UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C.  20549





FORM
10-Q/A


Amendment
No. 1





(Mark
One)


x
            QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934





For the
quarterly period
ended                March 31, 2008





 ̈
            TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934


For the
transition period from
__________________                to           ______________________





Commission
File Number:   000-52839





NORTH PENN BANCORP,
INC.


(Exact
name of registrant as specified in its charter)





Pennsylvania
              
              26-0261305(State
      or other jurisdiction of
                Incorporation
      or organization)
              
              (IRS
      Employer
                Identification
      No.)





216 Adams Avenue, Scranton,
PA  18503


(Address
of principal executive offices)





(570)
344-6113


(Registrant’s
telephone number)





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 a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule12b-2 of the Exchange Act.


(Check
one):


Large
accelerated filer  ̈             Accelerated
filer  ̈


Non-accelerated
filer    ̈             Smaller
reporting company x


(Do not
check if smaller reporting company)





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).  Yes   ̈  No  x





Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practical date: As of May 12, 2008, the issuer had
1,581,571 shares of common stock, par value $0.10 per share,
outstanding.





EXPLANATORY
NOTE




In the
course of preparing the financial statements for the year ended December 31,
2008, the Company determined that detail listings of residential loans sold and
commercial participations sold did not reconcile to corresponding general ledger
accounts at December 31, 2008. Upon performing further procedures, the Company
found that the cause of the misstatements were intentionally incorrect
accounting entries and reconciliations posted by a former officer of the Company
beginning in early 2008. The Company believes that the incorrect entries were
made to disguise the fact that North Penn Bank's primary correspondent bank
account had not been properly reconciled.  The Company determined that
correction of these errors requires the restatement of the consolidated
statement of income for the three months ended March 31, 2008 and the
consolidated balance sheet as of' March 31, 2008.




This
Quarterly Report on Form 10-Q/A corrects and restates the Company's consolidated
statement of income for the three months ended March 31, 2008 and the
consolidated balance sheet as of March 31, 2008 to reflect a charge to income to
correct the incorrect accounting entries.





Other
than the restatement, this Form 10-Q/A does not reflect events occurring after
the date of the original Form 10-Q for the quarter ended March 31, 2008 or
modify or update disclosures affected by subsequent events.


2





PART
I - FINANCIAL INFORMATION





PageItem
      1.
                Financial
      Statements.Consolidated
      Balance Sheets at March 31, 2008 and December 31, 2007
                4Consolidated
      Statements of Income for the Three Months Ended March 31, 2008 and
      2007
                5Consolidated
      Statements of Cash Flows for the Three Months Ended March 31, 2008 and
      2007
                6Notes
      to Unaudited Consolidated Financial Statements
                7Item
      2.
                Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
                15Item
      3.
                Quantitative
      and Qualitative Disclosures About Market Risk.
                19Item 4.
                Controls
      and Procedures.
                19PART
      II - OTHER INFORMATIONItem
      6.
                Exhibits.
                19


3


PART
I – FINANCIAL INFORMATION





Item
1.  Financial Statements





North
Penn Bancorp, Inc. and Subsidiary


Consolidated
Balance Sheets





March 31,
                  2008
                
                
                December 31,
                  2007(Unaudited)
                
                
                (Audited)(In
      thousands)RestatedASSETS:Cash
      and due from banks
                
                $
                1,815
                
                
                $
                3,071Interest
      bearing deposits
                
                
                26
                
                
                
                107Total
      cash and cash equivalents
                
                
                1,841
                
                
                
                3,178Federal
      funds sold
                
                
                6,906
                
                
                
                -Investment
      securities, available for sale
                
                
                14,883
                
                
                
                13,366Equity
      securities at cost, substantially restricted
                
                
                792
                
                
                
                1,060Loans,
      net of allowance for loan losses of $1,198 in 2008 and $1,171 in
      2007
                
                
                95,467
                
                
                
                97,247Loans
      held for sale
                
                
                1,754
                
                
                
                -Bank
      premises and equipment – net
                
                
                4,121
                
                
                
                4,159Accrued
      interest receivable
                
                
                626
                
                
                
                695Cash
      surrender value of life insurance
                
                
                2,157
                
                
                
                2,137Deferred
      income taxes
                
                
                653
                
                
                
                466Other
      real estate owned
                
                
                -
                
                
                
                100Other
      assets
                
                
                180
                
                
                
                124TOTAL
      ASSETS
                
                $
                129,380
                
                
                $
                122,532LIABILITIES:Deposits:Non-interest
      bearing deposits
                
                $
                6,131
                
                
                $
                7,424Interest
      bearing demand deposits
                
                
                45,142
                
                
                
                32,922Interest
      bearing time deposits
                
                
                45,221
                
                
                
                43,337Total
      deposits
                
                
                96,494
                
                
                
                83,683Other
      borrowed funds
                
                
                12,000
                
                
                
                17,879Accrued
      interest and other liabilities
                
                
                885
                
                
                
                786TOTAL
      LIABILITIES
                
                
                109,379
                
                
                
                102,348STOCKHOLDERS’
      EQUITY:Preferred
      stock, no par; 20,000,000 authorized; issued and outstanding,
      none
                
                
                -
                
                
                
                -Common
      stock, par value $0.10; 80,000,000 authorized; issued and outstanding,
      1,581,571
                
                
                158
                
                
                
                158Additional
      paid-in capital
                
                
                13,442
                
                
                
                13,433Retained
      earnings
                
                
                7,528
                
                
                
                7,742Unearned
      ESOP shares
                
                
                (1,059
                )
                
                
                (1,059
                )Accumulated
      other comprehensive loss
                
                
                (68
                )
                
                
                (90
                )TOTAL
      STOCKHOLDERS’ EQUITY
                
                
                20,001
                
                
                
                20,184TOTAL
      LIABILITIES AND STOCKHOLDERS’ EQUITY
                
                $
                129,380
                
                
                $
                122,532





See notes
to unaudited consolidated financial statements.


4


North
Penn Bancorp, Inc. and Subsidiary


Unaudited
Consolidated Statements of Income


For
the Three Months Ended March 31, 2008 and 2007


(In
thousands)





2008
                    
                    
                    2007RestatedINTEREST
      INCOMEInterest
      on loans
                    
                    $
                    1,714
                    
                    
                    $
                    1,690Interest
      on fed funds sold
                    
                    
                    32
                    
                    
                    
                    -Interest
      on tax exempt investments
                    
                    
                    72
                    
                    
                    
                    71Interest
      on investments
                    
                    
                    66
                    
                    
                    
                    69Dividends
      on investments
                    
                    
                    25
                    
                    
                    
                    29Total
      interest income
                    
                    
                    1,909
                    
                    
                    
                    1,859INTEREST
      EXPENSEInterest
      on deposits
                    
                    
                    744
                    
                    
                    
                    735Interest
      on short-term borrowings
                    
                    
                    15
                    
                    
                    
                    103Interest
      on long-term borrowings
                    
                    
                    155
                    
                    
                    
                    154Total
      interest expense
                    
                    
                    914
                    
                    
                    
                    992NET
      INTEREST INCOME
                    
                    
                    995
                    
                    
                    
                    867PROVISION
      FOR LOAN LOSSES
                    
                    
                    31
                    
                    
                    
                    30NET
      INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES
                    
                    
                    964
                    
                    
                    
                    837OTHER
      INCOMEService
      charges and fees
                    
                    
                    54
                    
                    
                    
                    32Other
      operating income
                    
                    
                    24
                    
                    
                    
                    60(Loss)
      gain on sale of securities
                    
                    
                    (2
                    )
                    
                    
                    17TOTAL
      OTHER INCOME
                    
                    
                    76
                    
                    
                    
                    109OTHER
      EXPENSESalaries
      and employee benefits
                    
                    
                    514
                    
                    
                    
                    463Occupancy
      and equipment expense
                    
                    
                    166
                    
                    
                    
                    149Other
      operating expenses
                    
                    
                    196
                    
                    
                    
                    202Loss
      from accounting errors
                    
                    
                    475
                    
                    
                    
                    -TOTAL
      OTHER EXPENSE
                    
                    
                    1,351
                    
                    
                    
                    814(LOSS)/INCOME
      BEFORE INCOME TAXES
                    
                    
                    (311
                    )
                    
                    
                    132INCOME
      TAX (BENEFIT)/EXPENSE
                    
                    
                    (144
                    )
                    
                    
                    37NET
      (LOSS)/INCOME
                    
                    
                    (167
                    )
                    
                    
                    95OTHER
      COMPREHENSIVE INCOME/(LOSS):Unrealized
      holding gain (loss) arising during period, net of income
    tax
                    
                    
                    22
                    
                    
                    
                    (47
                    )COMPREHENSIVE
      (LOSS)/INCOME
                    
                    $
                    (145
                    )
                    
                    $
                    48Weighted
      average number of shares outstanding
                    
                    
                    1,536,761
                    
                    
                    
                    1,449,030Earnings
      per share, basic and diluted
                    
                    $
                    (0.11
                    )
                    
                    $
                    0.07Dividends
      per share
                    
                    $
                    0.03
                    
                    
                    $
                    0.03





See notes
to unaudited consolidated financial statements.


5


North
Penn Bancorp, Inc. and Subsidiary


Unaudited
Consolidated Statements of Cash Flows


For
the Three Months Ended March 31, 2008 and 2007


(In
thousands)




2008
                  
                  
                  2007RestatedOperating
      Activities:Net
      (loss)/income
                  
                  $
                  (167
                  )
                  
                  $
                  95Items
      not requiring (providing) cashDepreciation
                  
                  
                  60
                  
                  
                  
                  67Provision
      for loan losses
                  
                  
                  31
                  
                  
                  
                  30Amortization
      of securities (net of accretion)
                  
                  
                  6
                  
                  
                  
                  4Increase
      in cash surrender value of life insurance
                  
                  
                  (20
                  )
                  
                  
                  (19
                  )Net
      realized loss (gain) on securities
                  
                  
                  2
                  
                  
                  
                  (17
                  )Net
      realized gain on other real estate
                  
                  
                  -
                  
                  
                  
                  (6
                  )Changes
      in:Accrued
      interest income and other assets
                  
                  
                  (186
                  )
                  
                  
                  (40
                  )Accrued
      interest expense and other liabilities
                  
                  
                  61
                  
                  
                  
                  (71
                  )Net
      Cash (Used in)/Provided By Operating Activities
                  
                  
                  (213
                  )
                  
                  
                  43Investing
      Activities:Purchase
      of bank premises and equipment
                  
                  
                  (22
                  )
                  
                  
                  (29
                  )Proceeds
      from sale of other real estate
                  
                  
                  100
                  
                  
                  
                  427Purchase
      of securities “available for sale”
                  
                  
                  (2,639
                  )
                  
                  
                  (100
                  )Sales
      of securities “available for sale”
                  
                  
                  11
                  
                  
                  
                  91Federal
      funds sold, net
                  
                  
                  (6,906
                  )
                  
                  
                  -Matured
      or called securities “available for sale”
                  
                  
                  885
                  
                  
                  
                  -Redemptions
      of mortgage-backed securities “available for sale”
                  
                  
                  252
                  
                  
                  
                  229Net
      sale of restricted stock
                  
                  
                  268
                  
                  
                  
                  71Net
      increase in loans to customers
                  
                  
                  (5
                  )
                  
                  
                  (822
                  )Net
      Cash Used In Investing Activities
                  
                  
                  (8,056
                  )
                  
                  
                  (133
                  )Financing
      Activities:Increase
      in deposits
                  
                  
                  12,811
                  
                  
                  
                  83Decrease
      in borrowed funds
                  
                  
                  (5,879
                  )
                  
                  
                  (1,290
                  )Net
      Cash Provided By/(Used In) Financing Activities
                  
                  
                  6,932
                  
                  
                  
                  (1,207
                  )Net
      Decrease In Cash and Cash Equivalents
                  
                  
                  (1,337
                  )
                  
                  
                  (1,297
                  )Cash
      and Cash Equivalents, January 1
                  
                  
                  3,178
                  
                  
                  
                  4,116Cash
      and Cash Equivalents, March 31
                  
                  $
                  1,841
                  
                  
                  $
                  2,819Supplementary
      Schedule of Cash Flow Information:Cash
      paid during the period for:Interest
                  
                  $
                  845
                  
                  
                  $
                  911Income
      taxes
                  
                  
                  67
                  
                  
                  
                  57Non-cash
      investing and financing activities:Unrealized
      gains (losses) on securities
                  
                  $
                  34
                  
                  
                  $
                  (72
                  )Transfer
      from loans to other real estate owned
                  
                  
                  -
                  
                  
                  
                  421





See notes
to unaudited consolidated financial statements.


6


Notes
to Unaudited Consolidated Financial Statements





1.      
     Nature Of Operations And Summary Of Significant
Accounting Policies





Nature
of Operations





North
Penn Bancorp, Inc. (Company) is the holding company for North Penn Bank
(Bank).  The Company’s common stock is quoted on the OTC Bulletin
Board under the symbol “NPBP.OB.”  The Bank operates from five offices
under a state savings bank charter and provides financial services to
individuals and corporate customers primarily in Northeastern
Pennsylvania.  The Bank’s primary deposit products are savings and
demand deposit accounts and certificates of deposit.  Its primary
lending products are real estate, commercial and consumer loans.





Principles
of Consolidation





The
accompanying consolidated financial statements include the accounts of North
Penn Bancorp, Inc., its wholly-owned subsidiary, North Penn Bank and North Penn
Bank’s wholly-owned subsidiaries, Norpenco, Inc. and North Penn Settlement
Services, LLC.  These entities are collectively referred to herein as
the Company.  All significant intercompany accounts and transactions
have been eliminated in consolidation. Norpenco, Inc.’s sole activities are
purchasing bank stocks and receiving dividends on such stocks. North Penn
Settlement Services, LLC, receives non interest income from providing title
search work.





The
accounting policies of the Company conform with accounting principles generally
accepted in the United States of America and with general practices within the
banking industry.





Basis
of Presentation





The
unaudited consolidated financial statements have been prepared in accordance
with generally accepted accounting principals for interim financial
information.  In the opinion of management, all adjustments that are
of a normal recurring nature and are considered necessary for a fair
presentation have been included.  They are not, however, necessarily
indicative of the results of consolidated operations for a full
year.





Use
Of Estimates





The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the reporting period.  Actual results could differ from those
estimates.





Material
estimates that are particularly susceptible to significant change relate to the
determination of the allowance for loan losses on loans and the valuation of
real estate acquired in connection with foreclosures or in the satisfaction of
loans.  In connection with the determination of the allowances for
losses on loans and foreclosed real estate, management periodically obtains
independent appraisals for significant properties.


7


Mortgage
Partnership Finance Program




The Bank
participates in the Mortgage Partnership Finance (MPF) Program of the Federal
Home Loan Bank of Pittsburgh (FHLB).  The program is intended to
provide member institutions with an alternative to holding fixed-rate mortgages
in their loan portfolios or selling them in the secondary market.  An
institution participates in the MPF Program by either originating individual
loans on a “flow” basis as an agent for the FHLB pursuant to the “MPF 100
Program” or by selling, as a principal, closed loans owned by an institution to
the FHLB pursuant to one of the FHLB’s closed-loan programs.  Under
the MPF Program(s), credit risk is shared by the participating institution and
the FHLB by structuring the loss exposure in several layers, with the
participating institution being liable for losses after application of an
initial layer of losses (after any private mortgage insurance) is absorbed by
the FHLB, subject to an agreed-upon maximum amount of such secondary credit
enhancement which is intended to be in an amount equivalent to a “AA” credit
risk rating by a rating agency.  The participating institution may
also be liable for certain first layer losses after a specified period of
time.  The participating institution receives credit enhancement fees
from the FHLB for providing this credit enhancement and continuing to manage the
credit risk of the MPF Program loans.  Participating institutions are
also paid specified servicing fees for servicing the loans.




Transfers
involving sales with the Bank acting as principal are accounted for in
accordance with SFAS No. 140, Accounting for Transfers and
Servicing of Financial Assets and Extinguishment of Liabilities(SFAS
140), with the recognition of gains and losses on the sale and related mortgage
servicing rights.




The
credit enhancement feature of the MPF Program is accounted for by the Bank as a
financial guarantee in accordance with FASB Interpretation No. 45, Guarantor’s Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others(FIN 45) and reported on the balance sheet at its
initial fair value.  Subsequent changes in the recorded guarantee
amount would result from termination of any portion or all of the guarantee,
additional guarantees being issued or increases in the expected losses resulting
from the guarantee.  Such changes in recorded amounts are recognized
in the consolidated statements of income or as an increase in the offsetting
guarantee fees receivable account in the case of additional guarantees being
issued.





2.     
      Investment Securities





The
Bank’s investments in securities are classified in two categories and accounted
for as follows:





Securities
Held-to-Maturity.  Bonds, notes and debentures for which the
Bank has the positive intent and ability to hold to maturity are reported at
cost, adjusted for amortization of premiums and accretion of
discounts.





Securities
Available-for-Sale.  Securities available-for-sale consist of
bonds, notes, debentures and equity securities not classified to be
held-to-maturity and are carried at fair value with unrealized holding gains and
losses, net of tax, reported as a separate component of other comprehensive
income until realized.





Purchase
premiums and discounts are recognized in interest income on the straight-line
basis over the terms of the securities, which approximates the interest
method.  Declines in the fair value of held-to-maturity and
available-for-sale securities below their cost that are deemed to be other than
temporary are reflected in earnings as realized losses.  Gains and
losses on the sale of securities are recorded on the trade date and are
determined using the specific identification method and are reported as other
income in the statement of income.





The
amortized cost and fair value of investment securities at March 31, 2008 and
December 31, 2007 are as follows:


8


Available-for-Sale


March
31, 2008


(In
thousands)





Amortized
                        Cost
                      
                      
                      Gross
                        Unrealized
                        Gains
                      
                      
                      Gross
                        Unrealized
                        Losses
                      
                      
                      Fair
                        ValueU.S.
      Agency securities
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -Mortgage-backed
      securities
                      
                      
                      5,261
                      
                      
                      
                      23
                      
                      
                      
                      9
                      
                      
                      
                      5,275Municipal
      securities
                      
                      
                      7,527
                      
                      
                      
                      57
                      
                      
                      
                      18
                      
                      
                      
                      7,566Other
      securities
                      
                      
                      1,035
                      
                      
                      
                      -
                      
                      
                      
                      23
                      
                      
                      
                      1,012Total
      debt securities
                      
                      
                      13,823
                      
                      
                      
                      80
                      
                      
                      
                      50
                      
                      
                      
                      13,853Equity
      securities
                      
                      
                      1,162
                      
                      
                      
                      14
                      
                      
                      
                      146
                      
                      
                      
                      1,030Total
      Available for Sale
                      
                      $
                      14,985
                      
                      
                      $
                      94
                      
                      
                      $
                      196
                      
                      
                      $
                      14,883





Available-for-Sale


December
31, 2007


(In
thousands)





Amortized
                        Cost
                      
                      
                      Gross
                        Unrealized
                        Gains
                      
                      
                      Gross
                        Unrealized
                        Losses
                      
                      
                      Fair
                        ValueU.S.
      Agency securities
                      
                      $
                      385
                      
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      385Mortgage-backed
      securities
                      
                      
                      4,521
                      
                      
                      
                      -
                      
                      
                      
                      41
                      
                      
                      
                      4,480Municipal
      securities
                      
                      
                      7,026
                      
                      
                      
                      37
                      
                      
                      
                      2
                      
                      
                      
                      7,061Other
      securities
                      
                      
                      500
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      500Total
      debt securities
                      
                      
                      12,432
                      
                      
                      
                      37
                      
                      
                      
                      43
                      
                      
                      
                      12,426Equity
      securities
                      
                      
                      1,071
                      
                      
                      
                      22
                      
                      
                      
                      153
                      
                      
                      
                      940Total
      Available for Sale
                      
                      $
                      13,503
                      
                      
                      $
                      59
                      
                      
                      $
                      196
                      
                      
                      $
                      13,366





All of
the Company’s investment securities were classified as available for sale at
March 31, 2008 and December 31, 2007.





The gross
fair value and unrealized losses of the Bank’s investments, aggregated by
investment category and length of time that individual securities have been in a
continuous unrealized loss position at March 31, 2008 is as
follows:





Less than 12 months
                    
                    
                    12 months or longer
                    
                    
                    TotalFair
                      Value
                    
                    
                    Unrealized
                      Losses
                    
                    
                    Fair
                      Value
                    
                    
                    Unrealized
                      Losses
                    
                    
                    Fair
                      Value
                    
                    
                    Unrealized
                      LossesU.S.
      Agencies
                    
                    $
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    -Mortgage-backed
                    
                    
                    518
                    
                    
                    
                    4
                    
                    
                    
                    318
                    
                    
                    
                    5
                    
                    
                    
                    836
                    
                    
                    
                    9Municipal
                    
                    
                    1,971
                    
                    
                    
                    18
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    1,971
                    
                    
                    
                    18Other
      securities
                    
                    
                    1,012
                    
                    
                    
                    23
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    1,012
                    
                    
                    
                    23Equity
      securities
                    
                    
                    431
                    
                    
                    
                    58
                    
                    
                    
                    442
                    
                    
                    
                    88
                    
                    
                    
                    873
                    
                    
                    
                    146Total
                    
                    $
                    3,932
                    
                    
                    $
                    103
                    
                    
                    $
                    760
                    
                    
                    $
                    93
                    
                    
                    $
                    4,692
                    
                    
                    $
                    196





The above
table at March 31, 2008 includes 31 securities that have unrealized losses for
less than 12 months and 21 securities that have been in an unrealized loss
position for 12 or more months.


9


The Bank
invests in debt securities of the U.S. government, U.S. agencies, U.S. sponsored
agencies, obligations of states and political subdivisions and corporate
obligations.  Changes in market value of all debt securities can
result from changes in interest rates.  Changes in credit quality can
affect securities of states and political subdivisions and corporate
obligations.  The changes in market value of the debt securities held
by the Bank have been due to changes in interest rates, and because the Bank has
the ability to hold these investments until maturity, the Bank does not consider
these investments to be other-than-temporarily impaired at March 31,
2008.





The Bank
invests in equity securities of other banks through its subsidiary, Norpenco,
Inc.  Management has evaluated the near-term prospects of the issuers
with unrealized losses, in relation to the severity and duration of the
impairment.  Based on that evaluation, and the Bank’s ability to hold
these stocks for a reasonable period of time sufficient for a forecasted
recovery of fair value, the management does not consider these investments to be
other-than-temporarily impaired at March 31, 2008.





3.    
       Loans





March 31,
                              2008
                            
                            
                            December
                              31,
                              2007(In
      thousands)RestatedReal
      estate mortgages:Construction
      and land development
                            
                            $
                            218
                            
                            
                            $
                            154Residential,
      1 – 4 family
                            
                            
                            42,403
                            
                            
                            
                            45,593Residential,
      multi-family
                            
                            
                            1,433
                            
                            
                            
                            1,446Commercial
                            
                            
                            44,469
                            
                            
                            
                            41,685Total
      real estate mortgages
                            
                            
                            88,523
                            
                            
                            
                            88,878Commercial
                            
                            
                            1,439
                            
                            
                            
                            2,157Consumer
                            
                            
                            6,703
                            
                            
                            
                            7,383Total
      loans
                            
                            
                            96,665
                            
                            
                            
                            98,418Allowance
      for loan losses
                            
                            
                            1,198
                            
                            
                            
                            1,171Total
      loans, net
                            
                            $
                            95,467
                            
                            
                            $
                            97,247





Loans are
stated at the principal amount outstanding, net of any unearned income, deferred
loan fees and the allowance for loan losses.  Interest on mortgage and
commercial loans is calculated at the time of payment based on the current
outstanding balance of the loan.  Interest on consumer loans is
recognized on the simple interest method.





The
allowance for loan losses is increased by charges to income and decreased by
charge-offs (net of recoveries).  Management’s periodic evaluation of
the adequacy of the allowance is based on the bank’s past loan loss experience,
known and inherent risks in the portfolio, adverse situations that may affect
the borrower’s ability to pay, the estimated value of any underlying collateral
and current economic conditions.





Uncollectible
interest on loans that are contractually past due 90 days or more is credited to
an allowance established through management’s periodic
evaluation.  The allowance is established by a charge to interest
income equal to all interest previously accrued, and income is subsequently
recognized only to the extent that cash payments are received until, in
management’s judgment, the borrower’s ability to make periodic interest and
principal payments is back to normal, in which case the loan is returned to
accrual status.





Allowance
for Loan Losses





The Bank
determines the provision for loan losses through a quarterly analysis of the
loan portfolio.  Factors such as changes in the nature and volume of
the portfolio, overall portfolio quality, concentrations of credit risk, review
of specific problem loans, current economic conditions and trends that affect
the ability of borrowers to pay, and prior loss experience within the various
loan categories are considered when reviewing the risks of the
portfolio.  Part of management’s review includes risk ratings of
commercial loans, and the engagement of an external loan review of all loans
over $400,000, insider loans and delinquent loans.


10





The
following table sets forth the year-end balances of and changes in the allowance
for loan losses, as well as certain related ratios, as of December 31 for the
year indicated:





March 31,
                  
                  
                  December
                    31,(Dollars in thousands)
                  
                  2008
                  
                  
                  2007Balance
      at beginning of period
                  
                  $
                  1,171
                  
                  
                  $
                  1,121Charge-offs:Commercial
                  
                  
                  -
                  
                  
                  
                  -Real
      estate mortgages
                  
                  
                  3
                  
                  
                  
                  -Consumer
                  
                  
                  11
                  
                  
                  
                  45Total
                  
                  
                  14
                  
                  
                  
                  45Recoveries:Commercial
                  
                  
                  -
                  
                  
                  
                  -Real
      estate mortgages
                  
                  
                  -
                  
                  
                  
                  -Consumer
                  
                  
                  10
                  
                  
                  
                  9Total
                  
                  
                  10
                  
                  
                  
                  9Net
      charge-offs
                  
                  
                  4
                  
                  
                  
                  36Provision
      charged to operations
                  
                  
                  31
                  
                  
                  
                  86Balance
      at end of period
                  
                  $
                  1,198
                  
                  
                  $
                  1,171





4.     
      Other Borrowings





The Bank
has a line of credit agreement with the Federal Home Loan Bank of Pittsburgh for
short term borrowings varying from one day to three years.  Advances
on this line must be secured by “qualifying collateral” as defined in the
agreement and bear interest at fixed or variable rates as determined at the date
advances are made.  The line expires in June, 2011.  At
March 31, 2008, this line of credit had a zero balance.





The Bank
has a $5,000,000 borrowing with the Federal Home Loan Bank of Pittsburgh at a
fixed rate of 6.19%, which was issued in July of 2000, and matures July of
2010.  The loan requires monthly interest payments, with the principal
due at maturity.





The Bank
also has a $7,000,000 borrowing with the Federal Home Loan Bank of Pittsburgh at
a fixed rate of 4.34%, which was issued in July of 2005, and matures in July of
2015.  This loan requires quarterly interest payments, with the
principal due at maturity.





5.      
     Earnings Per Share





Basic
earnings per share is computed on the weighted average number of common shares
outstanding during each year, adjusted for unearned shares of the ESOP, as
prescribed in Statement of Financial Accounting Standards No. 128, Earnings Per Share (SFAS
128).   Diluted earnings per share at March 31, 2008, includes
common shares issuable upon exercise of employee stock options as
follows:


11




March 31, 2008- Restated
                    
                    Income
                      (Numerator)
                    
                    
                    Shares
                      (Denominator)
                    
                    
                    Per-Share
                      AmountBasic
      EPSIncome
      available
                    
                    $
                    (167,000
                    )
                    
                    
                    1,536,761
                    
                    
                    $
                    (0.11
                    )Options
      includable
                    
                    
                    -
                    
                    
                    
                    2,490
                    
                    
                    
                    -Diluted  EPS
                    
                    $
                    (167,000
                    )
                    
                    
                    1,539,251
                    
                    
                    $
                    (0.11
                    )




March 31, 2007
                    
                    Income
                      (Numerator)
                    
                    
                    Shares
                      (Denominator)
                    
                    
                    Per-Share
                      AmountBasic
      EPSIncome
      available
                    
                    $
                    95,000
                    
                    
                    
                    1,449,030
                    
                    
                    $
                    0.07Options
      includable
                    
                    
                    -
                    
                    
                    
                    1,026
                    
                    
                    
                    -Diluted  EPS
                    
                    $
                    95,000
                    
                    
                    
                    1,450,056
                    
                    
                    $
                    0.07




6.     
      Omnibus Stock Option Plan




Stock
Awards. In May of 2006, the Company's stockholders approved the 2006
Omnibus Stock Option Plan, under which the Company reserved 101,685 shares of
common stock for future issuance. The Plan provides for grants of stock options
and restricted stock awards. Only present and future employees and directors are
eligible to receive incentive awards under the 2006 Omnibus Plan.  The
Company believes that such awards better align the interests of its employees
with its stockholders.




The
exercise price and vesting are determined by the Board of Directors at the date
of grant. Options generally vest over five years, and expire ten years after the
date of grant. Certain option and stock awards provide for accelerated vesting
if there is a change in control (as defined in the Plan).





Stock Grants.Restricted stock grants totaling 5,323 shares were awarded on September
26, 2006 having a fair value of $54,000.  The grants vest over five
years.  The market value as of the grant date of the restricted stock
grants is charged to expense as the grants vest.





Stock Options.Stock options covering 29,484 shares of common stock were awarded on
September 26, 2006.  The option awards were granted with an exercise
price equal to the average price of the last trade date.  The stock
options vest and therefore become exercisable on a pro rata basis annually over
five years from the date awarded, commencing September 26, 2007. The options are
available to be exercised for a period of ten years after the date
awarded.




The fair
value of each option grant was estimated to be $3.86 on the date of grant using
the Black-Scholes option pricing model with the following assumptions used for
grants during the applicable period:





Dividend
      Yield (per share)
                  
                  $
                  0.12Volatility
      (%)
                  
                  
                  3.76
                  %Risk-free
      Interest Rate (%)
                  
                  
                  4.76
                  %Expected
      Life
                  
                  10
      years





An
additional set of stock options covering 3,766 shares were awarded on October
23, 2007. The option awards were granted with an exercise price equal to the
average price of the last trade date.  The stock options vest and
therefore become exercisable on a pro rata basis annually over five years from
the date awarded, commencing October 27, 2008. The options are available to be
exercised for a period of ten years after the date awarded.


12





The fair
value of each option grant was estimated to be $3.64 on the date of grant using
the Black-Scholes option pricing model with the following assumptions used for
grants during the applicable period:





Dividend
      Yield (per share)
                  
                  $
                  0.12Volatility
      (%)
                  
                  
                  19.00
                  %Risk-free
      Interest Rate (%)
                  
                  
                  4.01
                  %Expected
      Life
                  
                  10
      years





During
the quarter ended March 31, 2008, the Company recorded approximately $9,000 in
expense included in “Salaries and employee benefits” on the accompanying
financial statements. As of March 31, 2008, there was approximately $121,000 of
total unrecognized compensation cost related to unvested options and grants.
That cost is expected to be recognized over a weighted-average period of 5
years. The Company plans on obtaining shares to be issued upon exercise of stock
options through authorized common stock.





Number
                                        of
                                        Shares
                                      
                                      
                                      Weighted -
                                        Average
                                        Exercise Price
                                      
                                      
                                      Weighted –
                                        Average
                                        Remaining
                                        Contractual
                                        TermOutstanding,
      January 1, 2008
                                      
                                      
                                      33,250
                                      
                                      
                                      $
                                      10.19
                                      
                                      
                                      
                                      -Granted
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -Exercised
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -Forfeited  or
      expired
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -Outstanding,
      March 31, 2008
                                      
                                      
                                      33,250
                                      
                                      
                                      $
                                      10.19
                                      
                                      
                                      
                                      8.6Exercisable,
      March 31, 2008
                                      
                                      
                                      5,896
                                      
                                      
                                      $
                                      10.21
                                      
                                      
                                      
                                      8.5





Stock Options
                      
                      
                      Restricted StockNonvested shares
                      
                      Number
                        of
                        Shares
                      
                      
                      Weighted-
                        Average
                        Grant-Date
                        Fair Value
                      
                      
                      Number
                        of
                        Shares
                      
                      
                      Weighted-
                        Average
                        Grant-
                        Date Fair
                        ValueNonvested,  January
      1, 2008
                      
                      
                      27,354
                      
                      
                      $
                      3.83
                      
                      
                      
                      4,258
                      
                      
                      $
                      10.21Granted
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -Vested
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -Forfeited
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -Nonvested,
      March 31, 2008
                      
                      
                      27,354
                      
                      
                      $
                      3.83
                      
                      
                      
                      4,258
                      
                      
                      $
                      10.21




7.           
Guarantees




FASB
Interpretation No. 45, Guarantor’s Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others (FIN 45), requires certain guarantees to be
recorded at fair value as a liability at inception and when a loss is probable
and reasonably estimable, as those terms are defined in FASB Statement No. 5,
Accounting for
Contingencies (FAS 5).  FIN 45 also requires a guarantor to
make significant new disclosures even when the likelihood of making any payments
under the guarantee is remote.


13


In
September 2006, the Bank executed a Mortgage Partnership Finance (MPF) Master
Commitment (the Commitment) with the FHLBank of Pittsburgh (FHLB) to deliver
$10.0 million of mortgage loans and to guarantee the payment of any realized
losses that exceed the FHLB’s first loss account for mortgages delivered under
the Commitment.  The Bank receives credit enhancement fees from the
FHLB for providing this guarantee and continuing to manage the credit risk of
the MPF Program mortgage loans.  The term of the Commitment and
guarantee per the Master Commitment is through September 25, 2008. The maximum
potential amount of future payments that the Bank is required to make under the
guarantee is $250,000. Under the Commitment, the Bank agrees to service the
loans and therefore, is responsible for any necessary foreclosure
proceedings.  Any future recoveries on any losses would not be paid by
the FHLB under the Commitment.  The Bank has not experienced any
losses under these guarantees.





8.           
Related-Party Transactions





The
Company routinely enters into banking transactions with its directors and
officers.  Such transactions are made in the ordinary course of
business on substantially the same terms and conditions, including interest
rates and collateral, as those prevailing at the same time for comparable
transactions with other customers, and do not, in the opinion of management,
involve more than normal credit risk or present other unfavorable
features.  A summary of loans to directors and officers and related
parties is as follows for the quarter ended March 31, 2008 and the year ended
December 31, 2007 (dollars in thousands):





2008
                    
                    
                    2007Beginning
      balance
                    
                    $
                    1,334
                    
                    
                    $
                    922Additions
                    
                    
                    596
                    
                    
                    
                    539Collections
                    
                    
                    (569
                    )
                    
                    
                    (127
                    )Ending
      balance
                    
                    $
                    1,361
                    
                    
                    $
                    1,334




9.      
     Restatement of Previously Issued
Financial Statements




Subsequent
to the original filing of the Company's March 31, 2008 Form 10-Q, management
concluded that detail listings of residential loans sold and commercial
participations sold did not reconcile to corresponding general ledger accounts.
Upon further review, the Company found that the cause of the misstatements were
intentionally incorrect accounting entries and reconciliations posted by a
former officer of the Company beginning in early 2008. The Company determined
that correction of these errors requires the restatement of the consolidated
balance sheet as of March 31, 2008 and the consolidated statement of income for
the three months ended March 31, 2008 as follows:




(in thousands, except per share data)
                            
                            As Previously
                              Reported
                            
                            
                            As Corrected
                            
                            
                            Effect of
                              ChangeAs
      of March 31, 2008Consolidated
      Balance SheetsTotal
      Cash and cash equivalents
                            
                            $
                            2,077
                            
                            
                            $
                            1,841
                            
                            
                            $
                            (236
                            )Loans,
      net
                            
                            
                            95,707
                            
                            
                            
                            95,467
                            
                            
                            
                            (240
                            )Deferred
      income taxes
                            
                            
                            454
                            
                            
                            
                            653
                            
                            
                            
                            199Total
      assets
                            
                            
                            129,657
                            
                            
                            
                            129,380
                            
                            
                            
                            (277
                            )Retained
      earnings
                            
                            
                            7,805
                            
                            
                            
                            7,528
                            
                            
                            
                            (277
                            )Total
      stockholders equity
                            
                            
                            20,278
                            
                            
                            
                            20,001
                            
                            
                            
                            (277
                            )Total
      liabilities and stockholders equity
                            
                            
                            129,657
                            
                            
                            
                            129,380
                            
                            
                            
                            (277
                            )For
      the three months ended March 31, 2008Consolidated
      Statements of IncomeLoss
      due to accounting errors
                            
                            $
                            -
                            
                            
                            $
                            475
                            
                            
                            
                            475Total
      other expense
                            
                            
                            876
                            
                            
                            
                            1,351
                            
                            
                            
                            475Income/(loss)
      before income taxes
                            
                            
                            164
                            
                            
                            
                            (311
                            )
                            
                            
                            (475
                            )Income
      tax expense/(benefit)
                            
                            
                            54
                            
                            
                            
                            (144
                            )
                            
                            
                            (198
                            )Net
      income/(loss)
                            
                            
                            110
                            
                            
                            
                            (167
                            )
                            
                            
                            (277
                            )Comprehensive
      income/(loss)
                            
                            
                            132
                            
                            
                            
                            (145
                            )
                            
                            
                            (277
                            )Earnings/(loss)
      per share, basic and diluted
                            
                            
                            0.07
                            
                            
                            
                            (0.11
                            )
                            
                            
                            (0.18
                            )




14


Item
2.   Management’s Discussion and Analysis or Plan of
Operation.





Forward-Looking
Statements





North
Penn Bancorp, Inc. makes forward-looking statements in this
report.  These forward-looking statements may include: statements of
goals, intentions and expectations; estimates of risks and of future costs and
benefits; assessments of probable loan losses; assessments of market risk; and
statements of the ability to achieve financial and other
goals.  Forward-looking statements are typically identified by words
such as “believe,” “expect,” “anticipate,” “intend,” “outlook,” “estimate,”
“forecast,” “project” and other similar words and expressions. Forward-looking
statements are subject to numerous assumptions, risks and uncertainties, which
change over time. Forward-looking statements speak only as of the date they are
made. The Company does not assume any duty and does not undertake to update its
forward-looking statements.  Because forward-looking statements are
subject to assumptions and uncertainties, actual results or future events could
differ, possibly materially, from those that the Company anticipated in its
forward-looking statements, and future results could differ materially from
historical performance.





The
Company’s forward-looking statements are subject to the following principal
risks and uncertainties: general economic conditions and trends, either
nationally or locally; conditions in the securities markets; changes in interest
rates; changes in deposit flows, and in the demand for deposit and loan products
and other financial services; changes in real estate values; changes in the
quality or composition of the Company’s loan or investment portfolios; changes
in competitive pressures among financial institutions or from non-financial
institutions; the Company’s ability to retain key members of management; changes
in legislation, regulation, and policies; and a variety of other matters which,
by their nature, are subject to significant uncertainties.  The
Company provides greater detail regarding some of these factors in its Form
10-KSB for the year ended December 31, 2007, including in the Risk Factors
section of that report.  The Company’s forward-looking statements may
also be subject to other risks and uncertainties, including those that it may
discuss elsewhere in this report or in its other filings with the
SEC.


15


Financial
Condition- As Restated





Our total
assets increased $6.9 million, or 5.6%, from $122.5 million at December 31, 2007
to $129.4 million at March 31, 2008.  The increase in assets resulted
from increases in federal funds sold and investment purchases.





Our
overall loan portfolio declined a net of $26,000 or 0.03%, since December 31,
2007.  Consumer loans decreased $680,000 from $7.4 million at December
31, 2007 to $6.7 million at December 31, 2007, as the Bank has chosen not to
aggressively pursue that segment of loans. Commercial real estate loans have
increased $2.8 million from $41.7 million at December 31, 2007 to $44.5 million
at March 31, 2008. Residential mortgages decreased $1.4 million from December
31, 2007, and commercial loans not secured by real estate decreased
$700,000.





Investment
securities increased $1.5 million, or 11.2%, to $14.9 million from $13.4 million
since December 31, 2007. The Company had securities in the amount of $885,000
mature or called during the first quarter. The Company added to its investment
portfolio by purchasing $995,000 in mortgage-backed securities, $1.0 million in
corporate securities and $502,000 in municipal securities. The Company also
purchased $105,000 in equity securities and sold one equity security for $11,000
during the quarter.





The
allowance for loan loss increased $27,000 during the first quarter of 2008. The
Company added $31,000 in provisions during the first three months of the year.
Subtracting from the provision were charge-offs of $11,000 for three consumer
loans and $3,000 for one mortgage loan. There were recoveries of approximately
$10,000 made during the first quarter of 2008, representing repayments for
consumer loans that were previously charged off. Management assesses the
adequacy of the allowance for loan losses based on evaluating known and inherent
losses in the loan portfolio and upon management’s continuing analysis of the
factors underlying the quality of the loan portfolio. The ratio of the Bank’s
allowance for loan losses to total loans was 1.24% at March 31, 2008 and 1.19%
at December 31, 2007. We are carefully monitoring all credit quality so that we
can respond quickly to any deterioration which action may include strong
collection efforts and increased allowance for loan loss
protection.





While
management believes that, based on information currently available, the
allowance for loan losses is sufficient to cover losses inherent in its loan
portfolio at this time, no assurance can be given that the level of the
allowance for loan losses is sufficient to cover future possible loan losses
incurred by the Bank or that future adjustments to the allowance for loan losses
will not be necessary if economic and other conditions differ substantially from
the economic and other conditions used by management to determine the current
level of the allowance for loan losses.  Management may in the future
increase the level of the allowance for loan losses as a percentage of total
loans and non-performing loans in the event it increases the level of commercial
or consumer lending as a percentage of its total loan portfolio.  In
addition, various regulatory agencies, as an integral part of their examination
process, periodically review the allowance for loan losses.  Such
agencies may require the Bank to provide additions to the allowance based upon
judgments different from management.





Non-performing
loans, which are loans past due 90 days or more and non-accruing loans, totaled
$913,000 at March 31, 2008, compared to $378,000 at December 31, 2007. The ratio
of non-performing loans to total loans was 0.94% and 0.38% at March 31, 2008 and
December 31, 2007, respectively.





Total
deposits increased $12.8 million or 15.3%, from $83.7 million at December 31,
2007 to $96.5 million at March 31, 2008. Non-interest bearing deposits decreased
$1.3 million, or 17.6%, from $7.4 million at December 31, 2007 to $6.1 million
at March 31, 2008. Interest bearing demand deposits increased $12.2 million, or
37.1%, from $32.9 million at December 31, 2007 to $45.1 million at March 31,
2008. This increase was attributable to growth in our Signature Savings account
as well as a substantial municipal deposit. Time deposits increased $1.9
million, or 4.4%, from $43.3 million at December 31, 2007 to $45.2 million at
March 31, 2008.


16


Borrowings
decreased $5.9 million, or 33.0%, from $17.9 million at December 31, 2007 to
$12.0 million at March 31, 2008. The Company fully paid down our overnight
borrowings, leaving only two long term borrowings at FHLBank of
Pittsburgh.





Results
of Operations- As Restated





Comparison
of the Three Month Periods Ended March 31, 2008 and 2007





The
Company experienced a net loss of $167,000 for the three months ended March 31,
2008 compared to net income of $95,000 for the three months ended March 31,
2007, a decrease of $262,000, or 275.8%.  Net interest income for the
first quarter of 2008 increased $128,000, or 14.8%, compared to the first
quarter of 2007. This increase was the result of higher investment and loan
income, coupled with a decrease in interest expense.  The net loss
resulted from a $475,000 pre-tax loss which resulted from accounting errors
within the Bank’s primary correspondent bank account.





The
Company experienced a slight increase of $50,000, or 2.7%, in interest income
for the quarter ended March 31, 2008 compared to the same period in 2007. There
was a slight increase of $24,000, or 1.4%, in loan interest income for the
quarter ended March 31, 2008 compared to the same period in 2007. Interest and
dividends on investments increased $26,000, or 15.4%, to $195,000 at March 31,
2008 from $169,000 at March 31, 2007. The increase was due to the additional
securities purchased and the interest income from federal funds sold in the
current year.





Interest
expense decreased $78,000, or 7.9%, from $992,000 in 2007 to $914,000 in
2008.  Interest on deposits increased $9,000 or 1.2%, from $735,000 in
2007 to $744,000 in 2008 due to increases in outstanding interest bearing
deposits. Interest on borrowed funds decreased $87,000, or 33.9%, to $170,000 in
2008 compared to $257,000 in 2007. The decrease is the result of decreases in
the average volume of overnight borrowings.





Other
income decreased $33,000 to $76,000 in 2008, from $109,000 in 2007, primarily
due to a $17,000 gain on the sale of securities in 2007 compared to a loss of
$2,000 in the same category for 2008. The company also received an extra $20,000
in income in 2007 related to a property held in other real estate owned that was
sold in the first quarter of 2007. Other expenses increased $537,000 to
$1,351,000 in 2008 from $814,000 in 2007.  The primary reason for the
change was the loss resulting from accounting errors.  Salaries and
employee benefits increased $51,000 or 11.0%, from $463,000 in 2007, to $514,000
in 2008, due to increased personnel and annual merit increases. Occupancy and
equipment expense increased $17,000 or 11.4% from $149,000 in 2007, to $166,000
in 2008, and other operating expenses decreased $6,000 or 3.0%, from $202,000 in
2007 to $196,000 in 2008.





Liquidity
and Capital Resources- As Restated





The
Bank’s primary sources of funds are deposits, principal and interest payments on
loans, FHLB advances and proceeds from mortgage loan sales.  While
maturities and scheduled amortization of loans are predictable sources of funds,
deposit flows and mortgage prepayments are greatly influenced by general
interest rates, economic conditions, and competition.  The Bank’s
regulators require the Bank to maintain sufficient liquidity to ensure its safe
and sound operation.





A review
of the Consolidated Statements of Cash Flows included in the accompanying
financial statements shows that the Bank’s cash and cash equivalents decreased
$1.3 million for the three months ended March 31, 2008.  During that
period, cash was primarily provided from earnings and customer deposits and
primarily used to pay down overnight borrowings, purchase investments, and
invest in federal funds sold.


17


North
Penn Bank's capital ratios at March 31, 2008 and December 31, 2007 as well as
the required minimum ratios for capital adequacy purposes and to be well
capitalized under the prompt corrective action provisions as defined by the FDIC
are summarized as follows:





Actual
                                                                                                                          
                                                                                                                          
                                                                                                                          For capital adequacy
                                                                                                                            purposes
                                                                                                                          
                                                                                                                          
                                                                                                                          To be well capitalized
                                                                                                                            under
      prompt
                                                                                                                            corrective action
                                                                                                                            provisionsAmount
                                                                                                                          
                                                                                                                          
                                                                                                                          Ratio
                                                                                                                          
                                                                                                                          
                                                                                                                          Amount
                                                                                                                          
                                                                                                                          
                                                                                                                          Ratio
                                                                                                                          
                                                                                                                          
                                                                                                                          Amount
                                                                                                                          
                                                                                                                          
                                                                                                                          RatioAt
      March 31, 2008:Total
      Capital (to Risk-Weighted Assets):North
      Penn Bank
                                                                                                                          
                                                                                                                          $
                                                                                                                          16,210
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          16.18
                                                                                                                          %
                                                                                                                          
                                                                                                                          ≥$
                                                                                                                          8,014
                                                                                                                          
                                                                                                                          
                                                                                                                          ≥
                                                                                                                          8.0
                                                                                                                          %
                                                                                                                          
                                                                                                                          ≥$
                                                                                                                          10,018
                                                                                                                          
                                                                                                                          
                                                                                                                          ≥
                                                                                                                          10.0
                                                                                                                          %Tier
      1 Capital (to Risk-Weighted Assets):North
      Penn Bank
                                                                                                                          
                                                                                                                          $
                                                                                                                          15,012
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          14.98
                                                                                                                          %
                                                                                                                          
                                                                                                                          ≥$
                                                                                                                          4,007
                                                                                                                          
                                                                                                                          
                                                                                                                          ≥
                                                                                                                          4.0
                                                                                                                          %
                                                                                                                          
                                                                                                                          ≥$
                                                                                                                          6,011
                                                                                                                          
                                                                                                                          
                                                                                                                          ≥
                                                                                                                          6.0
                                                                                                                          %Tier
      1 Capital (to Average Assets):North
      Penn Bank
                                                                                                                          
                                                                                                                          $
                                                                                                                          15,012
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          12.00
                                                                                                                          %
                                                                                                                          
                                                                                                                          ≥$
                                                                                                                          5,004
                                                                                                                          
                                                                                                                          
                                                                                                                          ≥
                                                                                                                          4.0
                                                                                                                          %
                                                                                                                          
                                                                                                                          ≥$
                                                                                                                          6,255
                                                                                                                          
                                                                                                                          
                                                                                                                          ≥
                                                                                                                          5.0
                                                                                                                          %Risk-Weighted
      Assets:
                                                                                                                          
                                                                                                                          $
                                                                                                                          100,181Average
      Assets:
                                                                                                                          
                                                                                                                          $
                                                                                                                          125,092Reconciliation
      of GAAP Capital to Regulatory CapitalTotal
      Equity Capital March 31, 2008
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          $
                                                                                                                          15,078Plus:
      Unrealized Gain/Loss on Investments
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          (65
                                                                                                                          )Less:
      Disallowed Servicing Rights
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          (1
                                                                                                                          )Total
      Tier Capital March 31, 2008
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          $
                                                                                                                          15,012Plus:
      Allowance for loan losses
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          1,198Total
      Risk-based Capital March 31, 2008
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          $
                                                                                                                          16,210At
      December 31, 2007:Total
      Capital (to Risk-Weighted Assets):North
      Penn Bank
                                                                                                                          
                                                                                                                          $
                                                                                                                          16,319
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          16.97
                                                                                                                          %
                                                                                                                          
                                                                                                                          ≥$
                                                                                                                          7,695
                                                                                                                          
                                                                                                                          
                                                                                                                          ≥
                                                                                                                          8.0
                                                                                                                          %
                                                                                                                          
                                                                                                                          ≥$
                                                                                                                          9,619
                                                                                                                          
                                                                                                                          
                                                                                                                          ≥
                                                                                                                          10.0
                                                                                                                          %Tier
      1 Capital (to Risk-Weighted Assets):North
      Penn Bank
                                                                                                                          
                                                                                                                          $
                                                                                                                          15,148
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          15.75
                                                                                                                          %
                                                                                                                          
                                                                                                                          ≥$
                                                                                                                          3,847
                                                                                                                          
                                                                                                                          
                                                                                                                          ≥
                                                                                                                          4.0
                                                                                                                          %
                                                                                                                          
                                                                                                                          ≥$
                                                                                                                          5,771
                                                                                                                          
                                                                                                                          
                                                                                                                          ≥
                                                                                                                          6.0
                                                                                                                          %Tier
      1 Capital (to Average Assets):North
      Penn Bank
                                                                                                                          
                                                                                                                          $
                                                                                                                          15,148
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          12.71
                                                                                                                          %
                                                                                                                          
                                                                                                                          ≥$
                                                                                                                          4,766
                                                                                                                          
                                                                                                                          
                                                                                                                          ≥
                                                                                                                          4.0
                                                                                                                          %
                                                                                                                          
                                                                                                                          ≥$
                                                                                                                          5,958
                                                                                                                          
                                                                                                                          
                                                                                                                          ≥
                                                                                                                          5.0
                                                                                                                          %Risk-Weighted
      Assets:
                                                                                                                          
                                                                                                                          $
                                                                                                                          96,186Average
      Assets:
                                                                                                                          
                                                                                                                          $
                                                                                                                          119,156Reconciliation
      of GAAP Capital to Regulatory CapitalTotal
      Equity Capital December 31, 2007
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          $
                                                                                                                          15,190Plus:
      Unrealized Gain/Loss on Investments
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          (41
                                                                                                                          )Less:
      Disallowed Servicing Rights
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          (1
                                                                                                                          )Total
      Tier Capital December 31, 2007
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          $
                                                                                                                          15,148Plus:
      Allowance for loan losses
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          1,171Total
      Risk-based Capital December 31, 2007
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          $
                                                                                                                          16,319


18


Item
3.   Quantitative and Qualitative Disclosure About Market
Risk





Not
applicable as the Company is a smaller reporting company.





Item
4.   Controls and Procedures- As Restated





The
Company maintains disclosure controls and procedures as required under Rule
13a-15 promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), that are designed to ensure that information required to be
disclosed in our Exchange Act reports is recorded, processed, summarized and
reported within the time periods specified in the SEC's rules and forms, and
that such information is accumulated and communicated to the Company's
management, including its Chief Executive Officer and Chief Financial Officer,
as appropriate, to allow timely decisions regarding required disclosures. At
March 31, 2008, the Company's management, with the participation of the Chief
Executive Officer and Chief Financial Officer, carried out an evaluation of the
effectiveness of the Company's disclosure controls and procedures. Based on that
evaluation, the Company's Chief Executive Officer and Chief Financial Officer
initially concluded that the Company's disclosure controls and procedures were
effective. As a result of the restatement described in the Explanatory Note,
management has since concluded that the Company did not maintain effective
controls to ensure that an employee acting alone cannot record journal entries
and reconcile significant accounts.  This control deficiency resulted
in intentionally incorrect accounting entries that were not initially identified
by the Company’s internal control and that require the restatement of the
Company's financial statements for the quarter ended March 31, 2008. Because of
this control deficiency, management has reevaluated its assessment for that
period and concluded that the Company's disclosure controls and procedures were
not effective as of March 31, 2008.





The
Company reviews its disclosure controls and procedures, which includes its
internal controls over financial reporting, on an ongoing basis and may from
time to time make changes aimed at enhancing their effectiveness. As previously
reported, no such control enhancements occurred during the quarter ended March
31, 2008 that have materially affected, or are reasonably likely to materially
affect, the Company’s internal control over financial reporting.




The Audit
Committee of the Board of Directors and senior management met with the firm that
provides its internal audit services to review the design of the Company’s
internal controls in light of recent events.  Specific areas discussed
and that will be implemented included the following: an increase in segregation
and rotation of duties; a complete review of access rights to the bank’s data
processing system; and increased management oversight and review of certain
general ledger entries.  It was also decided that a “Financial
Statement Disclosure Committee” would be instituted, the purpose for which is to
review the process and accuracy of financial statement preparation prior to
filing.  This committee will consist of the Company’s five most senior
officers including the following: Chief Executive Officer, Chief Financial
Officer, Chief Lending Officer, Senior Commercial Lender and Chief Technology
and Risk Officer.





PART
II – OTHER INFORMATION





Item
6.   Exhibits.





3.1
            Articles
      of Incorporation of North Penn Bancorp, Inc. (Incorporated herein by
      reference to Exhibit 3.1 to the Company’s Registration Statement on
      Form SB-2 (File
No. 333-143601))


19


3.2
            Bylaws
      of North Penn Bancorp, Inc. (Incorporated herein by reference to
      Exhibit 3.2 to the Company’s Registration Statement on Form SB-2
      (File No. 333-143601))


4
            Specimen
      Stock Certificate(Incorporated herein by reference to Exhibit 4 to
      the Company’s Registration Statement on Form SB-2 (File
      No. 333-143601))


31.1
            Rule
      13a-14(a) /15d-14(a) Certification


32.1
            Section
      1350 Certification


20


SIGNATURES





In
accordance with the requirements of the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.





North Penn Bancorp, IncDated: March 31, 2009
              
              /s/ Frederick L. HickmanFrederick L. Hickman
                President and
                Chief Executive Officer
                (Acting Principal Financial
Officer)




21