**

***1.41%***

***1.20%***

***1.29%***

***Peer Group Avg.***

**1.99%**

**0.83%**

**0.71%**

**0.92%**

**Total Past Dues**

**  0.10%**

**0.13%**

**0.22%**

**0.44%**

**90 Days and Over**

**  1.89%**

**0.70%**

**0.49%**

**0.48%**

**30-89 Days**

**2007**

**2006**

**2005**

**2004**

 

***Total Deposits******in millions***

 

***Deposit Market Share Analysis –Lehigh County***

****

**2006**

****

**2005**

****

**2004**

****

# of 

Branches

Total 

Deposits

Rank

Market 

Share

Rank

Market 

Share

Rank

Market 

Share

Wachovia Corporation (NC)

28

2,116,153

1

38.48

1

38.46

1

34.93

KNBT Bancorp (PA)

15

436,090

2

7.93

2

7.62

2

6.70

American Bank Incorporated (PA)

1

370,8

14

3

6.74

3

7.06

3

6.59

**East Penn Financial Corp.**

**(PA)**

****

**7**

****

**330,374**

****

**4**

****

**6.01**

****

**5**

****

**5.74**

****

**4**

****

**5.08**

****

Sovereign Bancorp, Inc. (PA)

8

325,098

5

5.91

4

6.17

7

4.07

PNC Financial Services Group, Inc. (PA)

6

272,363

6

4.95

7

4.54

10

3.43

Fulton Financial Corporation (PA)

7

258,763

7

4.71

6

4.78

6

4.22

Neffs Bancorp (PA)

1

171,148

8

3.11

9

3.40

11

3.98

Bank of America Corporation (NC)

8

166,053

9

3.02

8

3.71

5

4.57

First Star Bancorp, Inc. (PA)

4

164,698

10

2.99

11

2.95

12

2.86

New Tripoli Bancorp, Inc. (PA)

2

162,433

1

1

2.95

10

3.24

13

2.81

National Penn Bancshares, Inc (PA)

6

142,414

12

2.59

12

2.30

16

1.99

Susquehanna Bancshares, Inc. (PA)

5

113,596

13

2.07

13

2.17

14

2.73

Semperverde Holding Company (PA)

2

97,004

14

1.76

14

2.08

15

2.05

Harleysville National Corp

oration (PA)

4

90,586

15

1.65

15

1.66

18

1.45

M&T Bank Corporation (PA)

5

82,161

16

1.49

16

1.52

17

1.47

Embassy Bank for the Lehigh Valley (PA)

1

75,609

17

1.37

18

0.73

N/A

N/A

QNB Corp. (PA)

1

65,579

18

1.19

17

1.28

20

1.08

Palm Bancorp (PA)

1

33,476

19

0.61

19

0.58

N/A

N/A

Commerce Bancorp, Inc. (NJ)

2

25,150

20

0.46

N/A

N/A

N/A

N/A

****

**2006**

****

**2005**

****

**2004**

****

# of 

Branches

Total 

Deposits

Rank

Market 

Share

Rank

Market 

Share

Rank

Market 

Share

Wachovia Corporation (NC)

28

2,116,153

1

38.48

1

38.46

1

34.93

KNBT Bancorp (PA)

15

436,090

2

7.93

2

7.62

2

6.70

American Bank Incorporated (PA)

1

370,8

14

3

6.74

3

7.06

3

6.59

**East Penn Financial Corp.**

**(PA)**

****

**7**

****

**330,374**

****

**4**

****

**6.01**

****

**5**

****

**5.74**

****

**4**

****

**5.08**

****

Sovereign Bancorp, Inc. (PA)

8

325,098

5

5.91

4

6.17

7

4.07

PNC Financial Services Group, Inc. (PA)

6

272,363

6

4.95

7

4.54

10

3.43

Fulton Financial Corporation (PA)

7

258,763

7

4.71

6

4.78

6

4.22

Neffs Bancorp (PA)

1

171,148

8

3.11

9

3.40

11

3.98

Bank of America Corporation (NC)

8

166,053

9

3.02

8

3.71

5

4.57

First Star Bancorp, Inc. (PA)

4

164,698

10

2.99

11

2.95

12

2.86

New Tripoli Bancorp, Inc. (PA)

2

162,433

1

1

2.95

10

3.24

13

2.81

National Penn Bancshares, Inc (PA)

6

142,414

12

2.59

12

2.30

16

1.99

Susquehanna Bancshares, Inc. (PA)

5

113,596

13

2.07

13

2.17

14

2.73

Semperverde Holding Company (PA)

2

97,004

14

1.76

14

2.08

15

2.05

Harleysville National Corp

oration (PA)

4

90,586

15

1.65

15

1.66

18

1.45

M&T Bank Corporation (PA)

5

82,161

16

1.49

16

1.52

17

1.47

Embassy Bank for the Lehigh Valley (PA)

1

75,609

17

1.37

18

0.73

N/A

N/A

QNB Corp. (PA)

1

65,579

18

1.19

17

1.28

20

1.08

Palm Bancorp (PA)

1

33,476

19

0.61

19

0.58

N/A

N/A

Commerce Bancorp, Inc. (NJ)

2

25,150

20

0.46

N/A

N/A

N/A

N/A

 

**DEPOSIT MIX**

**12/31/2006**

DDA

Non-interest

12%

Deposits

Time

50%

DDA and MMA

Savings

38%

 

***Cash Dividend History***

 

***Semi-AnnualCash Dividend***

**The first of two dividend payments...**

**12 cents per share, payable February 28,2007**

**to shareholders of record February 2, 2007.**

**The second cash dividend payment will beannounced in the second half of 2007.**

 

***Selected Financial Data***

**3.6 %**

**$0.55**

**$0.57**

**Diluted earnings per share**

**1.8%**

**$0.56**

**$0.57**

**Basic earnings per share**

**-13.9%**

**15.86%**

**15.64%**

**Return on average equity**

**-5.4%**

**0.92%**

**0.87%**

**Return on average assets**

**-2.5%   **

**8.0%**

**7.8%**

**Tier I leverage capital**

**10.2%**

**$3.62**

**$3.99**

**Book value**

**10.2%**

**22,841**

**25,161**

**Stockholders’ equity**

**14.9%**

**324,306**

**372,631**

**Deposits**

**-6.4%**

**75,213**

**70,392**

**Investment securities**

**10.1%**

**290,315**

**319,542**

**Loans, net**

**8.7%**

**$404,229**

**$439,452**

**Total assets**

**% Change**

**12/31/05**

**12/31/06**

**(In thousands, except book value and EPS)**

 

**Twelve Months Ended:**

**                ****December 31, 2006**** ****481,095  shares**

**                ****December 31, 2005**** ****494,640  shares**

**                ****December 31, 2004**** ****476,834  shares**

**Four Months Ended:**

**                ****April 30, 2007****                            ****224,326  shares**

**Stock Price Range:**

**                    ****  ****High****                        ****Low**

**2006****                                                                               ****$   9.50****                                                                         ****$  7.66**

**2005****                                                                               ****$   9.50****                                                                         ****$  8.39**

**2004****                                                                               ****$ 10.59****                                                                         ****$  7.75**

**Closing price @ April 30, 2007****   ****-   $  8.28**

**(Source of information – NASDAQ)**

***Summary of Shares Traded***

 

Note:  Data as of May 7, 2007 

Source: SNL Financial

**Three Year Comparative Price Appreciation**

**Five Year Comparative Price Appreciation**

(21.5%)

37.4%

19.4%

49.5%

43.8%

34.6%

*Stock Price Performance*

EPEN Overview

35.3%

31.6%

 

****

***BRENT L. PETERSCHAIRMAN, PRESIDENT & CEO***

 

***QUESTIONS?***

 

****

***“WOODY” ROHRBACHLeadIndependent Director andVice-Chairman***

 

**Management Reports and Reported Actionsof the Corporation’s Directors and Officers for the Year Ending December 31, 2006.**

***Motion to approve a resolution toconfirm***

 

****

***DON PETERSONJUDGE OF ELECTION***

 

**.**

***“WOODY” ROHRBACHLeadIndependent Director andVice-Chairman***

 

***Motion to adjourn the Annual Meetingof Shareholders for the Year 2007***

 

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