SE Financial Corp. Announces Fourth Quarter and 2008 Year End Results and Unprecedented Growth in Loans and Core Deposits

PHILADELPHIA--(BUSINESS WIRE)--SE Financial Corp. (trading symbol:SEFL) (the “Company”), the holding company for St. Edmond’s Federal Savings Bank, announced net income of $212.7 thousand for the three months ended October 31, 2008 as compared to a net loss of $86.6 thousand for the same period last year. For the twelve months ended October 31, 2008, the Company announced net income of $236.6 thousand compared to a net loss of $90.1 thousand for the same period last year.

• Total assets at October 31, 2008 were $283.2 million, an increase of $14.6 million as compared to total assets at July 31, 2008 of $268.6 million, representing annualized growth of 22%.
• Net interest income increased 18.53% for the quarter ending October 31, 2008 as compared to the quarter ending July 31, 2008. The net interest margin decreased 3 basis points to 2.87% for the quarter ended October 31, 2008 versus 2.90% for the quarter ended July 31, 2008.
• During the quarter, loans receivable increased $18.2 million to $204.8 million at October 31, 2008, as compared to loans receivable of $186.6 million at July 31, 2008, representing a 39.11% increase on an annualized basis. The increase occurred mainly in one-to-four family mortgage loans. The yield on loans for the quarter ended October 31, 2008 decreased 33 basis points as compared to the quarter ended July 31, 2008 primarily due to a decrease in rates on construction loans and lines of credit tied to the prime rate and the growth in one to four family residential mortgage loans. The growth in the residential portfolio represents loans to borrowers for the purchase of homes in the Bank’s primary lending area. Our lending pipeline continues to remain strong due to the efforts of both our lending staff and retail banking market managers and is also benefiting from customers who are choosing to conduct business with a community bank where lending decisions are made locally. St. Edmond’s Federal Savings Bank has a 96-year history of serving South Philadelphia and the surrounding markets. The pipeline contains a mix of residential mortgage loans, commercial real estate loans, residential construction loans, home equity loans and lines, and real-estate secured commercial and industrial loans for businesses within our local market areas.

• Loans receivable increased $68.6 million or 50.4% for the year ended October 31, 2008.
• While focused on growth, we also remain committed to maintaining credit quality in the loan portfolio. To that end, procedures include adherence to sound underwriting standards and loan portfolio management procedures, including aggressive monitoring of delinquency, on-going credit file reviews and independent external loan review. The ratio of total non-performing assets (consisting of loans delinquent over 90 days) to total assets was 87 basis points at October 31, 2008 compared to 6 basis points at July 31, 2008. As of October 31, 2008 the over 90 day delinquent loans totaled $2.5 million and were comprised of one single family construction loan in the amount of $2.1 million and two 1-4 family residential mortgage loans. Subsequent to quarter end the Bank foreclosed on the construction loan and the property is aggressively being marketed for sale. The Bank currently believes there is excess collateral to cover amounts due.
• Total deposits reached $205.0 million as of October 31, 2008. Despite continued competitive pricing in the Bank’s market areas, deposits increased $11.3 million during the quarter representing a 23% increase on an annualized basis, comprising increases in savings accounts of $8.0 million and checking accounts of $9.6 million, offset by strategic decreases in certificates of deposit and money market accounts of $3.6 million and $1.5 million respectively. Our newest neighborhood banking office in Drexel Hill, Delaware County, PA opened on April 5^th, 2008, has quickly established a foothold in the community over its first seven months of operation. Due to the successful efforts of the branch staff, deposits total in excess of $16 million with over 586 accounts, significantly exceeding expectations. This location has also benefited from the unique approach of the presence of Crossroads Coffee as a subtenant, incorporating a coffee shop within the premises to share common lobby and lounge areas and adding a traffic-driving dynamic to attract new customers. The average cost of deposits decreased 13 basis points to 3.48% for the quarter ended October 31, 2008 as compared to 3.61% for the quarter ended July 31, 2008 due to the Bank’s aggressive repricing of maturing certificates of deposit at lower rates and its focus on the collection of lower costing deposits.
• Total deposits increased $40.7 million or 24.8% for the year ended October 31, 2008.

SE FINANCIAL CORP.
UNAUDITED QUARTER HIGHLIGHTS
(Dollars in Thousands)
		QTR		QTR		$ Increase		% Increase
		10/31/2008		7/31/2008		(Decrease)		(Decrease)
Total Assets		283,224		268,643		14,581		5.43%
Investment Securities		56,086		61,280		(5,194)		-8.48%
Loans		204,797		186,556		18,241		9.78%
Deposits		204,967		193,689		11,278		5.82%
Borrowings		54,064		51,662		2,402		4.65%
Equity		23,272		22,372		900		4.02%
Interest Income		3,943		3,611		332		9.19%
Interest Expense		2,065		1,919		146		7.61%
Net Interest Income		1,878		1,692		186		10.99%
Provision		111		202		(91)		-45.05%
Noninterest Income		208		143		65		45.45%
Noninterest Expense		1,668		1,540		128		8.31%
Net Income (Loss)		213		60		153		255.00%
Net Interest Margin		2.87%		2.90%		-0.03%		-1.03%
Yield on Loans		6.39%		6.72%		-0.33%		-4.91%
Yield on Investments		5.00%		4.94%		0.06%		1.21%
Cost of Deposits		3.48%		3.61%		-0.13%		-3.60%
Cost of Borrowings		3.00%		3.27%		-0.27%		-8.26%

Comparison of the Results of Operations for the Three Months Ended October 31, 2008 and October 31, 2007

For the three-month periods ended October 31, 2008 and 2007, net interest income before provision for loan losses totaled $1.9 million and $1.3 million, respectively. The increase was due to an increase in the average balance of interest-earning assets of $80.7 million to $261.5 million for the three months ended October 31, 2008 as compared to $180.8 million for the three months ended October 31, 2007, slightly offset by a decrease in the net interest margin of 1 basis point to 2.87% for the three months ended October 31, 2008 from 2.88% for the three months ended October 31, 2007.

The provision for loan losses decreased $112.6 thousand to $111.4 thousand for the three months ended October 31, 2008 versus $224.0 thousand for the three months ended October 31, 2007.

Non-interest income was $208.2 thousand for the three months ended October 31, 2008 compared to $177.1 thousand for the three months ended October 31, 2007. The increase of $31.2 thousand was due mainly to an increase of $20.0 thousand on service fees on deposit accounts.

Non-interest expense increased $294.3 thousand to $1.7 million for the three months ended October 31, 2008 compared to $1.4 million for the three months ended October 31, 2007. The increase in non-interest expense was due mainly to increases in compensation and employee benefits, occupancy and equipment costs, federal deposit insurance premiums, data processing expense and other expenses. The $126.1 thousand increase in compensation and employee benefits was due primarily to additions to staff for the new banking office in Drexel Hill PA opened in April 2008, higher payroll taxes and employee benefits expense, and an increase in RSP expense of $20.7 thousand. The $76.4 thousand increase in occupancy and equipment costs was due to an increase in depreciation, rent expense, utilities and maintenance expense related to the opening of the new banking office in Drexel Hill, Pennsylvania. The $19.3 thousand increase in data processing expenses is due to the increased number of deposit and loan accounts. The increase of $39.4 thousand in other expense is due mainly to marketing efforts related to the new banking office and special promotions of approximately $30.8 thousand.

Comparison of the Results of Operations for the Twelve Months Ended October 31, 2008 and October 31, 2007

For the twelve month periods ended October 31, 2008 and 2007, net interest income before provision for loan losses totaled $6.3 million and $4.9 million, respectively. The increase of $1.4 million was due to an increase in the average balance of interest-earning assets of $50.0 million to $222.8 million for the twelve months ended October 31, 2008 as compared to $172.8 million for the twelve months ended October 31, 2007, but was slightly offset by a decrease in the net interest margin of 2 basis points to 2.88% for the twelve months ended October 31, 2008 from 2.90% for the twelve months ended October 31, 2007.

The provision for loan losses increased $234.3 thousand to $485.0 thousand for the twelve months ended October 31, 2008 versus $250.7 thousand for the twelve months ended October 31, 2007 due to the growth of $69.0 million in the loan portfolio as well as an increase in loans classified as substandard.

Non-interest income was $688.4 thousand for the twelve months ended October 31, 2008 compared to $592.8 thousand for the twelve months ended October 31, 2007. The increase of $95.6 thousand was due mainly to increases of $82.9 thousand in service fees on deposit accounts, $20.9 thousand in earnings on bank-owned life insurance and $38.1 thousand in other income comprised mostly of rental income for office space in our Ardmore banking location offset by a decrease in gains on the sale of investments of $46 thousand.

Non-interest expense increased $697.6 thousand to $6.2 million for the twelve months ended October 31, 2008 compared to $5.5 million for the twelve months ended October 31, 2007. The increase in non-interest expense was due mainly to increases in compensation and employee benefits, occupancy and equipment costs, federal deposit insurance premiums and data processing expenses offset by a decrease in professional fees. The $389.4 thousand increase in compensation and employee benefits was due primarily to additions to staff for the new banking office in Drexel Hill PA and higher payroll taxes and employee benefits expense as well as an increase in RSP expense of $102.3 thousand over the prior year. The $227.4 thousand increase in occupancy and equipment costs was due mainly to an increase in depreciation, utilities and maintenance expense related to the opening of the new banking office in Drexel Hill, Pennsylvania in April 2008. The $53.7 thousand increase in data processing expenses is due to the increased number of deposit and loan accounts.

Comparison of Financial Condition at October 31, 2008 and October 31, 2007

Total assets increased $85.0 million to $283.2 million at October 31, 2008 as compared to $198.3 million at October 31, 2007. Cash and cash equivalents increased $2.2 million to $6.8 million at October 31, 2008 from $4.6 million at October 31, 2007. Loans receivable increased $68.6 million to $204.8 million at October 31, 2008 from $136.2 million at October 31, 2007. Deposits increased $40.7 million to $205.0 million at October 31, 2008 from $164.3 million at October 31, 2007. Borrowed money increased $44.6 million to $54.1 million at October 31, 2008 from $9.4 million at October 31, 2007 which was used to fund the loan growth. Stockholders’ equity decreased $695 thousand to $23.3 million at October 31, 2008 from $24.0 million at October 31, 2007 due mainly to the change in the market value of the available for sale investment and mortgage-backed portfolios, the repurchase of 51,000 shares of Treasury stock, as well as dividends paid for the period slightly offset by net income of $236.6 thousand and shares released quarterly for the ESOP and RSP plans.

Company Information

SE Financial Corp. is the holding company for St. Edmond’s Federal Savings Bank, a federally chartered stock savings institution with six Neighborhood Banking Offices serving South Philadelphia, Roxborough, Ardmore and Drexel Hill, Pennsylvania and Deptford and Sewell, New Jersey. SE Financial Corp. is incorporated under the laws of the Commonwealth of Pennsylvania and its executive offices are located at 1901-03 East Passyunk Avenue, Philadelphia, Pennsylvania 19148. As of October 31, 2008, there were issued and outstanding 2,201,377 shares of common stock, par value $0.10 per share of SE Financial Corp. Registrar and Transfer Company serves as the transfer agent for SE Financial Corp. and its address is 10 Commerce Drive, Cranford, New Jersey 07016.

Senior Management: Pamela M. Cyr, President and CEO, J. Christopher Jacobsen, EVP and Chief Operating Officer, Charles F. Miller, EVP and Chief Lending and Credit Officer, and Caroline H. Doyle Chief Financial Officer.

Board of Directors: Marcy C. Panzer (Chairman), Samuel Barsky (Secretary), Charles M. Cahn, Andrew A. Hines, Megan L. Mahoney, J. W. Parker, Jr., CPA, William F. Saldutti, III, Susanne Spinell Shuster, CPA.

Forward-Looking Statements Disclaimer

This news release contains forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. Any statement that is not a historical fact is a forward-looking statement. Such forward-looking statements are subject to risk and uncertainties, which could cause actual results to differ materially from those currently anticipated due to a number of factors.

SE FINANCIAL CORP.
Selected Income Statement Data (Unaudited)
(Dollars in thousands except per share data)		Three Months Ended October 31,								Twelve Months Ended October 31,
		2008				2007				2008				2007
Interest income		$	3,943			$	3,098			$	13,993			$	11,682
Interest expense			2,065				1,802				7,643				6,755
Net interest income			1,878				1,296				6,350				4,927
Provision for loan losses			111				224				485				251
Net interest income after provision for loan losses			1,767				1,072				5,865				4,676
Noninterest income			208				177				688				593
Noninterest expense			1,668				1,374				6,243				5,545
Income (loss) before taxes			307				(125	)			310				(276	)
Income tax (benefit) expense			94				(38	)			74				(186	)
Net income (loss)		$	213			$	(87	)		$	236			$	(90	)
Weighted average shares outstanding (1)
Basic			1,868,350				1,887,035				1,876,002				1,902,671
Diluted			1,868,350				1,887,035				1,876,002				1,902,671
Earnings per share - basic (1)		$	0.11				($0.05	)		$	0.13				($0.05	)
Earnings per share - diluted (1)		$	0.11				($0.05	)		$	0.13				($0.05	)
Performance Ratios (Unaudited)		Three Months Ended October 31,								Twelve Months Ended October 31,
		2008				2007				2008				2007
Return on average assets (2)			0.31	%			-0.18	%			0.10	%			-0.05	%
Return on average equity (2)			3.73	%			-1.46	%			1.01	%			-0.37	%
Net interest margin on average interest earning assets (2)(3)			2.87	%			2.88	%			2.88	%			2.90	%

Selected Balance Sheet Data (Unaudited)
(Dollars in thousands except per share data)		October 31,				October 31,
		2008				2007
Assets		$	283,224			$	198,260
Loan receivable, net			204,797				136,176
Cash and cash equivalents			6,827				4,609
Investment securities			56,086				45,277
Deposits			204,797				164,280
FHLB borrowings			54,064				9,429
Total stockholders' equity			23,272				23,967
Ending shares outstanding (1)			1,875,374				1,893,365
Book value per share (1)			12.41				12.66
Stockholders' equity to total assets			8.22	%			12.09	%
Asset Quality (Unaudited)
(Dollars in thousands)		October 31,				October 31,
		2008				2007
Non-performing assets (4)		$	2,459			$	447
Allowance for losses			1,527				1,161
Non-performing assets to total assets			0.87	%			0.23	%
Allowance for losses to total loans			0.75	%			0.85	%
Allowance for losses to non-performing assets			62.10	%			259.83	%

(1)		Shares outstanding does not include unreleased ESOP shares, unearned nonvested RSP shares, or shares held in the Stock Compensation Trust for purposes of the weighted average shares outstanding calculation and the ending shares outstanding calculation.
(2)		Annualized for the three months ended October 31, 2008 and 2007.
(3)		The yield on municipal securities has been adjusted to a tax-equivalent basis.
(4)		Non-performing assets include non-accrual loans and real estate owned.