UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C.  20549





FORM
10-Q





(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, 2009





 ̈
            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 has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding
12 months (or for such shorter period that the registrant was required to submit
and post such files).   Yes  ̈     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 1, 2009, the issuer had
1,453,071 shares of common stock, par value $0.10 per share,
outstanding.











PART
I - FINANCIAL INFORMATION





PageItem
      1. Financial Statements.Consolidated
      Balance Sheets at March 31, 2009 and December 31, 2008
                  
                  3Consolidated
      Statements of Income for the Three Months Ended March 31, 2009 and
      2008
                  
                  4Consolidated
      Statements of Cash Flows for the Three Months Ended March 31, 2009 and
      2008
                  
                  5Notes
      to Unaudited Consolidated Financial Statements
                  
                  6Item
      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
      1. Legal Proceedings
                  
                  19Item
      1A. Risk Factors
                  
                  19Item
      2. Unregistered Sales of Equity Securities and Use of
    Proceeds
                  
                  20Item
      3. Defaults Upon Senior Securities.
                  
                  20Item
      4. Submission of Matters to a Vote of Security Holders.
                  
                  20Item
      5. Other Information.
                  
                  20Item
      6. Exhibits.
                  
                  20





2





PART
I – FINANCIAL INFORMATION





Item
1. Financial Statements





North
Penn Bancorp, Inc. and Subsidiary


Consolidated
Balance Sheets





March
      31,
                  2009
                
                
                December
      31,
                  2008(Unaudited)
                
                
                (Audited)(In
      thousands)ASSETS:Cash
      and due from banks
                
                $
                2,580
                
                
                $
                1,604Interest
      bearing deposits
                
                
                43
                
                
                
                43Total
      cash and cash equivalents
                
                
                2,623
                
                
                
                1,647Federal
      funds sold
                
                
                4,750
                
                
                
                627Investment
      securities, available for sale
                
                
                19,454
                
                
                
                20,293Equity
      securities at cost, substantially restricted
                
                
                1,143
                
                
                
                1,090Loans,
      net of allowance for loan losses of $1,215 in 2009 and $1,170 in
      2008
                
                
                104,782
                
                
                
                106,106Loans
      held for sale
                
                
                -
                
                
                
                684Bank
      premises and equipment – net
                
                
                4,072
                
                
                
                4,126Accrued
      interest receivable
                
                
                700
                
                
                
                676Cash
      surrender value of life insurance
                
                
                2,906
                
                
                
                2,864Deferred
      income taxes
                
                
                597
                
                
                
                657Other
      assets
                
                
                226
                
                
                
                220TOTAL
      ASSETS
                
                $
                141,253
                
                
                $
                138,990LIABILITIES:Deposits:Non-interest
      bearing deposits
                
                $
                6,571
                
                
                $
                6,985Interest
      bearing demand deposits
                
                
                45,787
                
                
                
                48,468Interest
      bearing time deposits
                
                
                56,596
                
                
                
                43,700Total
      deposits
                
                
                108,954
                
                
                
                99,153Other
      borrowed funds
                
                
                12,000
                
                
                
                19,648Accrued
      interest and other liabilities
                
                
                877
                
                
                
                891TOTAL
      LIABILITIES
                
                
                121,831
                
                
                
                119,692STOCKHOLDERS’
      EQUITY:Preferred
      stock, no par; 20,000,000 authorized; issued and outstanding,
      none
                
                
                -
                
                
                
                -Common
      stock, par value $0.10; 80,000,000 authorized; 1,581,571shares issued in
      2009 and 2008; outstanding: 1,453,071 in 2009 and 1,478,571 in
      2008
                
                
                158
                
                
                
                158Additional
      paid-in capital
                
                
                13,503
                
                
                
                13,480Retained
      earnings
                
                
                8,091
                
                
                
                7,905Unearned
      ESOP shares
                
                
                (980
                )
                
                
                (980
                )Accumulated
      other comprehensive loss
                
                
                (345
                )
                
                
                (460
                )Treasury
      Stock at cost, shares: 128,500 in 2009 and 103,000 in 2008
                
                
                (1,005
                )
                
                
                (805
                )TOTAL
      STOCKHOLDERS’ EQUITY
                
                
                19,422
                
                
                
                19,298TOTAL
      LIABILITIES AND STOCKHOLDERS’ EQUITY
                
                $
                141,253
                
                
                $
                138,990




See notes
to unaudited consolidated financial statements.





3





North
Penn Bancorp, Inc. and Subsidiary


Unaudited
Consolidated Statements of Income


For
the Three Months Ended March 31, 2009 and 2008


(In
thousands)





2009
                      
                      
                      2008INTEREST
      INCOMEInterest
      on loans
                      
                      $
                      1,719
                      
                      
                      $
                      1,714Interest
      on federal funds sold
                      
                      
                      1
                      
                      
                      
                      32Interest
      on tax exempt investments
                      
                      
                      74
                      
                      
                      
                      72Interest
      on investments
                      
                      
                      122
                      
                      
                      
                      66Dividends
      on investments
                      
                      
                      12
                      
                      
                      
                      25Total
      interest income
                      
                      
                      1,928
                      
                      
                      
                      1,909INTEREST
      EXPENSEInterest
      on deposits
                      
                      
                      613
                      
                      
                      
                      744Interest
      on short-term borrowings
                      
                      
                      13
                      
                      
                      
                      15Interest
      on long-term borrowings
                      
                      
                      153
                      
                      
                      
                      155Total
      interest expense
                      
                      
                      779
                      
                      
                      
                      914NET
      INTEREST INCOME
                      
                      
                      1,149
                      
                      
                      
                      995PROVISION
      FOR LOAN LOSSES
                      
                      
                      52
                      
                      
                      
                      31NET
      INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES
                      
                      
                      1,097
                      
                      
                      
                      964OTHER
      INCOMEService
      charges and fees
                      
                      
                      57
                      
                      
                      
                      54Other
      operating income
                      
                      
                      44
                      
                      
                      
                      24Loss
      on sale of securities
                      
                      
                      -
                      
                      
                      
                      (2
                      )Net
      gain on sale of loans
                      
                      
                      14
                      
                      
                      
                      -TOTAL
      OTHER INCOME
                      
                      
                      115
                      
                      
                      
                      76OTHER
      EXPENSESalaries
      and employee benefits
                      
                      
                      504
                      
                      
                      
                      514Occupancy
      and equipment expense
                      
                      
                      151
                      
                      
                      
                      166Other
      operating expenses
                      
                      
                      226
                      
                      
                      
                      196Loss
      from accounting errors
                      
                      
                      -
                      
                      
                      
                      475TOTAL
      OTHER EXPENSE
                      
                      
                      881
                      
                      
                      
                      1,351INCOME(LOSS)
      BEFORE INCOME TAXES
                      
                      
                      331
                      
                      
                      
                      (311
                      )INCOME
      TAX EXPENSE(BENEFIT)
                      
                      
                      107
                      
                      
                      
                      (144
                      )NET
      INCOME/(LOSS)
                      
                      
                      224
                      
                      
                      
                      (167
                      )OTHER
      COMPREHENSIVE INCOME/(LOSS):Unrealized
      holding gain arising during period, net of income tax
                      
                      
                      115
                      
                      
                      
                      22COMPREHENSIVE
      INCOME(LOSS)
                      
                      $
                      339
                      
                      
                      $
                      (145
                      )Weighted
      average number of shares outstanding
                      
                      
                      1,426,835
                      
                      
                      
                      1,536,761Earnings
      per share, basic and diluted
                      
                      $
                      0.16
                      
                      
                      $
                      (0.11
                      )Dividends
      per share
                      
                      $
                      0.03
                      
                      
                      $
                      0.03




See notes
to unaudited consolidated financial statements.





4





North
Penn Bancorp, Inc. and Subsidiary


Unaudited
Consolidated Statements of Cash Flows


For
the Three Months Ended March 31, 2009 and 2008


(In
thousands)


2009
                
                
                2008Operating
      Activities:Net
      income/(loss)
                
                $
                224
                
                
                $
                (167
                )Items
      not requiring (providing) cashDepreciation
                
                
                58
                
                
                
                60Provision
      for loan losses
                
                
                52
                
                
                
                31Amortization
      of securities (net of accretion)
                
                
                (2
                )
                
                
                6Increase
      in cash surrender value of life insurance
                
                
                (42
                )
                
                
                (20
                )Net
      realized loss on securities
                
                
                -
                
                
                
                2Net
      realized gain on sale of loans
                
                
                (14
                )
                
                
                -Changes
      in:Accrued
      interest income and other assets
                
                
                (30
                )
                
                
                (186
                )Accrued
      interest expense and other liabilities
                
                
                23
                
                
                
                61Net
      Cash Provided By (Used in) Operating Activities
                
                
                269
                
                
                
                (213
                )Investing
      Activities:Purchase
      of bank premises and equipment
                
                
                (4
                )
                
                
                (22
                )Proceeds
      from sale of other real estate
                
                
                -
                
                
                
                100Purchase
      of securities “available for sale”
                
                
                (30
                )
                
                
                (2,639
                )Sales
      of securities “available for sale”
                
                
                -
                
                
                
                11Federal
      funds sold, net
                
                
                (4,123
                )
                
                
                (6,906
                )Matured
      or called securities “available for sale”
                
                
                500
                
                
                
                885Redemptions
      of mortgage-backed securities “available for sale”
                
                
                541
                
                
                
                252(Purchase)
      redemption of restricted stock
                
                
                (53
                )
                
                
                268Net
      decrease (increase) in loans to customers
                
                
                1,272
                
                
                
                (5
                )Proceeds
      from sale of loans
                
                
                698
                
                
                
                -Net
      Cash Used In Investing Activities
                
                
                (1,199
                )
                
                
                (8,056
                )Financing
      Activities:Increase
      in deposits
                
                
                9,801
                
                
                
                12,811Decrease
      in borrowed funds
                
                
                (7,648
                )
                
                
                (5,879
                )Treasury
      stock purchased
                
                
                (200
                )
                
                
                -Cash
      dividends paid
                
                
                (47
                )
                
                
                -Net
      Cash Provided By Financing Activities
                
                
                1,906
                
                
                
                6,932Net
      Increase (Decrease) In Cash and Cash Equivalents
                
                
                976
                
                
                
                (1,337
                )Cash
      and Cash Equivalents, January 1
                
                
                1,647
                
                
                
                3,178Cash
      and Cash Equivalents, March 31
                
                $
                2,623
                
                
                $
                1,841Supplementary
      Schedule of Cash Flow Information:Cash
      paid during the period for:Interest
                
                $
                733
                
                
                $
                845Income
      taxes
                
                
                45
                
                
                
                67Non-cash
      investing and financing activities:Unrealized
      gains on securities
                
                $
                93
                
                
                $
                34




See notes
to unaudited consolidated financial statements.


5




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.





6




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, 2009 and
December 31, 2008 are as follows:





7




Available-for-Sale


March
31, 2009


(In
thousands)





Amortized
                        Cost
                      
                      
                      Gross
                        Unrealized
                        Gains
                      
                      
                      Gross
                        Unrealized
                        Losses
                      
                      
                      Fair
                        ValueU.S.
      Agency securities
                      
                      $
                      2,500
                      
                      
                      $
                      48
                      
                      
                      $
                      -
                      
                      
                      $
                      2,548Mortgage-backed
      securities
                      
                      
                      4,533
                      
                      
                      
                      74
                      
                      
                      
                      -
                      
                      
                      
                      4,607State
      & political subdivisions
                      
                      
                      8,526
                      
                      
                      
                      34
                      
                      
                      
                      37
                      
                      
                      
                      8,523Other
      bonds
                      
                      
                      3,017
                      
                      
                      
                      -
                      
                      
                      
                      210
                      
                      
                      
                      2,807Total
      debt securities
                      
                      
                      18,576
                      
                      
                      
                      156
                      
                      
                      
                      247
                      
                      
                      
                      18,485Equity
      securities
                      
                      
                      1,402
                      
                      
                      
                      6
                      
                      
                      
                      439
                      
                      
                      
                      969Total
      Available-for-Sale
                      
                      $
                      19,978
                      
                      
                      $
                      162
                      
                      
                      $
                      686
                      
                      
                      $
                      19,454





Available-for-Sale


December
31, 2008


(In
thousands)





Amortized
                        Cost
                      
                      
                      Gross
                        Unrealized
                        Gains
                      
                      
                      Gross
                        Unrealized
                        Losses
                      
                      
                      Fair
                        ValueU.S.
      Agency securities
                      
                      $
                      3,000
                      
                      
                      $
                      16
                      
                      
                      $
                      -
                      
                      
                      $
                      3,016Mortgage-backed
      securities
                      
                      
                      5,074
                      
                      
                      
                      68
                      
                      
                      
                      -
                      
                      
                      
                      5,142State
      & political subdivisions
                      
                      
                      8,529
                      
                      
                      
                      20
                      
                      
                      
                      338
                      
                      
                      
                      8,211Other
      bonds
                      
                      
                      3,017
                      
                      
                      
                      38
                      
                      
                      
                      189
                      
                      
                      
                      2,866Total
      debt securities
                      
                      
                      19,620
                      
                      
                      
                      142
                      
                      
                      
                      527
                      
                      
                      
                      19,235Equity
      securities
                      
                      
                      1,371
                      
                      
                      
                      11
                      
                      
                      
                      324
                      
                      
                      
                      1,058Total
      Available-for-Sale
                      
                      $
                      20,991
                      
                      
                      $
                      153
                      
                      
                      $
                      851
                      
                      
                      $
                      20,293





All of
the Company’s investment securities were classified as available-for-sale at
March 31, 2009 and December 31, 2008.





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, 2009 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
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -Municipal
                      
                      
                      5,062
                      
                      
                      
                      37
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      5,062
                      
                      
                      
                      37Other
      securities
                      
                      
                      2,807
                      
                      
                      
                      210
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      2,807
                      
                      
                      
                      210Equity
      securities
                      
                      
                      408
                      
                      
                      
                      101
                      
                      
                      
                      483
                      
                      
                      
                      338
                      
                      
                      
                      891
                      
                      
                      
                      439Total
                      
                      $
                      8,277
                      
                      
                      $
                      348
                      
                      
                      $
                      483
                      
                      
                      $
                      338
                      
                      
                      $
                      8,760
                      
                      
                      $
                      686





The above
table at March 31, 2009 includes 33 securities that have unrealized losses for
less than 12 months and 32 securities that have been in an unrealized loss
position for 12 or more months.





8





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 and intent to hold these investments until maturity, the Bank does
not consider these investments to be other-than-temporarily impaired at March
31, 2009.





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 cost, management does not consider these investments to be
other-than-temporarily impaired at March 31, 2009.





3.
            Loans





March 31,
                            2009
                          
                          
                          December 31,
                            2008(In
      thousands)Real
      estate mortgages:Construction
      and land development
                          
                          $
                          816
                          
                          
                          $
                          546Residential,
      1 – 4 family
                          
                          
                          44,588
                          
                          
                          
                          44,986Residential,
      multi-family
                          
                          
                          1,136
                          
                          
                          
                          1,147Commercial
                          
                          
                          52,915
                          
                          
                          
                          53,448Total
      real estate mortgages
                          
                          
                          99,455
                          
                          
                          
                          100,127Commercial
                          
                          
                          1,591
                          
                          
                          
                          1,796Consumer
                          
                          
                          4,951
                          
                          
                          
                          5,353Total
      loans
                          
                          
                          105,997
                          
                          
                          
                          107,276Allowance
      for loan losses
                          
                          
                          1,215
                          
                          
                          
                          1,170Total
      loans, net
                          
                          $
                          104,782
                          
                          
                          $
                          106,106





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.





9




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.





The
following table sets forth the period-end balances of and changes in the
allowance for loan losses as of March 31, 2009 and December 31,
2008:





March
      31,
                  
                  
                  December
      31,(Dollars
      in thousands)
                  
                  2009
                  
                  
                  2008Balance
      at beginning of period
                  
                  $
                  1,170
                  
                  
                  $
                  1,171Charge-offs:Commercial
                  
                  
                  -
                  
                  
                  
                  -Real
      estate mortgages
                  
                  
                  -
                  
                  
                  
                  3Consumer
                  
                  
                  8
                  
                  
                  
                  47Total
                  
                  
                  8
                  
                  
                  
                  50Recoveries:Commercial
                  
                  
                  -
                  
                  
                  
                  -Real
      estate mortgages
                  
                  
                  -
                  
                  
                  
                  -Consumer
                  
                  
                  1
                  
                  
                  
                  18Total
                  
                  
                  1
                  
                  
                  
                  18Net
      charge-offs
                  
                  
                  7
                  
                  
                  
                  32Provision
      charged to operations
                  
                  
                  52
                  
                  
                  
                  31Balance
      at end of period
                  
                  $
                  1,215
                  
                  
                  $
                  1,170





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, 2009, 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, 2009, includes
common shares issuable upon exercise of employee stock options as
follows:





10





March 31, 2009
                    
                    Income
                      (Numerator)
                    
                    
                    Shares
                      (Denominator)
                    
                    
                    Per-Share
                      AmountBasic
      EPSIncome
      available
                    
                    $
                    224,000
                    
                    
                    
                    1,426,835
                    
                    
                    $
                    0.16Options
      includable
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -Diluted  EPS
                    
                    $
                    224,000
                    
                    
                    
                    1,426,835
                    
                    
                    $
                    0.16




March 31, 2008
                  
                  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
                  )




6.
              Omnibus
      Stock Option Plan




Stock-based
compensation is accounted for in accordance with SFAS No. 123(R),Share-Based Payment. The
Company establishes fair value for its equity awards to determine their
cost. The Company recognizes the related expense for employees over the
appropriate vesting period, or when applicable, service period, using the
straight-line method. However, consistent with SFAS No. 123(R), the amount of
stock-based compensation recognized at any date must at least equal the portion
of the grant date value of the award that is vested at that date and as a result
it may be necessary to recognize the expense using a ratable method. In
accordance with Emerging Issues Task Force (EITF) Issue No. 96-18, Accounting for Equity Instruments
That Are Issued to Other Than Employees, the compensation expense for
non-employees is recognized on the grant date, or when applicable, the service
period, using the straight-line method.




The
Company’s 2006 Omnibus Stock Option Plan (the Plan) authorizes the issuance of
shares of common stock pursuant to awards that may be granted in the form of
stock options and restricted stock awards. Under the Plan, the Company reserved
101,865 shares of common stock for future issuance. The purpose of the Plan is
to attract and retain personnel for positions of substantial responsibility and
to provide additional incentive to certain officers, directors, advisory
directors, employees and other persons to promote the success of the Company.
Under the Plan, options expire ten years after the date of grant, unless
terminated earlier under the option terms. A committee of non-employee directors
has the authority to determine the conditions upon which the options granted
will vest. Options are granted at the then fair market value of the Company’s
stock.





11





A summary
of the status of the Company’s stock options under the Plan as of March 31, 2009
is as follows:





Number of
                                  Shares
                                
                                
                                Weighted
                                  Average
                                  Exercise PriceOutstanding,
      January 1, 2009
                                
                                
                                62,879
                                
                                
                                $
                                9.11Granted
                                
                                
                                -
                                
                                
                                
                                -Exercised
                                
                                
                                -
                                
                                
                                
                                -Forfeited
                                
                                
                                -
                                
                                
                                
                                -Outstanding,
      March 31, 2009
                                
                                
                                62,879
                                
                                
                                $
                                9.11Exercisable,
      March 31, 2009
                                
                                
                                10,799
                                
                                
                                $
                                10.19





The
following table summarizes all stock options outstanding under the Plan as of
March 31, 2009:





Options OutstandingDate Issued
                  
                  Number of
                    Shares
                  
                  
                  Weighted
                    Average
                    Exercise Price
                  
                  
                  Weighted
                    Average
                    Remaining
                    Contractual LifeSeptember
      26, 2006
                  
                  
                  25,116
                  
                  
                  $
                  10.19
                  
                  
                  
                  7.5October
      23, 2007
                  
                  
                  3,766
                  
                  
                  $
                  9.95
                  
                  
                  
                  8.6May
      28, 2008
                  
                  
                  33,997
                  
                  
                  $
                  8.25
                  
                  
                  
                  9.2




A summary
of non-vested shares as of March 31, 2009 is as follows:





Options:
                  
                  
                  
                  
                  
                  Awards:Number
                    of
                    Shares
                  
                  
                  Weighted
                    Average
                    Grant
                    Date Fair
                    Value
                  
                  
                  Number
                    of
                    Shares
                  
                  
                  Weighted
                    Average
                    Grant
                    Date Fair
                    ValueNonvested,
      January 1, 2009
                  
                  
                  52,080
                  
                  
                  $
                  3.40
                  
                  
                  
                  22,992
                  
                  
                  $
                  8.47Issued
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Vested
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Forfeited
                  
                  
                  -
                  
                  
                  
                  
                  
                  
                  
                  -Nonvested,
      March 31, 2009
                  
                  
                  52,080
                  
                  
                  $
                  3.40
                  
                  
                  
                  22,992
                  
                  
                  $
                  8.47





The
compensation expense recognized for awards under the Plan for the quarters ended
March 31, 2009 and 2008 was $24,000 and $9,000, respectively.





As of
March 31, 2009, there was approximately $317,000 of total unrecognized
compensation cost related to options and nonvested stock awards granted under
the Plan. The cost of the options and stock awards is expected to be recognized
over a weighted-average period of five years.





12




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.




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, 2009. The maximum
potential amount of future payments that the Bank is required to make under the
guarantee is $450,000. 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, 2009 and the year ended
December 31, 2008 (dollars in thousands):





2009
                      
                      
                      2008Beginning
      balance
                      
                      $
                      1,327
                      
                      
                      $
                      1,334Additions
                      
                      
                      46
                      
                      
                      
                      647Collections
                      
                      
                      (23
                      )
                      
                      
                      (654
                      )Ending
      balance
                      
                      $
                      1,350
                      
                      
                      $
                      1,327




13





9.
            Retirement
      Plans




The
Company participates in the Financial Institution Retirement Fund (the Fund)
administered by the Pentegra Group.  The Fund operates as a
multi-employer plan for accounting purposes under Statement of Financial
Accounting Standards No. 87 Employers’ Accounting for Pensions.  As
such, the annual pension expense to be recorded is defined as the amount of the
required annual contribution.





In
February, 2009, the Bank’s Board of Directors authorized the freezing of
benefits within the defined benefit plan as of April 1, 2009.  For the
plan years ending June 30, 2008 and 2007, the required contributions due were
$94,000 and $138,000 respectively.





In March,
2009, the Board of Directors approved an increase in matching employees’
contributions within the Bank’s existing 401k plan from 50% of the first 6% to
100% of the first 6% as of April 1, 2009.  It is estimated that the
increased cost of higher matching will be approximately $26,000 for
2009.





10.
            Fair
      Value Measurements




SFAS No.
157 establishes a hierarchal disclosure framework associated with the level of
pricing observability utilized in measuring assets and liabilities at fair
value. The three broad levels defined by SFAS No. 157 hierarchy are as
follows:




Level
I: Quoted
prices are available in active markets for identical assets or liabilities as of
the record date.




Level
II: Pricing
inputs are other than quoted prices in active markets, which are either directly
or indirectly observable as of the reported date. The nature of these assets and
liabilities include items for which quoted prices are available but traded less
frequently, and items that are fair valued using other financial instruments,
the parameters of which can be directly observed.




Level
III: Assets
and liabilities that have little to no pricing observability as of the reported
date. These items do not have two-way markets and are measured using
management’s best estimate of fair value, where the inputs into the
determination of fair value require significant management judgment or
estimation




Investments
available for sale are recorded at fair value on a recurring basis. Loans held
for sale are recorded at fair value on a nonrecurring basis based on the lower
of cost or market.




The
following table presents the assets reported on the consolidated balance sheets
at their fair value as of March 31, 2009 by level within the fair value
hierarchy. As required by SFAS No. 157, financial assets and liabilities are
classified in their entirety based on the lowest level of input that is
significant to the fair value measurement.




Assets
measured at fair value on a recurring basis (in thousands):




March
      31, 2009Level
      I
                
                
                Level
      II
                
                
                Level
      III
                
                
                TotalAssets:Securities
      available-for-sale
                
                $
                933
                
                
                $
                18,485
                
                
                $
                36
                
                
                $
                19,454




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-K
for the year ended December 31, 2008, 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.


Financial
Condition





Our total
assets increased $2.3 million, or 1.6%, from $139.0 million at December 31, 2008
to $141.3 million at March 31, 2009.  Significant changes in asset
totals from December 31, 2008 to March 31, 2009 included an increase of $4.1
million in Federal funds sold, while net loans decreased $1.3
million.





Our
overall loan portfolio declined a net of $1.3 million or 1.2%, since December
31, 2008.  Consumer loans decreased $402,000 from $5.4 million at
December 31, 2008 to $5.0 million at March 31, 2008, as the Bank has chosen not
to aggressively pursue that segment of loans. Commercial real estate loans have
decreased $533,000 from $53.4 million at December 31, 2008 to $52.9 million at
March 31, 2009. Residential mortgages decreased $398,000 from December 31, 2008,
and commercial loans not secured by real estate decreased $205,000.





Investment
securities decreased $839,000, or 4.1%, to $19.5 million from $20.3 million
since December 31, 2008. The Company had securities in the amount of $500,000
called during the first quarter. The Company also purchased $30,000 in equity
securities during the quarter.





15




The
allowance for loan loss increased $45,000 during the first quarter of 2009. The
Company added $52,000 to the allowance during the first three months of the
year. Subtracting from the provision were charge-offs of $8,000 for two consumer
loans.  There were recoveries of approximately $1,000 made during the
first quarter of 2009. 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 1.15% at March 31, 2009 and 1.09% at December 31, 2008. We are
carefully monitoring credit quality so that we can respond quickly to any
deterioration with action to 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
$500,000 at March 31, 2009, compared to $1.1 million at December 31, 2008. The
ratio of non-performing loans to total loans was 0.48% and 1.03% at March 31,
2009 and December 31, 2008, respectively.





Total
deposits increased $9.8 million, or 9.9%, from $99.2 million at December 31,
2008 to $109.0 million at March 31, 2009. Non-interest bearing deposits
decreased $414,000, or 5.9%, from $7.0 million at December 31, 2008 to $6.6
million at March 31, 2009. Interest bearing demand deposits decreased $2.7
million, or 5.6%, from $48.5 million at December 31, 2008 to $45.8 million at
March 31, 2009.  Time deposits increased $12.9 million, or 29.5%, from
$43.7 million at December 31, 2008 to $56.6 million at March 31,
2009.  This increase in time deposits was largely new money to the
Bank and consists primarily of 13 month certificates of deposit at rates
slightly higher than the local competition.





Borrowings
decreased $7.6 million, or 38.9%, from $19.6 million at December 31, 2008 to
$12.0 million at March 31, 2009. The Company fully paid down our overnight
borrowings, leaving only two long term borrowings at FHLBank of
Pittsburgh.





Results
of Operations





Comparison
of the Three Month Periods Ended March 31, 2009 and 2008





The
Company realized net income of $224,000 for the three months ended March 31,
2009 compared to a net loss of $167,000 for the three months ended March 31,
2008, an increase of $391,000.  The net loss in the first quarter of
2008 resulted from a $475,000 pre-tax loss due to accounting errors within the
Bank’s primary correspondent bank account.  Net interest income for
the first quarter of 2009 increased $154,000, or 15.5%, compared to the first
quarter of 2008. This increase was the result of higher investment and loan
income, coupled with a decrease in interest expense.





16





The
Company experienced a slight increase of $19,000, or 1.0%, in interest income
for the quarter ended March 31, 2009 compared to the same period in 2008. There
was a slight increase of $5,000, or 0.3%, in loan interest income for the
quarter ended March 31, 2009 compared to the same period in 2008. Interest and
dividends on investments increased $14,000, or 7.2%, to $209,000 at March 31,
2009 from $195,000 at March 31, 2008. The increase was due to additional
securities purchased.





Interest
expense decreased $135,000, or 14.8%, from $914,000 in 2008 to $779,000 in
2009.  Interest on deposits decreased $131,000 or 17.6%, from $744,000
in 2008 to $613,000 in 2009 due to substantially lower rates on deposits.
Interest on borrowed funds decreased $4,000, or 2.4%, to $166,000 in 2009
compared to $170,000 in 2008. The decline was the result of the decrease in
short term borrowings.





Other
income increased $39,000 to $115,000 in 2009, from $76,000 in 2008, primarily
due to a $14,000 gain on the sale of loans as well as a $20,000 increase in
other operating income.  On January 20, 2009, the bank sold four
residential mortgage loans totaling $684,000 to the Federal Home Loan Bank’s
Mortgage Partnership Finance Program.  These loans were sold to
decrease interest rate risk within the bank’s fixed rate residential mortgage
portfolio.  The increase in other operating income was primarily
attributable to higher income from bank owned life insurance.  Other
expenses decreased $470,000 to $881,000 in 2009 from $1,351,000 in
2008.  Salaries and employee benefits decreased $10,000 or 1.9%, from
$514,000 in 2008, to $504,000 in 2009. Occupancy and equipment expense decreased
$15,000 or 9.0% from $166,000 in 2008, to $150,000 in 2009, and other operating
expenses increased $30,000 or 15.3%, from $196,000 in 2008 to $226,000 in 2009.
The primary change in other expense was attributable to the first quarter 2008
loss due to accounting errors of $475,000.





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.   Since management believes the amounts
are not recoverable, a loss was recorded.





Liquidity
and Capital Resources





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 increased
$976,000 for the three months ended March 31, 2009.  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.





North
Penn Bank's capital ratios at March 31, 2009 and December 31, 2008 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:





17





To
      be well capitalizedunder
      promptFor
      capital adequacy
                                                                                                        
                                                                                                        corrective
      actionActual
                                                                                                        
                                                                                                        purposes
                                                                                                        
                                                                                                        provisionsAmount
                                                                                                        
                                                                                                        
                                                                                                        Ratio
                                                                                                        
                                                                                                        Amount
                                                                                                        
                                                                                                        Ratio
                                                                                                        
                                                                                                        Amount
                                                                                                        
                                                                                                        RatioAt
      March 31, 2009:Total
      Capital (to Risk-Weighted Assets):North
      Penn Bank
                                                                                                        
                                                                                                        $
                                                                                                        16,903
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        16.28
                                                                                                        %
                                                                                                        >$
      8,305
                                                                                                        
                                                                                                        >8.0
                                                                                                        %
                                                                                                        >$10,381
                                                                                                        
                                                                                                        >10.0
                                                                                                        %Tier
      1 Capital (to Risk-Weighted Assets):North
      Penn Bank
                                                                                                        
                                                                                                        $
                                                                                                        15,688
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        15.11
                                                                                                        %
                                                                                                        >$
      4,152
                                                                                                        
                                                                                                        >4.0
                                                                                                        %
                                                                                                        >$
      6,229
                                                                                                        
                                                                                                        >6.0
                                                                                                        %Tier
      1 Capital (to Average Assets):North
      Penn Bank
                                                                                                        
                                                                                                        $
                                                                                                        15,688
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        11.37
                                                                                                        %
                                                                                                        >$
      5,517
                                                                                                        
                                                                                                        >4.0
                                                                                                        %
                                                                                                        >$
      6,896
                                                                                                        
                                                                                                        >5.0
                                                                                                        %Risk-Weighted
      Assets:
                                                                                                        
                                                                                                        $
                                                                                                        103,812Average
      Assets:
                                                                                                        
                                                                                                        $
                                                                                                        137,920Reconciliation
      of GAAP Capital to Regulatory CapitalTotal
      Equity Capital March 31, 2009
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        $
                                                                                                        15,787Plus:
      Unrealized Gain/Loss on Investments
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        (98
                                                                                                        )Less:
      Disallowed Servicing Rights
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        (1
                                                                                                        )Total
      Tier 1 Capital March 31, 2009
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        $
                                                                                                        15,688Plus:
      Allowance for loan losses
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        1,215Total
      Risk-based Capital March 31, 2009
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        $
                                                                                                        16,903At
      December 31, 2008:Total
      Capital (to Risk-Weighted Assets):North
      Penn Bank
                                                                                                        
                                                                                                        $
                                                                                                        16,706
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        15.05
                                                                                                        %
                                                                                                        >$8,878
                                                                                                        
                                                                                                        >8.0
                                                                                                        %
                                                                                                        >$11,098
                                                                                                        
                                                                                                        >10.0
                                                                                                        %Tier
      1 Capital (to Risk-Weighted Assets):North
      Penn Bank
                                                                                                        
                                                                                                        $
                                                                                                        15,536
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        14.00
                                                                                                        %
                                                                                                        >$4,439
                                                                                                        
                                                                                                        >4.0
                                                                                                        %
                                                                                                        >$
      6,659
                                                                                                        
                                                                                                        >6.0
                                                                                                        %Tier
      1 Capital (to Average Assets):North
      Penn Bank
                                                                                                        
                                                                                                        $
                                                                                                        15,536
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        11.57
                                                                                                        %
                                                                                                        >$5,370
                                                                                                        
                                                                                                        >4.0
                                                                                                        %
                                                                                                        >$
      6,713
                                                                                                        
                                                                                                        >5.0
                                                                                                        %Risk-Weighted
      Assets:
                                                                                                        
                                                                                                        $
                                                                                                        110,977Average
      Assets:
                                                                                                        
                                                                                                        $
                                                                                                        134,261Reconciliation
      of GAAP Capital to Regulatory CapitalTotal
      Equity Capital December 31, 2008
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        $
                                                                                                        15,390Plus:
      Unrealized Gain/Loss on Investments
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        147Less:
      Disallowed Servicing Rights
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        (1
                                                                                                        )Total
      Tier 1 Capital December 31, 2008
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        $
                                                                                                        15,536Plus:
      Allowance for loan losses
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        1,170Total
      Risk-based Capital December 31, 2008
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        $
                                                                                                        16,706




Stock
Repurchase Plan





On April
28, 2009, the North Penn Bancorp., Inc.’s Board of Directors authorized the
completion of the previous 10% stock repurchase plan (29,657 shares) and the
repurchase of up to 142,341 shares of the Company’s outstanding common stock, or
approximately 10% of outstanding shares.  The current repurchase
authorization will remain in effect until all shares have been repurchased or
until the Company terminates the authorization.  Purchases under the
program will be conducted solely through a Rule 10b5-1 repurchase plan with
Stifel, Nicolaus & Company, Incorporated and will be based upon the
parameters of the Rule 10b5-1 repurchase plan.   The Rule 10b5-1
repurchase plan allows the Company to repurchase its shares during periods when
it would normally not be active in the market due to its internal trading
blackout period.





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





The
Company’s management, including the Company’s principal executive officer and
principal financial officer, have evaluated the effectiveness of the Company’s
“disclosure controls and procedures,” as such term is defined in Rule 13a-15(e)
promulgated under the Securities Exchange Act of 1934, as amended, (the
“Exchange Act”). Based upon their evaluation, the principal executive officer
and principal financial officer concluded that, as of the end of the period
covered by this report, the Company’s disclosure controls and procedures were
effective for the purpose of ensuring that the information required to be
disclosed in the reports that the Company files or submits under the Exchange
Act with the Securities and Exchange Commission (the “SEC”) (1) is recorded,
processed, summarized and reported within the time periods specified in the
SEC’s rules and forms, and (2) is accumulated and communicated to the Company’s
management, including its principal executive and principal financial officers,
as appropriate to allow timely decisions regarding required
disclosure.





As a
result of the loss from accounting errors in 2008, management has made, or has
begun the process of developing various improvements to the Company’s internal
control over financial reporting.  The Audit Committee of the Board of
Directors and all members of the senior management team through the Financial
Statement Disclosure Committee have taken an active role in evaluating and
planning for improvement to policy, procedures and controls in the accounting
and financial reporting areas.  The reconcilement function has been
reevaluated and specific responsibilities, the frequency and review process are
in place.  Access rights to various accounting functions within the
Bank’s core processing/accounting system are being
reevaluated.  Management oversight has been enhanced over the general
ledger entry function, both as to ensuring that proposed entries are reviewed
for propriety and authority level, as well as review of accounting reports that
result after the entries have been processed.  A comprehensive policy
is in process which will provide guidance to accounting personnel, senior
management and the Audit Committee.





PART
II – OTHER INFORMATION





Item
1.             Legal
Proceedings.





The
Company is not involved in any pending legal proceedings other than routine
legal proceedings occurring in the ordinary course of business. Such routine
legal proceedings, in the aggregate, are believed by management to be immaterial
to the Company’s financial condition or results of operations.





Item
1A .         Risk Factors





In
addition to the other information set forth in this report, you should carefully
consider the factors discussed in our Annual Report on Form 10-K for the year
ended December 31, 2008, which could materially affect our business, financial
condition or future results. At March 31, 2009 the risk factors of the Company
have not changed materially from those reported in our Annual Report on Form
10-K. However, the risks described in our Annual Report on Form 10-K are not the
only risks that we face. Additional risks and uncertainties not currently known
to us or that we currently deem to be immaterial also may materially adversely
affect our business, financial condition and/or operating results.





19




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





Period
                    
                    (a)
                      Total number of
                      Shares
                      Purchased
                    
                    
                    (b)
                      Average Price
                      Paid per Share
                    
                    
                    (c)
                      Total Number of
                      Shares Purchased as
                      Part of Publicly
                      Announced Plans or
                      Programs (1)
                    
                    
                    (d)
                      Maximum Number of
                      Shares that May Yet Be
                      Purchased Under the Plans
                      or ProgramsJanuary
      1, 2009throughJanuary 31, 2009
                    
                    
                    10,500
                    
                    
                    $
                    7.55
                    
                    
                    
                    113,500
                    
                    
                    
                    44,657February
      1, 2009throughFebruary 28, 2009
                    
                    
                    15,000
                    
                    
                    $
                    8.05
                    
                    
                    
                    128,500
                    
                    
                    
                    29,657March
      1, 2009throughMarch 31, 2009
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    128,500
                    
                    
                    
                    29,657Total
                    
                    
                    25,500
                    
                    
                    $
                    7.84





(1) On
October 1, 2008, the Company announced a repurchase program of 158,157 shares,
approximately 10% of all shares outstanding. On April 28, 2009, the North Penn
Bancorp., Inc.’s Board of Directors authorized the completion of the previous
10% stock repurchase plan (29,657 shares) and the repurchase of up to 142,341
shares of the Company’s outstanding common stock, or approximately 10% of
outstanding shares.





Item
3.             
 Defaults Upon Senior
Securities.





None.





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





None





Item
5Other
Information.





None


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))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) Chief Executive Officer
  Certification31.2
                
                Rule
      13a-14(a) /15d-14(a) Chief Financial Officer
  Certification32.1
                
                Section
      1350 Certification of Chief Executive Officer32.2
                
                Section
      1350 Certification of Chief Financial
Officer




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:
                May
      14, 2009
                
                /s/
      Frederick L. HickmanFrederick
      L. Hickman
                  President
      and Chief Executive OfficerDated:
                May
      14, 2009
                
                /s
      Robin R. WeikelRobin
      R. Weikel
                  Chief
      Financial Officer




21